Private Equity Firms of the Elite Are Snatching Up Banks & Businesses

2012-01-24T13:04:00.001-05:00

Elite Private Equity Firms are Buying Farmland to Control the Food Supply

Hunger results when people are not allowed to participate in a food system of their choosing. Fair methods of land distribution must be considered -- a fair and just food system depends on small holder farmers having access to land. The function of a just farming system is to insure that everyone gets to eat; in contrast, an industrial agriculture functions to insure that corporations controlling the system make a profit.

Food shortages are seldom about a lack of food -- there is plenty of food in the world -- the shortages occur because of the inability to get food where it is needed and the inability of the hungry to afford it. Unable to afford the grain, the hungry depend on the government to distribute food. Apparently that's not going so well. Not everyone living in a poor country goes hungry; those with money eat. Poverty and inequality cause hunger -- a higher value should be placed on people than on corporate profit.

The framework of international trade and the rules imposed by the International Monetary Fund and World Bank on developing countries, place emphasis on crops for export, not crops for feeding a hungry population. The greatest portion of the world's diet still relies on crops and farming systems developed and cultivated by the indigenous for centuries. The best hope for ending hunger lies with local, traditional, farmer controlled agricultural production, not high tech industrial agriculture.

Civil wars, structural adjustment policies, inadequate distribution systems, international commodity speculation, and corporate control of food from seed to table -- these are the causes of hunger, the stimulus for food crises.

Being Like Soros in Buying Farm Land Lets Investors Reap 16% Annual Gains

“Control oil and you control nations; control food and you control the people.“
–Henry Kissinger

Bloomberg
August 10, 2011

Perry Vieth baled hay on a neighbor’s farm in Wisconsin for two summers during high school in 1972 and 1973. The grueling labor left him with no doubt about getting a college degree so that he’d never have to work as hard again for a paycheck. Thirty-eight years later, and after a career as a securities lawyer and fixed-income trader, Vieth is back on the farm.

Except, now, he owns it. As co-founder of Ceres Partners LLC, a Granger, Indiana-based investment firm, Vieth oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. He’s so enthusiastic about the investments that he quit a job in 2008 overseeing $7 billion in fixed-income assets at PanAgora Asset Management Inc., a Boston-based quantitative money management firm, to focus full time on farming, Bloomberg Markets magazine reports in its September issue.

On a spring afternoon, Vieth, 54, barrels along backcountry roads in a Jeep Cherokee in Indiana and Michigan to scout a fruit orchard and corn and soybean farms to buy. Rural towns with names such as Three Rivers pass by in a blur, separated by a wide horizon of fields with young crops popping up.

“When I told people I was leaving to start an investment fund in farmland, they said, ‘You’re doing what?’” says Vieth, in a red polo golf shirt and khakis. “It will always be difficult for Wall Street firms to understand. It’s not like buying stocks on a computer.”

It’s much better: Returns from farmland have trounced those of equities. Ceres Partners produced an average annual gain of 16.4 percent after fees from January 2008, just after the firm started, through June of this year, Vieth says.

George Soros

The bulk of the returns are in rent payments from tenant farmers who grow and sell the crops and from land appreciation. The Standard & Poor’s GSCI Agriculture Index of eight raw materials gained 5.3 percent annually over the same period, and the S&P 500 Index (SPX) dropped almost 1 percent.

Investors are pouring into farmland in the U.S. and parts of Europe, Latin America and Africa as global food prices soar. A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 percent of South American farmland venture Adecoagro SA.

Hedge funds Ospraie Management LLC and Passport Capital LLC as well as Harvard University’s endowment are also betting on farming. TIAA-CREF, the $466 billion financial services giant, has $2 billion invested in some 600,000 acres (240,000 hectares) of farmland in Australia, Brazil and North America and wants to double the size of its investment.

Jim Rogers

“I have frequently told people that one of the best investments in the world will be farmland,” says Jim Rogers, 68, chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1996. “You’ve got to buy in a place where it rains, and you have to have a farmer who knows what he’s doing. If you can do that, you will make a double whammy because the crops are becoming more valuable.”

The growth in demand for food, spurred by the rising middle classes in China, India and other emerging markets, shows no signs of abating. Food prices in June, as measured by a United Nations index of 55 food commodities, were just slightly below their peak in February. The UN’s Food and Agriculture Organization said in a June report that it expects food costs to remain high through 2012.

So many investors have rushed to capitalize on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20 percent in the first quarter compared with a year earlier.

Safe Haven

“Yes, farmland will be a bubble again; all agricultural products will be in a bubble again,” says Rogers, who is an investor in Agrifirma Brazil Ltd., a South American farmland owner.

Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers Holdings Inc. (LEHMQ) filed for bankruptcy in September of that year and the S&P 500 plunged 43 percent in the next six months. He purchased 8,000 acres in Uruguay, three smaller plots in southern Illinois and an 80-acre New Zealand kiwi-and-avocado orchard.

“We really thought all the investment banks would go under,” says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. “Everyone said, ‘Buy gold.’ But at the end of the day, you can’t eat it. If everything else goes and I just have these farms, it makes me moderately wealthy.”

‘Prosperous China’

The hedge fund Diggle co-founded, Artradis Fund Management Pte in Singapore, suffered about $700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management Pte. Diggle plans to incorporate his five farms into an investment management group run by Vulpes.

From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he’s witnessed aspiring locals eating their way up the food chain.

“You can see what a more prosperous China will consume,” Diggle, 47, says. “It means more dairy, more meat -- not just pork and chicken.”

Investors find in farmland a respite from the cyclical price swings of the commodities market. Since 1970, there have been at least four price jumps of at least 100 percent that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of an acre of farmland tracked by the U.S. Department of Agriculture has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.

Leaving BlackRock

“Farmland is the lowest-risk part of the value chain, but it’s also a key part of production,” says Jose Minaya, TIAA- CREF’s head of natural resources and infrastructure investments.

In the U.K., where farm prices are also rising, one money manager traded his career at BlackRock Inc. (BLK) for one in farming. Graham Birch, 51, left in 2009 as the London-based head of the natural resources team at BlackRock, the world’s biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.

Birch, who says farming has suffered from a lack of investment and management talent, has spent $1 million on improvements. He now captures all of the effluent from his 600- cow herd, stores it in a 4 million-liter (1-million-gallon) steel tank and uses it as fertilizer for his crops.

“At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do,” Birch says.

Wall Street Roots

Ceres Partners’ Wall Street roots are evident in the firm’s makeshift office in an old clapboard farmhouse that sits in the middle of cropland. Lucite tombstones resting on a shelf in a small room mark deals done by Brandon Zick, a former vice president of strategic acquisitions at Morgan Stanley (MS)’s investment management unit. Vieth hired Zick in January to help analyze and manage farm purchases.

Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P 500 options. After a series of stints running an arbitrage team for Fuji Securities Inc. and other firms, he was hired as chief investment officer of fixed income at PanAgora, the quant firm, in 1999.

By about 2006, Vieth’s concerns about the economy were mounting: Inflation was at a low, and the dollar had peaked as U.S. debt and deficits soared. So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts U.S. crop exports.

Falling Dollar

Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres’s point person with tenant farmers.

As the dollar fell 24 percent against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends. So, in late 2007, he founded Ceres, just as tightening credit markets began to push the global economy into a recession.

He named the firm Ceres for both the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago.

“I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify,” Vieth says.

By May 2011, he had collected 17,238 acres, mostly in the Midwest.

Shade and Rocks

When Vieth wants land, he goes shopping, as he does with Zick and Blum under a partly cloudy southern Michigan sky in May. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.

The trio drive by a 337-acre farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter.

“Those trees will shade the corn and stunt growth,” he says.

Blum doesn’t like the many rocks scattered on the unplanted dirt. Zick is skeptical that the bank will get its asking price of $7,000 an acre in a foreclosure sale.

The investors next visit a farmer they hired, Ed Kerlikowske Jr., who grows watermelon, peas and corn on their 782-acre spread near Berrien Springs, Michigan. Kerlikowske. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that they would otherwise have to spend on land.

“To really grow the business in today’s economy, you need partners,” Kerlikowske says as he passes around slices of fresh watermelon.

Possible Bubble

The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.

In March, then-FDIC Chairman Sheila Bair devoted a symposium to the topic in Washington with the participation of economists, bankers and agricultural experts.

“If there is a bubble in farmland prices, I hope the bulk of any correction is borne by investors such as hedge funds and not by the banking industry,” William Isaac, chairman of the FDIC during the farm banking bust and now senior managing director of FTI Consulting Inc. (FCN) said during the event.

Overpaying

Charles McNairy, whose family has been involved in agriculture since 1871, says neophyte investors who lack a deep understanding of farming are making bad deals. In 2009, McNairy started U.S. Farming Realty Trust LP, a fund based in Kinston, North Carolina, that had raised $261 million as of late May to buy farms, according to a Securities and Exchange Commission filing.

McNairy says funds such as Ceres have been overpaying for land, based on the return from crops.

“Ceres shouldn’t be buying in the Midwest,” says McNairy, who declined to disclose the states he invests in. “It’s crazy to be buying up there.”

Vieth disagrees, saying Ceres’s returns prove that his strategy is working.

“I certainly don’t want to start slinging mud, but I don’t know what the heck he’s talking about.”

Greyson Colvin, who started farming fund Colvin & Co. LLP in Anoka, Minnesota, in 2009, dismisses the idea of an overheated market.

“After the housing bubble, people are a little too quick to assign the word bubble these days,” says Colvin, whose two funds and separately managed accounts hold 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.

Head Winds

Colvin, a former analyst at UBS AG (UBSN) and Credit Suisse Group AG (CSGN), says U.S. farmers aren’t carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23 percent, is expected to fall to 10.7 percent in 2011, according to Agriculture Department estimates.

Vieth’s farm funds are facing head winds in coming months and years: A likely rise in interest rates will push up his acquisition costs and the value of the dollar, which in turn might hurt commodity exports. While the former trader keeps a close eye on the dollar, he says farming will continue to thrive.

Investors seem to agree. At a dining-room table in the farmhouse in Granger, Vieth sits down at his computer one evening and totals the day’s haul: another $900,000 from investors looking for comfort -- and profits -- in one of the oldest and most essential industries on the planet.

Control the Food and You Control the People

By Trase, Serenity Acres Now

July 8, 2011

Politicians and warmongers know it. Activists who go on hunger strikes know it. Controlling food is an effective means to manipulate people. In wartime, aggressors attempt to cut off their enemies supply lines — starve out the enemy and perhaps they’ll simply surrender.

Well, there is a more surreptitious war going on within our own country, and it concerns our food. Who are the aggressors? Multi-billion dollar corporations in collusion with government agencies where they have easily managed to place toadies who insure that policy favors their true masters.

Watch documentaries like Food Inc, The Future of Food, Farmageddon; read books from Michael Pollan, Joel Salatin, and Marion Nestle and you’ll see specific examples of how this has happened and continues to shape food policy in our nation.

Do you want the same company that brought us DDT and Agent Orange deciding what kind of food should be available to you and your family? Well, too bad if you don’t, because they already are. Monsanto and other mega corporations have a tight grip on the FDA and USDA, many of our legislatures, and the agricultural departments of many of the land-grant universities.

It is terribly overwhelming for those of us who have educated ourselves about many of the issues with genetic modification of our food to know how to fight back. After all, most of us simply do not have the funding that these mega corporations do.

Monsanto, for instance, has a team of ex-military commandos as who patrol the country to inspect farmers and then enforce the company’s will. Because they have well-placed officials guarding their interests with the government, such as the FDA’s Michael Taylor (former chief lobbyist for Monsanto) they are able to get away with atrocities against small farmers, and ultimately, all of us.

Monsanto has modified their seeds so that they are dependent upon their herbicide Round-Up to grow, and so that the seeds terminate after one generation. You must go back to Monsanto year after year to get more seed, and cannot save seed. Even if you do, it won’t grow properly. But the seed is only neutered in that regard — it will, in fact, infect neighboring fields with its genetic material, so that those “friendly inspectors” I mentioned earlier can show up on a farm and accuse them of patent infringement.

Many family farms have been hurt because of this tactic. And it is, make no mistake, a strategy on their part. After all, it insures their growth — like the 77% increase in profits reported recently in the Wall Street Journal. That funds a huge legal department that is aggressive in its pursuit of anyone who does not kneel before Monsanto, which fancies itself a sort of feudal lord.

So what do we do?

Well, what we can do best — act locally. Grow some of your own food. Buy heirloom seeds (http://rareseeds.com/, http://www.seedsavers.org/, http://sustainableseedco.com/) and plant them, even if you can only do container gardening on a balcony. And save the new seeds created when you grow those vegetables, fruits, and herbs. Share them. Protect them. They are under attack.

So, what happens when you do just that, and your local government decides to punish you for it? “That would never happen,” you say, “why would any municipality get upset over one of its citizens trying to do something positive in the community?”

Well, that’s what the city of Oak Park, Michigan is doing. There is a resident family who have chosen to plant a vegetable garden, instead of wasting their front lawn on grass. And now they are facing court action and possible jail time for daring to reject having grass lawn. You know, the stuff that let’s face it, is not sustainable, and its history isn’t exactly something to be celebrated. As the book Food Not Lawns points out:

“French aristocrats popularized the idea of the green, grassy lawns in the eighteenth century when they planted the agricultural fields around their estates to grass to send the message that they had more land than they needed and could therefore afford to waste some. Meanwhile French peasants starved for lack of available farmland, and the resulting frustration might well have had something to do with the French Revolution in 1789. (p. 12)”

These days, in the U.S., the roles have reversed somewhat. We “peasants” are encouraged to grow lawns and let the “aristocrats” grow the food, because the leaders must have learned something from the French Revolution — it’s better for them to control our food under lock and key while keeping the peasants mollified with other distractions.

Also, so long as the aristocrats are in charge of food, why not make changes to it that will create even more dependence, like controlling seed availability and distribution so that it is only given to those who bow before the masters who hold the seeds year after year?

But — there is hope. The situation in Oak Park is one that local folk can fight face-to-face. Maybe the officials in Oak Park don’t see the bigger picture, and providing them with information that helps them to see that they are really not pursuing what can be described as the best interests of their citizenry will change their minds. I mean, let’s face it, growing up in the age of the “Little Houses” that Malvina Reynolds wrote about, it is easy to simply not think for one’s self about why you wouldn’t want to have a grass lawn, but the world in which that idea of suburbia was created no longer exists.

Food shortages are already occurring, and predictions are that they will only get worse. We are dealing with oil shortages, whether real or manufactured — but what’s the difference when your gasoline costs $4+ a gallon? That means it’s more expensive to go and get food from the store, as well as the cost of the food having gone up because of the petroleum products that went into growing, packaging, and transporting it. People have been especially hard-hit by unemployment in Michigan, and while there are “improved” numbers, most people aren’t dealing with a surplus of income these days, so their food budgets are tight. I know ours is!

So why in the world would local officials want to discourage local gardens? Surely they recognize the issues described in the previous paragraph, in addition to the weaknesses within the corporate food system — and if they do not, then it is their responsibility to educate themselves in order to best serve their citizens. How can they responsibly suggest that they have the authority to determine food policy in their community if they don’t possess the knowledge to make educated decisions about it?

Let’s not allow our right — or that of anyone else– to grow our own food be eroded. Speak up. Fight back. Let’s not forget what Thomas Jefferson said: “All authority belongs to the people.” This truly is OUR LAND. Let’s not forget that, friends.

The Food Crisis is Not About a Shortage of Food

CommonDreams.org
October 1, 2010

The food crisis of 2008 never really ended, it was ignored and forgotten. The rich and powerful are well fed; they had no food crisis, no shortage; so in the West, it was little more than a short lived sound bite, tragic but forgettable.

To the poor in the developing world, whose ability to afford food is no better now than in 2008, the hunger continues.

Hunger can have many contributing factors: natural disaster, discrimination, war, poor infrastructure.

So why, regardless of the situation, is high tech agriculture always assumed to be the only the solution? This premise is put forward and supported by those who would benefit financially if their “solution” were implemented. Corporations peddle their high technology genetically-engineered seed and chemical packages, their genetically-altered animals, always with the “promise” of feeding the world.

Politicians and philanthropists, who may mean well, jump on the high technology band wagon. Could the promise of financial support or investment return fuel their apparent compassion?

The Alliance for a Green Revolution in Africa (AGRA), an initiative of the Bill and Melinda Gates Foundation and the Rockefeller Foundation, supposedly works to achieve a food secure and prosperous Africa. While these sentiments and goals may be philanthropy at its best, some of the coalition partners have a different agenda.

One of the key players in AGRA, Monsanto, hopes to spread its genetically-engineered seed throughout Africa by promising better yields, drought resistance, an end to hunger, etc. etc. Could a New Green Revolution succeed where the original Green Revolution had failed? Or was the whole concept of a Green Revolution a pig in a poke to begin with?

Monsanto giving free seed to poor small holder farmers sounds great, or are they just setting the hook? Remember, next year those farmers will have to buy their seed. Interesting to note that the Gates Foundation purchased $23.1 million worth of Monsanto stock in the second quarter of 2010. Do they also see the food crisis in Africa as a potential to turn a nice profit? Every corporation has one overriding interest -- self-interest, but surely not charitable foundations?

Food shortages are seldom about a lack of food -- there is plenty of food in the world -- the shortages occur because of the inability to get food where it is needed and the inability of the hungry to afford it. These two problems are principally caused by, as Francis Moore Lappe' put it, a lack of justice. There are also ethical considerations: a higher value should be placed on people than on corporate profit; this must be at the forefront, not an afterthought.

In 2008 there were shortages of food in some places, for some people. There was never a shortage of food in 2008 on a global basis, nor is there currently. True, some countries, in Africa for example, do not have enough food where it is needed, yet people with money have their fill no matter where they live. Poverty and inequality cause hunger.

The current food riots in Mozambique were a result of increased wheat prices on the world market. The UN Food and Agriculture organization (FAO) estimates the world is on course to the third largest wheat harvest in history, so increasing wheat prices were not caused by actual shortages, but rather by speculation on the price of wheat in the international market.

While millions of people go hungry in India, thousands of kilos of grain rot in storage. Unable to afford the grain, the hungry depend on the government to distribute food. Apparently that's not going so well.

Not everyone living in a poor country goes hungry; those with money eat. Not everyone living in a rich country is well fed; those without money go hungry. We in the US are said to have the safest and most abundant food supply in the world; yet even here, surrounded by an over abundance of food, there are plenty of hungry people and their numbers are growing. Do we too have a food crisis concurrent with an obesity crisis?

Why is there widespread hunger? Is food a right? Is profit taking through speculation that drives food prices out of the reach of the poor a right? Is pushing high technology agriculture on an entire continent at that could feed itself a (corporate) right?

In developing countries, those with hunger and poor food distribution, the small farmers, most of whom are women, have little say in agricultural policy. The framework of international trade and the rules imposed by the International Monetary Fund and World Bank on developing countries, places emphasis on crops for export, not crops for feeding a hungry population.

Despite what we hope are the best intentions of the Gates Foundation, a New Green Revolution based on genetically engineered crops, imported fertilizer and government imposed agricultural policy will not feed the world. Women, not Monsanto, feed most of the world's population; and the greatest portion of the world's diet still relies on crops and farming systems developed and cultivated by the indigenous for centuries, systems that still work, systems that offer real promise.

The report of 400 experts from around the world, The International Assessment of Agricultural Science and Technology for Development (IAASTD), is ignored by the proponents of a New Green Revolution, precisely because it shows that the best hope for ending hunger lies with local, traditional, farmer controlled agricultural production, not high tech industrial agriculture.

To feed the world, fair methods of land distribution must be considered. A fair and just food system depends on small holder farmers having access to land. The function of a just farming system is to insure that everyone gets to eat; industrial agriculture functions to insure those corporations controlling the system make a profit.

The ultimate cause of hunger is not a lack of Western agricultural technology; rather, hunger results when people are not allowed to participate in a food system of their choosing. Civil wars, structural adjustment policies, inadequate distribution systems, international commodity speculation, and corporate control of food from seed to table -- these are the causes of hunger, the stimulus for food crises.

If the Gates Foundation is serious about ending hunger in Africa, they need to read the IAASTD report, not Monsanto's quarterly profit report. Then they can decide how their money might best be spent.

Fifty Million Farmers Had Land Stolen by the Chinese Regime

The Epoch Times
August 14, 2011

Between 40 and 50 million Chinese farmers have lost their farmland since Deng Xiaoping’s economic reforms began in the late 1970s, according to a recent report from the Chinese Academy of Social Sciences (CASS). The number is increasing at a rate of three million farmers per year, and will reach 110 million around 2030.

The report, titled, China Urban Development Report of 2011 and published by the Institute for Urban and Environmental Studies of CASS, states that large areas of farmland have been and are being expropriated as China’s industrialization and urbanization accelerates.

According to the directive “national land use planning” published by the Ministry of Land and Resources in October 2008, from 2000 to 2030, over 8.6 million acres of farmland will be expropriated and over 100 million farmers will lose their land.

The report also states that, while farmland is being lost, there is a serious trend of urban land being insufficiently utilized. According to the “national land use planning” directive, there are about 657,000 acres of unused land in China. This leads to the conclusion that the scale of land expropriation is greater than the actual need.

Regarding the farmers who lost their farmland, the official news website Red Net of Hunan Province reported a survey of 132 households on the issue on March 29. It stated that 97 percent of farmers are not satisfied with the compensation. The standard compensation rate to the farmer for commercial land use is about US$20,000 to US$35,000 per acre. But this farmland is often situated in a newly developed urban area, which could fetch over 10 times its current value.

The Director of the State Council’s Development Research Center, Han Jun, said in 2003 that since the start of economic reforms until 2003, the Chinese regime has taken US$312.8 billion from farmers by expropriating farmland at a low price and then reselling it at a high price.

The Red Net survey also stated that 85.61 percent of farmers do not have any kind of social security and insurance and that only 12 percent have medical insurance. When asked what they fear the most, 15.91 percent said not having medical insurance, 27.27 percent said retirement insurance and 75 percent feared unemployment.

The farmers who lost their land have no stable jobs and income. After losing their ownership, rights to use and derive an income from their farmland, they have no financial security.

Xu Zhiyong, a faculty member at the Beijing Post and Telecommunications University, told China Youth Daily:

“The dispute arising from farmland expropriation is not a regional problem. It exists in almost every big and small city, county and township.”

According to statistics given in the CASS report, among the farmers who appeal to higher authorities for help, 60 percent of the appeals are related to the farmland, and 30 percent are related to land expropriation.

Among farmers who lost their land, 60 percent of them said that they are in a state of economic hardship, and 81 percent are worried about their future livelihoods.

According to a random sample of 2,942 farmers who lost their land, the National Bureau of Statistics of China found that there are only 2.7 percent who received employment after expropriation; 24.8 percent went out to look for work on their own; 27.3 percent have opened a small business; and 20 percent stays at home, unemployed.

Sometimes, those who have had their land taken from them have responded violently.

In May a series of explosions hit Fuzhou City, Jiangxi Province, after Qian Mingqi, 52, failed to obtain redress for land that was expropriated but for which he was never properly compensated. After a decade of unsuccessfully attempting to get proper compensation (he says his losses were up to two million yuan, or around US$300,000), he set up a Sina Weibo account documenting his final thoughts, and proceeded to make fertilizer bombs. He said that he was left with no choice.

“I wanted to take genuine action to get rid of the bad guys for the people,” Qian said.

He was killed in one of the blasts.

In other cases people have climbed atop their house roofs and set themselves on fire. In yet other cases people have used violence against the gangs of thugs that are hired by local officials to carry out the eviction and demolition work that is often involved in land expropriation.

Read the original Chinese article.

U.S. Government is Flooding Farmland, Which May Leave It Damaged for Years and, in Turn Would Allow Private Equity Firms to Snatch It Up for Pennies on the Dollar

The U.S. Army Corps of Engineers intentionally breached the levee at Birds Point, resulting in the flooding of thousands of acres of Missouri prime farmland as well as damage and destruction to homes and buildings. "Farmers in the affected area will not only lose this year's crop, but have a long-term cleanup and restoration project if they hope to return their land to production, and we fear much of the flooded land might never be able to recover to its prior productivity," Hurst said. "Farm Bureau will do everything possible to ensure the farmers are compensated and receive all the help available to restore their farmland to productivity. It is vital the government rebuilds the levee as soon as possible, and cuts through red tape to get the compensation and help to those affected by this disaster immediately." - Farm Bureau seeks compensation for flooded farmland, May 22, 2011

Arizona Daily Star
May 6, 2011

Blasting open a levee and submerging more than 200 square miles of Missouri farmland has likely gouged away fertile topsoil, deposited mountains of debris and may even hamper farming in some places for years, experts say.

This week's explosions to ease the Mississippi River flooding threatening the town of Cairo, Ill., appear to have succeeded -- but their effect on the farmland, where wheat, corn and soybeans are grown, could take months or even years to become clear. The Missouri Farm Bureau said the damage will likely exceed $100 million for this year alone.

"Where the breach is, water just roars through and scours the ground. It's like pouring water in a sand pile. There is that deep crevice that's created," said John Hawkins, a spokesman for the Illinois Farm Bureau. "For some farmers, it could take a generation to recoup that area."

The issue is vital to farmers and the state of Missouri, whose attorney general repeatedly tried to block the U.S. Army Corps of Engineers' plan to break the levee. Opponents of the move argued it would leave the farmland buried under feet of sand and silt, rendering it useless for years.

It's still not clear how much damage the intentional flooding will cause and how farmers will be compensated for losses to the land and roughly 100 houses scattered through the area. Experts said the extent of the damage can't be accurately assessed until the floodwaters recede, and that likely will take months.

The river level itself is going to have to fall from its high flood stage before the water covering the fields can even begin to drain, said Jim Pogue, a corps spokesman. That could take a significant amount of time, he said.

"This is the greatest flood we've seen since 1937. We're tying records, breaking records, all down the river," Pogue said. "This is likely to be once-in-a-lifetime event."

Codex Alimentarius – How the Global Elite Will Control Your Food Supply

“If you are not suspicious of a large group of elite bankers/corporate giants/politicians who ultimately want to control the world's food and money supply than you are already under their (mind) control. Things are bad enough now, but if they manage to have their way with this, it will be nothing short of total enslavement.” - fredface, February 7, 2009

By Robert Singer, The Truth of the Fight

The Codex Alimentarius Commission (CAC), based in Rome, Italy is an international organization jointly created in 1962 by the Food and Agricultural Organization (FAO) and the World Health Organization (WHO) of the United Nations “allegedly” to protect the health of consumers with guidelines for food standards.

Codex Alimentarius may present the greatest disaster for our food supply and thus our health this country has ever seen, and if not stopped is likely to be implemented in 2011.

The Codex and its regulations affecting our food sovereignty go back to 1962. Fortunately in 1994 Congress passed the Dietary Supplements Health and Education Act (DSHEA) which for the moment preserved the definition of vitamins, minerals and herbs as foods.

Genetically Modified Organisms (GMOs) and the “World According to Monsanto,” should be required viewing and are related to the Codex. In the U.S. and in the Codex, GMO’s do not require labeling making in impossible to know what you are eating.

Without congressional oversight the U.S. will move towards the policies of Canada and Mexico where supplements are considered drugs, not foods. Codex if implemented will reverse DSHEA and the U.S. will no longer treat dietary supplements as foods, but as toxins.

For 18 years Norway, Switzerland, Russia, Japan, the European Union and most African countries have fought the U.S. unsuccessfully to require labeling of GMOs. The U.S. erroneously considers GMOs equal to non-GMOs based solely on a 1992 Executive Order from then Skull and Bones president George H. Bush.

The Codex will be enforced by the barrel of a gun.

The FDA will use their power to outlaw more than raw almonds and tryptophan. In Ohio a food co-op was raided Gestapo style by the USDA because they sold a dozen eggs to an aggressive undercover agent “without a business license.”

Is the FDA looking out for consumers … unlikely.

Half of the 198 new drugs the FDA approved from 1976 to 1985 had to be withdrawn or relabeled because they caused unexpected side effects. Predictably, no one at the FDA withdrew Donald Rumsfeld’s Aspartame sold under the trade names Equal and NutraSweet. Aspartame is a deadly carcinogen made from the feces of e coli bacteria that we can’t avoid because it’s an additive in just about every food we eat.

The story gets even more interesting when you find out NAZI Germany’s notorious I.G. Farben cartel is behind Codex and the proposals that would drastically curtail our health care freedoms.

Catherine Bertini, the head of the UN food programs in 1995, paraphrased the famous Kissinger statement,

“Food is power. We use it to change behavior.”

Is this the first time you have heard of “Codex Alimentarius?” That’s not unusual because Codex is an “open secret.” The information is available if you want to look for it but the corporate controlled media isn’t going to tell you about it until its already too late.

Monsanto, Big Pharma, Chema and Agra have convinced most companies “Codex is a non-issue,” and that they will actually gain market share when Codex is implemented.

So who is raising awareness about this issue?

John C. Hammell of International Advocates for Health Freedom and Ian Crane an ex oil field executive. Ian lectures and writes on U.S. Hegemony and the NWO agenda for control of Global Resources. Mr Crane says,

“After spending the past twelve months investigating Codex Alimentarius, I am deeply disturbed by the almost total lack of awareness (or even interest) with regard to the implications of this pernicious global Commission, particularly amongst those most affected by the excesses of this restrictive legislation.”

The general lack of public awareness is well illustrated by the low traffic volume visiting his website.

Ian warns of the “pernicious” effects legislation will have believing “without a shadow of a doubt” there is a plot by major food and pharmaceutical companies to see that the Codex proposals become international law.

Codex is laying siege to our freedom of choice, let’s stop it.

Normally I don’t recommend those take action campaigns. But Codex Alemintarius is different.

The inconvenient truth for our elected representatives, their families and staff is they have to eat and take vitamins and supplements… just like us. So go ahead and email, fax and phone. This is one email campaign that might just work.

It’s going to come down to a massive rebellion.

The DSHEA law that kept the FDA off our backs was passed because millions and millions of letters were sent to people in Congress demanding health freedom. International Advocates for Health Freedom website has a “take action” page.

Think buying organic will help you? Well, not as much as you think, because the U.S. currently allows for up to 10% of GMO contamination of organic foods (the highest of any country in the world, most permit 0.1%).

You can make a difference by support local self sustaining farmers who refuse to use GMO seeds. And of course start a garden and grow your own food.

