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HSBC, Santander Increase Share of U.K. Mortgage Market as Mutuals Shrink

February 1, 2010

By Kevin Crowley Feb. 1 (Bloomberg) — HSBC Holdings Plc and Banco Santander SA are among banks gaining a bigger share of the mortgage market as Britain’s building societies post the worst contraction in lending since records began. Customer-owned lenders reported net mortgage repayments totaling 7.4 billion pounds ($11.7 billion) in the 12 months through December 2009, the Building Societies Association said today. That’s the longest contraction since records began in 1987, said Rachel Le Brocq , a spokeswoman for the mutual lenders’ lobby group. “Building societies may find it difficult to recoup the market share that they’ve lost over the last few months,” said Professor Chris Hamnett of King’s College London , who last year wrote an Institute for Public Policy Research report on the British housing boom and bust. The 52 mutual lenders , which provide loans to almost 3 million British home-buyers, are struggling to offer competitive mortgages with wholesale funding costs still high following the credit crisis, according to banking analyst Neil Smith of WestLB AG. In addition, customers have withdrawn a net 5.2 billion pounds in savings since May, adding to funding pressures. Their share of the 253.2 billion-pound a year mortgage market has fallen to 13 percent from 16.7 percent in 2003, according to data compiled by the Council of Mortgage Lenders . ‘More Resources’ HSBC and Santander, Europe’s biggest banks by market value, both said last year they increased U.K. mortgage loans, even as overall lending declined. Abbey National, a unit of Santander, increased its market share to 20.5 percent in the third quarter of 2009, from 12.5 percent the previous year. London-based HSBC said it boosted its share of U.K. mortgage sales to 9.9 percent in the third quarter, from 4.5 percent in the first half of 2008. “The way we priced back in 2004 to 2006 made it very difficult to sell our mortgages because others were undercutting us with cheap wholesale funding,” said James Thorpe , a spokesman for HSBC. “That’s now changed.” Santander spokesman Andy Smith declined to comment. “The big banks have got much more financial resources behind them and have been able to borrow very cheaply from government,” Hamnett said. Lloyds Banking Group Plc, which became the U.K.’s biggest mortgage lender after acquiring HBOS Plc in 2009, said in August it “maintained” its 27 percent share of the market in the first half of 2009. Thatcher Liberalization Banks were restricted from selling mortgages in the U.K. until the 1980s, leaving building societies to dominate the market, Hamnett said. Before Prime Minister Margaret Thatcher liberalized lending rules, mutuals had at least an 80 percent share of the market, according to the BSA. The first English building society was formed in 1775 . “Building societies aren’t concentrating on market share at the moment, they’re concentrating on prudent lending,” said Adrian Coles , BSA director-general. Declining lending and savings may continue for another two or three years, he said. “It will take decades of this monthly data to see them go down to zero,” Coles said. “That’s not likely to occur.” The freeze in credit markets in 2007 and the ensuing recession prompted eight mergers between building societies, reducing the total number of mutual lenders to 52. “Further consolidation looks almost certain,” said Jonathan MacDonald , a London-based financial services analyst at Datamonitor. Chelsea, Dunfermline Dunfermline Building Society had its worst-performing assets nationalized before it merged with Nationwide, the U.K.’s biggest customer-owned lender, in March last year after defaults on commercial and subprime mortgages soared. Chelsea Building Society agreed to merge with Yorkshire Building Society last month after logging 41 million pounds in provisions for suspected or proven mortgage fraud. The “vast majority” of British building societies should reduce commercial and landlord lending by a total of 3.2 billion pounds, the Financial Services Authority said in a June paper . Any society deemed too risky would be forced to simplify lending models, the London-based regulator said. The FSA is requiring building societies to hold more cash and government bonds in reserve, limiting the amount they can lend, the BSA’s Coles said. The U.K. watchdog is also asking mutual lenders to get more of their funding from retail deposits at a time when the savings market is the smallest it’s been for a decade, he said. “Unprecedented Opportunity” Mutuals are missing out on an “unprecedented opportunity” to profit from mortgages as lenders that had 11 percent of the 2007 market have withdrawn, said Mike Baxter , lead banking partner at consultant Bain & Co. Many overseas-based lenders withdrew from the U.K. mortgage market as the financial crisis meant they couldn’t sell on the loans to investors, he said. Northern Rock Plc , which had 14 percent of the mortgage market share in 2005, and Bradford & Bingley Plc , previously the country’s biggest buy-to-let lender, were both nationalized in 2008. The two former building societies were forced to seek government aid after cheap wholesale funding dried up following the onset of the credit crisis in 2007. The four lenders offering the cheapest mortgages in the fourth quarter of last year were all owned by banks, according to a study released this month by realpricecomparison.com , which compares mortgage products. Santander and HSBC own four of the top six brands in the study. The highest-placed mutual lender was Principality Building Society , which was placed seventh. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Dubai’s Silence on Debt Standstill Evaporates Bailout Rally as Stocks Drop

January 31, 2010

By Michael Patterson and Haris Anwar Feb. 1 (Bloomberg) — Dubai’s failure to reassure investors its restructuring plan will succeed is causing the emirate’s benchmark stock index to drop the most in the world and forcing companies to scrap bond sales. The Dubai Financial Market General Index lost 15 percent since Dec. 14, wiping out a rally sparked by Abu Dhabi’s bailout of Dubai World that day. Bonds of the state-owned company’s property developer Nakheel PJSC sank to 55.75 cents on the dollar from 67.5 cents, while credit default swaps on Dubai government debt trade at 493 basis points, the highest level since Abu Dhabi’s fund injection. Dubai World, in talks to reschedule $22 billion of debt, failed to present an offer in a meeting with lenders in December and declined to say when a deal may be struck. Dubai Electricity & Water Authority said Jan. 17 it delayed a $1.5 billion bond sale as borrowing costs were too high. Lack of clarity on Dubai World’s restructuring plan “is creating uncertainty that is weighing heavily on the market,” said Rami Sidani , the Dubai-based head of Middle East and North Africa investment at Schroder Investment Management Ltd., which oversees about $230 billion worldwide. “We’re not out of the woods yet and we know Dubai will continue to struggle with a debt burden.” Real-Estate Crash Dubai stocks and bonds tumbled in November after the government said Dubai World would seek to delay payments to creditors until at least May 30. Investors speculated that Nakheel, which is building palm tree-shaped islands off the emirate’s coast, would default after Dubai companies lost access to cheap financing because of the global credit crunch and a 50 percent slump in Dubai home prices. Abu Dhabi’s $10 billion bailout on Dec. 14 ensured that Nakheel would have the $4.1 billion it needed to repay an Islamic bond due that day. Dubai is the second-biggest of seven states that make up the United Arab Emirates, whose capital Abu Dhabi holds 8 percent of global oil reserves. Dubai and its state-owned companies borrowed at least $80 billion until 2008 to transform the emirate into a tourism and financial hub. The Dubai stock index jumped 10 percent and bond prices soared on the day Abu Dhabi provided the funds. Dubai credit default swaps, which measure the cost of protecting against the default of government debt, sank to 430 basis points from 540. Biggest Decline The Dubai stock index has since posted the biggest decline among benchmark equity gauges in the world’s 70 largest markets. While global stocks have retreated on concern China will take steps to curb economic growth, the Dubai measure’s 15 percent loss compares with a 4 percent decline in the MSCI AC World Index . Nakheel’s $750 million of 2.75 percent bonds due 2011 lost 17 percent during the period, according to Citigroup Inc. prices on Bloomberg, while credit default swaps jumped 63 basis points. A basis point on a credit-default swap contract to protect against the default of $10 million of debt for five years is equivalent to $1,000 a year. “The Dubai World restructuring is going to be a long and tedious process,” said Shehab Gargash , a managing director at Dubai-based Daman Investments who’s holding half of his $1.5 billion under management in cash. “That’s the main reason we decided to stay out” of Dubai’s “bear market rally,” he said. Worst Is Over Templeton Asset Management Ltd.’s Mark Mobius says the Abu Dhabi bailout ensured the worst of the emirate’s debt crisis is over. The manager of $34 billion in emerging market assets said in an interview there’s “value and opportunity” in Dubai markets and that Templeton bought shares during the selloff in November and early December. “There has to be more revelations about what is being done and how, but the panic is over,” Mobius, the chairman of Templeton Asset Management, said in the Jan. 28 interview in Melbourne. “We are trying to buy at a good price given the fact that transparency isn’t complete.” The Dubai stock index trades for 5.1 times analysts’ 2010 earnings estimates, the cheapest level worldwide after Nigeria’s All Share Index, according to data compiled by Bloomberg. While investors speculate on the recovery values of Dubai debt, the lifeline from Abu Dhabi is helping the state-owned companies meet their interest payments. Nakheel paid a $10.3 million coupon last month on its 2011 bond. Dubai Holding Commercial Operations Group LLC, the investment company owned by Dubai’s ruler, made about $100 million of scheduled payments last month on three bonds. Refinancing Needs Dubai-based firms have to refinance $7.3 billion in syndicated loans and $2.8 billion in maturing bonds this year, according to Deutsche Bank AG estimates. Some of the biggest debt maturities include a $1.25 billion loan due in June by Dubai International Capital LLC, an investment company owned by Dubai’s ruler, and $1.5 billion in two floating-rate dollar notes issued by Emirates NBD PJSC. Emirates Telecommunications Corp., the U.A.E.’s biggest phone company, has deferred plans to issue the equivalent of $490 million bonds as it has enough cash for expansion plans, Ahmed bin Ali , a spokesman for the company, said Jan. 28. The Dubai government’s $1.93 billion Islamic bond issued in October was the last sale of bonds from the emirate. Drake & Scull International PJSC , a Dubai-based construction-engineering contractor that raised about 1.2 billion dirhams ($327 million) from its initial public offering in 2008, was the last stock sale from a Dubai- based company, according to Bloomberg data. “It makes very little sense for a Dubai corporate issuer to go out now and just try to force the issue in the market,” said Abdul Kadir Hussain , chief executive officer of fund manager Mashreq Capital DIFC Ltd. “Right now the market is waiting for a strategy. How are we going to reduce the absolute debt level in Dubai and how quickly is this going to happen. Investors are taking a very conservative attitude toward the U.A.E.” To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net Michael Patterson in London at mpatterson10@bloomberg.net . Vivian Salama in Abu Dhabi at vsalama@bloomberg.net