Because guess what? …..They can’t stop us from growing our own food.

For more information on Codex Alimentarius and the Food Safety Modernization Act, click here.

2011-12-24T13:07:00.001-05:00

Mystery Company Buying Up U.S. Gun Manufacturers

New York Times
December 4, 2011

Lined up in a gun rack beneath mounted deer heads is a Bushmaster Carbon 15, a matte-black semiautomatic rifle that looks as if it belongs to a SWAT team. On another rack rests a Teflon-coated Prairie Panther from DPMS Firearms, a supplier to the U.S. Border Patrol and security agencies in Iraq. On a third is a Remington 750 Woodsmaster, a popular hunting rifle.

The variety of rifles and shotguns on sale here at Cabela's, the national sporting goods chain, is a testament to America's enduring gun culture. But, to a surprising degree, it is also a testament to something else: Wall Street deal-making.

In recent years, many top-selling brands - including the 195-year-old Remington Arms, as well as Bushmaster Firearms and DPMS, leading makers of military-style semiautomatics - have quietly passed into the hands of a single private company. It is called the Freedom Group - and it is the most powerful and mysterious force in the U.S. commercial gun industry today.

Never heard of it?

You're not alone. Even within gun circles, the Freedom Group is something of an enigma. Its rise has been so swift that it has become the subject of wild speculation and grassy-knoll conspiracy theories. In the realm of consumer rifles and shotguns - long guns, in the trade - it is unrivaled in its size and reach. By its own count, the Freedom Group sold 1.2 million long guns and 2.6 billion rounds of ammunition in the 12 months ended March 2010, the most recent year for which figures are publicly available.

Behind this giant is Cerberus Capital Management, the private investment company that first came to widespread attention when it acquired Chrysler in 2007. (Chrysler later had to be rescued by taxpayers). With far less fanfare, Cerberus, through the Freedom Group, has been buying big names in guns and ammo.

From its headquarters in Manhattan, Cerberus has assembled a remarkable arsenal. It began with Bushmaster, which until recently was based here in Maine. Unlike military counterparts like automatic M-16s, rifles like those from Bushmaster don't spray bullets with one trigger pull. But, with gas-powered mechanisms, semiautomatics can fire rapid follow-up shots as fast as the trigger can be squeezed. They are often called "black guns" because of their color. The police tied a Bushmaster XM15 rifle to shootings in the Washington sniper case in 2002.

After Bushmaster, the Freedom Group moved in on Remington, which traces its history to the days of flintlocks and today is supplying M24 sniper rifles to the government of Afghanistan and making handguns for the first time in decades. The group has also acquired Marlin Firearms, which turned out a special model for Annie Oakley, as well as Dakota Arms, a maker of high-end big-game rifles. It has bought DPMS Firearms, another maker of semiautomatic, military-style rifles, as well as manufacturers of ammunition and tactical clothing.

"We believe our scale and product breadth are unmatched within the industry," the Freedom Group said in a filing last year with the Securities and Exchange Commission.

Some gun enthusiasts have claimed that the power behind the company is actually George Soros, the hedge-fund billionaire and liberal activist. Soros, these people have warned, is buying U.S. gun companies so he can dismantle the industry, Second Amendment be damned.

The chatter grew so loud that the National Rifle Association issued a statement in October denying the rumors.

"NRA has had contact with officials from Cerberus and Freedom Group for some time," the NRA assured its members. "The owners and investors involved are strong supporters of the Second Amendment and are avid hunters and shooters."

Soros isn't behind the Freedom Group, but, ultimately, another financier is: Stephen Feinberg, the chief executive of Cerberus.

Cerberus is part of one of the signature Wall Street businesses of the past decade: private equity. Buyout kings like Feinberg, 51, try to acquire undervalued companies, often with borrowed money, fix them up and either take them public or sell at a profit to someone else.

Before the financial crisis of 2008, scores of well-known U.S. companies, from Chrysler down, passed into the hands of private-equity firms. For the financiers, the rewards were often enormous. But some companies that they acquired later ran into trouble, in part because they were burdened with debt from the takeovers.

Feinberg, a Princeton graduate who began his Wall Street career at Drexel Burnham Lambert, the junk bond powerhouse of Michael Milken fame, got into private equity in 1992. That year, he and William Richter founded Cerberus, which takes its name from the three-headed dog in Greek mythology that guards the gates of Hades.

Today, Feinberg presides over a private empire that rivals some of the mightiest public companies in the land. Cerberus manages more than $20 billion in capital. Together, the companies it owns generate annual revenue of about $40 billion - more than either Amazon or Coca-Cola last year.

Why Cerberus went after gun companies isn't clear. Many private investment firms shy away from such industries to avoid scaring off big investors like pension funds.

Yet, in many ways, the move is classic Cerberus. Feinberg has a history of investing in companies that other people may not want, but that Cerberus believes it can turn around. When Cerberus embarked on its acquisition spree in guns, it essentially had the field to itself.

"There's much less competition for buying these companies," says Steven N. Kaplan, a professor at the University of Chicago Booth School of Business and a private equity expert. "They must have decided there is an opportunity to make money by investing in the firearms industry and trying to build a big company."

Whatever the reason, Cerberus, through the Freedom Group, is now a major player.

It has sold weapons to the governments of Afghanistan, Thailand, Mexico and Malaysia, among others, and obtained new business from the U.S. Army, including a contract worth up to $28.2 million to upgrade the M24 sniper weapon system.

Cerberus brings connections to the table. The longtime chairman of its global investments group is Dan Quayle, the former vice president. The Freedom Group, meantime, has added two retired generals to its board. One is George Joulwan, who retired from the Army after serving as Supreme Allied Commander of Europe. The other is Michael Hagee, formerly commandant of the Marine Corps.

Jessica Kallam, a spokeswoman at the Freedom Group, said executives there declined to comment for this article. Timothy Price, a managing director of Cerberus, also declined to comment.Bushmaster was among the first to sell ordinary people on weapons that look and feel like the ones carried by soldiers. Today many gunmakers have embraced military-style weapons, a major but controversial source of growth for the commercial gun market, says Tom Diaz, a senior policy analyst at the Violence Policy Center, a research group that backs gun control.

[...]

"It's clear that the militarized stuff is the stuff that sells and is defining the industry," says Tom Diaz, a senior policy analyst at the Violence Policy Center, a research group that backs gun control.

Richard Dyke, former the principal owner and chairman of Bushmaster, says he's not sure why Bushmaster caught the eye of Cerberus. Whatever the case, when Cerberus came calling, Dyke, then past 70, was ready to sell. At the time, Bushmaster had $85 million in annual sales and several million dollars in debt, he says. In April 2006, he sold the company to Cerberus for about $76 million, he says, and Cerberus rented the Bushmaster plant here for five years.

The next year, Cerberus formed the Freedom Group.

Now Bushmaster is gone from Maine. Earlier this year, Dyke says, the Freedom Group notified him it was closing Bushmaster's operation in the state and moving it to a bigger plant owned by Remington, a typical consolidation play for a private investment firm looking to cut costs and increase efficiency. Remington, for its part, announced earlier this year that it was expanding its manufacturing capacity and hiring new employees to make Bushmasters.

Several months ago, Dyke started a new company, Windham Weaponry, at the old Bushmaster site and has rehired most of his former employees. But he's not planning to go head-to-head with the Freedom Group.

"It's the big gorilla in the room," he says, adding: "We don't have to do $100 million. We'd have hopes of doing $20 million."

Remington has been producing guns since 1816, when, according to lore, a young man named Eliphalet Remington made a flintlock rifle in his father's forge in Ilion Gulch, in upstate New York. By the 1870s, the brand was so popular that the company diversified into typewriters. In 2007, the Freedom Group swooped in and bought Remington for $370 million, including $252 million in assumed debt. In one stroke, the Freedom Group gained one of the most famous names in U.S. firearms, the largest domestic maker of shotguns and rifles and a major manufacturer of ammunition.

"That caused a lot of stir in the industry," says Dean J. Lockwood, a weapons systems analyst at Forecast International, a market research firm.

Next, the Freedom Group in rapid succession went after other firearms companies: DPMS; Marlin Firearms, a classic maker that came with two niche shotgun brands, Harrington & Richardson and L.C. Smith; and Dakota Arms. The Freedom Group also bought S&K industries, which supplies wood and laminate for gun stocks, as well as the Advanced Armament Corp., which makes silencers. It acquired Barnes Bullets, which makes copper-jacketed bullets popular with precision shooters and police departments.

The more the company diversifies its portfolio, analysts say, the more it has to offer to firearms distributors and leading retailers like Wal-Mart and Cabela's.

2011-11-24T13:08:00.000-05:00

Corporate Seizure of Public Property at Bargain Prices is the Goal of Austerity Programs

Each and every day, people around the world are realizing that the one-world government is based upon a hybrid Socialism-Communism economics system — a system of corporate governance and ownership of natural resources, land, water, and complete control of human beings. It is a system based upon the marriage of corporations, science and politics. It is a system that is funded by us, the world’s people. But what do knowing people do? We can’t fight manufactured super viruses, HAARP and psychotronic weapons; and we certainly cannot fight global nuclear arsenals. But we can, however, refuse to think and participate in the global economics systems, which were set up to literally enslave humankind. - Nancy Levant, Get Off the Globalization Grid, Part 1, NewsWithViews.com, August 23, 2005

What’s Behind the Global Bankers’ Austerity Programs: Seizure of Public Property for Corporations

Wayne Madsen Report
June 15, 2011

What lies in store for Greece, Portugal, Spain, Ireland, Italy, and, in short order, the United States, is the wholesale sell-off of public property to private corporations at bargain basement prices.

What the despots who gather in their secretive lairs at Davos, Cernobbio, Bilderberg, and G8/G20 are bringing about is a world where no property is owned by the state, which by default means the people. Total corporate control over every facet of life equals extreme fascism.

What is occurring in Greece is a bellwether for what will befall other nations in Europe, as well as the United States, if the bankers get their way. And in Greece, the people know how generations of investments by the taxpayers are being turned over to vampire capitalists who have the full backing of the International Monetary Fund, European Commission, and the European Central Bank.

The European and global bankers have demanded that the Greek government sell off entirely or assume a minority stake in a number of state enterprises and utilities.

For example, this year global capitalists are slated to acquire 84 percent of OTE, the Greek telecommunications provider. In addition, private bankers will assume 66 percent ownership of the Greek Postal Savings Bank; 51 percent of the National Lottery; 60 percent of the Salonika Water Authority; 68 percent of DEPA, the natural gas utility; and 25 percent ownership of the ports of Piraeus and Salonika.

Next year, the capitalist grab for public property increases in intensity with Athens International Airport coming under 79 percent private ownership. The global capitalists will also obtain 100 percent ownership of the Egniata toll motorway; 60 percent of Hellenic Post; 66 percent of OPAP, the state-run video-lotto and online sports betting firm; 73 percent of the Athens Water Authority; 83 percent of DEI, the Greek Electric Authority; and 51 percent of the Greek Regional Airports Authority.

The Greek Communist Party has vowed to fight against the acquisition of public property by the private sector. In fact, it is the Communist parties of Europe that have been the most vocal against the power grab by the bankers but their opposition to the privatization moves receives very little attention by the corporate-controlled media.

Massive sell-off lists of public property are now being drawn up by the governments of Portugal, Spain, Italy, and Ireland. In the United States, there are calls for the privatization of the US Postal Service, Social Security, and Medicare.

One Libyan government official this reporter spoke to in Tripoli, during an intensive NATO bombing assault, opined that the same fate is in store for the Libyan Socialist Jamahiriyah. With the highest standard of living in Africa, Libyans could witness the U.S.- and NATO-backed rebel government begin to sell off Libyan government assets to global capitalists.

The Libyan official said, “These people [global bankers] would sell the air if they could get away with it.”

2011-10-24T13:09:00.001-04:00

Private Operators Are Taking Over Roads and Increasing Tolls, Which Are No Different Than Tax Increases on the People

Ohio Turnpike Lease Plans Bring Toll Hike Fears

The Associated Press
July 3, 2011

Leasing Ohio's busy toll road that links the East Coast with the Midwest has the potential to bring billions of dollars to the cash-strapped state. It also could bring higher tolls and drive more traffic onto routes that meander through small towns, opponents say.

The governor wants to lease the Ohio Turnpike to a private operator, following the lead of a handful of states and cities that have pocketed cash for their toll roads in recent years.

Governments strapped by the Great Recession also are turning to selling off and leasing office towers, warehouses and prisons.

"We can get a big chunk of money that can be used to improve our infrastructure in the state," Ohio Gov. John Kasich said Friday during a news conference. "Indiana did it. Indiana made a lot of progress."

Neighboring Indiana last week marked the five-year anniversary of its $3.8 billion lease of the Indiana Toll Road to foreign investors. The state has spent much of the money on highway projects and put $500 million into an investment fund for future road construction.

Chicago leased an 8-mile highway for nearly $2 billion five years ago, and an Australian company bought a 99-year lease on Pocahontas Parkway in Virginia. But a plan to lease the Pennsylvania Turnpike fell through in recent years, in part because of fierce opposition from state and federal lawmakers.

Ohio's new budget allows the state to lease nearly all of Interstate 80, which carries about 50 million vehicles each year across northern Ohio from Pennsylvania to Indiana. It also gives the state's legislature some control over any potential deals after concerns were raised about whether a new owner would take care of the highway.

Much of the resistance is being led by officials from Ohio counties along the 241-mile turnpike, which is funded through tolls and the sale of gas and food at rest stops.

"It's a terribly unfair deal for northern Ohioans who have largely paid for the turnpike over the years," said Tim Brown, a commissioner in Wood County, just south of Toledo. "It's no different than a tax increase for us."

Among the main concerns is that tolls are almost certain to go up if a private operator takes over.

Tolls have nearly doubled since investors took over the Indiana Toll Road. A 10 percent increase took effect on Friday, bringing the price to cross the northern half of the state to $9 for most cars.

County officials in Ohio want to make sure there would be limits on future toll increases if the state's toll road is leased. It's now $15 for cars making a full trip. The turnpike collected a record $236 million from motorists last year. By comparison, Pennsylvania charges $32 to travel all 357 miles on its turnpike.

Kasich, a Republican, views the Ohio Turnpike as an asset that has potential to bring more revenue at a time when the state just completed a series of spending cuts to fill an estimated $6 billion budget hole.

He thinks the state could get at least $2.5 billion in leasing it and has said the money would pay for work on roads, bridges and harbors without raising taxes.

No deals are in the works yet. Kasich officials have said they envision a 30-year lease with an initial payment and a piece of annual toll revenues.

Still, there are many more details to work out.

A five-county planning body in northeast Ohio wants most of the money to go toward projects in northern Ohio, where the turnpike money is generated. It also wants to make sure there are guarantees that a private operator will keep up with highway maintenance.

The concern is that if the road becomes too costly or goes downhill, businesses that rely on the route might relocate or it will be tougher to attract new companies.

"There's a cost to the communities that are along the turnpike," said Stephen Hambley, a Medina County commissioner who heads the planning body in northeast Ohio. "We've been paying for it since the '50s. We feel we're a majority stockholder."

That's why state Sen. Mark Wagner, a Republican from Toledo, inserted a provision to Ohio's state budget giving lawmakers oversight of any lease deals.

"We owe it to northern Ohio to do it in a responsible way," he said.

Another worry is that truck traffic will move to secondary roads and clog up the small towns along the way. That's what happened when an 82 percent rate increase took full effect in 1999. The state responded by lowering tolls and increasing speeds for truckers.

More toll hikes if the turnpike is leased will likely push a lot more tractor-trailers onto other roads, said Joe Jones, a long-haul truck driver from Charlotte, N.C. He went out of his way to avoid the turnpike's toll booths while hauling machinery from upstate New York to Chicago on Friday.

"It puts another 60 miles on the trip, but I hate paying tolls," he said while refueling at a truck stop just outside Toledo.

Toll Road RFID Tags: A Threat to Privacy, Anonymity and Individual Liberty

RFID1984.com

Many people consider RFID technology to be a substantial threat to privacy and liberty, especially if it appears that remotely-readable RF tags will be incorporated into a National ID Card, passport or some other form of mandatory identification — an ID card that you will be required to present when opening a bank account, entering a federal building, or buying an airplane ticket.

I'm a little surprised that the people who are so vocal about domestic surveillance haven't said much about this issue.

There are thousands of Texas motorists who have already unwittingly opened the door to government surveillance by participating in TollTag, TxTag, or EZ Pass, programs that allow the use of toll roads and airport parking garages without having to stop and deposit coins at a toll booth. Each participating motorist attaches an RFID tag to his or her car's windshield, and a device at the toll booth detects the card as the motorist zooms unimpeded through the toll plaza.

In other areas of the country, similar programs have names like SunPass, Cruise Card, EXpressToll, Fast Lane, Fastrak, K-Tag, MnPass, PalmettoPass, Pikepass, Smart Tag, I-Pass — and the best name for such a device — eGo.

A serious problem, from the standpoint of privacy protection, is that not all of the RFID tag readers are on toll roads. In Dallas, TollTags can be used to pay for parking at Dallas Love Field and DFW International Airport.* In Houston, plans are under development to allow the use of EZ TAGs at both Hobby and Bush Intercontinental airports.*

The Dallas North Tollway was the first toll road in the world to use electronic toll collection when the technology became available in 1989.* A newer variation called TxTag allows access to toll roads throughout Texas.*

So the major airports have RFID tag readers, along with the tollways, as a matter of convenience. But there is no reason that TollTag readers could not be placed at other points all over the state. This would make it easier to locate a stolen car, for example, if it had an RFID tag.

More recently, a more mysterious development has taken shape: these square white modules have appeared on TXDOT poles along the freeways in the Dallas area. They are usually mounted on the same poles as the traffic surveillance cameras, but in some locations they stand alone.

This mysterious roadside antenna is on Spur 408 in southwest Dallas. The writer knows an antenna when he sees one, and the peculiar thing about this one is that it is tilted downward, about 20°, toward the traffic.

This specimen is located at 32°41'52.0" N., 96°56'10.1" W. An inquiry to the Texas Department of Transportation produced this reply:

The units are Smart Sensors manufactured by Wavetronix. The Smart Sensor is a digital wave radar used for vehicle detection. The Smart Sensor measures vehicle volume, occupancy, speed and classification. The information gathered is NOT used for law enforcement purposes. We use the information to generate the speed map shown on our web site and to generate the travel times displayed on the dynamic message signs on the freeways.

That's interesting. The system is sensitive enough to measure occupancy of each passing vehicle? Even more interesting is the claim that the information is not used for law enforcement purposes. Why not? If their system shows a steady stream of people driving at 90 mph on the freeway, or driving on the shoulders at 60 mph, isn't TXDOT obligated to notify the police?

Updated 9/13/2008:
Today I got an informative email from a reader who clarified the use of the word "occupancy" in TXDOT's explanation above. The term refers to the percentage of time that each of the lanes on the highway is occupied -- the traffic density, in other words, not the number of people in each passing car. Obviously I had overestimated the power of this system.

SmartSensor is a 10.525 GHz Frequency Modulated Continuous Wave (FMCW) radar.* Information about vehicle movements is collected and stored. To some extent, it is necessary to retain this information in the event of a billing dispute. But there's no way to know whether the data is retained, archived, or sold to the highest bidder, or whether the information is shared with other government agencies in real time.

If the SmartSensor devices are accompanied by TollTag readers, and (someday soon) they could easily be, the technology is in place to track the movements (and speed) of people all over town, not just on the toll roads. This could be a good thing — for example, if the police are looking for a stolen car — or it could be very bad, depending on Big Brother's use of the information.

Yes, but what if you don't have a TollTag on your car? Can you travel anonymously and blend in with the crowd, without being electronically followed? No, because the state is using license plate readers as well.

Highway 121's new lanes to open in July, sans toll collection. Once collections begin, [Texas State Highway] 121 will be the first toll road in the nation without tollbooths. Motorists will be able to use their North Texas Tollway Authority TollTag in addition to the transportation agency's TxTag stickers and the Harris County Toll Road Authority's EZ TAG. People who don't have toll tags, though, won't have to stop at a booth. Instead, video cameras will capture their license plate number and send them a bill, though that will cost about 33 percent more than toll tag users will have to pay.

The Editor says...
I went up the Dallas North Tollway several months ago and never saw a toll booth, so I didn't pay the toll. Nor did I ever get a bill in the mail. I hope there's not a warrant out for my arrest!

Texas Considers Putting RFID Tags in All Cars. New inspection stickers will "contain a tamper-resistant transponder, and at a minimum, be capable of storing: (1) the transponder's unique identification number; and (2) the make, model, and vehicle identification number of the vehicle to which the certificate is affixed."

The Editor states the obvious:
This would render Toll Tags obsolete. It would also make it fairly simple to locate a stolen car, and might be an easy way to enforce the speed limits on the open highway. For example, if your car is detected in Dallas at noon and in Houston at 2:30 p.m., you were obviously speeding on I-45.

Electronic Vehicle Registration Picks Up Speed. In South Africa, at least 500,000 RFID tags are now being affixed to metal license plates to automatically identify vehicles and verify they are properly registered. Within the next two years, 10 million cars in that country are expected to sport electronic license plates. In Bermuda, meanwhile, more than half of the island nation's cars and trucks currently have RFID-enabled registration stickers attached to their windshields, and all of its trucks and cars — nearly 25,000 — are expected to have them by June of this year. Other countries — including Brazil, China, Dubai, India and Mexico — have either already begun implementing or are currently eyeing RFID-enabled vehicle identification and registration systems.

Georgia 400 To Upgrade Cruise Card eGo Tags. Georgia's State Road and Tollway Authority (SRTA), which operates the GA 400 toll road in Atlanta, will be the first toll facility within the continental United States to upgrade their radio frequency identification (RFID) toll collection technology to TransCore's paper-thin eGo® tags, a lower-cost, battery-less windshield sticker tag. Almost a million eGo tags are already deployed in transportation applications, including toll roads in Puerto Rico and Brazil.

TxDOT selects TransCore RFID for tracking and tolling throughout Texas. The Texas Department of Transportation (TXDOT) selects TransCore's eGo® Plus radio frequency identification technology for use in the area's Central Texas Turnpike Program, a $2 billion transportation initiative. The multimillion-dollar contract allows for the initial release of 500,000 eGo Plus tags, branded locally as TxTag, with a total of 2 million tags over two years. The Central Texas Turnpike Program was designed to increase mobility by adding capacity and reducing congestion in the region.

Trusted traveler toll road system means the government will decide if and where you travel.

NAFTA Superhighway RFID Card For US Citizens. US citizens will be forced to adopt a de facto national identification card and have their freedom of mobility defined by the government under proposals set to derive from NAFTA superhighway toll road systems and the implementation of the American Union. Existing toll road systems operational at US borders such as SENTRI/NEXUS and the FAST program mandate that passing vehicles are enrolled in RFID passive tracking and identification programs linked to central databases.

Did someone mention the NAFTA Superhighway?

Pike needs to play fare: Tolls for all or no one. So now the Massachusetts Turnpike Authority is thinking about setting up something called "open-road tolling," which means that instead of robbing you at tollbooths, they would record every driver's license-plate number and then rob them with monthly bills. This raises a couple of interesting questions.

Highway Tolls Key to New Jersey Debt, Spending Reform Plan. In his January State of the State address, New Jersey Gov. Jon Corzine (D) unveiled a long-awaited plan to capture the value of the state's toll roads. The state would receive approximately $38 billion in cash financed by the sale of bonds backed by toll increases. According to the plan, the cash would be used to significantly pay down New Jersey's $32 billion bonded indebtedness and finance transportation projects.

RFID: A Brief Technology Analysis. Radio frequency identification (RFID) systems have been deployed in limited numbers for years. Two of the most predominant have been in the form of toll road collection transponders and security badges. Toll road authorities around the country have equipped drivers with a transponder that is connected to their credit card. This allows them to pay their tolls at 40 miles-per-hour rather than stopping to throw quarters into a basket and slow the flow of traffic.

Skymeter: Skymeter's satellite data aggregation and price matching takes all of the pain out of getting a GPS billing feed [which] can be used for Road Use Charging, Pay as you go Insurance, Parking, and any application requiring payment for vehicle use.

National RFid Center General Newsletter 09/02/2006: The roadway, known as the "Golden Corridor" is the first in the country to install all-video toll collection. Using license plate information photographed by cameras, money will be deducted from customer accounts. Those without toll accounts will have bills sent to their address, based on information from their license plates.

Video eye to scan for Newton parking lapses. Automatic license plate recognition — a kind of RoboCop of the parking world that uses a panoramic video camera, laptop computer, and sophisticated software — detects cars that have been parked too long and sounds an alert to write a ticket. The city bought three systems for $50,000 and plans to install them in parking enforcement vehicles this month.

Police partner with license plate readers. A growing number of police departments are turning to mobile camera systems to fight motor vehicle theft and identify unregistered cars. The cameras read license plates of parked and moving cars — hundreds per minute — and check them against vehicle databases, said Lance Clem, a spokesman for the Colorado Bureau of Investigation, which purchased several systems for its police vehicles last fall.

This license plate-scanning technology has been around for a few years already, and is in use on side streets as well as freeways. The following commentary was written in 2004:

License Plate "Guns" and Privacy: New Haven police have a new law enforcement tool: a license-plate scanner. Similar to a radar gun, it reads the license plates of moving or parked cars and links with remote police databases, immediately providing information about the car and owner. Right now the police check if there are any taxes owed on the car, if the car or license plate is stolen, and if the car is unregistered or uninsured. A car that comes up positive is towed.

Even the most gung-ho devotee of big government would have to be a little concerned about the potential for totalitarianism at this point, even if privacy is not guaranteed. Wholesale monitoring of motorists on the streets and freeways is legal. The U.S. Supreme Court has said in two cases, U.S. v. Knotts and U.S. v. Karo, that Americans have no reasonable expectation of privacy when they're driving on a public street.*

"Our commuting to and from where we live and work is not done clandestinely". [Webb v. City of Shreveport, 371 So. 2d 316, 319 (La. Ct. App. 1979).]*

It is interesting that, at least for now, TollTag users can (and do) drive at speeds considerably in excess of the posted speed limit, and even though the TollTag system recognizes those drivers as they enter and exit the highway (and many points along the way), the system is not used to generate speeding tickets. This, I suspect, is to avoid making the TollTag into an unpopular snitch, and to avoid revealing that capability before some appointed hour yet to come -- perhaps after TollTags are mandatory.

Information about vehicle movements is collected and stored, at least for billing purposes. It is necessary to retain this information for some number of months, to resolve potential billing disputes. But there's no way to know whether the data is retained, archived, or sold to the highest bidder, or whether the information is shared with other government agencies in real time.

Incidentally, TollTags are vehicle-specific -- they can't be shared, even between two cars owned by the same person.* There are now over 1,000,000 of these electronic transponders in operation in the North Texas area.*

The use of the TollTag may seem to be sheer luxury, but there are places around Dallas where a vehicle without such a tag must stop and pay a toll two or three times. This results in a little more risk, more gas consumption, and more wear and tear on the brakes at every stop. TollTag users are rewarded with a discounted toll rate as well. If I needed to travel on the North Dallas Tollway every day, I would probably get a TollTag for my car. But I think I would find a way to wrap the TollTag in aluminum foil when I wasn't on the tollway. That might not keep Big Brother from following me around, but there's no reason to make that kind of surveillance any easier.

GMAC Insurance Low-Mileage Discount; Pay by the Mile for Your Insurance

GMAC

Pay for what you use and nothing more.

Would you buy a whole pizza if you only wanted a slice?

Common sense says to only use what you need -- and only pay for what you use. That's the thinking behind the GMAC Insurance Low-Mileage Discount, where those who drive less, save more on their auto insurance. Whatever the reason for hitting the road less often, GMAC Insurance can reward you for something you're already doing.

The less you drive, the more you save -- up to 54%* a year on your auto insurance premiums.

2011-09-24T13:11:00.000-04:00

Transnational Corporations Fighting for Stake in the Smart Grid

24/7 Wall St.
June 2, 2011

Today’s alternative energy news keys off of another acquisition in the increasingly competitive smart grid area. What is more important is that the dollars at stake here are literally billions and billions.

France’s Schneider Electric SA (OTC: SBGSY) has offered to acquire Spain-based Telvent GIT, S.A. (NASDAQ: TLVT) for $2 billion.

Schneider, along with ABB Ltd. (NYSE: ABB), France’s Alstom SA (OTC: ALSMY), General Electric Co. (NYSE: GE), and Siemens AG (NYSE: SI) are major players in the nascent buildout of the smart grid.

The Electric Power Research Institute (EPRI) has estimated could cost nearly half a trillion dollars in the US alone. That’s enough money to be worth fighting over.

And that’s what these players have been doing, using their stacks of cash to acquire strategic components of the smart grid. Telvent, for example, offers real-time monitoring services for utilities to help balance electricity load. Doesn’t sound like a big deal, but the amount of electricity flowing to the grid is now calculated, not measured. Monitoring equipment like that from Telvent will give a utility a more accurate picture of load, and enable more efficient generation. Better monitoring will also help avoid costly blackouts and brownouts.

The First Trust NASDAQ Clean Edge Smart Grid Infrastructure (NASDAQ: GRID) ETF is too thinly traded to even matter for most investors. What does matter here in this ETF is that any or almost all of the fund’s small and mid-sized weighting components could find themselves under fire from an acquirer if they can be quickly integrated and then scaled for broader distribution.

ABB paid $3.1 billion in Janurary to acquire precision motor maker Baldor Electric and GE spent $3.2 billion to get 90% of French automation equipment firm Converteam. Siemens is looking to spend up to $4.3 billion on “bolt-on” acquisitions this year. Siemens has not yet participated in the buying spree, but it will likely have to do a deal or two if it wants to stay in the smart grid game.

These companies understand the stakes in the smart grid game and they also understand the utilities. Big utilities are wary of buying technology from start-ups and other small companies, but are willing to buy the same thing from ABB, GE, Schneider, or Siemens because these companies have a history and a track record. The risk that a company like GE will fold is very small, which means that it will be around to maintain and upgrade any systems it installs.

When it comes to M&A in the smart grid, the questions should probably point to “when” rather than “if” more deals are coming.