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Dubai’s Silence on Debt Standstill Evaporates Bailout Rally as Stocks Drop

January 31, 2010

By Michael Patterson and Haris Anwar Feb. 1 (Bloomberg) — Dubai’s failure to reassure investors its restructuring plan will succeed is causing the emirate’s benchmark stock index to drop the most in the world and forcing companies to scrap bond sales. The Dubai Financial Market General Index lost 15 percent since Dec. 14, wiping out a rally sparked by Abu Dhabi’s bailout of Dubai World that day. Bonds of the state-owned company’s property developer Nakheel PJSC sank to 55.75 cents on the dollar from 67.5 cents, while credit default swaps on Dubai government debt trade at 493 basis points, the highest level since Abu Dhabi’s fund injection. Dubai World, in talks to reschedule $22 billion of debt, failed to present an offer in a meeting with lenders in December and declined to say when a deal may be struck. Dubai Electricity & Water Authority said Jan. 17 it delayed a $1.5 billion bond sale as borrowing costs were too high. Lack of clarity on Dubai World’s restructuring plan “is creating uncertainty that is weighing heavily on the market,” said Rami Sidani , the Dubai-based head of Middle East and North Africa investment at Schroder Investment Management Ltd., which oversees about $230 billion worldwide. “We’re not out of the woods yet and we know Dubai will continue to struggle with a debt burden.” Real-Estate Crash Dubai stocks and bonds tumbled in November after the government said Dubai World would seek to delay payments to creditors until at least May 30. Investors speculated that Nakheel, which is building palm tree-shaped islands off the emirate’s coast, would default after Dubai companies lost access to cheap financing because of the global credit crunch and a 50 percent slump in Dubai home prices. Abu Dhabi’s $10 billion bailout on Dec. 14 ensured that Nakheel would have the $4.1 billion it needed to repay an Islamic bond due that day. Dubai is the second-biggest of seven states that make up the United Arab Emirates, whose capital Abu Dhabi holds 8 percent of global oil reserves. Dubai and its state-owned companies borrowed at least $80 billion until 2008 to transform the emirate into a tourism and financial hub. The Dubai stock index jumped 10 percent and bond prices soared on the day Abu Dhabi provided the funds. Dubai credit default swaps, which measure the cost of protecting against the default of government debt, sank to 430 basis points from 540. Biggest Decline The Dubai stock index has since posted the biggest decline among benchmark equity gauges in the world’s 70 largest markets. While global stocks have retreated on concern China will take steps to curb economic growth, the Dubai measure’s 15 percent loss compares with a 4 percent decline in the MSCI AC World Index . Nakheel’s $750 million of 2.75 percent bonds due 2011 lost 17 percent during the period, according to Citigroup Inc. prices on Bloomberg, while credit default swaps jumped 63 basis points. A basis point on a credit-default swap contract to protect against the default of $10 million of debt for