2011-08-11T13:12:00.000-04:00

Private Investors Buying Up Government Resources Cheap: The Great Government Fire Sale Is On

The Associated Press
May 13, 2011

As 2010 drew to a close, the mayor of Newark, N.J., was staring into a budget abyss so deep that he sold 16 city buildings to pay the bills. They included the architecturally significant Newark Symphony Hall and the police and fire headquarters.

In New York, the transit authority may sell its Madison Avenue headquarters, complete with an underground tunnel connected to Grand Central Terminal and air rights to build a skyscraper on top.

And soon, if state legislators have their way, private investors will be able to buy plenty of other municipal treasures: power plants in Wisconsin, prisons in Louisiana and Ohio and municipal buildings in Boston.

The Great Government Tag Sale is on. As states and cities struggle with billions of dollars in shortfalls, elected officials are increasingly selling public assets to cover their costs. Sometimes municipalities sell the buildings to pocket a one-time pile of cash and then lease them back so they can continue to use them.

To proponents, selling government property is an efficient way to plug budget holes. That's one reason the Obama administration has looked at unloading office towers, courthouses, warehouses and shacks. Private owners who develop the properties can inject vibrancy into municipal dead zones, the thinking goes. Buildings that were once exempt from property taxes are put back on the rolls.

But to critics, these sales are as misguided as pulling money out of your house to pay your bills. They point out that the government is letting go of a long-term, valuable asset in exchange for a one-time payment. When the asset is a building, a municipality then has to spend more money on leasing it back or renting another facility.

"This is tantamount to selling the family china only to have to rent it back in order to eat dinner," says economist Yves Smith, author of the top-rated business blog Naked Capitalism.

The Desperate States of America, yes. But in some cases, politics is influencing policy. Selling state assets has long been a part of the conservative playbook, which calls for moving some of the traditional functions of government to the private sector. And in other instances, the deals are shaded by accusations of corruption.

In Wisconsin, the center of the state budget battles, legislators lobbied for the budget repair bill to allow politicians to sell any state-owned heating, cooling or power plant to anyone for any price at any time — without public approval or a call for bids.

Critics of Republican Gov. Scott Walker charged that Koch Industries, an energy conglomerate that made a $43,000 donation to his campaign, the biggest from any corporation, might stand to benefit. Koch's head of government affairs, Philip Ellender, says the company was never interested in buying a state-owned power plant.

The provision was removed from the budget bill just before it passed. But it is expected to be taken up again later this year.

In many ways, it's the perfect time to market these deals as do-or-die propositions. Elected officials across the country say the ravages of the Great Recession have given them no choice, as evidenced by the escalating conflict between governments and the unions representing their employees.

Local and state governments made promises about their retirement benefits but often failed to set aside the money to make good on those promises. Now those governments say they simply can't afford them. Illinois' pension fund, for example, is only 45 percent paid for. Actuaries recommend 80 percent.

Years of wishful budgeting and fiscal gimmickry have finally caught up. The states' "ridiculous" budget and pension accounting would "make Enron blush," as Microsoft founder Bill Gates recently put it. For fiscal 2012, states face a $125 billion shortfall, according to the Center for Budget and Policy Priorities.

Elected leaders have already raided road-repair budgets and borrowed from emergency-service coffers. They've nabbed citizens' unclaimed checking account cash and sold future proceeds from lotteries. Detroit and Omaha just reduced the pensions of the police.

Now that other options have been exhausted, officials say that to avoid mammoth tax hikes — or any tax hikes, in some cases — they have no choice but to sell municipal assets.

Greece Reassures the IMF That It Will Privatize Services to Comply with Terms of Its International Bailout

The International Monetary Fund (IMF) is to send a permanent team of officials to Greece to oversee the country’s efforts at economic reform. It had originally held off placing representatives in Athens but has made the decision after Greece was provided with its second installment of the €110 billion ($144 billion) bailout package agreed by the IMF and the EU earlier this year. The inspectors have now been sent out to the country with a brief to keep a watch on tax collection and public spending reform. - Claire Archer, IMF to send permanent officials to Athens, September 21, 2010

Reuters
May 13, 2011

Despite bailouts for Greece, Ireland and Portugal, Europe's debt crisis may yet spread to core euro zone countries and emerging Eastern Europe, the International Monetary Fund said on Thursday.

The stark warning came as government sources in Athens said international inspectors checking on Greece's compliance with its EU/IMF rescue package had found problems and were pressing for deeper spending cuts to cover a likely revenue shortfall.

"Contagion to the core euro area, and then onward to emerging Europe, remains a tangible downside risk," the global lender's latest economic report on Europe said.

A Reuters poll of investors and economists showed an overwhelmingly majority believe Greece will restructure its debt, possibly as soon as later this year. Most fund managers expect Athens to pay back less than half of what it owes.

The IMF said it stood ready to provide more aid to Greece if requested, but the country that triggered Europe's sovereign debt crisis in 2009 still had plenty of untapped potential to raise extra cash itself though privatizations.

Finance ministers of the 17-country single currency area are set to approve a 78 billion euro ($109 billion) rescue plan for Portugal next Monday after Finland's prime minister-in-waiting clinched a deal to ensure parliamentary approval of the package.

But markets are increasingly concerned that Greece will never be able to repay its 327 billion euro debt and will have to restructure, forcing losses on investors with severe consequences in the euro zone and beyond.

Asked whether there could be new aid package to help Greece work through its fiscal recovery program, Antonio Borges, the IMF's European department director, said the fund was open to the possibility.

"The Greeks have to take the initiative, and so far they have not approached us. The IMF stands ready (to provide additional support) as a matter of policy," he told reporters.

The semiannual IMF report said peripheral members of the euro zone needed to make "unrelenting" reform efforts to overcome the debt crisis and prevent it spreading further.

It also urged the European Central Bank to tread carefully on further rises in interest rates after last month's first increase since 2007, saying euro zone monetary policy could "afford to remain relatively accommodative"...

Greece Reassures IMF on Privatization

UPI
February 14, 2011

Finance Minister George Papaconstantinou said Greece was committed to privatizing services to comply with terms of its international bailout.

Greece received a $148 billion loan from the International Monetary Fund and the European Union in May. The terms include an agreement to sell $67 billion in state assets, the EUobserver reported Monday

An assessment team from the IMF and the EU recently criticized Greece for its slow efforts to turn services over to private concerns. In turn, a spokesman for the Greek government on Saturday said the assessment team had "behaved unacceptably."

"We asked them for help ... not to meddle in our internal affairs," the spokesman said.

Papaconstantinou sought to calm tensions Sunday after a statement from the European Central Bank and the IMF applauded Greece's effort to comply with the terms of the loan.

"We recognize the difficult challenge facing the Greek economy and we have the deepest respect for the tremendous efforts being made by the Greek people," the IMF and the ECB said.

Papaconstantinou said Greece "will commercially exploit public property," but drew the line at selling state land.

"We will not sell off state land," he said.

"The decisions about how this will be done will be taken by the Greek government and nobody else," he added.

2011-07-24T13:13:00.000-04:00

Obama to 'Invest' Tax Dollars in 'Partnership' Between the Feds and 11 Major Corporations

CNSNews.com
June 26, 2011

In his weekly address released Saturday, President Barack Obama called for a campaign of "nation building here at home," citing as an example of what is needed to rebuild the American economy an initiative he announced Friday to "invest" tax dollars in what he called a "partnership" between the federal government and an initial group of 11 major corporations.

The administration's corporate partners in this venture include Caterpiller, Corning, Dow Chemical, Ford, Honeywell, Intel, Johnson and Johnson, Allegheny Technologies, Stryker and Proctor and Gamble.

Editor's Note:

Caterpillar Inc. is the bulldozer manufacturer that President Barack Obama used to help push his $787 billion stimulus plan. Chief Executive Officer Jim Owens, 63, is a member of the president’s Economic Recovery Advisory Board. Obama visited the Peoria, Illinois, headquarters on February 12, 2009, the final day of his campaign to press for Congressional passage. - How’s the stimulus working out for Caterpillar?, Michelle Malkin, April 21, 2009

Caterpillar Inc. of Illinois announced nearly 2,400 layoffs despite President Obama using his home state’s company as an example of a struggling manufacturer that would benefit from his economic stimulus plan and save jobs. The new round of job cuts will span five plants in Illinois, Indiana and Georgia, and follows the January news that Caterpillar would slash 22,000 people from its 112,000-person workforce. Mr. Obama hosted an event in support of his stimulus plan at the company’s Peoria, Ill., headquarters in mid-February, saying the $787 billion stimulus would be “a major step forward on our path to economic recovery.” - Caterpillar slashes jobs despite stimulus, Washington Times, March 17, 2009

Obama is not seeking new legislation from Congress to authorize his government-corporate partnership program--which he is calling the "Advanced Manufacturing Partnership"--and he did not say how the corporations in the partnership had been chosen.

"The President’s plan, which leverages existing programs and proposals, will invest more than $500 million to jumpstart this effort," the White House said in a statement released Friday.

"Even though we’ve turned our economy in the right direction over the past couple of years, many Americans are still hurting, and now is the time to focus on nation building here at home," Obama said before explaining the partnership in his Saturday address.

In addition to the 11 corporations, the administration also picked a small group of universities to participate in the government-corporate partnership. These include the Massachusetts Institute of Technology, Carnegie Mellon University, Georgia Institute of Technology, Stanford University, the University of California-Berkeley and the University of Michigan. The White House did not say how these universities were selected.

In a speech in Pittsburgh Friday announcing the government-corporate partnership program, Obama said that in American history such partnerships have often led the way in enterpreneurial breakthroughs.

"Throughout our history, our greatest breakthroughs have often come from partnerships just like this one," said Obama. "American innovation has always been sparked by individual scientists and entrepreneurs, often at universities like Carnegie Mellon or Georgia Tech or Berkeley or Stanford. But a lot of companies don’t invest in early ideas because it won’t pay off right away. And that’s where government can step in."

As described in the White House statement, the largest single element of the partnership program will have the Departments of Commerce, Agriculture, Homeland Security, Energy and Defense spending an estimated $300 million in tax dollars to "co-invest with industry" in the development of products including "small high-powered batteries" and "alternative energy."

"Starting this summer, the Departments of Defense, Homeland Security, Energy, Agriculture, Commerce and other agencies will coordinate a government-wide effort to leverage their existing funds and future budgets, with an initial goal of $300 million, to co-invest with industry in innovative technologies that will jumpstart domestic manufacturing capability essential to our national security and promote the long-term economic viability of critical U.S. industries," said the White House statement. "Initial investments include small high-powered batteries, advanced composites, metal fabrication, bio-manufacturing, and alternative energy, among others."

In his weekly address, President Obama explained his view that "nation building here at home" means government "investment" in education and infrastructure, as well as in the development of technology--including the kind of "clean energy" technology that will be one focus of his new government-corporate partnership.

"That means giving our kids the best education in the world so they have the knowledge and skills to succeed in this economy. It means rebuilding our crumbling roads, railways, and runways," said Obama. "And it means investing in the cutting-edge research and technologies that will spur growth in the years ahead – from clean energy to advanced manufacturing."

In his Friday speech at Pittsburgh as he announced the Advanced Manufacturing Partnership, Obama also put a focus on government "investment" in "clean energy" and pointed to the government bailouts of General Motors and Chrysler as successes.

"If we want a robust, growing economy, we need a robust, growing manufacturing sector. That’s why we told the auto industry two years ago that if they were willing to adapt, we’d stand by them. Today, they’re profitable, they’re creating jobs, and they’re repaying taxpayers ahead of schedule," said Obama.

"That's why we’ve launched a partnership to retrain workers with new skills. That’s why we’ve invested in clean energy manufacturing and new jobs building wind turbines and solar panels and advanced batteries," he said.

The White House said the creation of the government-corporate partnership program was based on a recomendation by the President's Council of Advisers on Science and Technology (PCAST). PCAST is co-chaired by John Holdren, head of the White House Office of Science and Technology Policy.

In Human Ecology: Problems and Solutions, a 1973 book that he co-authored with Paul Ehrlich and Anne H. Ehrlich, Holdren and his co-authors wrote:

“A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States."

“De-development means bringing our economic system (especially patterns of consumption) into line with the realities of ecology and the global resource situation,” Holdren and the Ehrlichs wrote.

“Resources must be diverted from frivolous and wasteful uses in overdeveloped countries to filling the genuine needs of underdeveloped countries," Holdren and his co-authors wrote.
"This effort must be largely political, especially with regard to our overexploitation of world resources, but the campaign should be strongly supplemented by legal and boycott action against polluters and others whose activities damage the environment. The need for de-development presents our economists with a major challenge. They must design a stable, low-consumption economy in which there is a much more equitable distribution of wealth than in the present one. Redistribution of wealth both within and among nations is absolutely essential, if a decent life is to be provided for every human being.”

In a videotaped interview with CNSNews.com in September 2010, reporter Nicholas Ballays asked Holdren what he meant by a campaign to de-develop the United States.

“What we meant by that was stopping the kinds of activities that are destroying the environment and replacing them with activities that would produce both prosperity and environmental quality," said Holdren. "Thanks a lot.”

Ballasy followed-up: “And how do you plan on implementing that?”

“Through the free market economy,” Holdren said.

Here is the September 2010 videotape of White House Science Adviser Holdren explaining his call for de-developing the United States:

2011-06-24T13:15:00.000-04:00

Rothschild's Carbon Ring Consortium and Carbon Ring Pty Limited

1991 "In searching for a new enemy to unite us, we came up with the idea that pollution, the threat of global warming, water shortages, famine and the like would fit the bill."
- Club of Rome 1991

July 6, 2007 David Rothschild's says he and his family (that own half of the world's wealth) have no plans for a global carbon dioxide (what we breath out) tax. Ow that's good news, no tax on breathing. Plants that breath in carbon dioxide will be happy as well...or will they...

April 21, 2009 Whoops, the same Rothschild family are setting up carbon tax "banks" here in Australia and abroad!!

Flashback: Rothschild Launches Carbon Credit Investment Fund

Rothschild Australia and Australia-based environmental group E3 International have launched a fund which will allow highly polluting companies to offset their emissions by buying carbon credits from cleaner firms. With individual investments of no less than $100,000, the Consortium hopes to raise $2 million. It is expected that by June 2003 the carbon credits purchased will be ready for distribution among investors. - Rothschild, E3 Launch Carbon Credit Investment Fund, National Energy Technology Laboratory, Carbon Sequestration Newsletter, October 2002

Originally Published on September 3, 2002

Reuters - Billed as the first of its kind in the Asia-Pacific region and soon to be followed by other similar private investment vehicles, the Carbon Ring Consortium seeks to raise $2 million, with individual investors obliged to pay $100,000.

"With recent developments in international climate change policy, the question is no longer if, but when the global carbon trading market will emerge," said Richard Martin, chief executive officer of Rothschild Australia.

Rothschild said in a prospectus that the Carbon Ring Consortium would be open for investments until October 30. [See The Rothschilds: the First Barons of Banking]

It would be wrapped up in June 2003, when the carbon credits purchased will be distributed to investors pro rata.

Trading environmental credits is an emerging market designed to allow firms that fail to meet emissions standards to buy credits from other firms that undercut their targets.

The Kyoto accord signed by developing nations in the Japanese city of that name envisages some carbon credit trade between countries with so-called carbon sinks - forests - and others that produce higher levels of pollution than they are allowed to.

The same applies to companies, and a nascent market has already emerged in the United States where some states have limits on acid rain components like sulphur dioxide and others have limits on carbon dioxide emissions.

Greenhouse gases such as carbon dioxide are blamed by many scientists for rising world temperatures.

The investment bank said it was estimated that the global carbon trading market could be worth up to $150 billion by 2012.

It said it looked increasingly likely that the 1997 Kyoto Protocol on reducing greenhouse gas emissions would be ratified by enough countries to come into effect, notwithstanding the decision of the United States and Australia to reject the accord.

The process of investing will involve workshops to allow investors to gain hands-on knowledge of the new market.

The unregistered, managed investment scheme will be the first in a series of private investment vehicles that Carbon Ring Pty Limited, a joint venture between Rothschild and E3 International, expects to launch in the coming years, the partners said.

Rothschild Australia to Take the Lead in the Global Carbon Trading Market

March 22, 2009

PR NewsWire - Rothschild Australia and E3 International are set to become key players in the international carbon credit trading market, an emerging commodity market that analysts estimate could be worth up to US$150 billion by 2012.

In a move that will re-shape the fledgling emissions trading market, Rothschild Australia and E3 International today announced their intention to launch the Carbon Ring Consortium — an investment vehicle that will provide companies in the Asia Pacific Region with an innovative way of learning about and understanding their risks in the new carbon market.

The Carbon Ring Consortium is the first of its kind in the Asia-Pacific Region, and is the first in a series of private investment vehicles that Carbon Ring Pty Ltd will launch in coming years.

Richard Martin, the chief executive officer of Rothschild Australia said:

“With recent developments in international climate change policy, the question is no longer if, but when the global carbon trading market will emerge. Rothschild Australia, through Carbon Ring, intends to be at the forefront of this market, providing private investment vehicles to companies seeking to offset their greenhouse gas emissions liabilities.” [See The Rockefellers, Obama and the Carbon Tax Scam]

The Carbon Ring Consortium allows companies with a future carbon liability to purchase a range of carbon credits and obtain a practical insight into the operation of this new market. Carbon credits will be bought from domestic and international projects that achieve a reduction in greenhouse gas emissions. These carbon credits will be distributed pro rata to Consortium investors.

“The Carbon Ring Consortium is an important first step for Rothschild and for our clients,” said Mr. Martin.

“The Consortium should appeal to companies that are faced with a greenhouse liability and are significant users or producers of energy, such as electricity generators, heavy industrials, oil companies, major manufacturers or airlines, amongst many others.

“It provides investors with an opportunity to learn about the market through an investment in a low risk, low cost investment vehicle, created specifically to acquire a diverse range of carbon credits. Participants will also share in significant knowledge and intellectual property,” Mr. Martin said.

During its life, the Carbon Ring Consortium intends to purchase a range of carbon credits, in a range of jurisdictions and from a range of sources. In the process, the Consortium will expose investors to many of the most pressing issues that corporations will have to address if they are to participate in the emerging carbon market. It will also give investors a practical insight into the buying and selling of carbon credits in the present market, without the need to invest in significant trading infrastructure or to assume undue risk.

Mr. Martin believes that there are many reasons why an organisation would invest in the Consortium: gaining practical experience in an emerging market; offsetting their greenhouse gas emissions; hedging their investments in new infrastructure; or in response to the expectations of the public, customers or shareholders.

Craig Windram, the director of E3 International and a partner in Carbon Ring, said:

“A carbon liability brings with it considerable financial risk for organisations, and early planning to deal with this risk will add to an organisation’s competitive advantage — that’s where Carbon Ring comes in.

“Few companies have developed a practical understanding of the emerging carbon market. For companies on either side of the equation, as either buyers or sellers, the Carbon Ring Consortium will provide the opportunity to ‘learn by doing’. This experience will be vital in assisting businesses to formulate policy, to understand and identify their risks, and to demonstrate leadership in an area of growing public concern,” Mr. Windram said.

The Carbon Ring Consortium is an unregistered, managed investment scheme. Designed to be a tailored, limited-life vehicle, it will document the legal and accounting process involved in the purchase, settlement and distribution of various carbon credit assets.

Requiring an investment of US$100,000, with a portion returned to investors in the form of carbon credits, the Consortium is intended to provide investors with a low cost, low risk and structured entry into this new market.

About Rothschild

N M Rothschild & Sons has been at the centre of the world’s financial markets for more 200 years. Today, the firm is a global investment bank, which provides independent and quality advice to governments, corporations and individuals worldwide through a network of professionals in 40 offices across more than 30 countries. The firm employs 2,500 employees worldwide.

About E3

The E3 Group is a hybrid organisation dedicated to making the business case for sustainable development. It is part strategic management consultancy, part environmental think tank, part project developer and part investment manager.

The E3 Group comprises a number of companies that have developed around the business of sustainability. The Group includes a conventional consulting business, an environmental software company, a dedicated renewable energy project promoter and the Carbon Ring Consortium. The principal operating company in the group is E3 International Pty Limited, which is headquartered in Australia.

Carbon Advice Group Announces the Appointment of Oliver Rothschild

May 4, 2009

Press Release - Carbon Advice Group Plc is pleased to announce the appointment of Oliver Rothschild as its chairman. Matthew Sullivan, Founder and CEO of Carbon Advice Group, welcomed the appointment saying:

“We are delighted that Oliver Rothschild has agreed to join Carbon Advice Group Plc as Chairman. We believe that Oliver will bring significant experience and international credibility to the Board of Carbon Advice Group Plc as it rapidly extends its carbon offsetting services and network of environmental entrepreneurs across Europe and the United States”.

Oliver Rothschild said:

“Carbon Advice Group Plc provides a unique way of engaging individuals and businesses in combating climate change across borders and nationalities. I am pleased to join Carbon Advice Group Plc at such an exciting stage in the company’s growth. I look forward to the exciting challenges of the future and working with my colleagues at Carbon Advice Group Plc to ensure the company provides a quality service to justify the public’s continuing support”.

Continued Carbon Advice Group founder Matthew Sullivan:

“We want to motivate the average person in the street to get online, join our global network, build their own carbon offsetting website and get the message across to everyone they know”.

“Everyday we see, hear and read about the catastrophic effects of global climate change. We all know we need to do something, and we need to do it now. We believe the appointment of Oliver Rothschild will help Carbon Advice Group Plc get closer to achieving our objective of bringing carbon emissions reduction and offsetting into the mainstream,” Sullivan continued.

2011-06-13T19:37:00.001-04:00

Wendy's Agrees to Sell Arby's to Private Equity Group

AFP
June 13, 2011

Wendy's/Arby's Group Inc. says it has agreed to sell a majority stake in its struggling Arby's brand to a private equity group.

The Atlanta company had put Arby's up for sale at the beginning of the year, saying it needed to focus on the better-performing Wendy's restaurants.

The buyer is a group led by Roark Capital Group, an Atlanta private equity firm that also owns Moe's Southwest Grill and Cinnabon.

The buyers are paying $130 million in cash for Arby's. In addition, the group will assume $190 million of Arby's debt, Wendy's/Arby's Group will keep an 18.5 percent stake in Arby's.

The companies value the overall deal at $430 million. That includes the debt being assumed, the value of the minority stake that Wendy's keeps and an $80 million income tax benefit for Wendy's.

The deal is expected to close in the third quarter.

Burger King, Franchisees Drop $1 Burger Lawsuit

Reuters
April 18, 2011

Burger King Corp's U.S. franchisees agreed to dismiss a lawsuit over $1 cheeseburgers, and will gain more power to set prices for the fast food restaurant chain's cheaper items.

The agreement, announced on Monday, comes as the Miami-based Burger King's new private-equity owners try to repair its historically contentious relationship with franchisees, who operate almost all of the restaurants for the world's second-biggest hamburger chain.

The National Franchisee Association (NFA), which represents Burger King franchisees, sued the company in 2009. Its main complaint was the company's decision to set the Value Menu price of its Double Cheeseburger at $1, a move operators said hurt profits.

Burger King's new policy gives franchisees more input on the price of items on its Value Menu and on how long special deals run, said Steve Wiborg, Burger King's president of North America. He declined to give more specifics.

"We saw this as an opportunity to resolve our differences and move forward," Wiborg told Reuters. "Our system is 90 percent franchised and it's important for our franchisees to win."

Wiborg was president and chief executive at Heartland Food Corp, one of Burger King's largest franchise operators, before taking his position at the company in October.

Burger King's new management has engaged franchisees in meaningful discussions and is listening to their concerns, said NFA Chairman Tony Versaci.

3G Capital bought Burger King in October for $3.26 billion and took it private.

At the end of 2010, there were 7,550 Burger King restaurants in the United States and Canada.

Fast-food chains like Burger King and bigger rival McDonald's Corp use low-priced food like $1 burgers to lure diners into restaurants. If those items are priced below costs, franchisees can suffer.

That is because franchisees pay royalties to the parent company based on overall sales. While $1 menu items can boost traffic and sales, restaurant operators can lose money if too many of those sales come from money-losing items.

Costs for ingredients such as beef, cheese, wheat and corn have spiked in recent months.

2011-05-20T17:09:00.002-04:00

Six Huge American Companies With Total Revenue Over $250 Billion That Will Never Have An IPO

24/7 Wall St.
May 19, 2011

With all the hubbub surrounding the IPO of professional social networking site LinkedIn, along with rumored deals involving Facebook and Twitter, it’s worth remembering that there are some companies that will probably never go public and probably are unlikely to sell themselves.

Some, such as media company Bloomberg L.P., are in businesses controlled by their founders or their heirs and do not see the need to be answerable to public shareholders. Others, Including fast food chicken chain Chick-Fil-A, may be worried about comparisons to large public competitors such as McDonald’s Corp. (NYSE:MCD). Some including Perdue Farms probably wouldn’t go public now because investors remain concerned about rising commodities prices. Cargill, the agribusiness giant, may not see the point in going public since it already reports its earnings since its bonds are publicly traded. Cargill is the largest private firm in the US. Update: A company spokeswoman says that the firm has voluntarily reported its earnings for years and that it has nothing to do with its bonds being traded on the open market.

Then there are the expenses of being public. When Sarbanes-Oxley was enacted after a wave of corporate scandals in the late 1990s including Enron and WorldCom, many business leaders argued that the law’s costs -- which averaged about $3 million, far exceeding the SEC’s estimates of $91,000 excluding audit fees — were not worth its benefits. Some make that same argument today even though the public largely favored the law when it was enacted.

“Paradoxically, the companies that were most aggressive in manipulating earnings were the companies that benefited the most from SOX,” writes Cheryl L. Wade, Dean Harold F. McNiece Professor of Law at St. John’s University School of Law, in a 2008 article in the Loyola University Chicago Law Journal. “Because of SOX, investors believed the information they received was more reliable.”

Despite all the hoopla surrounding the big tech IPOs and the growth of the private stock market, the IPO market needs to be kept in perspective. As Renaissance Capital noted in January, China surpassed the US in 2010 in the IPO market and China-based companies accounted for one-third of US IPOs. Those figures were helped by the mammoth $16 billion General Motors IPO. It was the only U.S.-based company to rank among the world’s biggest IPOs.

“Despite GM’s blockbuster offering, average deal size fell 28% from 2009 to $251 million as several high-profile buyout firms pushed out their IPO plans, most notably Nielsen, HCA and Toys “R” Us. Of note, only five US companies raised more than $500 million in their IPOs, well below the trailing five-year average of 13 companies,” Renaissance Capital says.

Indeed, US IPOs showed a total return of 25% in 2010, which though better than 2008′s -33% and 2009′s 16% still lagged behind 2006′s 26% gain. Renaissance expects the 2011 IPO to increase this year. Venture capitalist William Quigly recently opined that the next 10 years will be “great” for tech company founders and the venture capitalists who back them.

Maybe Quigly has a point that addresses the high-fliers such as Facebook (more than $200 billion) valuation, Groupon’s estimated value of as much as $20 billion and Twitter’s $7.7 billion, that’s not the case for all companies. Some prefer to stay private because they don’t need the money or the aggravation. Here is our picks for firms that have never gone public and may stay private forever. It is in no particular order.

Bloomberg L.P., the media company controlled by New York Mayor Mike Bloomberg, has been the subject of buyout rumors for years. I heard plenty of them myself when I worked there for seven years. None of them, including one involving Microsoft Corp. (NASDAQ:MSFT), proved to be true. Bloomberg, who owns a 68% stake in the company, has received buyout offers for years and turned them down. Fortune reported in 2007 that the mayor held discussions with private equity players that went nowhere.
In any case, there is a pointed question to be asked of Mike about his sale explorations, and Fortune asked it in a phone conversation with him in January: “Considering how proud you are of this company, could you really sell it to a private-equity firm?” And he answered, “No, I couldn’t.”

Besides, what would be the point? Bloomberg already is quite successful and has been one of the few media companies that have continued to expand during the economic slowdown. It even bought BusinessWeek in 2009 and has turned around the moribund publication. In 2008, it acquired Merrill Lynch’s 20% stake for $4.5 billion, which valued the entire firm at $25 billion. The value has probably increased more since then. Bloomberg the business person decided years ago not to discount his product even though that’s what his rivals did such as Dow Jones and Reuters did. Customers thought the service was worth the money. Revenue at the New York-based company reportedly rose from $4.6 billion in 2006 to $6.25 billion in 2010, according to Fortune and Forbes. Integrating Bloomberg’s unique business model and corporate culture into a larger organization would be exceedingly difficult. An IPO seems unlikely. A spokesperson could not immediately be reached for comment.
Koch Industries Inc., which does everything from refine chemicals to make consumer products such as Brawny paper towels, clearly likes the flexibility that comes with being a private company. In 2007, CEO Charles Koch told Amity Shales of the Council on Foreign Relations that he found quarterly earnings to be “pernicious.” As Shales wrote:
He said the old truism still held: If you, as a chief executive, obsess about delivering those “ever-increasing and predictable quarterly earnings, you are going to sacrifice long- term value.” He says only companies whose bosses the markets trust – such as Warren Buffett at Berkshire Hathaway Inc. – can focus on multiyear investments. In doing so, Buffett, the Sage of Omaha, has made a public company seem as if it is private.

The Kochs are savvy business people who are also huge backers of conservative political causes. They also very successful. Revenue at the Kansas-based company was $100 billion last year, according to Forbes. Koch was not immediately available for comment.
Chick fil-A offers something that many fast food customers never get — service. Workers are unfailingly polite and will even help customers carry their food to their tables. Later, they even go around to clean up trash and offer free soda refills. This attention to detail has paid off. Chick-fil-A, which owns more than 1,500 restaurants in 39 states, has posted 43 straight annual sales increases. Sales hit $3.58 billion in 2010 and rose 5.62% on a same-store basis, surpassing McDonald’s which rose 5%. What makes these figures even more impressive is that the chain is closed on Sunday. The family of founder S. Truett Cathy likes that Chick-fil-A is a family business and has vowed never to sell, a spokeswoman says.

TV pitchman Jim Perdue is the third generation of his family to run Perdue Food Products. The food and agribusiness firm generates more than $4.6 billion in annual sales and is the third-largest poultry producer in the United States. Clearly, the Salisbury, Maryland firm, which has ruffled the feathers of environmentalists and animal rights activists takes pride is being “family run.” In fact, the corporate headquarters is across the street from the original Perdue family farm. That makes an IPO or sale seem unlikely. A spokesperson couldn’t be reached for comment.

Cargill generated more than $109 billion in revenue last year, the most of any private company, according to Forbes. Cargill was founded at the end of the Civil War by William Wallace Cargill and his descendants have controlled the company ever since then. It probably too sees no reason to go public more than 140 years later, as the Minneapolis Star Tribune explained in January:
When the late Margaret Cargill’s charitable trusts wanted to sell off their company stock to free up billions of dollars for philanthropy, their representatives suggested a typical approach for a major corporation — a public stock offering.

But Cargill isn’t a typical major corporation.

The proposal went nowhere with the roughly 100 descendants of the company’s early leaders who control the Minnetonka-based agribusiness behemoth. And the complex deal that ultimately emerged — selling Cargill’s $20 billion-plus stake in fertilizer giant Mosaic Co. — underscored their determination to to keep Cargill private, immune to the whims and scrutiny of Wall Street.

An IPO or a sale seems as unlikely as ever. Cargill spokeswoman Lisa Clemens told 24/7 Wall St. that the firm has no plans to go public. “Through the years, our family shareholders have supported the benefits of private, patient capital,” she says in an email. “They continue to express support for private ownership.”
Bechtel Corp. , the world’s largest construction and engineering firm,, takes pride in being a family run business. Its recent history, though, has been rough. “In the late 1990s, Bechtel, under the direction of its fourth-generation family scion, CEO and chairman Riley Bechtel, began pumping nearly $1 billion into a series of disastrously timed investments in everything from e-commerce plays to telecom start-ups to power plants,” according to a 2004 story in Business 2.0. Since its founding in 1898, four generations of Bechtels have lead company through 23,000 projects in 140 nations and seven continents including the Hoover Dam. Kuwait Oil Fires and the Channel Tunnel, and given the unpredictability of the construction business, it would make a poor candidate to go public. Wall Street likes predictable earnings. Its revenue in 2010 was $27.9 billion, down from $30.8 billion in 2009. Like the Kochs, the Bechtel’s are known for their ties to conservative political causes. Bechtel could not be reached for comment.

2011-05-20T17:06:00.001-04:00

Private Equity Returns, Blackstone & Electricity (BX, DYN, KKR, NRG)

24/7 Wall St.
August 13, 2010

The Blackstone Group, L.P. (NYSE: BX) has agreed to purchase electricity generator Dynegy Inc. (NYSE: DYN). Blackstone will pay $4.50/share in cash, for a total of about $543 million, and assume Dynegy’s existing debt. The total deal is valued at about $4.7 billion. Blackstone’s cash offers represents a premium of 62% over Dynegy’s closing price last night of $2.78.

While just a tenth the size of the $48 billion deal that Kohlberg Kravis Roberts & Co. (NYSE: KKR) made for TXU in 2007, this is Blackstone’s largest ever acquisition of an electricity generation company.

The acquisition is expected to be completed by the end of 2010, and requires regulatory and shareholder approvals. Blackstone is not using any financing, instead putting up all the cash itself. Dynegy expects to issue a preliminary proxy statement within 15 days, and is permitted to seek other bids for a period of 40 days.

Blackstone has also entered into a deal with NRG Energy, Inc. (NYSE: NRG), in which NRG will purchase four natural gas-fired plants from Blackstone for $1.36 billion, once the acquisition of Dynegy is completed. The sale to NRG is contingent on the Dynegy acquisition.

That deal leaves Blackstone with a cash profit of about $800 million, but debt amounting to roughly $4.1 billion. The four plants represent about a third of Dynegy’s generating capacity, and 90% of its generating capacity in California, where three of the plants are located.

Blackstone says that it “look[s] forward to working together with Dynegy’s employees to realize the full potential of the company’s attractive portfolio of power generation assets.” Dynegy employees might not want to buy Blackstone-logo gear on the strength of that statement.

Dynegy shares are up about 60% this morning. Blackstone shares are off about 0.5%.

2011-04-25T11:51:00.002-04:00

IPO Rethink: Apollo (and a Private Equity Curse?)

24/7 Wall St
March 15, 2011

The world of private equity is not what it once was, but the remaining private equity leaders that survived out there do now seem to be stronger if they survived.

Apollo Management has tried to come public in an Initial Public Offering before, but the deal has just not been able to make it out of the gate due to market conditions and timing issues. We were expecting an IPO to come fairly soon with a unit (equity in partnership interests) sale of up to almost $500 million. That may now be delayed.

Goldman Sachs, JPMorgan, and Bank of America Merrill Lynch were expected to lead the underwriting. Apollo has wanted to join the ranks of The Blackstone Group (NYSE: BX), Kohlberg Kravis Roberts & Co. (NYSE: KKR), and Fortress Investment Group LLC (NYSE: FIG) in the realm of public private equity.

CNBC reported earlier today that the current IPO, which has been three years in the making, is again being delayed though it’s unclear for how long. Too bad, because Reuters even noted that a price range was already being discussed. Is it fair to ask if Apollo’s market ambitions mark a top each time or if an unofficial hex is placed on the markets when it finally determines “now is the time” to come public? Probably not, but it is hard to not wonder about it.

In all fairness, private equity firms may not be much more intelligent than the rest of us. They may be just as prone to buying companies at the top of the market as Joe Retail. Some of the logic may be as simple as the thought that these firms are ‘smooth buyers’ in normal times but they can’t really be vultures as easily when capital markets are tighter. How many huge M&A deals were made by private equity buyers when share prices were in free-fall in 2008 and into 2009? It was not really until after a significant market rally and after the return of the credit markets came back that private equity firms were able to start aggressively making acquisitions again.

We have not been able to confirm whether Apollo is a dead IPO again or not. For now we’ll just take ‘market conditions’ at face value and assume that a private equity giant will remain private or that it will have to value itself a bit lower than it would have just a few days earlier.

2011-04-24T13:18:00.001-04:00

Dynamic Applications Corp. Continues Development of Carbon Credit Generating Projects

A proposed initiative by President Barack Obama to establish a carbon credit trading program in the United States has been received well by Dynamic Applications Corp., a 'financier of emission reduction projects' which in-turn produce carbon credits. The company then sales the 'newly-produced carbon credits' on the carbon trading market.

AZoCleantech
April 16, 2010

Carbon credit trading presents a LUCRATIVE AND GROWING MARKET that encourages industrial entities to cut down on greenhouse gas emissions. President Obama hopes that the proposed initiative will help generate revenues for the economy and also reduce the total greenhouse gas emissions.

The budget plan of President Obama estimates revenues of $78.7 billion by 2012 by means of SELLING PERMITS TO POLLUTERS with greenhouse-gas emission. Estimates by the Congressional Budget Office indicate that revenues ranging from $50 billion to $300 billion per year can be produced from such an initiative.

Dynamic Applications Corp. operates by financing emission reduction projects which in-turn produce carbon credits. The produced carbon credits are sold by the company in the carbon trading market.

Dynamic Applications Corp.’s Chief Financial Officer Asher Zwebner commented that the market for carbon trading presents huge growth potential with negligible competition (see stories below).

Dynamic Applications Corp. Continues Development of Carbon Credit Generating Projects in Asia

Dynamic Applications Corp. is one of the players in the lucrative and growing carbon trading markets. It is one of the relatively few companies that is able to 'generate carbon credits' by 'financing private emissions reduction projects.' The company then takes the carbon credits, which they just 'produced,' and sales them on the open carbon trading market. The carbon trading market is a multi-billion dollar industry with tremendous growth potential and minimal competition.

PR Newswire
April 9, 2010

Dynamic Applications Corp. (OTCBB: DYAP), a facilitator of carbon credit generating projects, announced today that the company is continuing business development efforts to initiate projects in China and other Asian countries.

Dynamic Applications is currently in preliminary discussions with industrial entities in China and throughout Asia that are interested in reducing greenhouse gas emissions. The company's business model is to finance emission reduction projects that in-turn generate carbon credits. Dynamic Applications then participates in the sale of the newly-generated carbon credits on the open carbon trading market.

The carbon emissions trading program was established under the Kyoto Protocols which were put into effect in 2005. These protocols, signed by over 185 nations, were established to create limits on global greenhouse gas emissions. As such, a country may only exceed its emissions quota if excess carbon credit allowances are purchased from another entity.

"The carbon trading market is a multi-billion dollar industry, with tremendous growth potential and minimal competition," said Asher Zwebner, Chief Financial Officer of Dynamic Applications. "There are relatively few companies that are able to generate carbon credits by financing private emissions reduction projects."

"Dynamic Applications continues to negotiate towards lucrative carbon credit generating projects in China and throughout Asia. And we look forward to updating the market with continued developments," Zwebner added.

Dynamic Applications Corp. public filings may be viewed at http://www.sec.gov.

Contact:
CFO, Asher Zwebner
asher@fxmng.com
+972-54-464-6363

SOURCE Dynamic Application Corp

Dynamic Applications Corp., Based in Jerusalem, Israel, Has Negligible Competition in the Carbon Trading Market

On August 9, 2009, Dynamic Applications Corp., founded in 2008, entered into an areement with Green Biofuels Holding Ltd., an Israeli corporation, to contribute, convey, assign and transfer all of GBH's rights title and interest in specified Carbon Credit Projects. On the same date, Dynamic Applications Corp. agreed to issue to each of Mr. Shlomo Palas, Mr. Samuel Keshet and Mr. Eliezer Weinberg 7,178,750 shares of the common stock of the Company, which constituted an aggregate total of 21,538,250 of such shares. The share issuances were agreed to be accomplished by means of private placements of common stock, which relied on applicable exemptions from registration under U.S. securities laws.

Company Overview: Dynamic Applications Corp. focuses on manufacturing, marketing, and selling an electromagnetic percussion system that could be used as a chisel, a cutting tool, a magnet, and a coil. The company was founded in 2008 and is based in Jerusalem, Israel.

216 Jaffa Street
Jerusalem, Israel

Founded in 2008
Phone: 972 2 502 1322

Key Executives: Dynamic Applications Corp. does not have any Key Executives recorded.

Key Developments for Dynamic Applications Corp.:

Dynamic Applications Corp. announced delayed annual 10-K filing (04/1/2010)
On 04/01/2010, Dynamic Applications Corp. announced that they will be unable to file their next 10-K by the deadline required by the SEC.
Dynamic Applications Corp. Reports Earnings Results for the Third Quarter Ending Sept. 30, 2009 (11/9/2009): Dynamic Applications Corp. reported earnings results for the the third quarter ending Sept. 30, 2009. Net loss for the quarter was $37.61 million, down from $10.11 million for the same quarter the previous year (2008).
Dynamic Applications Corp. Enters into Co-Operation and Partnership Agreement with Green Biofuels Holding Ltd (08/10/2009)

Form 8-K for DYNAMIC APPLICATIONS CORP

10-Aug-2009

Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation

On August 9, 2009, Dynamic Applications Corp. (the "Company") entered into a Cooperation and Partnership Agreement with Green Biofuels Holding Ltd. ("GBH"), an Israeli corporation (the "Agreement"). Under the Agreement GBH agreed to contribute, convey, assign and transfer all of GBH's rights title and interest in specified Carbon Credit Projects. As compensation, the Company will pay GBH a compensation payment of 3% of the first six years of total gross income derived from an accepted project, from income paid to Dynamic or to any third party recruited by Dynamic to participate in such project or to any of its affiliated companies. The payment will apply only when the total gross income derived from the accepted project reaches 1 million Euros for the first time.

The Company further agreed to arrange financing of 44,000 Euro for a Fuxin Project within 10 days of the date of the Agreement, and 26,000 Euro for a coal mine and two projects in the Ukraine and Kazakhstan by August 27, 2009. In addition, the Company agreed to provide further financing for the benefit of these aforesaid projects in the amount of 100,000 Euro up until September 15, 2009 and 100,000 Euro up until October 1, 2009.

GBH agreed to a non-compete agreement for a period until 1 year following the date GBH or its affiliates owns, directly or indirectly any interest in the Company.

Private Placement Subscription Agreement

On the same date, the Company agreed to issue to each of Mr. Shlomo Palas, Mr. Samuel Keshet and Mr. Eliezer Weinberg (collectively, the "Recipients") 7,178,750 shares of the common stock of the Company, which constituted an aggregate total of 21,538,250 of such shares (the "Share Issuances"). The Share Issuances are subject to the prior finalization and approval of a stock plan relating to the common stock under applicable Israeli law by the Company and/or its Israeli subsidiary, which finalization and approval remains pending. The Recipients are officers, directors and/or shareholders in GBH. Mr. Weinberg was appointed as a director and Messrs. Palas and Keshet were appointed as employees of the Company's wholly-owned Israeli subsidiary.

The Share Issuances were agreed to be accomplished by means of private placements of common stock, which relied on applicable exemptions from registration under U.S. securities laws.

Forward-Looking Statements

Forward-looking statements in this report include matters that involve known and unknown risks, uncertainties, and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this report. Such risk factors include, among others: uncertainties as to the timing of the matters covered by the Agreement; costs related to the Agreement; availability and terms of capital and financing; the effectiveness of the carbon credits program; the timing and amount of any contracts agreements or rights relating to carbon credit projects; the success of prospect development and contract acquisition GBH and the Company relating to carbon credit projects; the relationship of the Company and GBH with owners of carbon credit projects; the impact of weather and the occurrence of disasters, such as fires, floods, and other events and natural disasters; government regulation of carbon credit industry; developments in China, Ukraine or Kazakhstan or other countries; the success of strategic plans, expectations and objectives for future operations of the Company. Actual results may differ materially from those contained in the forward-looking statements in this report. The Company undertakes no obligation and do not intend to update these forward-looking statements to reflect events or circumstances occurring after the date of this report. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. All forward-looking statements are qualified in their entirety by this cautionary statement.

Dynamic Applications Additional New Activity

PRNewswireOriginally Published on June 5, 2009

Dynamic Applications Corp. announced today that it has decided to enter the carbon credit market. This market was formed, in general, following the Kyoto Protocol, which required that signatory countries reduce their green house gases ("GHG") to set target levels.

Accordingly, a carbon credit market has evolved whereas activities that are recognized as reducing GHG levels, usually through technology utilization, are traded with activities that exceed their GHG limits. Consequently, a growing number of polluting plants around the world are trading carbon credits so they can achieve their allowed polluting levels.

According to public sources, the carbon credit market is estimated to involve trading of billions of dollars of carbon credits with constant growth streaming from growing demand by countries that are wishing to trade carbon credits in order to manage or reduce their levels of greenhouse gases.

The Company's carbon credit activity is added to its kenaf related activity, which Dynamic has recently initiated. The kenaf crop is used by many industries as an eco-friendly natural raw material. It is believed to have an extraordinary ability to absorb huge quantities of carbon dioxide and accordingly be entitled to carbon credit payment. Thus, Dynamic believes there is a direct synergy between the carbon credit activity and its kenaf activity of which it can benefit greatly.

Dynamic believes that it can utilize its sound networking, business development abilities and knowledge to take a share in the great opportunities that are provided by the carbon credit market.

About Dynamic

Dynamic focuses its activities in the clean tech sector and, among other initiatives, is investigating the market potential for kenaf. Kenaf is a fast-growing crop that, traditionally, has been used as a raw material for the production of ropes, bags and similar products. But, in recent years has been used in a wide range of new industrial applications, including the production of paper, bioplastics and environmentally friendly materials used in automobiles by manufacturers such as Toyota. Moreover, it has been integrated into the product lines of electronics companies such as NEC, Panasonic and others.

Researchers have suggested that kenaf may offer a broad range of environmental advantages, including the extraordinary capacity to absorb and store huge quantities of carbon dioxide, the gas most associated with the adverse effects of global warming. Accordingly, the appropriate use of kenaf might provide a substantial means of coping with global warming.

Currently, the Company is conducting a thorough survey of the kenaf market in China, which is the world's largest producer and the base for several major manufacturers incorporating Kenaf into their products.

In addition the Company has started a new activity in the carbon credit market.

Dynamic Applications Corp.
Mr. Ori Goore, CEO, 972(0)506335800 (see story below)
dynamicapplicationscorp@gmail.com
PR Office:Financial Communication
Mr. Noam Yellin, 972(0)544246720

Dynamic Applications Nominates Ori Goore as New CEO

Trading Markets
Originally Published on April 1, 2009

Dynamic Applications announced the nomination of Ori Goore to serve as a director and Chief Executive Officer of the company.

Until recently, Goore served as the Deputy Chief Executive Officer at Carmel Beach Resort 89, an affiliate of Delek Real Estate Group, a position he had occupied since July 2007. From October 2006 through July 2007 Goore was the senior economic advisor to the Chief Executive Officer at Delek Real Estate Group [Delek Group is one of the largest and most dynamic investment holding groups based out of Israel today investing in best of breed companies in four main sectors: energy, infrastructure, financial services and automotive].

Goore's appointment coincides with Dynamic's planned venture into the clean tech industry.

Goore said: "Dynamic sees that much of the world's attention is dedicated to current global environmental concerns. It believes that the clean tech industry can play a major role in providing solutions to some of the most acute challenges. By entering the clean tech industry Dynamic intends to contribute to both improving world environmental conditions and creating value for its shareholders."

(DYAP) has Short Term PowerRatings at TradingMarkets. Details on (DYAP) Short Term PowerRatings is available at this Link.

Hoover's Profile: Delek Group Ltd.

Delek Group Ltd.
Bet Adar Bldng., 7 Giborei Israel St., New Industrial Park
Netanya (South) 42504, Israel
Tel. +972-9-863-8444
Fax +972-9-885-4955

Type: Public
On the web: http://www.delek-group.com
Employees: 12

Delek Group is a conglomerate that primarily sells refined oil products and lubricants. Operating a network of more than 230 gas stations Delek Petroleum is one of the largest gasoline retailers in Israel. It's Delek US Holdings operates about 500 MAPCO-branded gas stations in the US (in Tennessee). Delek also operates about 1,300 gas stations in Europe. Delek Investments and Properties acts as holding company for subsidiaries in the energy, infrastructure, automotive, media, insurance, and finance sectors. Delek Group has spun off its real estate unit (Delek Real Estate) but retains a 64% share. The Delek Group is controlled by Israeli mogul Yitzhak Tshuva, owner of New York's Plaza Hotel.

The Israel Securities Authority Raids Delek Real Estate Ltd. Offices (12/6/2009)
The Israel Securities Authority is investigating whether Delek Real Estate Ltd. made improper accounting measures to inflate the value of foreign properties. Securities Authority investigators raided the company's offices in Ramat Gan, and questioned CEO Eran Meyital and CFO Daniel Leventhal. The events under investigation occurred before either man was appointed to his present post. So far as is known, the Securities Authority opened the investigation several weeks ago in the wake of the sudden resignation of former CEO Yarom Oren, who replaced longstanding CEO Ilik Rozansky in July, after his eight years in the job. Delek Real Estate went public during Rozansky's tenure.

2011-04-01T16:44:00.000-04:00

Will Private Equity Be the Next Meltdown?

By Barbara Kiviat, TIME
November 24, 2009

Over the past decade, some 3,000 U.S. companies have been bought by private-equity firms. Their M.O.? Suck up companies with borrowed money, make them more efficient and then resell, turning a profit in the process.

These days, nearly 1 in 10 nongovernmental employees works for a private equity–owned company, and that, says longtime industry reporter Josh Kosman, is a big problem. In his new book, The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis, Kosman argues that private-equity firms not only pillage the companies they buy, but also put the broader economy at risk by making those companies take on copious amounts of debt.

TIME's Barbara Kiviat spoke with Kosman about where he thinks the industry is headed.

You predict that private equity will go through a shakeout similar to what we've seen in the housing market. How does that analogy work?

Private-equity firms used the same cheap credit to buy companies that caused the housing bubble.

There are about 100 of these firms — KKR, Blackstone and Carlyle are some of the bigger ones — and they buy a company the same way we would buy a house. Put down about 20% and borrow about 80%. The big difference is, the company they're buying borrows the 80%, so they're the ones responsible for repayment. These loans were structured the same way and sold to the same people as mortgages. And the same kind of crazy prices were paid, so unfortunately we probably are going to see a private-equity meltdown just like what we saw in the housing market.

How bad do you think it will get?

The opinions on this shift, but the Boston Consulting Group in late 2008 predicted that about 50% of the companies bought in leveraged buyouts would default on their debt. If half default, and they fire about half of their workers — not the most aggressive estimate — then you're talking about 1.9 million unemployed.

Why haven't we seen more evidence of this yet?

I think the media hasn't put it together, but it actually is starting. The default rate for the past 12 months is roughly 12% — that's very high. Half of those companies that have defaulted, according to Standard & Poor's, had some type of private-equity involvement in their corporate life. A lot of those are PE-owned companies, ranging from Chrysler to the Tribune Company to Simmons Bedding. We've already seen the tip of the iceberg.

More broadly, what sorts of companies should we be worried about?

Unfortunately, private-equity firms infiltrated almost every industry — industrials, consumer goods, retail, hospitals, utilities — so a leveraged-buyout bust will be very widespread. TXU, which is now called Energy Future Holdings, one of the largest utilities in Texas, faces huge problems. They probably won't default on their debt until 2013, but at this point, and this is according to ratings agencies, it looks like they have very little chance of paying their debt. The range is from a huge utility like that to HCA, the largest hospital chain in the country.

And you think the private-equity industry will be the next one to line up for bailout money?

Yes. It's already happened with GMAC. You know, private-equity firms are very well connected. Four of the last eight Treasury secretaries currently work for private-equity firms.

Is there anything we could do now to prevent this wave from coming?

Probably not much. One of the main points of the book is to show how private equity and leveraged buyouts don't work, and even if the credit crisis I'm predicting doesn't happen — even if the economy recovers and some of the companies can refinance and push their debt off — the core practice is still destructive.

Many of these companies will fall apart anyway. In the 1980s, when Michael Milken was funding buyouts, 52% of the biggest 25 companies acquired ended up going bankrupt. I did a study of the 1990s, ideal economic times, and with 6 of the 10 biggest buyouts, the companies clearly were worse off 10 years later. In three cases the results were mixed, and in one case the private-equity firm improved the business.

This decade, 6 of the 10 biggest buyouts are already considered distressed, according to Moody's. The core practice does not work and rips apart our economy.

Fairy Tales of Recovery, Reality of More Failures

By Bob Chapman, The International Forecaster
September 3, 2009

The Illuminists are desperate. They are appealing the Bloomberg directive to reveal who received funding from the Federal Reserve to keep from going bankrupt.

In addition, HR 1207 (Federal Reserve Transparency Act) will pass in the House this month. The question is in what form. No matter what happens, the Illuminati know we are hot on their trail. They have to do everything possible to end the depression, or go for broke.

Thus far there has been little recovery even with an official $23.7 trillion committed by the Treasury and the Fed. This number alone shows you how serious this situation is.

The banking sector is still broke and is using TARP funds to buy out failing smaller banks. The residential TARP funds returned will go toward helping bail out the collapsing commercial real estate industry. Quantitative easing has not worked, nor has TARP and the endless stream of money from TALF.

We are anxious to see if the FASB sticks to its guns and demands mark-to-market accounting. That will pull the cover off of the fraud known as mark-to-model, which really is mark to whatever you want it to be.

As you can now see this is a much deeper problem than a subprime problem - that just triggered events. As we pointed out before, we are still facing a new wave of subprime loans written over the past year by FHA, Ginnie Mae, Fannie Mae and Freddie Mac, plus ALT-A, Option ARMS Pick-and-Pay Loans, and the failure of prime loans that will stretch to 2013.

On top of that, we have commercial real estate loans now to deal with and credit card failure. This is what the Illuminati crime syndicate has brought you in their lust for more power and riches. We must not forget as well, standing in the wings, are America’s creditors, especially the Chinese who are dumping $25 billion to $100 billion in dollar denominated assets monthly. Their goal is to be out of dollar paper in another 1 1/2 years.

Then there are the other sellers. There are few buyers, so the Fed will have to monetize trillions of dollars in dollar denominated bonds, which presently they are doing secretly. It is no wonder they are terrified of an audit, which would not only uncover their illegal activities, but also expose their leadership and participation in the outrageous suppression of gold and silver prices.

The status of foreign creditors could turn on a dime. We predict they will abandon ship one at a time, as the dollar slips lower and lower. The Fed and the Treasury have tried over and over to keep the USDX, dollar index, over 80 for weeks, and they have been totally unsuccessful. It settled this past Friday at 78.31, just ready to break to new lows. We wonder how long these countries will tolerate such arrogance and the dream of world government? One must remember these countries are suffering the fallout of the actions that have been deliberately executed by these Illuminists, and they are not happy about that. They are all suffering recession and many depression. It is only a matter of time before they too dump dollar denominated assets.

We would like to say for individuals caught up in this mess worldwide, other currencies are not the answer. Only gold and silver related assets are the answer. Remember that, for in the final analysis, all currencies will fall in value versus gold and silver, and there are no exceptions. We have been there before and seen that, so do not be deluded into going into other currencies, or shares in foreign markets denominated in other currencies; they are not the answer, only gold and silver are.

Then we hear the fairy tales of recovery in the US, Europe and Asia. If you spend enough money you can create a recovery, albeit of short duration. No one is out of the woods. Europe, particularly the eurozone, has cut issuance of money and credit to 3.7%, but they are maintaining interest rates at 1%, which is in reality ½%. The European recovery will be a parallel movement for a year, and without more cheap money or an increase in money and credit, it will die and wither away.

Then there are the ongoing real estate collapses in the US, Ireland, Spain and in the Persian Gulf. There could be a bank panic or holiday in any of these regions. If a panic occurs, the first liquid asset sold will be US Treasuries and Agencies and the US dollar. This would spread terror in Frankfurt, Paris, London and NYC. All these stock exchanges could collapse as well.

The world is about to find out that free trade and globalization has been a disaster.

The millions of jobs lost in the US and Europe, so that transnational conglomerates could prosper, is in the final stages of death. The redistribution of wealth from the rich to the poor countries is about to end in a shattering smash-up. The myth of worldwide prosperity is about to end.

Contrary to prevailing thought, the biggest losers will be world exporters, such as China, which has already seen a 40% fall in exports. All the money and credit creation we have seen in China over the past seven months, some $1.9 trillion, isn’t going to work. They still face 30 million unemployed. Those jobs are not going to return for a long time, if ever. Out of desperation, there eventually will be tariffs (legislated in the US, Europe and in other countries), and inflation will rise as a result.

In America, the safety net of the FDIC doesn’t exist. It is virtually broke, and that is why, a few months ago, unofficially the FDIC asked government for $500 billion. Putting this into perspective, about $700 billion would insure about 1% of all the qualifying deposits in the US.

Not only will the Federal Reserve Transparency Act, HR-1207, pass the House, but also it will pass the Senate, because you are going to write every Senator demanding that they pass it.

If passed, we will see our gold inventories. We’ll find out what toxic garbage the Fed has been buying from banks and what they have paid for it. We will find out every company that received funds and how they were spent. We will subpoena every piece of correspondence, fax, e-mail, and phone calls the Fed has ever made. We will get a real balance sheet; not some version the GAO approved. Wait until the public sees how the Fed and its owners have looted the people for almost 100 years.

Two Republican lawmakers, Darrell Issa, (R-CA) and Rep. Spencer Bachus, (R-OK), House Financial Services ranking members, are seeking an audit of the trust that manages the government’s controlling stake in AIG.

Three more U.S. banks failed on Friday, bringing the total to 84 so far this year, as the industry continues to grapple with deteriorating loans on their books. Regulators shuttered Affinity Bank of Ventura, California, Bradford Bank in Baltimore, and Mainstreet Bank of Forest Lake, Minnesota, which in total are expected to cost the government’s deposit insurance fund about $446 million.   

The Federal Deposit Insurance Corp. on Thursday reported that the insurance fund’s balance stood at $10.4 billion at the end of the second quarter. But the agency also noted that the figure was adjusted to account for $32 billion set aside for expected failures over the next year. FDIC Chairman Sheila Bair said this week that bank failures will remain elevated as banks go through the painful process of recognizing loan losses and cleaning up balance sheets. The total of 84 failures this year marks a sharp rise over the 25 last year, and the three failures in all of 2007.

We stated long ago the somewhere between 3,400 and 4,200 banks would go under, and the FDIC would spend trillions of dollars to cover the loses. A loss of 3,400 banks would lead to losses of over $33 trillion.

The FDIC now has foreign banks and private equity groups about to engorge themselves on failing US banks. Worse yet, rather than cash, the FDIC is allowing these financial firms to use equity, which is unprecedented. The use of non-cash collateral assets is being used because the purchasing banks are broke; and without TARP, not only could they not buy anything, but they’d probably be out of business.

What Ms. Bair has done has been to expedite the takeover of banks by bigger banks and involved the use of foreign banks as well as private equity partnerships.

As far as we are concerned, as a foreigner, you have to be deranged to buy dollar denominated assets with the massive monetization of agency securities, collateralized debt obligations, and treasuries going on, never mind the underhanded secret deals the Fed is involved in to fund their markets. If we can understand what the Fed is up too, so can these foreigners. That is what a more than $600 billion swap facility is all about, including suppression of foreign currencies in order to bolster the strength of the dollar.

This month, September, a great confusion will begin. The occupation of Iraq will continue, more troops will be sent to Afghanistan, and Pakistan will become another major battleground. Terrorism will be used to continue to propagandize the American public, along with Cap & Trade and medical reform and the Swine Flu fiasco. These are all distractions to keep the publics’ eye off the continued failure of our financial system.

Deflation continues to eat away at assets, except for gold and silver, and the Fed creates money and credit to offset deflation’s savages.

The torrent of money and credit has pulled some nations, at least temporarily, out of the negative decline on GDP. Japan, France and Germany are examples. The question is when will their economies run out of stream? Probably when they attempt to raise interest rates. In the case of the eurozone, the expansion of money and credit has already fallen 3.7%.

The global economic crisis, now more than two years old, has allowed governments to run banking and financial systems in a usurpation of power over the individual and private property. What we are facing is perpetual crisis and intended government control. There will not be a return to normality. Next will come food shortages and rationing, and one epidemic or pandemic after another.

We wonder what will happen when the public finds out that all these problems were preplanned by the Illuminati. Then comes the control of all labor. Government is now spending 185% of tax receipts. The budget deficit will be between $1.6 and $2.00 trillion for fiscal 2009, ending on 9/30/09.