five years is equivalent to $1,000 a year. “The Dubai World restructuring is going to be a long and tedious process,” said Shehab Gargash , a managing director at Dubai-based Daman Investments who’s holding half of his $1.5 billion under management in cash. “That’s the main reason we decided to stay out” of Dubai’s “bear market rally,” he said. Worst Is Over Templeton Asset Management Ltd.’s Mark Mobius says the Abu Dhabi bailout ensured the worst of the emirate’s debt crisis is over. The manager of $34 billion in emerging market assets said in an interview there’s “value and opportunity” in Dubai markets and that Templeton bought shares during the selloff in November and early December. “There has to be more revelations about what is being done and how, but the panic is over,” Mobius, the chairman of Templeton Asset Management, said in the Jan. 28 interview in Melbourne. “We are trying to buy at a good price given the fact that transparency isn’t complete.” The Dubai stock index trades for 5.1 times analysts’ 2010 earnings estimates, the cheapest level worldwide after Nigeria’s All Share Index, according to data compiled by Bloomberg. While investors speculate on the recovery values of Dubai debt, the lifeline from Abu Dhabi is helping the state-owned companies meet their interest payments. Nakheel paid a $10.3 million coupon last month on its 2011 bond. Dubai Holding Commercial Operations Group LLC, the investment company owned by Dubai’s ruler, made about $100 million of scheduled payments last month on three bonds. Refinancing Needs Dubai-based firms have to refinance $7.3 billion in syndicated loans and $2.8 billion in maturing bonds this year, according to Deutsche Bank AG estimates. Some of the biggest debt maturities include a $1.25 billion loan due in June by Dubai International Capital LLC, an investment company owned by Dubai’s ruler, and $1.5 billion in two floating-rate dollar notes issued by Emirates NBD PJSC. Emirates Telecommunications Corp., the U.A.E.’s biggest phone company, has deferred plans to issue the equivalent of $490 million bonds as it has enough cash for expansion plans, Ahmed bin Ali , a spokesman for the company, said Jan. 28. The Dubai government’s $1.93 billion Islamic bond issued in October was the last sale of bonds from the emirate. Drake & Scull International PJSC , a Dubai-based construction-engineering contractor that raised about 1.2 billion dirhams ($327 million) from its initial public offering in 2008, was the last stock sale from a Dubai- based company, according to Bloomberg data. “It makes very little sense for a Dubai corporate issuer to go out now and just try to force the issue in the market,” said Abdul Kadir Hussain , chief executive officer of fund manager Mashreq Capital DIFC Ltd. “Right now the market is waiting for a strategy. How are we going to reduce the absolute debt level in Dubai and how quickly is this going to happen. Investors are taking a very conservative attitude toward the U.A.E.” To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net Michael Patterson in London at mpatterson10@bloomberg.net . Vivian Salama in Abu Dhabi at vsalama@bloomberg.net