For those who hadn’t noticed, yoy commercial real estate values fell 27% and are off 36% from their October 2007 peak. We'll see a total drop of 70% to 75% from the highs, when all is said and done. Refinancing has to be found for $165 billion in properties by the end of the year, which is impossible, even with leftover TARP funds.

Deflation has prices somewhere between minus 2% to plus 5% worldwide as imports and exports have fallen over 30%. As an example, in Los Angeles, the busiest port in the US, imports have fallen 16.9% yoy. It is the exporters who are getting hit the hardest and some have cut prices in the process.

The only thing that keeps a veneer of equilibrium is the massive creation of money and credit pumped out by central banks worldwide. We said we had entered depression this past February; and just as when we called the beginning of recession two years before, no one shared our opinion. If we are not in depression, than what is the significance of 20.8% unemployment, a factory utilization level of 65%, and continued massive foreclosures?

As we have said over and over again, the Fed, Treasury, Wall Street and banking are in a box and they cannot get out. They deliberately created this horrible situation, and there is no going back. It is impossible to reverse the process. We are in an economic and financial depression. The palliative supposedly is bigger budget deficits and credit expansion into infinity. We are going to see a replay of the 1970s. Inflation will catch up and overtake deflation one more time, but in the end deflation will prevail.

Fiscal spending is running wild, and our president predicts a budget deficit of $9 trillion dollars over the next ten years. The Congressional Budget Office (CBO) says spending has to be cut 8% permanently over the next several years. In July alone, federal spending rose 26%, as revenues fell 6%. Corporate tax receipts fell 58%, as individual revenues fell 21%.

The official economic contraction is the worst since the great depression. Can you imagine what it really is? 9.4% unemployment is front-page news, but you didn’t hear about the 4.7% loss in salaries and wages of 4.7% for the 12 months ended in June. There are more government employees now than all those employed in manufacturing and construction.

How is it that state employees now make 40% more than the average income in non-governmental jobs? What a perversion of government. It is no wonder that the US poverty rate is higher than in Mexico and Turkey.

FDIC Revises Rules to Favor Takeover of Banks By Private Equity Firms

Reuters
August 27, 2009

U.S. regulators backed down from the tough stance they took a month ago on rules for auctions of troubled banks, clearing the way for more private equity bidders to come back into the game.

A capital requirement for private equity investments in banks was lowered to a Tier 1 common equity ratio of 10 percent, from the 15 percent Tier 1 leverage ratio previously proposed.

The regulators also dropped a requirement that investors serve as a "source of strength" for the bank they buy, which critics said could have put them on the hook for more capital if the institution struggled.

A cross-guarantee proposal — meaning if an investor owns more than one bank , the FDIC can use the assets of the healthier bank to cut losses from the one that has faltered — was modified to only include investors that had an 80 percent common ownership of the two banks...

"On the whole, it's favorable to private equity. It's positive in terms of attracting private equity money," said Brett Barragate, a partner with the Jones Day law firm...

The FDIC also said it would seek comment about whether to phase in the impact on banks' capital requirements of an accounting change that requires institutions to bring off-balance sheet assets back on their books.

A New Abuse on Wall Street

By Robert Kuttner, The Boston Globe
August 11, 2009

...One new abuse that should be stopped before it spreads: big private equity companies, which are largely unregulated, are hungry to take over failed banks. Their argument is that the banks need new capital, and the private equity firms have it. But this is a profoundly bad idea.

Today, the FDIC is sitting on an inventory of failed banks that it needs to unload, and an insurance fund that it needs to replenish. Enter shadowy and unregulated private equity outfits like the Carlyle Group and Blackstone Capital, who are circling like vultures. The FDIC has done the hard part — at taxpayer expense: it has eaten the losses and cleaned up the failed banks’ balance sheets, making them appetizing targets...

In earlier deals, the FDIC has bent its own rules somewhat: it doesn’t permit any single private firm to own a bank, but in the $32 billion collapse of Indy Mac last year, the agency permitted a consortium of private equity firms to be the buyer.

Last month, the FDIC proposed to toughen its policy. It put out a draft policy statement for comment, signaling that it would prefer to merge failed banks with other banks, or to find investors other than private equity conglomerates. It proposed to prohibit self-dealing by firms acquiring failed banks, and to exclude firms based in offshore tax-havens. And if a private equity firm acquired a bank, it would be required to have higher ratios of capital because of its inherently riskier business strategies.

The private-equity companies have mounted a fierce lobbying campaign to soften the terms, arguing that the banking industry needs the capital. But the FDIC, the rare agency in this whole crisis that has put the public interest first, should hold the line.

In financial crises, conflicts of interests by insiders tend to mutate. We got into this mess, after all, because federally guaranteed banks were behaving like compulsive gamblers. Let’s not repeat these abuses in new forms.

SEIU Proposes New Rules for Private Equity Investments in Nation's Struggling Banks

Service Employees International Union
August 22, 2009

With private equity firms publicly calling for radical change to banking regulations that would ease their investment into the nation's struggling banks, the Service Employees International Union (SEIU) today proposed new rules to protect consumers and working families against the buyout firms' riskiest practices, strengthen long-standing consumer protections, and support stronger banks.

The new principles called for by SEIU — the fastest-growing labor union in the Americas and a leading advocate for better private equity and banking practices — directly address recent moves by a number of leading private equity firms to win special treatment by the Federal Reserve allowing them to take over commercial banks but avoid the current transparency and oversight rules by which other investors must abide.

Allowing private equity to purchase controlling stakes in large banks would undermine long-standing banking regulations and consumer protections by permitting buyout firms to access subsidized funding in the form of FDIC-insured deposits. Special rules could allow buyout firms to sell themselves their own debt at a discounted rate from the banks they want to control.

Under the terms called for by the private equity industry, buyout firms would remain exempt from oversight and transparency rules governing bank holding companies. This kind of special treatment from the Federal Reserve could open the door for private equity firms to assume little responsibility if a bank fails, adding unacceptable risk to taxpayer bailouts of banks deemed "too big to fail" by federal regulators.

Private Equity Could Reshape U.S. Banking Industry

Reuters
May 22, 2009

After a disastrous foray into banking early last year, private equity is making a cautious comeback with deals such as the BankUnited takeover, and their return will likely change how the industry looks.

Regulators appear to be working with private equity firms looking to buy banks, and in the next year or two several U.S. regional lenders could end up in the hands of buyout funds, banking analysts said.

"I can't picture a 5,000-branch bank coming out of this. But could I see 300-, 400-, 500-branch networks stitched together? I think so," said Seamus McMahon, chief executive of bank consulting firm McMahon Advisory LLC.

"Private equity firms are going to have a lot of influence."

As real estate markets continue to crater, many of the 8,300 U.S. banks will suffer, and some will fail. Private equity funds, meanwhile, have roughly $1 trillion of untapped funds at their disposal.

Some buyout funds are dipping their toes in the water now.

Firms including Wilbur Ross's WL Ross & Co, Carlyle Group, Blackstone Group, and Centerbridge Partners teamed up to take over Florida-based BankUnited in a government-assisted deal announced on Thursday. The funds put in $900 million of their capital, and are receiving support in the deal from the government.

Earlier this year, private equity firm J.C. Flowers & Co. got together with other investors to take over assets of failed mortgage lender IndyMac. In December, MatlinPatterson Global Advisers LLC agreed to invest in Flagstar Bancorp Inc.

After winning the auction for BankUnited, the group led by former North Fork Bank head John Kanas intends to continue growing through further acquisitions that could be rolled into the new bank once it is fixed. One of the targets could be BankAtlantic Bancorp Inc. a person familiar with the consortium said. The source is anonymous because the plans are not public...

Private equity firms have to structure their deals carefully to stay below thresholds that would subject their entire firms to onerous banking regulations. So as many as eight investors pitched in to buy BankUnited. The largest stake holders are Ross, Carlyle and Blackstone, each holding between 20 percent and 24.9 percent, below the level they are deemed to be in control, the source said...

IndyMac: Private Equity Gets Smart About Banks

By Heidi N. Moore, Wall Street Journal Blogs
January 5, 2009

...This weekend, a group of seven private equity firms led by Dune Capital bought the carcass of failed Pasadena, Calif., mortgage lender IndyMac. The private-equity firms plan to rebuild it and use it as a platform to acquire other financial institutions, while overhauling IndyMac’s business model to steer clear of risky subprime mortgage loans. Because each of the firms are pitching in some money, no one firm owns more than 10% of IndyMac, thus appeasing federal regulators.

Similarly, in August, private-equity investor J. Christopher Flowers, a veteran of Goldman Sachs Group’s financial-institutions group, bought a little bank in Missouri called First Cainsville Bank. The bank, with $14 million in assets and just two branches, probably wouldn’t normally be considered worthy of the attention of a financial sophisticate like Flowers, who kicked the tires at such massive potential M&A targets as Bear Stearns, American International Group and Washington Mutual and advised on Bank of America’s acquisition of Merrill Lynch. But Flowers saw the Cainsville acquisition as a way to get a foothold into the banking business and make it easier to buy other banks. And instead of buying the bank as part of his private-equity firm, J.C. Flowers, he bought it under his own name, overhauled the board of directors and informed the Office of the Comptroller of the Currency of his plan to make more acquisitions.

Federal regulators have been amenable to such solutions thus far. Perhaps that has something to do with the fact that roughly 25 banks have already failed, and more are expected.

The benefit to the private-equity firms of participating in federal auctions for failed banks is the chance to own cheap assets and gain a toehold in the rapidly consolidating banking industry, which they know well. Private-equity firms plowed $23 billion of capital into financial-services deals in 2008, and that is down 69% decrease from the $74 billion of 2007, according to data from Freeman & Co.

Meantime, the federal government gets a known quantity: private-equity firms that are experienced players in financial services. This is something of an echo of the late 1980s and early 1990s, when some private-equity firms snapped up assets from the government’s Resolution Trust Corp. amid the savings & loan crisis. They are also willing buyers, which is no small comfort to the government. Federal regulators looked for a buyer for IndyMac for five months before finally handing it over to a private-equity consortium.

Still, in taking over banks, private-equity firms are entering somewhat complicated contracts to accept federal bank regulators as highly involved overlords, something not all PE firms have been willing to do. Blackstone Group abandoned its proposed $6 billion acquisition of Alliance Data Systems–which owned a bank — arguing that it wouldn’t be able to meeting the changing requirements of federal regulators. In addition, some banks are allowed to choose their regulator, which creates a confusing drama of regulatory competition. IndyMac, for instance, chose the Office of Thrift Supervision, which ended up looking the other way at the lender’s financial troubles...

Private Equity Aims to Snatch Up Banks

By Dollars and Sense
May 7, 2009

Very interesting piece from yesterday's New York Times ("As Investors Circle Ailing Banks, Fed Sets Limits"). Private equity manager J. Christopher Flowers buys a tiny bank in Missouri in the hopes of using its national charter to snap up ailing banks across the country. The last two paragraphs are among the juiciest: Flowers "has estimated his banking empire will one day earn at least a 35 percent return on banks it has bought in the United States. 'I find it to be an extraordinary time to invest,' he said. He was even more blunt when he spoke to an industry group in New York earlier this year. 'Lowlife grave dancers like me will make a fortune,' he predicted."

As Investors Circle Ailing Banks, Fed Sets Limits

By Eric Lipton, The New York Times
May 6, 2009

Cainsville, Mo. — No one seems to want to own a business in this dusty, windswept corner of rural America, population 370, with its crumbling sidewalks and boarded-up storefronts. Except, that is, for J. Christopher Flowers, a media-shy New York billionaire who last year bought the First National Bank of Cainesville, one of the United States’ smallest national banks.

Mr. Flowers, a private equity manager, has no particular love for rural Missouri; in fact, he has never set foot in Cainsville. Rather, he wants to use the national bank charter he picked up in this farm town to go on a nationwide buying spree.

With that charter in hand, Mr. Flowers plans to take over a handful of large struggling banks, casualties of the economic crisis. In some cases, he hopes, the federal government will help...

For all the talk of the banking crisis, Mr. Flowers and other giant private equity players are circling distressed banks around the country, competing to buy into the industry. Bidding wars are now breaking out among private equity firms, including the Carlyle Group, which is going up against Mr. Flowers’s firm for a stake in BankUnited of Florida.

They and other investors see banks as the recession’s biggest prize: potential money machines that could one day generate fabulous returns, particularly after the federal government eats the losses of failed banks, then heavily subsidizes their sale. But like Mr. Flowers, some of them would prefer to take over the banks completely, replace their managements and take all the profit.

“I don’t think the Republic is going to be brought to its knees if private equity owns banks, personally,” Mr. Flowers said from his Midtown Manhattan office with its expansive views of Central Park. “We invest around the world — Japan, Germany, England, no problem.”

The Fed is resisting this pitch, for several reasons. Current law prohibits mixing banking and commerce, based on a fear that if industrialists own banks, they will dominate — and try to manipulate — the economy, as they did during the early-20th-century heyday of John Pierpont Morgan.

The government also wants the ability to stabilize a teetering bank by drawing on the funds of its parent company. That is hard to do with private equity firms, which have numerous businesses owned by funds, each of which is walled off to protect investors.

For these reasons, banks generally cannot be owned by nonfinancial companies like the Carlyle Group, whose assets are as varied as an interest in Dunkin’ Donuts and United Defense Industries, a maker of combat vehicles and missile launchers.

The equity firms counter that banking desperately needs cash if the economy is going to recover, and that they are the only big sources of money around. An executive at the Carlyle Group said the industry had an estimated $400 billion in “dry powder,” or ready-to-invest reserves.

To push their case at the White House, the Treasury and the Fed, Mr. Flowers and others in his industry have enlisted an all-star cast of advisers, lobbyists and lawyers. They include H. Rodgin Cohen, chairman of the Sullivan & Cromwell law firm and Wall Street éminence grise, and Randal K. Quarles, a managing director of the Carlyle Group and a Treasury under secretary in the administration of President George W. Bush...

While they press their case, the firms have found some ways around the rules.

They have formed so-called club deals, in which teams of private equity firms and other investors each buy up to the legal limit of a bank — about a quarter or a third, depending on the type of bank — with their individual pieces adding up to 100 percent control. IndyMac, the failed California bank, was sold by the Federal Deposit Insurance Corporation last fall to one such club, which includes funds controlled by Mr. Flowers; the hedge fund billionaires George Soros and John Paulson; and Michael S. Dell, founder of the Dell computer company. The investors are barred from acting in concert to, in effect, take control of the bank — an unwieldy arrangement but one that regulators insist they can enforce.

As part of the IndyMac deal, the FDIC agreed to take most of the risk from future losses on loans acquired by the partnership — leading Mr. Flowers to quip at one investor forum in New York in January that “the government has all the downside and we have all the upside.”

Mr. Flowers has come up with another way around the restrictions. There is no limit on an individual’s taking over a bank, so he purchased all of the First National Bank of Cainesville in his own name and with his own funds. But that deprives him of the billions his equity firm has set aside to buy banks, so his new bank sits in this tiny town, waiting for a change in the rules.

First National — whose second story is boarded up and whose $17 million in assets are worth about a third of what Mr. Flowers paid for an Upper East Side town house in 2006 — seems an unlikely launching pad for a new American banking empire. It is so tradition-minded that it refused to change the spelling of its name, even after the town did so back in 1925 to honor its founder, Peter Cain. Suddenly, in February, the First National Bank name was dropped and “Flowers Bank” was painted on the window. New bank executives showed up, passing out packs of promotional sunflower seeds with the bank’s new logo, urging the mostly elderly town residents to get ready to “Grow with Us.”

“Everyone wonders, who is this Flowers guy?” said Lefty McLain, as he finished up the ham, mashed potatoes and butter beans lunch special at the Little Store, an all-in-one restaurant, deli, pool hall and gossip post here in the one-block downtown.

Mr. Flowers, while still in his 20s, founded Goldman Sachs’s financial services merger business, helping line up the $62 billion merger of NationsBank and BankAmerica (now Bank of America) and the $34 billion takeover of Wells Fargo by Norwest...

Mr. Flowers and other executives have lobbied hard; their efforts have included a recent meeting with William C. Dudley, chairman of the New York Fed. At the meeting, Mr. Flowers and his colleagues bragged about how they could raise as much as $10 billion in 48 hours to help with a bank takeover if they were given the chance, according to one executive in attendance.

Mr. Flowers, in an interview, said he was confident he would prevail. Even if he cannot make the Fed reverse its policy, he will consider it a victory if the Fed approves an individual deal. He has estimated his banking empire will one day earn at least a 35 percent return on banks it has bought in the United States. “I find it to be an extraordinary time to invest,” he said. He was even more blunt when he spoke to an industry group in New York earlier this year.

“Lowlife grave dancers like me will make a fortune,” he predicted.

The Carlyle Group & The Carlyle Group Bailout, March 2008
How the Bush Administration Stopped the States from Stepping In to Stop Predatory Lenders
Bush Administration Rejected Tougher Mortgage Rules in 2005
AIG, Blackstone, and Kissinger Associates Joint Venture in Private Equity Funds
Max Keiser: Goldman Sachs Gang Are 'Scum' Who Have Co-Opted the U.S. Government
1,000 Banks to Fail in Next Two Years: Bank CEO
Rothschild to Start $711M Private Equity Fund
Federal Government Needs Massive Hiring Binge of 600,000 New Workers, Study Claims
Ground broken on $3.4 billion Homeland Security complex

2011-03-24T13:21:00.001-04:00

Companies Sell Junk Bonds to Private Equity Firms to Fund Bankruptcy Exit

Cash-strapped companies emerging from bankruptcy have turned to investors -- not banks -- to help fund their return.

Reuters
March 30, 2010

High-yield bonds may be "junk" but they can be golden for bankrupt companies seeking cash to fund their exit from bankruptcy and pay down debt.

Reader's Digest Association Inc and chemicals maker Lyondell Chemical Co are two formerly bankrupt companies that have tapped the high-yield market to benefit from ravenous demand from investors for higher interest payments. There will likely be more to come.

"We have at least another year of a very favorable backdrop to issue high-yield bonds," said Margaret Patel, senior portfolio manager with Evergreen Investments, who manages more than $1 billion in Boston.

When emerging from bankruptcy, companies need cash to pay down old debt, such as debtor-in-possession loans, and to fund ongoing operations. This financing, called exit financing, has traditionally come from banks.

But banks dramatically curtailed such lending in response to the U.S. economic recession and credit crunch. While there are signs of renewed lending, companies may still turn to high-yield bonds for the benefits they provide, including fewer restrictions on the loan terms and more time to repay.

While companies may pay higher interest on new junk bonds, it buys them wiggle room as the work through any lingering operational issues, strategists said.

"If companies can extend maturities and pay down bank debt, it makes a lot of sense," said Patel. "This is a way to ensure their liquidity in case the market (worsens). It's opportunistic cash raising."

Reader's Digest, in February, used the high-yield market to raise $525 million in bankruptcy exit financing, cutting interest expenses by $30 million annually. The interest rate is 9.5 percent.

Lyondell, meanwhile, sold $2.25 billion of senior secured notes yielding 8 percent to fund its bankruptcy exit.

"As long as liquidity is good, and until the bank loan market becomes fully functional, I think people will continue" to sell junk bonds to finance bankruptcy exits, said Sabur Moini, manager of the Payden High Income Fund in Los Angeles.

In the meantime, new money is pouring into the junk bond market.

Junk bond sales have surged to records every month since December as companies contend with "wall of maturity" over the next few years, prompting a rush to refinance debt ahead of the quickly approaching repayment deadlines. In February, U.S. high-yield bond sales posted their busiest month on record, with $15.8 billion of new issuance, strategists said.

For bankrupt companies, "high-yield is a real option," said Mark Podgainy, senior director in the New York office of Getzler Henrich & Associates.

"How long will the market be favorable for that to take place? For this year, as long as Fed keeps rates low."

Investors, too, have incentives to snap up the junk bonds of formerly bankrupt companies.

"Yield," said Podgainy. "Everyone's looking for yield."

Benchmark 10-year Treasury notes are yielding about 3.86 percent. As of March 26, the average junk bond yielded 5.8 percentage points more than Treasuries according to Bank of America and Merrill Lynch data.

Reader's Digest senior floating rate notes, issued at 97 cents on the dollar, have risen to 101.25 cents, according to high-yield research firm KDP Investment Advisors. Lyondell notes now trade at 103.25 cents on the dollar, KDP said.

"It's pretty hard to live off what you'd make in a certificate of deposit or a Treasury bond," said Dwayne Moyers, chief investment officer of SMH Capital Advisors in Fort Worth.

Buying junk debt of companies exiting bankruptcy "is definitely something we'd look at because the bankruptcy process pretty much cleanses the company," said Moyers.

Junk Bonds and Corporate Takeovers By Private Equity Firms of the Elite

America.gov
September 15, 2009

... The LBO (leveraged buyout) was “created in hell by the devil himself.”

The corporate raiding frenzy subsided in the 1990s after Drexel’s demise was followed by heavy losses for junk bond investors generally. The 1990s boom in technology stocks absorbed larger and larger amounts of investors’ money until that speculative stock surge collapsed in 2000. After a few years, however, a new wave of corporate acquisitions swelled up. It was led by private investment funds whose clients pooled their capital and borrowed additional funds to purchase companies whose profits and stock market prices had slumped, creating possible bargains for the investors.

In 1992, private equity investments totaled just $21 billion. In 2006, private equity firms bought control of 654 U.S. companies for a total of $375 billion, evidence of the constant turnover in American business that Schumpeter would have instantly recognized.

Financiers Flock to Private Equity Firms to Sidestep Tougher Regulations

• Bonus tax deters expat financiers from returning to Britain
• HSBC and Barclays warn of an impending exodus of bankers

The Guardian
January 25, 2010

Many of London's investment bankers are seeking to quit the industry in favour of private equity firms and hedge funds to escape heavy regulation and public censure for the financial crisis, according to a leading firm of City headhunters.

Heidrick & Struggles, which has recruited some of the highest-paid figures in the City, said it was snowed under with requests from middle-ranking and senior staff who wanted to switch to other areas of the financial services industry.

But the firm said fears that bankers were queueing up to leave London was a myth with most senior finance staff declaring they want to stay in London despite the tax on bonuses and an increase to 50% in the top rate of tax.

Chris Gaunt, a principal in the firm's financial services unit, said:

"People are asking to be taken out of banks for jobs in other parts of the industry. Hedge funds and private equity are top of the list."

"We are not seeing anyone looking to leave London, or at least only in small numbers, but we are seeing people wanting to leave banking," he said.

Gaunt said the 50p tax rate, which applies to incomes of more the £150,000 from this April, was deterring bankers located overseas from a move back to Britain.

"Brits overseas are much more reluctant to move back. For instance, it is almost impossible to lure back someone from a large financial centre like Hong Kong at the moment," he said.

His experience over the last month supports the growing confidence in the commercial property sector that London's financial district will successfully overcome threats from rival centres.

Office rents in the West End are already back to their peak of 2007, while City rents are beginning to pick up after enduring two years of sliding rates. However, threats from banks that they could relocate some or all of their main businesses overseas are unlikely to abate.

Last week, HSBC boss Michael Geoghegan said:

"I know a large number of bankers are moving out of the UK."

He was quickly followed by warnings from Barclays that London stood to lose some of its brightest and best financiers following the tax hike on highly paid workers in the UK.

Geoghegan also said the "strange" one-off bonus tax imposed by Alistair Darling in his pre-budget report last year will affect large banks' businesses. He echoed Gaunt's view that traders and corporate financiers will want to move out of the spotlight currently shining on banks into less-regulated and potentially more profitable firms.

"All will move to what I call shadow banking or twilight banking, where they will not be regulated, and I think that is a risk and it may well lay the foundations for a future problem in financial services," warned Geoghegan.

Private equity firms and hedge funds have suffered from the financial crisis with many shedding jobs or going out of business.

But most analysts believe those firms that have come through the 'recession are well positioned to benefit from the upturn.

2011-03-08T17:34:00.001-05:00

Icahn to Return Outside Money in Hedge Fund

The New York Times
March 8, 2011

Carl C. Icahn is returning all outside money in his hedge fund, citing his reluctance to be responsible to investors through another possible crisis.

“While we are not forecasting renewed market dislocation, this possibility cannot be dismissed,” Mr. Icahn wrote in a letter to investors. “Given the rapid market run-up over the past two years and our ongoing concerns about economic outlook, and recent political tensions in the Middle East, I do not wish to be responsible to limited partners through another possible market crisis.”

Mr. Icahn is the latest prominent manager to decide to close off his fund to outside investors after the financial crisis.

Stanley Druckenmiller, who ran Duquesne Capital Management, and Chris Shumway, who founded Shumway Capital Partners, are among those who have handed money back to investors in recent months.

In his letter, Mr. Icahn reflected on the experience of 2008, noting that while it might sound “corny to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses.”

Mr. Icahn said his firm’s decision not to impose gates during 2008 and 2009 meant many investors withdrew money from the funds. But rather than selling off positions to meet the liquidity demands, his firm pumped its own capital into the fund. As a result, outside money makes up just 25 percent, or $1.76 billion, of fund assets.

Icahn Capital, the fund started in 2004, has earned gross returns of 104 percent since its inception, Mr. Icahn said.

David Shukis, a managing director of hedge fund research and consulting at Cambridge Associates, said of Mr. Icahn:

“He clearly has enough money to do what he’s continued to do without the frustrations of outside investors. It’s unfortunate because the occurrence of really outstanding investors closing their funds and focusing on their own capital is reducing the opportunity set for our clients.”

Mr. Icahn said in his letter that he planned to return 95 percent of outside money in April.

2011-02-16T08:12:00.001-05:00

Family Dollar Gets Peltz Bid to Take It Private

The Associated Press
February 15, 2011

Discount retailer Family Dollar Stores Inc. on Tuesday received a bid from activist investor Nelson Peltz's firm to take the company private in a deal worth up to $7 billion.

The Trian Fund is offering $55 to $60 per share for Family Dollar, according to a filing with the Securities and Exchange Commission.

Shares of Family Dollar soared 25 percent, or $11.19, to $55.15 in extended trading Tuesday after the filing was made.

Trian owns large stakes in a variety of major American businesses including upscale jeweler Tiffany's & Co., food company H.J. Heinz Co. and fast-food chain Wendy's/Arby's Group Inc.

It is already Family Dollar's largest shareholder with about 8 percent of its shares. Paying $60 each for the Family Dollar shares it does not already own would cost Trian about $6.99 billion.

Family Dollar, a discount retailer based in Matthews, N.C., confirmed late Tuesday that it received the offer. It said its board will review the proposal with its financial and legal advisors, Morgan Stanley and Cleary Gottlieb Steen & Hamilton LLP.

The company has more than 6,800 stores in 44 states and is one of the standout retailers in the post-recession economy. It benefited during the downturn from shoppers heading to its stores for bargains on everything from food to clothing.

Family Dollar's net income rose 23 percent to $358.1 million, or $2.62 per share, on revenue of $7.87 billion in its latest fiscal year.

Last summer, Peltz disclosed that he was buying up shares of Family Dollar, saying the stock was undervalued. He said he met with senior management to discuss the company's direction and attempts to boost shareholder value

The Trian Fund bought up more Family Dollar shares in January.

Value in Dollar Stores After Family Dollar Buyout Offer (FDO, DG, DLTR, NDN, BIG)

24/7 Wall St.
February 16, 2011

Family Dollar Stores, Inc. (NYSE: FDO) soared last night after announcing that it has received an unsolicited conditional buyout proposal from Nelson Peltz’ Trian Group to acquire Family Dollar in a price range of $55.00 to $60.00 per share in cash. The deal is subject to due diligence, financing and other conditions. While the company has said it will “review the proposal in due course,” we really want to see what this does for the valuations of all of the other dollar stores out there.

This will have serious implications for shares of Dollar General Corporation (NYSE: DG), Dollar Tree, Inc. (NASDAQ: DLTR), and even in 99 Cents Only Stores (NYSE: NDN). We ran a comparison of forward earnings and revenue multiples to derive some implied prices on each of those if the same financial terms were applied for value investing purposes. Also, don’t forget about the ‘near-dollar’ store of Big Lots Inc. (NYSE: BIG) after it is already up for sale.

The deal comes to $7.6 billion after a 36% premium price to Tuesday’s closing bell, assuming $60.00. For this year’s Thomson Reuters estimates of $3.12 EPS and $8.54 billion in revenues, that comes to a projected 17.6 to 19.2 times forward earnings and just under 0.9-times revenues. We have not yet seen it on an EBITDA calculation.

Dollar General Corporation (NYSE: DG) was already taken private and refloated by private equity owners. Still, this garners greater value for the dollar king… Shares have backed off all the way to $26.93 to a $9.2 billion market cap and shares rose to above $28.00 per share last night. The 52-week range is $22.27 to $33.73. Unfortunately, its year-end is January rather than August like Family Dollar and that creates a light disparity in apples to apples comparisons. At $28.00, Dollar General trades at 15.4-times projected earnings of $1.82 EPS and trades at 0.73-times revenues. If you interpolate the $60 values of Family Dollar, then Dollar General’s comparable valuation would come to about $34.58 on an earnings basis and over $35.00 on a revenue basis.

Dollar Tree, Inc. (NASDAQ: DLTR) has backed off to $50.94 versus a 52-week range of $32.76 to $57.99, and shares were indicated up around $53.00. At the adjusted price, the market cap would be $6.65 billion. Based upon Thomson Reuters estimates (again Jan-2011 fiscal year end) of $3.21 EPS and $5.9 billion, it trades at 16.5-times earnings and 1.12-times revenues. If you interpolate the $60 values of Family Dollar, then Dollar General’s comparable valuation would come to about $60.99 on an earnings basis but only $47.70 on the same revenue basis.

99 Cents Only Stores (NYSE: NDN) closed at $16.40 yesterday with a $1.15 billion market cap and it has a 52-week range of $13.12 to $19.07. Thomson Reuters has its March fiscal estimates at $1.05 EPS and $1.41 billion in revenues, implying 15.6-times earnings and 0.81-times revenues. If you used the same $60-valuation of Family Dollar, you would end up with a relative value of $19.95 on an earnings basis and just over $18.00 on a revenue basis.

Let’s not forget about Big Lots Inc. (NYSE: BIG) which is in play now… Keep in mind that Big Lots already has a valuation premium based upon its shares having risen from under $34 to over $40 of late after word that it is up for sale.