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Amazon.com Pulls Macmillan Books From Site in Dispute Over Kindle Pricing

January 31, 2010

By Greg Bensinger Jan. 31 (Bloomberg) — Amazon.com Inc. has removed print and electronic versions of books from Macmillan after a dispute over pricing of titles for the Kindle digital reader, the publisher said. Macmillan proposed new terms for prices of electronic books last week, Macmillan Chief Executive Officer John Sargent said in an e-mailed statement. In response, Amazon.com said it was removing Macmillan’s print and electronic books from the site, he said. “Amazon and Macmillan both want a healthy and vibrant future for books,” Sargent said. “We clearly do not agree on how to get there.” Under the new terms, Macmillan wants to be able to set the prices of electronic books individually, with most new titles costing $12.99 to $14.99. Amazon.com charges $9.99 for most best-sellers and new releases. Retailers would get a 30 percent commission under the proposal, Macmillan said. Titles such as “Sarah’s Key ” by Tatiana de Rosnay and “Wolf Hall” by Hilary Mantel , listed as best sellers on Macmillan’s Web site, weren’t available for purchase from Amazon.com today. Macmillan books are still available on the site from third-party sellers, Sargent said. Drew Herdener , a spokesman for Seattle-based Amazon, didn’t immediately return a voicemail message seeking comment outside normal business hours. Amazon, based in Seattle, lost 62 cents to $125.41 on Jan. 29 in Nasdaq Stock Market trading. The shares have lost 6.8 percent this year. Macmillan, which has offices in New York and London, is privately held. To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

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Gold Fields Says Changes to South African Mine Law Should Be `Sustainable’

January 28, 2010

By Ron Derby Jan. 28 (Bloomberg) — Gold Fields Ltd. , Africa’s second- biggest producer of the metal, said any changes to South African mining law to encourage black investor participation should be “sustainable” to avoid damaging the country’s industry. “I hope that sanity prevails,” Nick Holland , chief executive officer, said in an interview in Johannesburg yesterday at the company’s headquarters. “Don’t kill the goose that laid the golden egg.” The government, mining companies and labor unions will review South African legislation at a meeting in March. Minister of Mineral Resources Susan Shabangu said in November the industry had missed targets to increase black investment. Shares of companies that mine in South Africa plunged in 2002 when laws compelling them to sell assets to black owners were first reported. The ruling African National Congress party passed legislation in 2004 forcing miners to sell 15 percent of their assets to black investors by 2009 and 26 percent by 2014. The measures are aimed at compensating for discrimination against blacks during apartheid, which ended in 1994. “Are we in for an unpleasant surprise that’s going to cause another wave of investor fatigue and investor retreat?” Holland said. “That’s the risk.” Jeremy Michaels , a spokesman for the Department of Mineral Resources, declined to comment. “The real concern in the industry is whether the goalposts are going to be moved,” Peter Leon, chairman of the Mining Law Committee of the International Bar Association, said in a telephone interview from Cape Town. “It’s up to government to allay those concerns as best they can.” Platinum, Ferrochrome South Africa produces almost four-fifths of the world’s platinum, is the largest maker of ferrochrome and third-biggest gold miner. Johannesburg-based AngloGold Ashanti Ltd. is Africa’s biggest gold producer. If new measures are introduced following the March meeting, the government has to be “realistic and reasonable” on how long it will take to implement them, Holland said. Measures put in place over a “short period” would be a “recipe for disaster,” he said. To contact the reporter on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net

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Toyota Idling Plants Marks Step to Win Back Buyers’ Trust as Shares Slump