As you have seen, the Family Dollar deal would highlight some value at other dollar stores while it may actually not highlight others in as positive of a light. Again, we have not done EBITDA calculations that private equity buyers love to do. We do not generally use EBITDA because we know what that translates to. It generally is the “how to leverage the company up and strip out the cash” model.

2011-01-26T16:34:00.001-05:00

Hedge Fund Management Pay Moves Back Above $1 Billion Per Man

24/7 Wall St.
April 1, 2010

According to the annual pay survey done by AR: Absolute Return+Alpha magazine and reviewed by The New York Times, the top 25 hedge fund managers made $25.3 billion in 2009.

David Tepper was at the top of the list with a $4 billion pay day. His main fund was up 130% last year. Hedge fund legend George Soros made $3.3 billion, adding to a string of unprecedented good years. Carl Icahn, a perennial member of the group made $1.3 billion. Other big players where back as well, including Steven Cohen, who runs huge fund SAIC and Eddie Lampert, the man who bought a controlling interest in Sears (SHLD) and nearly brought the company to its knees through a series of bad decisions.

The news will likely rattle Washington which has tried to create the image, especially The White House and Democratic lawmakers, that big pay on Wall St. must be vanquished.

Washington’s problem is that, unlike many bank and investment bank CEOs, whose firms received huge sums of money from the TARP to survive and who otherwise might have no jobs at all, the hedge fund managers are beholden to no one other than their own investors. These investment groups are usually made up small groups of sophisticated institutional investors.

A hedge fund manager can lose in one year what he made in the year before. Hundreds of hedge funds closed in 2009, so the risks of running the funds can be extraordinary.

The one move that Washington can do to keep hedge fund management under control is to cap the lending that large banks make to funds that allow them to leverage their bets. These loans are often risky, but they are also often profitable to the institutional divisions of the bank, and curbing them could cost banks money at the bottom line.

For now at least, capitalism has its day in the sun, a day when an individual can make $1 billion and not be bothered by any public shareholders, the government pay czar, or anyone in Washington who is unhappy about the situation.

M&A Hits $2.2 Trillion as 2011 Looms

24/7 Wall St.
December 17, 2010

Data from Reuters shows that global M&A activity rose to $2.2 trillion in 2010. The 2010 improvement was the first since 2007. Most comments about the news said that 2011 should be an even better year for bankers.

“Senior executives on average expect $3 trillion of M&A next year, a recent Thomson Reuters/Freeman survey found,” the news service wrote.

The excitement may be overheated.

News outlets which cover M&A reported the same optimistic comments three years ago. Stocks were rising so quickly that shares in public companies could be used to close many transactions.

Private equity funds had access to so much capital that they could finance deals like the $33 billion HCA buyout or the $18 billion Clear Channel transaction. Those deals did not do as well as expected. The recession was part of the cause. The overpayments for the companies, brought on by potential private equity and bank profits, undermined many of the private equity forecasts within two years.

The new cycle of M&A is likely to be helped by two things. The first is historically low interest rates. The second is the rush to buy assets in Asia. IPOs in that region often soar in their first few days of trading. That further encourages bankers to believe that many companies in Asia are undervalued.

It is easy to forget when deals are plentiful that there is a large body of evidence that most mergers and acquisitions do not work. Companies overpay for acquisitions because of overly optimistic forecasts. On the other hand, combining two cultures and two complex sets of operations is often too much for even the most talented executives. Recent M&A in the pharmaceutical industry shows that not all transactions, such as the Pfizer (NYSE: PFE) $69 billion buyout of Wyeth, work. The problems each firm had due to operational difficulties and aging products could not be addressed by a marriage.

The greatest enemy of M&A has always been the economy. Asia appears like a fertile ground for M&A deals, but there are already some cracks in the Chinese economy. Inflation appears to be accelerating. The value of corporate assets may change overnight if China has to apply breaks to its economy. That would bring down the value of many companies in the People’s Republic. Bankers may argue they can seek deals in India and other smaller countries, but China’s problems are not unique to China. Growth in the entire region could be hurt by inflation or an ongoing recession in Europe, Japan, and the US.

Bankers say every year that the number of IPO and M&A transactions will be better in the next year. History show that is not the case.

New Frontier for Dynegy Post-Blackstone

24/7 Wall St.
November 23, 2010

Dynegy Inc. (NYSE: DYN) is one of the country’s largest electric power producers. In August, the company’s board announced an offer from the world’s largest private equity firm, Blackstone Group LP (NYSE: BX), to buy Dynegy for $4.50/share, a premium of more than 60% to the company’s share price at the time. That deal is now dead, as Dynegy’s two largest shareholders, Seneca Capital and Icahn Associates, have refused to sign on.

As part of the deal for Dynegy, Blackstone had agreed to sell four of the company’s power plants to NRG Energy Inc. (NYSE: NRG) for $1.36 billion once Blackstone had completed the acquisition. The sale of the plants to NRG was contingent on a successful acquisition. NRG’s CEO has said that the outlook for power prices has fallen since August, and that NRG would not offer the same price today.

The deal between Dynegy and Blackstone failed primarily on the objections of both Seneca Capital and Icahn Associates, both of which believed that Dynegy was worth more than the $5/share that Blackstone ultimately offered on November 17th in an effort to win over shareholders. Both Seneca and Icahn were holding out for around $7/share.

Dynegy has decided to open a formal process to sift through strategic alternatives and “to solicit proposals from potentially interested parties and carefully review its standalone restructuring alternatives,” according to the company’s press release. Under the terms of the Blackstone deal, Dynegy had 40 days to seek competing bids, and none turned up. Maybe this time will be different, but that seems unlikely.

Dynegy also announced today that it had adopted a new Stockholder Protection Rights Plan under which each current shareholder receives one stock purchase right for each share owned at close of business on December 2, 2010. According to the press release, the board “adopted this short term, narrowly tailored Rights Plan to prevent any person from obtaining control or de facto control of Dynegy without offering a control premium to all Dynegy stockholders.” In other words, Carl, don’t even think about making a solo offer for Dynegy. Icahn has already offered to supply a $2 billion line of credit to Dynegy

Blackstone is scheduled to receive a $16.3 million break-up fee if Dynegy is sold for more than $4.50/share within the next 18 months. Dynegy shares are off about -4.5% this morning, and Blackstone shares are off about -2%. Dynegy shares went from under $3 to above $4.50 after the merger announcement. Shares later on went to above $5.00 as the deal was expected to grow in size. Now that the deal is off, Dynegy shares are still up at $4.93.

Tech/Comm Acquisition Target Updates

24/7 Wall St.
October 26, 2010

Mergers and Acquisitions are still coming in the world of technology and communications. Many deals have been announced in technology that are around the Ciscoization of the data center and around cloud computing and software. We wanted to review several technology and communications companies we have covered as potential M&A targets in the recent past to discuss what the outlook is and what sort of progress has been made at each company. You will notice the Cisco Systems, Inc. (NASDAQ: CSCO) theme throughout this potential tech M&A, but that is merely a sign of the times as tech giants like H-P, IBM, and Dell have gone after IT-management, cloud, storage, and networking operations. We want to evaluate and update the outlook for Brocade Communications Systems, Inc. (NASDAQ: BRCD), Novell Inc. (NASDAQ: NOVL), Premiere Global Services, Inc. (NYSE: PGI), Seagate Technology PLC (NASDAQ: STX) and Western Digital Corp. (NYSE: WDC). We also wanted to see how these compared to the Technology Select Sector SPDR (NYSE: XLK) as the tech/comms key ETF.

Brocade Communications Systems, Inc. (NASDAQ: BRCD) rose as an M&A potential target in late-Summer and shares have held their own despite the thought that many feel a merger here would have to come at too high of a premium for a buyer. This was one of our picks for stocks which could double earlier this year before the cloud and M&A craze came, and the buyout thesis for a low-cost provider in networking and storage was a part of that call.

The company is effectively half Brocade in storage and half Foundry in communications and networking. Shares were at $5.15 on our first go-round, now shares trade around $5.80. The 52-week trading range is $4.64 to $9.45 and the market cap is roughly $2.6 billion. Brocade is not meant to be an earnings report play as shares are often volatile around earnings. The status of a deal is currently “possible, but nothing set on the books.” Analysts also have an average price target of $6.35 for Brocade.

Novell Inc. (NASDAQ: NOVL) has been a long road of excitement that has so far led to nowhere. The pending merger offer and pending auction or divesting plan has been on hold for about a month now,and frankly from the start we expected that Novell would need a higher buyout price to secure shareholder approval. There were reports that Novell was having a hard time selling its NetWare and identity management products because private equity firms would not pay Novell’s asking price.

When the first merger offer came, shares popped to $6.08 from $4.75 on over 140 million shares in a single day in March. Shares have traded as high as around $6.50 but the stock is back to about $6.00. Unfortunately, that is the long road to nowhere. One key issue is that much of Novell’s cash is tied up internationally and cannot be easily accessed in a tax-efficient manner of repatriation. The company had been a potential buyout candidate in the minds of many investors on several occasions over the last 10 to 15 years. Here we are, Novell is small with a $2.1 billion market cap and it is still an independent company with over $1 billion in cash and equivalents if the cash can be tapped.

Premiere Global Services, Inc. (NYSE: PGI) is one we featured earlier in the year as “an easy bolt-on acquisition for any of the larger communications and behind-the-scenes IT players.” Much of its business has been mistakenly considered legacy communications when that is not the case any longer. The company just last week announced the divestiture of its Xpedite Systems to EasyLink for $105 million in cash. Premiere also last week reported third quarter revenues of $142.3 million (including $109.5 million from PGiMeet solutions), earnings from continuing operations of $0.06 EPS and non-GAAP earnings of $0.18 EPS. Guidance was put at revenue from continuing operations of $107 to $109 million, and non-GAAP earnings of $0.09 to $0.11. Shares were at $7.18 before earnings, fell to $6.72 after earnings, and are down to $6.35 now. Shares were at $6.65 and had been down over 30% since the April peak when we covered it in July.

Now the company will effectively be a pure-play on conferencing and enterprise collaboration solutions. The company is going to pay down debt and may repurchase stock along with investing in core communications technology. This divestiture makes Premiere a potential stealth M&A target now that it is easier to analyze, and the company had long been overlooked because of its fax business. The $383 million market cap here could make for an easy integration for any of the larger communications providers that want to keep competing against Cisco.

Seagate Technology PLC (NASDAQ: STX) is one we covered among our dirt cheap value stocks in technology even before the rumors were flying high that the hard drive and storage device maker was considering going private (again). Now shares are up significantly and the valuations are still dirt cheap with a current and forward P/E ratio of under 10. Ditto for rival Western Digital Corp. (NYSE: WDC). Both are attractive on valuations, although Western has a leaner balance sheet,

The difference between Seagate and the others mentioned here is that Seagate IS in talks to go private with a private equity firm. Are flash-drives a threat ahead? Sure, but imagining that neither of these storage leaders will play in the field seems unlikely even if they are not leaders there. There is also a poor earnings trend with no guidance as you would expect from its low valuations. The problem is that the cost of 1 terabyte of external storage is now under the $100 mark, and this is likely to at a minimum keep fears up that margins will decline. Seagate traded nearly at $10 during the August lows and traded up to almost $13 in early October. Now that the buyout talks have been confirmed, shares are now north of $15.00. We have no updates on the merger as of yet, but we continue to see Seagate as likely bait.

Technology Select Sector SPDR (NYSE: XLK) has been on fire rising from under $21 at the end of August to above $24 currently. Keep in mind that the top six components here account for roughly 45% of the entire ETF weighting. The index ETF recently hit a 52-week high that is now technically a 2-year high and you have to go back to early-2008 to get higher share prices now.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

2011-01-25T00:10:00.012-05:00

GNC: Chinese Food Company Wants to Muscle Up

24/7 Wall St.
December 7, 2010

It appears that the talk about China’s Bright Food Group Co. wanting to buy US nutritional retailer GNC Holdings Inc. is about to prove true. The Wall Street Journal is citing “people familiar with the matter” as saying that Bright Food will offer between $2.5 and $3 billion for GNC. If the deal goes through at that level, it will be the largest takeover by a Chinese company of a US firm, at least doubling the price paid by Lenovo for the PC business of IBM Corp. (NYSE: IBM) in 2004.

According to Bloomberg, Blackstone Group LP (NYSE: BX) is “teaming up” with the Chinese to make the deal happen. That seems a little odd, given that Blackstone and Bright Food have been unable to reach a deal for United Biscuits, a company that Bright Food wants to buy from Blackstone and private equity firm PAI Partners.

GNC is owned by private equity firm Ares Management LLC and the investment division of the Ontario Teachers’ Pension Plan, which bought the company in 2007 for $1.65 billion from Apollo Management LP. Apollo failed twice to take GNC public.

GNC sells its products through a global network of about 7,100 stores, of which 4,800 are located in the US with the rest operating as franchises in 48 international markets. Earlier this year, Bright Food and GNC had agreed to form a joint venture to help GNC gain entry to the Chinese market.

Bright Food is majority-owned by the municipal government of Shanghai, which holds just over 50% of the company. Shanghai DaSheng Holdings Co. Ltd. holds just over 40%, and four other Chinese companies hold the rest. Four Bright Food subsidiaries are listed on the Shanghai stock exchange.

If the deal is made, it would need approval from the federal government’s Committee on Foreign Investment in the United States. But if a PC business jumped that hurdle, there’s no reason to think a vitamin and nutritional supplement business won’t. Unless of course the US government fears that the Chinese will bulk up and take over the NFL too.

A New Patent Troll on the Scene?

24/7 Wall St.
December 17, 2010

When Novell, Inc. (NASDAQ: NOVL) agreed to be acquired by privately held Attachmate Corp. in late November, part of the deal included the concurrent sale of some of Novell’s intellectual property to CPTN Holdings LLC for $450 million. CPTN was identified in Novell’s press release as a “consortium of technology companies organized by Microsoft Corporation” (NASDAQ: MSFT). The other members of the consortium are Apple Inc. (NASDAQ: AAPL), Oracle Corp. (NASDAQ: ORCL), and EMC Corp. (NYSE: EMC).

So far, that’s about all anyone knows for sure about the mysterious CPTN Holdings. The most obvious question is whether or not CPTN plans to make it easier or more difficult to license the 882 patents once held by Novell.

One possible reason for the purchase could be that the four companies want to assure themselves that they hold the legal rights to components of their own technologies that they either licensed or should have licensed from Novell. Without getting into the alphabet soup of computer software development, it is probably safe to say pending lawsuits among CPTN companies and Novell will disappear, and that companies outside the consortium face some pretty formidable opposition should they be the least bit vulnerable to a patent infringement charge.

The target here has to be Google Inc. (NASDAQ: GOOG). Oracle has already filed suit against Google for infringing intellectual property related to Java that Oracle acquired with its purchase of Sun Microsystems. Google is already the main target of patent infringement suits over its Android smartphone operating system, and now that the company has released a preview version of its Chrome operating system, the target painted on its back just got bigger.

Microsoft, especially, and Apple could feel the impact of Google’s cloud-based Chrome OS. Early reviews of Chrome are lukewarm, to be sure, and many doubt that the OS will ever amount to much. But if you’re Microsoft, you can’t be too careful.

Oracle’s lawsuit against Google goes right to the heart of Android, seeking to enjoin Google from distributing the OS and destroying all copies that are already out there. On top of that, Oracle wants statutory and treble damages. Google has to fight this lawsuit, but may choose to pony up some cash if the CPTN group gets lawyered up.

At the very least, the CPTN group’s purchase will save them from potential lawsuits related to the 882 patents and it gives them the right to enforce their own rights should they choose to do so. A good guess is that they will choose to do so, and very aggressively too.

Prime Acquisition Corp. Focusing on Greater China Region

24/7 Wall St.
January 21, 2011

SPACs, the special purpose acquisition companies, were very popular during the private equity bubble and before the recession took hold. You hardly ever hear about them now. This week brought on a new SPAC filing to come public, with the focal region being in the Greater China Region.

Prime Acquisition Corp. has filed to raise $40 million in stock and warrant units at $10.00 a piece, but the filing is actually for more if you look at the details. The maximum proposed aggregate securities offering is listed as $70.495 million. The company has also applied to list its units, ordinary shares and redeemable warrants on the NASDAQ Capital Market under the “PACQ” ticker.

Prime Acquisition Corp. is a newly formed exempted company organized under the laws of the Cayman Islands. The company is a blank check company that will acquire (through a merger, capital stock exchange, asset acquisition, stock purchase or similar business combination, or control through contractual arrangements) one or more operating businesses. The company says that it is not limited to any particular geographic region or any specific industry, but it also says that it will focus on operating companies in the Greater China region (China, Hong Kong, Macau and Taiwan).

This is the initial public offering of our units. Each unit has a public offering price of $10.00 per unit and consists of one ordinary share, par value $0.001 per share, and one-half of a redeemable warrant. Each full redeemable warrant entitles the holder to purchase one ordinary share at a price of $7.50.

Management is deeply tied to and has deep overlaps with AutoChina International Ltd. (NASDAQ: AUTC) and other public companies. Its Chairman & CEO, Yong Hui Li, has the same position at both companies, and others are tied to each company as well. The underwriters are listed as Chardan Capital Markets, Rodman & Renshaw, and Maxim Group. Its full SEC filing from this week is available.

Carl Icahn Buys the Electric Power Company

24/7 Wall St.
December 15, 2010

Carl Icahn usually makes his headlines by criticizing management for not rewarding shareholders. This morning he is in the news because he is buying Dynegy Inc. (NYSE:DYN) for a higher price than had been previously agreed to. An announcement was made this morning that Dynegy’s board of directors has unanimously approved a definitive agreement to be acquired by Icahn Enterprises, L.P. (NYSE: IEP).

Dynegy’s buyout is a tender offer that will follow with a formal merger that pays Dynegy shareholders $5.50 per share in cash. IEP and its affiliates own approximately 9.9% of Dynegy’s outstanding shares and have previously acquired options to purchase approximately 5% of Dynegy’s outstanding shares.

This is a deal where the plot has thickened and thickened. The Blackstone Group (NYSE: BX) originally tried to buy Dynegy for $4.50 per share in an August offer and then raised its offer to $5.00 per share.

There is an out here and a go-shop provision: “IEP has also agreed that, in certain circumstances, if a ‘superior’ all cash offer is made and supported by Dynegy, and IEP does not wish to top the ‘superior’ offer, it will support it.” Dynegy will continue its ongoing open strategic alternatives process where Dynegy will solicit superior proposals until January 24, 2011.

As far as what Icahn will get, the company provides electricity to markets and customers in the United States; as of December 31, 2009, its power generation portfolio consisted of approximately 12,300 megawatts of baseload, intermediate, and peaking power plants fueled by a mix of natural gas, coal, and fuel oil.

The equity value is listed as only $665 million, but Dynegy has approximately $3.95 billion in outstanding debt.

Investors are hoping for a higher deal yet. Shares are up 4.7% at $5.71 in pre-market trading versus a 52-week range of $2.76 to $10.15.

As Leonard Green Takes All of Retail Private

24/7 Wall St.
December 29, 2010

The rumors and thought of private equity in retail is going on and on, oddly enough with the same player. BJ’s Wholesale Club Inc. (NYSE: BJ) is the newest target according to many web reports, and the buyer is said to be none other than Leonard Green & Partners, L.P. If you need a reminder of who Leonard Green is, this is the outfit that is already buying the crafts and fabrics retail outfit of Jo-Ann Stores Inc. (NYSE: JAS) and also in a management-led buyout partnering to buy J. Crew Group Inc. (NYSE: JCG).

Leonard Green already had a 9.5% stake in BJ’s back in the summer. There was already an expression of interest back then, and this new report seems to be that a BJ’s sale process is coming after the holidays and that Leonard Green remains an interested party.

Leonard Green & Partners, L.P. is well known private equity firm and its website shows current assets under management of approximately $9 billion in equity capital. The firm was founded back in 1989 and it claims that it has invested in 53 companies with aggregate value of $44.4 billion.

As far as how BJ’s compares in size against Costco Wholesale Corporation (NASDAQ: COST), Costco has a market cap of $31.5 billion. For annual sales estimates from Thomson Reuters: Costco is expected to post annual sales of $85.02 billion for the fiscal-year about to end and expected to post $92.01 billion for next year, which is way above the BJ’s estimates of $11.04 billion for this year and $11.86 billion next year.

BJ’s Wholesale Club Inc. shares are indicated up 6% at $47.20 in the pre-market. Its 52-week range is $32.36 to $48.43 and its market cap based on a $44.47 close was listed as $2.43 billion.

J. Crew Buyout, An Unfair Price to Many

24/7 Wall St.
November 23, 2010

Retail and apparel mergers are still alive and well for good brands. J. Crew Group, Inc. (NYSE: JCG) is reportedly close to being acquired in a private equity buyout led by TPG Capital and Leonard Green & Partners in a deal valued around $3 billion. The proposed price that is being reported is $43.50 per share in cash. While this is roughly a 16% premium to the $37.65 close on Monday, the 52-week trading range is $30.06 to $50.96.

Over the last year, it looks like there were about six different months that J. Crew shares traded above $40.00 per share. If you go back to its IPO of late 2006 and go into 2008 there were either 16 or 17 months that J. Crew shares traded above $40.00 and it looks like about 7 of those months were above $50.00.

TPG is the former owner and would end up with close to 75% of the company and Leonard Green would own a 25% stake per reports from New York Times and Bloomberg. The belief is also that the buyout firms plan to work with CEO Millard Drexler with his 5% stake.

A 16% premium may sound like a lot for an overnight pop. For many shareholders, this won’t be enough. There will be law firms which initially file inquiries and investigations into whether or not $43.40 is a fair price. Those inquiries and investigations will likely turn into class action suits thereafter.

Thomson Reuters has earnings estimates of $2.24 EPS for this year and estimates of $2.45 EPS for next year. That $43.50 generates forward earnings multiples of 19.4 for Jan-2011 and 17.75 for Jan-2012. Those are premium multiples for many retail and apparel companies on a standalone basis. The issue at hand is whether far more earnings power can be milked out of the J. Crew chain.

After looking at the numbers, many will refer to this proposed buyout as a lackluster deal. There is an old saying: “An offer is as good as a take.” That is not always true.

Another Retailer Going Private

24/7 Wall St.
December 23, 2010

Fabrics and craft retailer Jo-Ann Stores Inc. (NYSE: JAS) has agreed to accept a buyout offer of $61.00 share from private equity firm Leonard Green & Partners that values the retailer at about $1.6 billion. Jo-Ann stores have until February 14th to seek a better offer. The offer from Leonard Green is expected to close in the first half of 2011.

Last month Green teamed with private equity firm TPG Capital to make a $3 billion offer for J. Crew Group, Inc. (NYSE: JCG). That deal has come under intense scrutiny since it was revealed that J. Crew’s CEO had unreported early contacts with representatives of Leonard Green and that TPG was given confidential information about J. Crew in September.

Recent interest in retailers is a little difficult to fathom. Retailing is, at best, a low-margin business that is very susceptible to changes in the economy. A fabrics and craft store like Jo-Ann could be seeing an uptick as the economy encourages people to make rather than buy clothing and other items for a home. But all the signs are that the economy is in for a boost in 2011, which should lower interest in sewing, although it could raise interest in craft hobbies like scrapbooking.

Jo-Ann’s CEO noted that going private would enable renovation of the stores and quicker expansion to increase market share. Maybe that will happen, but Jo-Ann is betting the ranch on it.

Jo-Ann Stores are seeing a jump in share prices of more than 30% on very heavy volume. Shares of J. Crew are also up marginally.

That Was Fast: Gymboree Bought by Bain

24/7 Wall St.
October 11, 2010

The Gymboree Corporation (NASDAQ: GYMB) has hardly been on the market for much time after shares had a great ten days or so on word that it was reviewing alternatives in hope of getting a private equity buyout. It already came. Bain Capital Partners has entered into a definitive agreement for affiliates of Bain Capital to acquire all the outstanding stock of Gymboree for $65.40 per share, or $1.8 billion.

The merger has been unanimously approved by Gymboree’s board of directors. The price represents a 57.4% premium to the ‘unaffected share price’ on September 30, 2010 before market rumors of a transaction. Furthermore, this represents a 23.5% premium to Friday’s closing price.

Under the terms of the agreement, it is anticipated that affiliates of Bain Capital will commence a tender offer for all of the outstanding shares of Gymboree shortly following the execution of the agreement. Gymboree has a 40-day go-shop provision in the deal.

Some deals happen fast, others happen faster than fast. The 52-week trading range is $37.26 to $55.27, or at least it was before the deal reaction this morning. Shares are indicated up about 30% around $69.00 as some hope a higher buyout price will be offered. Keep in mind, this is an all-time high for Gymboree and that goes back to the mid-1990′s.

M&A Alerts: MBO Heads Harbin’s Way

24/7 Wall St.
October 11, 2010

Harbin Electric, Inc. (NASDAQ: HRBN) is going private, at least that is if the deal is accepted. The company has received a proposal letter from its Chairman and CEO, Mr. Tianfu Yang and Baring Private Equity Asia Group Limited. The offer is for $24.00 per share in cash, subject to certain conditions. The company is a developer and manufacturer of electric motors in China and products include industrial rotary motors, linear motors, and specialty micro-motors.

Mr. Yang currently owns 31.1% of Harbin’s common stock and an acquisition vehicle will be formed and the deal is intended to be financed with a combination of debt and equity capital. In addition, the equity portion of the financing would be provided by Mr. Yang, the Baring Fund and related sources. Goldman Sachs (Asia) LLC is acting as financial advisor to the acquisition vehicle.

Harbin’s Board of Directors has already formed a special committee of independent directors (David Gatton, Boyd Plowman and Ching Chuen Chan) to consider this proposal. The special committee will retain independent advisors to assist in a decision and no decisions have been made by the special committee over this proposal.

Management buyouts have a mixed history when it comes to independent committees approving such mergers. The fact that this is more of a Chinese operation may only make predicting whether a buyout would allowed only that much more difficult. The company did note, “There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.”

Harbin’s shares closed at $19.96 on Friday and the 52-week trading range is $15.26 to $26.00. Shares are up more than 21% at $24.30 in thin-volume trading.

Over $100 Billion in Buybacks and M&A in August

24/7 Wall St.
August 31, 2010

$100 billion… That is roughly the combined tally of August share buyback announcements and merger announcements. This may not be a record, but it has to be one of the most active months of announcements that intend to return capital to shareholders.

Share buyback announcements were led by Hewlett-Packard Co. (NYSE: HPQ), Intuit Inc. (NASDAQ: INTU), Lorillard, Inc. (NYSE: LO), VeriSign Inc. (NASDAQ: VRSN), DIRECTV (NASDAQ: DTV), Discovery Communications Inc (NASDAQ: DISCA), Gap Inc. (NYSE: GPS), Nordstrom Inc. (NYSE: JWN), Marvell Technology Group Ltd. (NASDAQ: MRVL), and RadioShack Corporation (NYSE: RSH).

M&A activity was led by deals for 3PAR, Inc. (NYSE: PAR), Genzyme Corporation (NASDAQ: GENZ), Potash Corp. of Saskatchewan (NYSE: POT), Intel Corporation (NASDAQ: INTC), Charles Schwab Corporation (NASDAQ: SCHW), 3M Co. (NYSE: MMM) and Dynegy Inc. (NYSE: DYN).

While you can not expect all of the set buybacks to be accelerated and while some may never be completed, combined announcements of more than $26 billion (not including many smaller buybacks announced) are hard to ignore even if $10 billion was via Hewlett-Packard Co. (NYSE: HPQ). Some of these were add-on amounts and some were new combined announcements.

The merger front is also a slippery slope in the named deals (not including some smaller deals) because some of these are being challenged. The lion’s share of M&A revolves around Genzyme Corporation (NASDAQ: GENZ) by Sanofi-Aventis (NYSE: SNY) and Potash Corp of Saskatchewan (NYSE: POT) by BHP Billiton plc (NYSE: BHP), both of which deals have the targets trading at a premium because the companies want more money.

The table below was geared down to only account for the larger deals. Many smaller deals and smaller buybacks were left off, which is why the tally is just shy of the $100 billion mark. Below is a table summary of the combined share buybacks and the combined acquisition targets:

BUYBACK ANNOUNCEMENTS	SIZE (MIL$)
Fossil, Inc. (NASDAQ: FOSL)	$750
Qlogic Corp. (NASDAQ: QLGC)	$200
Oil States International Inc. (NYSE: OIS)	$100
White Mountains Insurance Group, Ltd. (NYSE: WTM)	$180
Veeco Instruments Inc. (NASDAQ: VECO)	$200
Myriad Genetics Inc. (NASDAQ: MYGN)	$100
Ann Taylor Stores Corporation (NYSE: ANN)	$400
Dillard’s Inc. (NYSE: DDS)	$250
Gap Inc. (NYSE: GPS)	$750
Hewlett-Packard Co. (NYSE: HPQ)	$10,000
Lorillard, Inc. (NYSE: LO)	$1,000
Marvell Technology Group Ltd. (NASDAQ: MRVL)	$500
Intuit Inc. (NASDAQ: INTU)	$2,000
The Children’s Place Retail Stores, Inc. (NASDAQ: PLCE)	$100
Nordstrom Inc. (NYSE: JWN)	$500
RadioShack Corporation (NYSE: RSH)	$500
Rambus Inc. (NASDAQ: RMBS)	$90
Research In Motion Limited (NASDAQ: RIMM)	$80
Flextronics International Ltd. (NASDAQ: FLEX)	$200
RenaissanceRe Holdings Ltd. (NYSE: RNR)	$500
TD AMERITRADE Holding Corporation (NASDAQ: AMTD)	$500
Advance Auto Parts (NYSE: AAP)	$300
The Scotts Miracle-Gro Company (NYSE: SMG)	$500
Polo Ralph Lauren (NYSE: RL)	$250
VeriSign Inc. (NASDAQ: VRSN)	$1,100
DIRECTV (NASDAQ: DTV)	$2,000
Discovery Communications Inc (NASDAQ: DISCA)	$1,000
Gartner Inc. (NYSE: IT)	$500
WMS Industries Inc. (NYSE: WMS)	$300
Focus Media Holding Limited (NASDAQ: FMCN)	$300
Plum Creek Timber Co. (NYSE: PCL)	$200
Atmel Corporation (NASDAQ: ATML)	$200
W. R. Berkley Corporation (NYSE: WRB)	$260
Skyworks Solutions (NASDAQ: SWKS)	$200
Owens Corning (NYSE: OC)	$285
WebMD Health Corp. (NASDAQ: WBMD)	$150
Total Counted Buybacks	$26,445
MERGER ANNOUNCEMENTS	SIZE (MIL$)
Deere & Company (NYSE: DE) sale of wind to Exelon	$900
3PAR, Inc. (NYSE: PAR) by HP	$1,900
Genzyme Corporation (NASDAQ: GENZ) by Sanofi	$18,500
Potash Corp of Saskatchewan (NYSE: POT) by BHP	$39,000
Intel Corporation (NASDAQ: INTC) Infineon wireless	$1,400
McAfee, Inc. (NYSE: MFE) by Intel	$7,700
New Alliance Bancshares Inc. (NYSE: NAL)	$1,500
Charles Schwab (NASDAQ: SCHW) for Windward	$150
Cogent Inc. (NASDAQ: COGT) by 3M	$943
3M Co. (NYSE: MMM) buys Attenti from Francisco Partners	$230
Dynegy Inc. (NYSE: DYN) by Blackstone	$542
Total Counted M&A	$72,765

Barnes & Noble Settles With Burkle–To What End?

24/7 Wall St.
August 12, 2010

Failing bookstore company Barnes & Noble (NYSE: BKS), maker of the also-ran e-reader, the Nook, has settled with raider Ron Burkle, who bought enough shares in the company so that he could claim that he needed a board seat.

The Wall Street Journal reports that “As part of the settlement, Barnes & Noble will add two independent directors to the board, in addition to a director affiliated with Yucaipa Cos., the investment firm run by Mr. Burkle, these people said.”

Burkle believed that the founding Riggio family, which holds a controlling interest in the firm, would act in their interests and not those of other shareholders. Burkle will end his proxy fight against the company in exchange for those board seats and support the re-election of chairman Leonard Riggio. Apparently, Barnes & Noble will pay the raider’s legal costs for his challenge. It is hard to imagine why this is a good deal for shareholders who will watch Burkle pick the company’s pocket in exchange for a seat at the table.

Riggio is already acting in his best interests and those of Burkle as well by putting the book company up for sale. Riggio has indicated that he may be a buyer, probably with a private equity firm which could borrow most of the purchase price from unwitting banks which have already lost tens of billions of dollars on LBOs.

Barnes & Noble has been thrashed by Amazon.com which has sold books online for more than a decade and does not have the costs of maintaining store locations. Amazon has also launched its Kindle e-reader which controls that market with a share that is estimated at 70% or better.

Even with a potential private sale of the company, its shares are only up to $14.48, well below their 52-week high of $25.07 and their five-year high of $48 reached in May 2006 when selling books out of physical locations was as good a business as selling DVDs from stores. Blockbuster found out the hard way that its sales would suffer when DVD sales moved to the Internet and the same now holds true of books, both paper and digital.

It is hard to see what Burkle gains by his new-found seat at the table. Barnes & Noble can hardly be broken up. The company’s online business many be attractive, but its stores are an albatross which have very little value at all.

Burkle may regret that he got what he wanted.

GE’s Cleantech Venture Fund Targets Grid, Batteries, and Electric Vehicles

24/7 Wall St.
July 13, 2010

General Electric Co. (NYSE: GE) is touting its new initiative for smarter power usage, which is from the power grid to plug-in electric vehicles, and a home energy command center. More importantly, it is starting a $200 million venture fund that will be used to fund and partner with start-ups with new ideas in the field. GE’s Jeff Immelt told us in our exclusive interview at GE’s annual meeting that the company sees big opportunities in battery technology. This furthers that push.

The fund is focused toward the clean-tech researchers, entrepreneurs and start-ups that have some of the best ideas to transform creating, connecting, and using power. Yes, this is an Ecomagination initiative.

The move is part of GE’s clean technology showcase, which also included two new smart grid product launches and what the company called “a host of innovations that are either deployed or in the pipeline.”

GE WattStation was debuted to help accelerate the adoption of plug-in electric vehicles, designed to significantly cut the time needed for charging. It will also allows utilities to better manage the impact of the vehicles on power grids.

GE also unveiled Nucleus, the company’s home energy command center. This is only size of a cell phone, and can be used for communication between smart meters, smart appliances, and the household computer or smartphone.

A $200 million venture fund will not likely make a huge dent in the nation’s power troubles nor will it make a huge impact on GE’s finances. What this will do is assure investors that GE has a shot of owning stakess in emerging cleantech power companies that will potentially be IPOs down the road or allow GE to profit from the power savings initiatives.

Citigroup’s Ongoing Exits… Still Room to Double

24/7 Wall St.
July 7, 2010

Citigroup, Inc. (NYSE: C) had a surprisingly small reaction today considering that when banks rise it tends to rise even more. Thomson Reuters, via PEHub, reported today that Citi has agreed to sell a portfolio of private equity interests for more than $900 million.

The report cited “multiple sources” calling Lexington Partners the buyer. We are looking beyond a single sale issue here.

There is something far more important here at stake. It is not just that we have said Citi could still see shares double. It is not even that hedge fund great Bill Ackman mirrored our call.

Citi is still paring its operations. It will probably take years for this to happen. It should as well, when you consider that selling off assets should be done through time for the best prices rather than a series of ongoing fire-sales at distressed prices.

Citi’s unofficial closing bell price was up 2.90% at $3.90. The volume was light at “only” 460 million shares.

New Economy: Dollar Stores Becoming The Next Wal-Mart

24/7 Wall St.
July 7, 2010

Today may seem like a poor example of growth and sector dominance when you consider that the news catalyst has a shadow over its peers. Family Dollar Stores Inc. (NYSE: FDO) beat earnings, but its shares are lower after issuing lackluster guidance. This is acting as drag on Dollar General Corp. (NYSE: DG), and it is having a muted reaction in Dollar Tree, Inc. (NASDAQ: DLTR), and 99¢ Only Stores (NYSE: NDN) is actually having a green day. Wal-Mart Stores Inc. (NYSE: WMT) might argue against this notion, but the trend of the current economy is that dollar stores could actually become (or may have already become) the next Wal-Mart.

Family Dollar Stores Inc. (NYSE: FDO) reported that quarterly earnings rose 19% and were $0.77 EPS, which beat Thomson Reuters by $0.01; and revenue rose by over 8% to $1.9 billion, which met estimates. The dollar store chain also said that sales strength continued into June with same store sales showing a 5.5% gain. The company sees 5% to 7% sales growth this quarter, but the problem came when it projected a profit view below analyst estimates. The company also said that it anticipates further caution from shoppers. Family Dollar shares are down over 8% at $36.11 on over 11 million shares so far today. Interestingly enough, S&P’s equity research just raised the stock to Buy from Hold after earnings.

The big notion about dollar stores being the new Wal-Mart may spark at least some controversy. It shouldn’t. If you have a recession, there are still things that have to be bought on the low-end of the spectrum. And dollar stores of the 2000′s are not dollar stores of the 1990s. They now sell many food items and consumer staples. For a buck. Wal-Mart’s big growth came from two major pushes: a focus on having the lowest prices around, followed by moving into areas where individual and smaller proprietors were natural “targets on price efficiency” or they were just small specialty shops rather than destinations. In short, Wal-Mart had the lowest prices and it killed many smaller competitors because they could not win even if they were able to compete on price.

Now you have Wal-Mart and the dollar stores which have to become impeccable at managing their entire supply chains so that they can have lower and lower prices. At Wal-Mart, the trick is that you have to compete on price with Target, Costco, Sears, and other large outfits. For dollar stores, the price target is fairly self explanatory outside of their ‘higher-end’ items. It is still funny to ask the cashier at the register how much each item costs. Dollar stores have much room for growth if you use the Wal-Mart comparison. In its last fiscal year, Wal-Mart’s annual sales were over $408 billion. The combined sales at these four dollar store leaders were almost $26 billion for the last fiscal year of each.

Wal-Mart’s 2000 Annual Report shows that sales were $165 billion, and that compares to $25.8 billion per the 1990 Annual Report. In short, the dollar store leaders combined today are still only where Wal-Mart was in 1990 (unadjusted for inflation and cost of living). Are we likely to see more than tenfold rise in dollar store sales over the next one or two decades? Let’s hope not, but this is meant as a starting point for trend analysis and reference.

Dollar stores have an implied and mandatory price target of its products regardless of what is going on between Target and Wal-Mart. They are also not destinations. For much of America, Wal-Mart is a destination on top of it having consistently lower prices than the companies it considers peers.

As far as a classification for a stock, we are not alone in calling Wal-Mart a classic example of being a dead-money stock. While there have been some exceptions to this, Wal-Mart’s stock has traded from $40 to $60 for a decade. At $48.72 today, that is not even close to any hope for a breakout. Wal-Mart’s most recent stock hay day was the 1990′s, where shares rose about tenfold. That performance has not exactly been seen by the dollar store sector, but there are some interesting factoids:

* Dollar Tree is up close to 150% in the last 5-years;
* 99¢ Only Stores has had a hard time getting and staying above $15.00 since 2004 and it used to be a $20 and even $30 stock earlier in the decade;
* Dollar General ran almost 50% from trough to peak since its late 2009 re-IPO;
* Family Dollar rose almost 20-fold from trough to peak during the 1990′s, and its shares before this last leg down had shown a double from the start of 2008.

Wal-Mart was supposed to be the winner of the recession as customers leaving Target, Sears, and elsewhere had to flee to comparable items (or sometimes the same items) for lower prices. The real recession winners were the dollar stores… Maybe you have to pick and look and can’t count on your go-to items, but a buck is hard to beat. If there is a double-dip recession that drags millions of more Americans back down that slide of misery, the dollar stores might actually get to become a destination after all.

Dollar General Corp. (NYSE: DG) recently had its own earnings and shares have slid since it reported solid earnings as well. Shares are down 1% at $27.72 today. One of the biggest overhangs here is that despite coming back to as a public company it is still mostly owned KKR. The big fear is that private equity firms sell into any strength after an IPO, and there is a whole history of that happening in post-IPOs from private equity firms to back up those fears. Since its IPO last year, Dollar General shares have traded in a range of $21.30 to $31.41.

Dollar stores will not ever equate a Wal-Mart. Even if these dollar stores double in the coming years, they may only pass Sears at $44 billion in its latest annual sales if the company does not get back on growth.

Dollar Tree, Inc. (NASDAQ: DLTR) is down 2.5% at $41.86, but it has held up the best of the entire group. Its 52-week range is $27.05 to $44.14. 99¢ Only Stores (NYSE: NDN) is actually UP 0.6% at $15.03 today, although its 52-week range is $11.21 to $18.10. It is interesting that 99¢ Only Stores is up on the day when you consider that it is viewed by many as the least attractive of the group.

Restructuring World: Major Spin-Offs From Major Companies

24/7 Wall St.
June 21, 2010

Restructuring never ends in many large corporations. After a week’s worth of reading through dozens of corporate deals in the pipeline and analyzing others which could be close, it seems that many of America’s (and ex-US) largest companies are about to go through major changes because of asset sales, spin-offs, and unit dispositions. These can be major events for the underlying companies and can create huge opportunities for investors to buy units inside the business rather than the whole company .

The list of corporations for 2010 is major and includes companies such as American International Group Inc. (NYSE: AIG), Prudential plc (NYSE: PUK), AMR Corp. (NYSE: AMR), Bank of America Corporation (NYSE: BAC), Barclays plc (NYSE: BCS), BP plc (NYSE: BP), General Electric Co. (NYSE: GE), Genzyme Corporation (NASDAQ: GENZ), HSBC Holdings (NYSE: HBC), Lockheed Martin Corporation (NYSE: LMT), McDermott International Inc. (NYSE: MDR), Motorola Inc. (NYSE: MOT), Questar Corporation (NYSE: STR), Sunoco Inc. (NYSE: SUN), Verizon Communications Inc. (NYSE: VZ) (NASDAQ: VZ), Frontier Communications Corporation (NYSE: FTR), and Vishay Intertechnology Inc. (NYSE: VSH).

This comes to about 15 deals in the spin-off and disposition category that is part of special situation and value investing. This is also key for dividend investors. We have outlined the units up for grabs or pending in each company. We have also tried to look for relative value comparisons and financial comparisons on each where applicable and when possible.

American International Group Inc. (NYSE: AIG) lost out on its $35.5 billion sale of the its main Asian unit and crown jewel, AIA Group. If you read reports, it looks as though the secondary bidders behind Prudential plc (NYSE: PUK) were lower than what AIG would accept. The company has toyed with spinning assets off, and that looks to be one of the biggest issues today. If AIG was getting a cash sale of $35.5 billion, who knows where this would come of it was parceled off in an IPO. It could get a few strong minority shareholders and secure many more today for that growing unit. What the price tag will be, that is another question and one that is dependent upon the DJIA and the world markets. The company has little choice to spin the company off and CEO Benmosche is at the point that he’d probably like to offer some proof to taxpayers that he’s ready to start paying back that huge debt owed. This is not the first sale or divestiture inside AIG, and it won’t be the last.

AMR Corp. (NYSE: AMR) may be an unlikely spin-off company considering that the industry is consolidating. The parent of American Airlines said recently that it may revive plans to jettison its regional air-carrier arm of American Eagle. This is partly in response to criticism over its long-term strategy. The company has gone as far as putting one of its more senior and well-respected executives in charge of American Eagle. AMR tried this before and the two companies were not solid enough. It is also a safe bet that the two may be more intertwined than they would believe just on the surface. After going through the spin-off candidates out there, this is one to watch.

Bank of America Corporation (NYSE: BAC) is not going to be a game-changer, but it is expected to bring in around $4 billion by selling off its stake in Brazilian bank preferred shares and common stock in Itau Unibanco Holding SA. This is part of the company’s effort to raise additional capital by June 30 and helps BofA meet a capital requirement to lift its common equity level by about $3 billion, via asset sales and holdings sales, as part of a regulatory agreement from when it paid back $45 billion for its bailout.

Barclays plc (NYSE: BCS) has a spin-off or sale coming, maybe. Barclays Private Equity is expected to be spun out of the bank as soon as this summer. That will allow its management to raise between €1.5 billion and €2 billion for their next fund, something that is going to be hard to do under the coming financial regulatory changes coming in the U.K. and in the U.S. Talks have been ongoing and it seems that a management buyout is the likely end game.

BP plc (NYSE: BP) is in the pending-pending category. Telling you about the Gulf of Mexico woes is not even needed, but the talk over the weekend is that now BP may look to raise as much as $50 billion. This would be from bank loans, bond sales, and even from asset sales. BP solar would be one of the world’s largest independent solar companies, and you know that employees now at this unit aren’t feeling as proud of their name as they were about 60 days ago. BP has toiled with consolidating before, and BP solar is one of the operations some feel could make the grade. It is still too soon to know if even could get anything sold off. It is not as if there are not creative enough of attorneys in the United States that know how to try to enjoin assets even after a disposition of those assets.

General Electric Co. (NYSE: GE) is probably not a huge shock that it is on the list of spin-offs and unit divestitures. Recent reports put GE as shopping around its Latin American bank and credit card business called BAC-Credomatic GECF. Reuters noted that the proposed sale is part of a plan already outlined in April aimed at trimming down financial services as a percentage of the company. Reuters also sourced about $1.5 billion as a price tag in today’s markets versus about $500 million paid for the near-half stake in BAC-Credomatic in 2005 before then raising the stake to 75%. Is this one a done deal for sure? Probably not. The $170 billion market cap makes this one of a gesture of goodwill on the surface.

Genzyme Corporation (NASDAQ:GENZ) used to have tracking stocks for the Genzyme Biosurgery and Genzyme Molecular Oncology units, and it ended that by acquiring the units in 2003. But the new recent shareholder value plan shows Genzyme is now considering strategic options for its Genetic testing, Diagnostic products, and for its pharmaceutical intermediates operations. The company said the consideration involves a sale, a spin-off or even a management buyout. The company said that it has already selected some possible partners for the units and that it has even received some initial inquiries. The company also contacted Goldman Sachs and Credit Suisse for assistance. With a $14 billion market cap, and a $2 billion share buyback plan ($1 billion just accelerated now), this could greatly change the focus of Genzyme in a more narrow manner.

HSBC Holdings (NYSE: HBC) has announced that it was in talks in recent weeks to sell off its private equity fund management businesses in England, Hong Kong, the United States, Canada and elsewhere. This sale appears to be similar to Barclays as being management buyouts. After looking around for figures, the private-equity businesses under consideration have close to $8.8 billion in funds under management, but the kicker is that about 20% of the assets are HSBC’s. Predicting a sale price here at this juncture may be far too soon, but there is now way it could be sold for under 1% of assets under management and probably not more than 10% of assets under management.

Lockheed Martin Corporation (NYSE: LMT) has already begun to brace for different forms of military spending in the future. The company has begun to reshape its portfolio to drive its longer-term performance. Up for grabs are most of the Enterprise Integration Group and also Pacific Architects and Engineers, which are both under its Information Systems & Global Services operations today. EIG provides independent systems engineering and integration products and services and the PAE unit is in mission readiness, global infrastructure support, and in disaster relief activities; the two units are said to comprise only about 3% total revenue and less than 3% of operating profits. With close to a $30 billion market cap, straight-line accounting would put this being close to $1 billion on the market at current prices.

McDermott International Inc. (NYSE: MDR) has been given a tax-free spin-off status under IRS ruling for its Babcock & Wilcox Company, its power generations systems unit and government operations. McDermott and B&W are continuing to work to satisfy all the conditions to the spin-off transaction, including obtaining applicable governmental approvals, and the company expects the spin-off to be completed in the third quarter of this calendar. The engineering and construction company said in May that spin-off costs ended up taking a bite out of earnings, but a 21% revenue decline worked its magic too. The company is also set to spin out the J. Ray McDermott S.A. unit into another independent and publicly traded company. Due to sector issues and due to a $5.6 billion market cap, McDermott is probably not one to ignore.

Motorola Inc. (NYSE: MOT) has restructured literally for almost the entire time I have covered equities. The mobile communications technology giant is about to be much different after its cell phone spin-off comes. Unfortunately, that is not expected until 2011. As disappointment as lingered here forever, it is probably safe to assume that Hello-Moto could always yell “Do-Over!” and change its mind. Motorola recruited Sanjay Jha in 2008 as the turnaround man by making him co-CEO and the head of mobile phone and cable set-top box operations. If this sounds familiar, it should. The first spin-off (or sale) was expected in 2008 but things in the markets caused that spin-off to get delayed.

Questar Corporation (NYSE: STR) recently announced that its board of directors approved and set the record and distribution dates for its tax-free spin-off of its natural gas and oil exploration and production and midstream field services businesses to shareholders on June 30, 2010 to Questar shareholders of record as of the close of business on June 18, 2010. Questar’s shareholders will receive one share of QEP common stock for each share of Questar common stock held as of the record date, and this includes fractional shares. With an $8.7 billion market cap, the Questar deal is oe to watch. In the spin-off are:

* QEP Energy Company, formerly Questar Exploration and Production, a diversified natural gas and oil-exploration, development and production company;
* QEP Field Services Company, formerly Questar Gas Management, a midstream field services company that gathers and processes natural gas in the Rocky Mountain region and northwest Louisiana;
* and QEP Marketing Company, formerly Questar Energy Trading, which markets natural gas and oil on behalf of QEP Energy Company and others and operates a natural gas storage facility in western Wyoming.

Sunoco Inc. (NYSE: SUN) is going to separate its coke business to unlock shareholder value. The company also said it anticipates its refining segment to report a profit for the quarter ending June 30, so things at the core business may be improving. With the woes of refining margins seen at competitors like Valero, a focus here may not be such a surprise. The $4 billion market cap might not be changed drastically here, but a recent upgrade to “Overweight” by Barclays with a $45 per share price target make it less surprising that Sunoco is close to 52-week highs while refining stocks are generally lower.

Verizon Communications Inc. (NYSE: VZ) (NASDAQ: VZ) has established a record date of June 7, 2010 for the proposed spin-off of shares of subsidiary New Communications Holdings Inc. to Verizon stock holders. This spin-off and the merger of New Communications with Frontier Communications Corporation (NYSE: FTR) is expected to occur on July 1, 2010, at last look and is subject to closing conditions in the merger agreement(s) among Verizon, Frontier and New Communications. Immediately after the completion of the merger, Verizon holders will own between about 66% and 71% of the shares of Frontier common stock; and Frontier’s common holders will collectively own 29% to 34% before accounting for the elimination of fractional shares. Verizon common holders will not be required to pay for any shares of Frontier common stock that they receive and will also retain all of their shares of Verizon common stock. Verizon has spun-off Idearc and the biggest change that could ever come down the road is that Vodafone plc (NYSE: VOD) relationship over Verizon Wireless.

Vishay Intertechnology Inc. (NYSE: VSH) has six major business lines: Automotive, Computer, Consumer, Industrial, Medical, and Telecom. Last week the company said it has set tentative spin-off dates for Vishay Precision Group Inc., its measurements and foil resistor business, of July 6, 2010. This is subject to satisfaction of all conditions and will give stockholders one share of the new company for every 14 of Vishay Intertechnology shares owned. Vishay Precision shares will trade under the stock ticker “VPG” on the NYSE. As it stands today it seems that Vishay has over 22,000 employees, and Vishay has a market cap of only $1.64 billion as of Friday.

Asset sales, spin-offs, divestitures, distributions and more are all part of corporate strategies. This also becomes the “special situation” category of investing. If units can enhance shareholder value more by being sold or by being put on their own, hen that is the job of management to decide. But these also are brought up often after pressure from activist shareholders. These also often create many more shareholder opportunities in either the old parent company or in the spin-co. Stay tuned.

Primerica Comes To America, Above Price and Range

24/7 Wall St.
March 31, 2010

Citigroup Inc. (NYSE: C) or Primerica Inc. (NYSE: PRI)?… The answer is both or either. The financial supermarket is about to have one less aisle. Citi is spinning off the life-insurance and mutual-fund brokerage arm via an initial public offering that raised close to $320 million. The offering will be 21.36 million shares at $15.00 per share, which is a higher share count than the 18 million shares originally projected and above the $12.00 to $14.00 range after the offering saw strong investor demand.

In addition to the spin-off via an IPO, Citigroup will sell 17.21+ million shares of Primerica to private equity firm Warburg Pincus LLC along with warrants for up to another 4.3 million shares at an exercise price per share equal to 120% of the per share public offering price.

Primerica’s 2009 profit was up almost 200% to about $495 million after seeing fewer write-offs, writedowns, and lower charges against its investments.

After the IPO, depending upon overallotments and dilution, Vikram Pandit and friends at Cit will have a stake of 32% to 46% stake. The total shares outstanding will be 75 million shares.

For those who like to see firms coming public receiving all the proceeds, this may be a different IPO than that. Primerica receives no new working capital nor any operating capital.

The underwriting group is huge here. Citi is the book-runner; co-lead managers are UBS, Deutsche Bank, and Morgan Stanley. Co-managers are KBW, Macquarie Capital, Raymond James, Sanler O’Neill, SunTrust Robinson Humphrey, ING, and Willis Capital Markets

KKR IPO… Private Equity’s Return

24/7 Wall St.
March 12, 2010

KKR & CO. L.P. is back. At least its IPO ambitions are. Long live private equity! Long Live leveraged buyouts! At least that is what the company wants you to think. KKR plans to sell up to 204,902,226 shares worth more than $2.2 billion in its common equity units in an underwritten initial public offering.

On a fully diluted basis, KKR has 683,007,420 common units outstanding and will trade on the NYSE under the “KKR” ticker.

If you can believe it after the crash, 2009 was a record year in total assets under management. 2009 saw $52.2 billion in total assets under management, $38.8 billion of which was private equity under management. After breaking out the public and private markets separately, both were a record in 2009.

On October 1, 2009, it completed the acquisition of the assets and liabilities of KKR Guernsey and completed a series of transactions where the business of KKR was reorganized into a holding company structure.

You can expect more to follow. If history is a yardstick, KKR will probably go for an expedited time frame here. This private equity giant tried to come public in 2007 at the peak of the private equity craze. We won’t bother telling you what happened as far as ‘market conditions’ are concerned.

More Key SPAC and Blank-Check Developments

24/7 Wall St.
February 25, 2010

We are seeing more and more deal news in the land of special purpose acquisition companies and in blank check companies. Some is good, while some is not. SPACUpdate.com sent us some exclusive coverage in BPW Acquisition Co. (AMEX: BPW), Talbots (NYSE: TLB), Hambrecht Asia Acquisition Co. (OTC: HMAQF), BBV Vietnam SEA Acquisition Co. (OTC: BBVVF), Western Liberty Bancorp (AMEX: WLBC), Ultimate Escapes Inc. (OTC: ULEI), and China Fundamental Acquisition Co. (OTC: CFQCF).

BPW Acquisition Co. (AMEX: BPW) shareholders overwhelmingly approved the SPAC’s deal to merge with Talbots (NYSE: TLB) with a 91% approval. The SPAC’s warrants traded up, to about $1.40, and common shares remained above trust at the close of trading Wednesday. However, BPW is not yet out of the woods: its deal also hinges on a warrant holder conversion vote. The SPAC is has amended its warrants so that only half of them would need to agree to a restructuring, instead of 90 percent.

Hambrecht Asia Acquisition Co. (OTC: HMAQF) now has a deal to buy LCD maker Guanke (Fujian) Electron Technological Industry Co. and the SPAC seeks to now extend its deal deadline. Despite having little volume recently, the SPAC’s management is committed to completing its deal and SPACupdate.com anticipates the blank check’s deadline delay will be approved, paving the way for a lengthy buybacks campaign. The SPAC’s warrants traded up immediately, to $0.55.

BBV Vietnam SEA Acquisition Co. (OTC: BBVVF) has been besieged by shareholders intent on buying up shares to withhold from the SPAC until it agrees to buybacks. Victory Park Capital Advisors, a hedge fund that has typically worked with SPACs to sell shares back above trust value, took a stake in the blank check; its warrants have seen value slide as nervous investors have begun dumping their positions. BBV warrants were recently being offered in the $0.16 range. In 2009, BBV announced plans to buy Migami Inc., which sells cosmetic products and licenses drug-delivery systems and technologies to pharmaceutical companies.

Both Western Liberty Bancorp (AMEX: WLBC) and Ultimate Escapes Inc. (OTC: ULEI) announced exchanges would be de-listing them. Western Liberty, which has a re-scheduled vote date to bring public a portion of its initial target, will try to appeal the exchange’s final decision, but Ultimate Escapes is already trading Over-The-Counter.

China Fundamental Acquisition Co. (OTC: CFQCF) completed its deal to bring public Beijing Wowjoint Machinery Co. Ltd.; since then, the SPAC’s shares have faltered, slightly losing value.

While the US SPAC pipeline remains clogged, in Korea, blank checks are being welcomed there by investors. Mirae Asset Securities, Hyundai Securities, Tong Yang Investment Bank and Daewoo Securities are all in the process of having SPACs listed on the Korean Stock Exchange. Most of the SPACs are about $20 million in size, aside from Daewoo’s, worth about $75 million.

14 IPO Updates for 2010

24/7 Wall St.
January 28, 2010

The IPO market is off to a rough start so far in 2010. We have seen very recent developments in deals on deck to price from CBOE Holdings Inc., Convio Inc., Everyday Health Inc., FriendFinder Networks Inc., Generac Holdings Inc., Graham Packaging Co., HealthPort Inc., IFM Investments Ltd., Ironwood Pharmaceuticals Inc., JinkoSolar Holding Co. Ltd., Motricity Inc., Prometheus Laboratories Inc., QuinStreet Inc., and Ryerson Holding Corp. all have significant developments in their quests to come public.

This has many implications for public companies such as The Blackstone Group (NYSE: BX), Intel Corp. (NASDAQ: INTC) via Intel Capital and Qualcomm Inc. (NASDAQ: QCOM) via Qualcomm Ventures, and Novartis (NYSE: NVS). Below is a brief update on each IPO on the docket.

CBOE Holdings Inc., the parent of the Chicago Board Options Exchange, has seen a tapering off of the pre-IPO value based upon two exchange seat sales in the last week. A seat at the CBOE sold for $2.625 million this week according to Dow Jones, after a seat went for $2.7 million last week. Earlier this month a seat sold for $2.825 million. According to our calculations on a all-in seat value of 930 seats, that generates an implied exchange value of $2.441 billion versus $2.627 billion earlier this month. This IPO is not due until mid-year, so this may be premature.

Convio Inc. is an online constituent relationship management provider that sells mainly to non-profit groups. This will trade under the ticker “CNVO” on NASDAQ and Piper Jaffray and Thomas Weisel were co-lead managers. It plans to raise $57.5 million in the IPO, although this needs to be double-checked because we saw up $86 million in an IPO filing that was withdrawn after a 2007 filing. You know why… unfavorable market conditions.

Everyday Health Inc., a VC-backed health information site for health-conscious consumers, recently filed for a $100 million IPO. The company plans to trade under the stock ticker “EVDY” on NASDAQ. Goldman Sachs and J.P. Morgan are the co-lead managers of the deal.

FriendFinder Networks Inc. has reportedly moved its IPO to next week (if not later). The social network, sort of, for dating and finding sex hook-up partners will trade under the ticker “FFN” on the NYSE. We had already noted how the size of the offering was cut severely. The reason the deal is delayed is because of requests from the SEC according to reports.

Generac Holdings Inc. is a maker of standby and portable generators. This is a private equity-backed IPO bought in late 2006. It has bumped up the proposed IPO size to over $427 million from $300 million and the proposed ticker is “GNRC” on NYSE… J.P. Morgan and Goldman Sachs are co-lead managers.

Graham Packaging Co. is a maker of plastic containers, and owned by The Blackstone Group (NYSE: BX). Terms were initially set at 23.3 million shares between $14 and $16 per share under the NYSE ticker of “GRM”… Citigroup, Goldman Sachs, and Deutsche Bank are the lead underwriters.

HealthPort Inc. has recently canceled its plans for an IPO because of poor market conditions. The medical record management company had planned a stock sale of up to $100 million.

IFM Investments Ltd. is set to trade Thursday under the stock ticker “CTC” on the NYSE. The Chinese real estate player is under a Century 21 franchise agreement to sell real estate in China. It now plans to sell 12.5 million ADSs between $7 and $8 per share, but this is under a prior range of $8.75 to $10.75 and under the prior 16+ million shares originally shown. If China is cutting down on its loans, how good can business be?