January 27, 2010

By Alan Ohnsman and Mike Ramsey Jan. 27 (Bloomberg) — Toyota Motor Corp. ’s plan to suspend output at five North American plants marks an “unprecedented” step to win back U.S. buyers’ trust after recalling 2.3 million vehicles at risk for sudden acceleration, analysts said. U.S. law required Toyota to stop sales of eight models while a “dangerous” pedal flaw is fixed, the National Highway Traffic Safety Administration said today. Toyota made that move yesterday and also ordered the halt in production. “The only thing that it is close to in scale and size is the Ford and Firestone rollover issues,” said Bill Visnic, senior editor at auto researcher Edmunds.com, referring to the fatal accidents that spurred a recall of tires used on Ford Motor Co. Explorers in 2000. Toyota’s case “vastly transcends” Ford’s, Visnic said. Stopping work at the factories underscores the urgency for Toyota in reclaiming its standing as a maker of safe, reliable vehicles. Toyota promoted that image, as validated in surveys such as those conducted by Consumer Reports magazine, in rising to No. 2 in U.S. sales behind General Motors Co. “This is unprecedented, on this kind of scale,” said John Wolkonowicz , an analyst with IHS Global Insight in Lexington, Massachusetts. “This will have some impact on Toyota.” Toyota ’s American depositary receipts fell $7.56, or 8.7 percent, to $79.22 at 2:10 p.m. in New York Stock Exchange composite trading. The ADRs declined as much as 8.9 percent earlier for the worst intraday drop since Jan. 22, 2009. Sticky Pedals The Toyota City, Japan-based company said U.S. sales of the affected models were being stopped indefinitely while it figures out how to fix a problem with accelerator pedals that could cause them to stick. A spokesman, Mike Goss , said he didn’t know how much production would be lost at the five plants. Along with the top-selling Camry and Corolla, Toyota’s recall covers the Avalon sedan and Matrix hatchback; RAV4, Highlander and Sequoia SUVs; and Tundra pickups. Also included is the Pontiac Vibe, a version of the Matrix built at a joint Toyota-GM plant until last year. The eight Toyota models accounted for 56 percent of the automaker’s U.S. sales last year, said Koji Endo , managing director of Advanced Research Japan in Tokyo. Toyota has 1,234 U.S. franchises employing more than 100,000 people, according to the company. The Jan. 21 recall of 2.3 million cars and sport-utility vehicles was in response to a flawed pedal part. In November, Toyota recalled 4.3 million vehicles to reshape accelerator pedals to prevent them from getting stuck by floor mats. About 1.7 million vehicles are affected by both recalls. Safety First While Toyota is aware of the risks to its reputation for quality, “this is a customer safety issue,” said Irv Miller , U.S. group vice president for corporate communications. Miller said he wasn’t aware whether the decision to halt production was made by President Akio Toyoda . “He is certainly aware of the issue,” Miller said. The automaker retained the top spot in June in J.D. Power & Associates’ survey of initial quality and topped Consumer Reports’ magazine’s annual survey of automotive brand perceptions this month. Still, Toyoda already was under pressure to improve quality since he took the helm in June, and the latest setbacks probably will add to the strain as competitors including South Korea’s Hyundai Motor Co. narrow Toyota’s lead. Dramatic Move “Toyota had a bulletproof reputation for quality, and now it’s been tarnished,” said Jim Hossack , an industry analyst at AutoPacific Inc. in Fountain Valley, California. “It’s a dramatic move, and an expensive move.” NHTSA said it had been working with Toyota for “several months” and was “pleased” the automaker was taking steps to protect consumers. “Toyota dealers have a legal obligation not to sell a vehicle they know to be defective until the defect has been remedied,” said Karen Aldana, an agency spokeswoman. Toyota’s November recall, which also included Lexus models and the Prius hybrid, resulted from multiple investigations by NHTSA over complaints of vehicles accelerating out of control even as drivers applied the brakes. That recall prompted product-liability lawsuits against the company. “Toyota needed to send a clear message they care more about their customers than monthly profits,” said Jeremy Anwyl , chief executive officer of Santa Monica, California-based Edmunds.com, after the sales and production suspensions were announced yesterday. “The company has to get ahead of the problem.” Explorer Case Ford’s image was battered in 2000 by the recall of 6.5 million ATX and Wildnerness tires made by Bridgestone/Firestone Inc., the U.S. unit of Bridgestone Corp. Most of the tires were on Explorer SUVs. NHTSA said in December 2000 that as many as 148 traffic deaths may have been tied to the tires. Today’s fallout for Toyota included the decision by Avis Budget Group Inc. to remove recalled Toyotas from its rental-car fleet in the U.S., Canada and Puerto Rico. GM said it was starting incentives to help Toyota owners to switch to the U.S. automaker if they’re concerned about safety. Shares of CTS Corp. , the manufacturer of the pedal part cited in last week’s recall, plunged $1.27, or 15 percent, to $7.36 in NYSE trading for the largest decline since April. Toyota said last week that a potential flaw in CTS-made parts could, “in rare instances, mechanically stick in a depressed position or return slowly to the idle position.” “We at CTS have no knowledge of any incidents, accidents or injuries that have resulted from this,” Mitch Walorski , a spokesman for the Elkhart, Indiana-based company, said in an interview. Walorski said there were eight warranty claims related to sticky pedals among millions of vehicles equipped with the part since 2005. “We are working with their engineers and are actively working to support Toyota,” Walorski said. Toyota makes up about 3 percent of CTS’s annual sales, he said. To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net ; Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net