Ironwood Pharmaceuticals Inc. filed at the end of 2009 for an IPO and has recently set the terms of the IPo at 16.6 million shares in a range of $14 to $16 per share. This one will trade as “IRWD” on NASDAQ and joint book-runners are J.P. Morgan, Morgan Stanley, and Credit Suisse. This company is the parent of Microbia, Inc., with a validated technology platform that enables it to produce specialty ingredients and industrial biomaterials from renewable resources.

JinkoSolar Holding Co. Ltd. is a VC-backed developer of silicon wafers in China for use in solar panels. The company filed to raise up to a $100 million and plans to trade on the NYSE with the “JKS” stock ticker. Goldman Sachs and Credit Suisse were listed as the co-leads on the deal.

Motricity Inc. is a provider of mobile data solutions that enable wireless carriers and enterprises to deliver mobile data services to their subscribers and customers. It has recently filed recently to raise up to $250 million in a sale of common stock in its IPO and plans to trade under the “MOTR” stock ticker on NASDAQ. Goldman Sachs and J.P. Morgan are the co-lead managers. Intel Corp. (NASDAQ: INTC) via Intel Capital and Qualcomm Inc. (NASDAQ: QCOM) via Qualcomm Ventures are VC-backers, and Carl Icahn was listed as a backing owner as well.

Prometheus Laboratories Inc. is a drug and diagnostics company that acquired the U.S. licensing rights covering the Novartis (NYSE: NVS) kidney cancer drug Proleukin for terms that were not seen but include up-front payment(s) and potential payments upon reaching certain milestones. We have the registration being up to $100 million stock being sold by the VC-backed company.

QuinStreet Inc. is a provider of vertical marketing solutions online and will sell 10 million common shares at $17 to $19 per share. We had penciled in up to $250 million originally. The firm will trade under the “QNST” stock ticker on NASDAQ. Credit Suisse, Bank of America Merrill Lynch, and J.P. Morgan are co-lead underwriters.

Ryerson Holding Corp. is a recently filed IPO for the metals processor to raise up to $350 million under the stock ticker “RYI”on the NYSE. This one was taken private by Platinum Equity in 2007 with a price tag of close to $2 billion. Its S-1 filing with the SEC showed us no listed underwriters.

2011-01-24T13:22:00.000-05:00

Billionaire Investor Carl Icahn Snaps Up CIT Debt; CIT Pays Goldman Sachs $285 Million to Trim Its Rescue Loan

Reuters
October 30, 2009

* CIT pays $285 million in fees to Goldman
* Counting votes on restructuring plan, debt exchange
* Shares fall almost 12 percent to 84 cents in pre-market

Goldman Sachs Group plans to trim the rescue loan it arranged for CIT Group Inc by $875 million to $2.125 billion, CIT said on Friday.

CIT, which has been struggling to finance itself amid the credit crunch and recession, said it is effectively removing the part of the loan it hadn't taken, according to a filing with regulators.

The commercial lender paid $285 million as a fee to Goldman for reducing the loan and it has posted an initial $250 million in collateral, according to the filing. In return, Goldman has agreed it will not terminate the loan should CIT file for bankruptcy.

Goldman had been seeking to amend the loan since earlier this month, according to reports. The bank had been due a payment of $1 billion if CIT filed for bankruptcy, a source told Reuters.

CIT is likely to file for bankruptcy in the coming days, analysts have said.

If struggling U.S. commercial lender CIT Group Inc were to collapse it would be a "drastic mistake" as the small businesses that rely on it would have few alternate sources of funding... "I have a great fear of the collapse of CIT and that people don't understand the ramifications of what that can be. I think it would be a very, very drastic mistake in this country to allow CIT to go under." - Lynn Tilton, chief executive of distressed investment firm Patriarch Partners, CIT Collapse Would Be a Mess, Turnaround Experts Say, October 1, 2009

The lender has offered investors two options: an exchange of bonds for new securities and equity, avoiding a bankruptcy filing; approval of a reorganization plan before the company files for bankruptcy.

Separately, in a statement on Friday, CIT said an independent balloting company is counting more than 150,000 ballots from investors on the exchange and restructuring plan, which expired on Thursday.

The company did not say how long this process might take.

CIT shares fell almost 12 percent to 84 cents in pre-market trading.

CIT Presses Bondholders to Agree to Restructuring

Reuters
October 23, 2009

CIT Group Inc warned bond holders that if they failed to exchange their debt or approve a prepackaged bankruptcy, the commercial finance company -- and its debt investors' returns -- could suffer mightily.

The company said that, without a debt exchange or an orderly bankruptcy, the company would have to liquidate, an expensive process that could leave unsecured bondholders with somewhere between 6 cents and 37 cents on the dollar. These bonds were trading just above 60 cents on the dollar earlier on Friday.

"Let's be clear. A free-fall bankruptcy will ... result in a lower recovery for today's unsecured bondholder," CIT Chairman and Chief Executive Jeffrey Peek said in a pre- recorded webcast presentation.

CIT's restructuring plans were almost immediately slammed by billionaire investor Carl Icahn, who snapped up CIT debt in the past few months to become what he says is the company's largest bondholder.

New York-based CIT is trying to restructure its debt through getting debt holders to exchange their debt, or to agree to a pre-packaged bankruptcy. It is also looking to boost a $3 billion secured credit facility by another $4.5 billion.

Once the company restructures its liabilities, it can try to move some of its businesses into its regulated bank subsidiary and fund them with deposits instead of bonds.

Icahn said a better plan is to try to move businesses into the bank within nine months. If that does not happen, the company should wind itself down and pay out proceeds to debt holders. Icahn said that, if the company pays off its debt with money from maturing assets, his bonds could be worth 80 cents to 85 cents on the dollar.

"CIT would have you believe that a bankruptcy would be calamitous. We do not believe this to be the case," said Icahn, who made much of his fortune over the years buying controlling stakes in distressed companies.

Icahn has been increasingly active in companies in bankruptcy court this year. This summer, he was approved by a court to provide part of the bankruptcy financing for auto parts maker Lear Corp, a company he had once had a large equity position in and tried to acquire. He also received approval from a bankruptcy court to buy Tropicana Casino and Resort in Atlantic City.

Time is running out for CIT. The company has until Oct. 29 to restructure its debt or get approval for a prepackaged bankruptcy. In the beginning of November, about $1 billion of its debt matures...

CIT makes loans mostly to small and medium sized businesses and also has a large factoring business that services the retail sector.

CIT Debt Swap Struggles, Bankruptcy Looms

Reuters
October 13, 2009

CIT Group Inc (CIT.N) is seeing little interest from bondholders in a debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely, sources familiar with the matter said.

The lender to small and medium-sized businesses said earlier this month it was looking for investors to approve a large debt exchange that would reduce its borrowings, or to approve a prepackaged bankruptcy.

CIT is now more likely to try a prepackaged bankruptcy, two people familiar with the matter said. They declined to be identified because the exchange offer is ongoing and information about its progress is private.

But separately, investors in CIT securities said it is possible the company will not find enough debtholder approval for a prepackaged bankruptcy, which requires sufficient support before the company files for protection from creditors. Instead, CIT might have to aim for a prenegotiated bankruptcy, which typically has less support before the actual filing.

CIT spokesman Curt Ritter declined to comment.

CIT has limited time to work out its debt difficulties. It has about $3 billion of debt to repay in the fourth quarter, including both secured and unsecured obligations, according to a CIT quarterly filing with regulators.

CIT has lost access to unsecured debt markets, but has billions to refinance in coming years. In three of the next four years, it will have more debt to repay than cash to pay it back. CIT has roughly 1 million customers and more than $70 billion of assets, but many of its borrowers are struggling amid the worst recession since the Great Depression.

The company's debt exchange aims to reduce CIT's borrowings by at least $5.7 billion, with specific targets for lowering the company's liabilities through 2012. The exchange offer expires on October 29.

AT LEAST TWO WANT MORE

At least two groups of investors are pushing for better terms in a bankruptcy than those suggested by the company earlier this month, one of the sources and investors said.

A subordinated debt holder said last week he was hoping to press for either more equity, or for a promise from the company to pay extra money to current subordinated debt holders if the company's assets perform well enough.

Separately, investors holding debt that funded CIT business in Canada are pushing for greater consideration in any bankruptcy plan, too. These investors are entitled to recover money from Canadian assets and the parent company in the United States and could therefore get close to 100 cents on the dollar in any bankruptcy.

One investor that would take a hit in a CIT bankruptcy is the U.S. government. The United States' Troubled Asset Relief Program invested $2.3 billion in CIT in December and much or all of that could be lost if the company files for bankruptcy, analysts said.

But many debt investors are likely to end up with much more than zero if CIT files for bankruptcy. One group of bondholders lent $3 billion to the company in July. That loan is collateralized by an estimated $30 billion of assets, which would ensure that the July loan could likely be paid back in full.

2010-10-14T11:57:00.002-04:00

Private Equity Courts News Corp, AOL on Yahoo

Reuters
Oct 14, 2010

Several private equity firms have approached Internet and media companies including News Corp and AOL Inc to gauge their interest in buying out Yahoo Inc, a source with knowledge of the approaches said.

The news comes as Yahoo, the No.2 search engine in the United States behind Google Inc, struggles to revive its revenue growth under the management of Chief Executive Carol Bartz, and to rebuild its buzz among consumers amid competition from social networking sites such as Facebook.

A potential deal would be contingent on Yahoo selling its prized Asian assets, including a 40 percent stake in China's Alibaba Group and 34.5 percent of Yahoo Japan, the source told Reuters on Wednesday on condition of anonymity because discussions were not public.

Talks with News Corp and AOL began about two weeks ago and intensified in recent days, but Yahoo had not yet been approached as talks were still in their early stages, the source said.

Yahoo shares, which finished Wednesday up nearly 6 percent, gained another 9.5 percent to $16.71 in extended trading. Shares in Alibaba.com and Yahoo Japan rose in Asia trading.

Speculation of private equity interest in Yahoo, which is also struggling to stem an exodus of senior executives to rivals, has surfaced sporadically in past months.

Silver Lake Partners was among the firms in very preliminary, recent discussions about acquisition scenarios, a second source with knowledge of the matter said.

Blackstone had also been pitched the idea but was not currently working on a Yahoo deal, a separate source said.

News Corp, AOL, and Yahoo declined comment.

GOOGLE DOMINATES

Yahoo's plans for its Asian investments have sprung into the investor spotlight since Yahoo Japan turned to arch-foe Google for its Internet search technology.

Once dominant in search, Yahoo has been overshadowed by Google's growth and its market value is now little more than a tenth of its rival.

In Tokyo, Yahoo Japan gained 5.5 percent and Yahoo Japan's top shareholder, Softbank Corp, rose 2.9 percent.

Yahoo Japan has a market capitalization of about $20.5 billion, valuing Yahoo's stake at about $7 billion.

Shares in Alibaba.com edged up 0.3 percent in Hong Kong.

Analysts value parent Alibaba Group, China's largest e-commerce company, at between $15 billion to $25 billion, meaning Yahoo's 40 percent stake is worth up to $10 billion.

By disposing of those assets -- which some of Yahoo's investors favor -- would help drastically reduce Yahoo's market value of almost $20 billion now, making a deal more feasible.

Analysts said disposing of Yahoo's Asian assets, particularly its high-growth Chinese assets might be a problem.

"An Alibaba share sale is not easy to achieve. It is not a small deal and obviously it would be hard to calculate the valuation to the benefit of all parties," said Wallace Cheung, an analyst with Credit Suisse in Hong Kong.

Of the three crown jewels of Alibaba Group, only Alibaba.com is listed. The other two, Taobao, China's largest e-commerce site with a consumer focus; and Alipay, China's largest e-payment provider, are private with shifting business models.

Taobao has 75 percent of China's consumer e-commerce market by transaction value while Alipay has 51 percent of China's e-payment market, according to Analysys International.

Softbank, Japan's No. 3 mobile phone operator, also owns 33 percent of Alibaba Group. The heads of the two groups, Jack Ma of Alibaba and Masayoshi Son of Softbank, work very closely, and as one of their latest collaborations, Yahoo Japan and Alibaba's e-commerce website Taobao in June launched online platforms to cross sell into each others' markets.

WANTED: MORE BUZZ

AOL is keen on gaining scale and snagging content to re-kindle growth. The Wall Street Journal cited people familiar with the matter as saying private equity firms were exploring the possibility of teaming up with AOL on a joint bid, which could give AOL the content and online eyeballs it needs to become a news and entertainment powerhouse.

Among various scenarios discussed, one involved Alibaba Group buying back Yahoo's 40 percent stake in the Chinese firm and Yahoo selling off assets to rival media and technology companies, the newspaper reported.

Another could involve AOL combining its operations with Yahoo in a reverse merger -- again after Yahoo sells its stake in Alibaba, it said.

In China, two sources at Alibaba said they had not heard about any buyout of Yahoo's stake. Analysts said that if the talks are preliminary, Alibaba may not have been approached yet.

Bloomberg reported that Yahoo is working with Goldman Sachs to help defend possible takeover approaches, citing three sources.

Whatever form it takes, any deal would likely be a far cry from the $47.5 billion, or $33 a share, offer that Microsoft made for Yahoo in 2008 and which was rebuffed by Yahoo's co-founder and then-CEO Jerry Yang, analysts and investors said.

Ironfire Capital's Eric Jackson, who was involved in an activist campaign directed at Yahoo during the time of the Microsoft acquisition talks, said that even a $20 a share offer for Yahoo -- which would represent a nearly 40 percent premium over Tuesday's closing price -- might encounter resistance from some of Yahoo's major shareholders.

"There would be some large shareholders in Yahoo that wouldn't like that, they wouldn't view that as an attractive exit for them," said Jackson, who no longer owns Yahoo shares.

2010-05-04T22:06:00.002-04:00

The Rich Continue to Use Government to Cut Out Their Competition

By David Kramer, LewRockwell.com
May 4, 2010

One of the scams that the rich use the government for in order to stop less wealthy people from getting richer is to promote the lie that, since venture capital is “riskier” than investing in public securities on the NYSE (another lie), individuals with less than a certain minimum net worth should not be allowed to invest in these “riskier” VC investments.

Bankster puppet Sen. Chris Dodd (D-CT) has inserted into the upcoming financial “reform” bill a clause that would more than double the minimum net worth of a potential venture capital investor from $1 million to $2.5 million, or require an annual salary of $450,000 for the past two years to the current annual salary requirement of $200,000 [the article mistakenly says it is $250,000] for the past two years. (Here is a link to the current minimum net worth regulations.)

Putting aside the libertarian principle that my money is my property -- and, therefore, just like the property of my body, it is up to me to decide what I want to do with it as far as my personal subjective risk is concerned -- an important issue here is that this new rule forcibly prevents people from investing in an area that not only can bring them much higher returns than publicly-traded stocks, but it cuts down the supply of investment funds for smaller, innovative new firms.

These smaller, innovative new firms generally find it much more difficult to raise funds compared to an established big corporation, because the start-up firms’ products have not yet proven themselves in the marketplace.

The bill insert also requires that a start-up firm wait up to four months to get permission from the Bankster-controlled SEC to accept the investment funds. And, get this:

“…this proposed bill also seeks to change the rules for a federal pre-emption [sic] for state regulation. Under the proposed bill, start-ups would be subject to state regulations from the 50 different states. Right now, start-ups & investors are not subject to 50 different state regulators. This would likely lead to more cost & risk for the start-up.”

Yes, this is just what our depressed economy needs now -- even less businesses to employ people and provide new products to improve our lives.

[Thanks to Shelly Roche]

2010-04-01T16:44:00.003-04:00

Will Private Equity Be the Next Meltdown?

The invisible money power behind these secretive private equity firms are the same international bankers that engineered the worldwide banking crisis, with the goal of consolidating the world's wealth into their hands.

By Barbara Kiviat, TIME
November 24, 2009

Over the past decade, some 3,000 U.S. companies have been bought by private-equity firms. Their M.O.? Suck up companies with borrowed money, make them more efficient and then resell, turning a profit in the process.

These days, nearly 1 in 10 nongovernmental employees works for a private equity–owned company, and that, says longtime industry reporter Josh Kosman, is a big problem. In his new book, The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis, Kosman argues that private-equity firms not only pillage the companies they buy, but also put the broader economy at risk by making those companies take on copious amounts of debt.

TIME's Barbara Kiviat spoke with Kosman about where he thinks the industry is headed.

You predict that private equity will go through a shakeout similar to what we've seen in the housing market. How does that analogy work?

Private-equity firms used the same cheap credit to buy companies that caused the housing bubble.

There are about 100 of these firms — KKR, Blackstone and Carlyle are some of the bigger ones — and they buy a company the same way we would buy a house. Put down about 20% and borrow about 80%. The big difference is, the company they're buying borrows the 80%, so they're the ones responsible for repayment. These loans were structured the same way and sold to the same people as mortgages. And the same kind of crazy prices were paid, so unfortunately we probably are going to see a private-equity meltdown just like what we saw in the housing market.

How bad do you think it will get?

The opinions on this shift, but the Boston Consulting Group in late 2008 predicted that about 50% of the companies bought in leveraged buyouts would default on their debt. If half default, and they fire about half of their workers — not the most aggressive estimate — then you're talking about 1.9 million unemployed.

Why haven't we seen more evidence of this yet?

I think the media hasn't put it together, but it actually is starting. The default rate for the past 12 months is roughly 12% — that's very high. Half of those companies that have defaulted, according to Standard & Poor's, had some type of private-equity involvement in their corporate life. A lot of those are PE-owned companies, ranging from Chrysler to the Tribune Company to Simmons Bedding. We've already seen the tip of the iceberg.

More broadly, what sorts of companies should we be worried about?

Unfortunately, private-equity firms infiltrated almost every industry — industrials, consumer goods, retail, hospitals, utilities — so a leveraged-buyout bust will be very widespread. TXU, which is now called Energy Future Holdings, one of the largest utilities in Texas, faces huge problems. They probably won't default on their debt until 2013, but at this point, and this is according to ratings agencies, it looks like they have very little chance of paying their debt. The range is from a huge utility like that to HCA, the largest hospital chain in the country.

And you think the private-equity industry will be the next one to line up for bailout money?

Yes. It's already happened with GMAC. You know, private-equity firms are very well connected. Four of the last eight Treasury secretaries currently work for private-equity firms.

Is there anything we could do now to prevent this wave from coming?

Probably not much. One of the main points of the book is to show how private equity and leveraged buyouts don't work, and even if the credit crisis I'm predicting doesn't happen — even if the economy recovers and some of the companies can refinance and push their debt off — the core practice is still destructive.

This decade, 6 of the 10 biggest buyouts are already considered distressed, according to Moody's. The core practice does not work and rips apart our economy.

Fairy Tales of Recovery, Reality of More Failures

By Bob Chapman, The International Forecaster
September 3, 2009

The Illuminists are desperate. They are appealing the Bloomberg directive to reveal who received funding from the Federal Reserve to keep from going bankrupt.

In addition, HR 1207 (Federal Reserve Transparency Act) will pass in the House this month. The question is in what form. No matter what happens, the Illuminati know we are hot on their trail. They have to do everything possible to end the depression, or go for broke.

Thus far there has been little recovery even with an official $23.7 trillion committed by the Treasury and the Fed. This number alone shows you how serious this situation is.

The banking sector is still broke and is using TARP funds to buy out failing smaller banks. The residential TARP funds returned will go toward helping bail out the collapsing commercial real estate industry. Quantitative easing has not worked, nor has TARP and the endless stream of money from TALF.

We are anxious to see if the FASB sticks to its guns and demands mark-to-market accounting. That will pull the cover off of the fraud known as mark-to-model, which really is mark to whatever you want it to be.

As you can now see this is a much deeper problem than a subprime problem - that just triggered events. As we pointed out before, we are still facing a new wave of subprime loans written over the past year by FHA, Ginnie Mae, Fannie Mae and Freddie Mac, plus ALT-A, Option ARMS Pick-and-Pay Loans, and the failure of prime loans that will stretch to 2013.

On top of that, we have commercial real estate loans now to deal with and credit card failure. This is what the Illuminati crime syndicate has brought you in their lust for more power and riches. We must not forget as well, standing in the wings, are America’s creditors, especially the Chinese who are dumping $25 billion to $100 billion in dollar denominated assets monthly. Their goal is to be out of dollar paper in another 1 1/2 years.

Then there are the other sellers. There are few buyers, so the Fed will have to monetize trillions of dollars in dollar denominated bonds, which presently they are doing secretly. It is no wonder they are terrified of an audit, which would not only uncover their illegal activities, but also expose their leadership and participation in the outrageous suppression of gold and silver prices.

The status of foreign creditors could turn on a dime. We predict they will abandon ship one at a time, as the dollar slips lower and lower. The Fed and the Treasury have tried over and over to keep the USDX, dollar index, over 80 for weeks, and they have been totally unsuccessful. It settled this past Friday at 78.31, just ready to break to new lows. We wonder how long these countries will tolerate such arrogance and the dream of world government? One must remember these countries are suffering the fallout of the actions that have been deliberately executed by these Illuminists, and they are not happy about that. They are all suffering recession and many depression. It is only a matter of time before they too dump dollar denominated assets.

We would like to say for individuals caught up in this mess worldwide, other currencies are not the answer. Only gold and silver related assets are the answer. Remember that, for in the final analysis, all currencies will fall in value versus gold and silver, and there are no exceptions. We have been there before and seen that, so do not be deluded into going into other currencies, or shares in foreign markets denominated in other currencies; they are not the answer, only gold and silver are.

Then we hear the fairy tales of recovery in the US, Europe and Asia. If you spend enough money you can create a recovery, albeit of short duration. No one is out of the woods. Europe, particularly the eurozone, has cut issuance of money and credit to 3.7%, but they are maintaining interest rates at 1%, which is in reality ½%. The European recovery will be a parallel movement for a year, and without more cheap money or an increase in money and credit, it will die and wither away.

Then there are the ongoing real estate collapses in the US, Ireland, Spain and in the Persian Gulf. There could be a bank panic or holiday in any of these regions. If a panic occurs, the first liquid asset sold will be US Treasuries and Agencies and the US dollar. This would spread terror in Frankfurt, Paris, London and NYC. All these stock exchanges could collapse as well.

The world is about to find out that free trade and globalization has been a disaster.

The millions of jobs lost in the US and Europe, so that transnational conglomerates could prosper, is in the final stages of death. The redistribution of wealth from the rich to the poor countries is about to end in a shattering smash-up. The myth of worldwide prosperity is about to end.

Contrary to prevailing thought, the biggest losers will be world exporters, such as China, which has already seen a 40% fall in exports. All the money and credit creation we have seen in China over the past seven months, some $1.9 trillion, isn’t going to work. They still face 30 million unemployed. Those jobs are not going to return for a long time, if ever. Out of desperation, there eventually will be tariffs (legislated in the US, Europe and in other countries), and inflation will rise as a result.

In America, the safety net of the FDIC doesn’t exist. It is virtually broke, and that is why, a few months ago, unofficially the FDIC asked government for $500 billion. Putting this into perspective, about $700 billion would insure about 1% of all the qualifying deposits in the US.

Not only will the Federal Reserve Transparency Act, HR-1207, pass the House, but also it will pass the Senate, because you are going to write every Senator demanding that they pass it.

If passed, we will see our gold inventories. We’ll find out what toxic garbage the Fed has been buying from banks and what they have paid for it. We will find out every company that received funds and how they were spent. We will subpoena every piece of correspondence, fax, e-mail, and phone calls the Fed has ever made. We will get a real balance sheet; not some version the GAO approved. Wait until the public sees how the Fed and its owners have looted the people for almost 100 years.

Two Republican lawmakers, Darrell Issa, (R-CA) and Rep. Spencer Bachus, (R-OK), House Financial Services ranking members, are seeking an audit of the trust that manages the government’s controlling stake in AIG.

Three more U.S. banks failed on Friday, bringing the total to 84 so far this year, as the industry continues to grapple with deteriorating loans on their books. Regulators shuttered Affinity Bank of Ventura, California, Bradford Bank in Baltimore, and Mainstreet Bank of Forest Lake, Minnesota, which in total are expected to cost the government’s deposit insurance fund about $446 million.   

The Federal Deposit Insurance Corp. on Thursday reported that the insurance fund’s balance stood at $10.4 billion at the end of the second quarter. But the agency also noted that the figure was adjusted to account for $32 billion set aside for expected failures over the next year. FDIC Chairman Sheila Bair said this week that bank failures will remain elevated as banks go through the painful process of recognizing loan losses and cleaning up balance sheets. The total of 84 failures this year marks a sharp rise over the 25 last year, and the three failures in all of 2007.

We stated long ago the somewhere between 3,400 and 4,200 banks would go under, and the FDIC would spend trillions of dollars to cover the loses. A loss of 3,400 banks would lead to losses of over $33 trillion.

The FDIC now has foreign banks and private equity groups about to engorge themselves on failing US banks. Worse yet, rather than cash, the FDIC is allowing these financial firms to use equity, which is unprecedented. The use of non-cash collateral assets is being used because the purchasing banks are broke; and without TARP, not only could they not buy anything, but they’d probably be out of business.

What Ms. Bair has done has been to expedite the takeover of banks by bigger banks and involved the use of foreign banks as well as private equity partnerships.

As far as we are concerned, as a foreigner, you have to be deranged to buy dollar denominated assets with the massive monetization of agency securities, collateralized debt obligations, and treasuries going on, never mind the underhanded secret deals the Fed is involved in to fund their markets. If we can understand what the Fed is up too, so can these foreigners. That is what a more than $600 billion swap facility is all about, including suppression of foreign currencies in order to bolster the strength of the dollar.

This month, September, a great confusion will begin. The occupation of Iraq will continue, more troops will be sent to Afghanistan, and Pakistan will become another major battleground. Terrorism will be used to continue to propagandize the American public, along with Cap & Trade and medical reform and the Swine Flu fiasco. These are all distractions to keep the publics’ eye off the continued failure of our financial system.

Deflation continues to eat away at assets, except for gold and silver, and the Fed creates money and credit to offset deflation’s savages.

The torrent of money and credit has pulled some nations, at least temporarily, out of the negative decline on GDP. Japan, France and Germany are examples. The question is when will their economies run out of stream? Probably when they attempt to raise interest rates. In the case of the eurozone, the expansion of money and credit has already fallen 3.7%.

The global economic crisis, now more than two years old, has allowed governments to run banking and financial systems in a usurpation of power over the individual and private property. What we are facing is perpetual crisis and intended government control. There will not be a return to normality. Next will come food shortages and rationing, and one epidemic or pandemic after another.

We wonder what will happen when the public finds out that all these problems were preplanned by the Illuminati. Then comes the control of all labor. Government is now spending 185% of tax receipts. The budget deficit will be between $1.6 and $2.00 trillion for fiscal 2009, ending on 9/30/09.

For those who hadn’t noticed, yoy commercial real estate values fell 27% and are off 36% from their October 2007 peak. We'll see a total drop of 70% to 75% from the highs, when all is said and done. Refinancing has to be found for $165 billion in properties by the end of the year, which is impossible, even with leftover TARP funds.

Deflation has prices somewhere between minus 2% to plus 5% worldwide as imports and exports have fallen over 30%. As an example, in Los Angeles, the busiest port in the US, imports have fallen 16.9% yoy. It is the exporters who are getting hit the hardest and some have cut prices in the process.

The only thing that keeps a veneer of equilibrium is the massive creation of money and credit pumped out by central banks worldwide. We said we had entered depression this past February; and just as when we called the beginning of recession two years before, no one shared our opinion. If we are not in depression, than what is the significance of 20.8% unemployment, a factory utilization level of 65%, and continued massive foreclosures?

As we have said over and over again, the Fed, Treasury, Wall Street and banking are in a box and they cannot get out. They deliberately created this horrible situation, and there is no going back. It is impossible to reverse the process. We are in an economic and financial depression. The palliative supposedly is bigger budget deficits and credit expansion into infinity. We are going to see a replay of the 1970s. Inflation will catch up and overtake deflation one more time, but in the end deflation will prevail.

Fiscal spending is running wild, and our president predicts a budget deficit of $9 trillion dollars over the next ten years. The Congressional Budget Office (CBO) says spending has to be cut 8% permanently over the next several years. In July alone, federal spending rose 26%, as revenues fell 6%. Corporate tax receipts fell 58%, as individual revenues fell 21%.

The official economic contraction is the worst since the great depression. Can you imagine what it really is? 9.4% unemployment is front-page news, but you didn’t hear about the 4.7% loss in salaries and wages of 4.7% for the 12 months ended in June. There are more government employees now than all those employed in manufacturing and construction.

How is it that state employees now make 40% more than the average income in non-governmental jobs? What a perversion of government. It is no wonder that the US poverty rate is higher than in Mexico and Turkey.

FDIC Revises Rules to Favor Takeover of Banks By Private Equity Firms

Reuters
August 27, 2009

U.S. regulators backed down from the tough stance they took a month ago on rules for auctions of troubled banks, clearing the way for more private equity bidders to come back into the game.

A capital requirement for private equity investments in banks was lowered to a Tier 1 common equity ratio of 10 percent, from the 15 percent Tier 1 leverage ratio previously proposed.

The regulators also dropped a requirement that investors serve as a "source of strength" for the bank they buy, which critics said could have put them on the hook for more capital if the institution struggled.

A cross-guarantee proposal — meaning if an investor owns more than one bank , the FDIC can use the assets of the healthier bank to cut losses from the one that has faltered — was modified to only include investors that had an 80 percent common ownership of the two banks...

"On the whole, it's favorable to private equity. It's positive in terms of attracting private equity money," said Brett Barragate, a partner with the Jones Day law firm...

"I can't picture a 5,000-branch bank coming out of this. But could I see 300-, 400-, 500-branch networks stitched together? I think so," said Seamus McMahon, chief executive of bank consulting firm McMahon Advisory LLC.

"Private equity firms are going to have a lot of influence."

“I don’t think the Republic is going to be brought to its knees if private equity owns banks, personally,” Mr. Flowers said from his Midtown Manhattan office with its expansive views of Central Park. “We invest around the world — Japan, Germany, England, no problem.”

While they press their case, the firms have found some ways around the rules.

“Everyone wonders, who is this Flowers guy?” said Lefty McLain, as he finished up the ham, mashed potatoes and butter beans lunch special at the Little Store, an all-in-one restaurant, deli, pool hall and gossip post here in the one-block downtown.

“Lowlife grave dancers like me will make a fortune,” he predicted.