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Netflix Spinoff Roku Seeks Funds for 100 Channels of Internet-TV Service

January 27, 2010

By Ari Levy and Adam Satariano Jan. 27 (Bloomberg) — Roku Inc. , the television set-top box maker spun off by Netflix Inc. , is planning to raise $30 million in private funding this quarter and may sell shares to the public next year, Chief Executive Officer Anthony Wood said. The company, which lets customers stream movies from Netflix and Amazon.com Inc. on their TVs, along with music from Pandora Media Inc., has sold more than 500,000 of its devices, Wood said yesterday in an interview in San Francisco. Revenue may almost double to about $75 million this year, he said. The funds would help Roku expand its engineering and marketing as competition mounts. Sony Corp. , Nintendo Co. and Microsoft Corp. stream Netflix and other services on game consoles, and Samsung Electronics Co. does so through Blu-ray DVD players. To win customers, Wood plans to continue cutting the price of his devices , which sold for $115 in May 2008 and now go for as little as $80. “It gets cheaper and cheaper, and the box will be free at some point in the not-too-distant future,” said Wood, 44, whose ReplayTV was an early seller of digital-video recorders. “We see hardware margins becoming less important over time and subscription content becoming more important.” Roku’s fund-raising this quarter will include investments from Menlo Ventures and others, Wood said. He declined to provide the company’s market value. Saratoga, California-based Roku isn’t working with an investment bank and doesn’t have a specific IPO date, he said. “Obviously our goal is to go public,” Wood said. “If things continue on this trajectory, I think it would be viable to go public next year.” Netflix Sells Stake Netflix hired Wood in 2007 to help the movie-rental company move from a mail-order to online service. Netflix planned to release its own box until Chief Executive Officer Reed Hastings decided to stay out of the hardware business. Wood created a separate company, and Netflix backed it with $6 million. Netflix recently sold its stake to Menlo Ventures, Wood said. Steve Swasey , a spokesman for Los Gatos, California-based Netflix, confirmed the sale and said the company may discuss it with fourth-quarter results today. Roku has raised $24 million from Wood, Netflix and Menlo. Wood is focused on signing partners to offer viewers more choices and expects to reach 1 million boxes sold this year. In November, the company introduced the Roku Channel Store, which includes the Pandora music service and photos from Facebook Inc. Roku also offers Revision3 and Blip.tv, which stream original shows on the Internet. Roku is recruiting third parties to create channels and offer products including games and submit them for inclusion on the service. The company is devising revenue-sharing agreements for developers who can sell subscriptions on the service or charge per product like Amazon.com. Revenue Sharing The terms will be comparable to other media products, Wood said. Developers for Apple Inc.’s iPhone get 70 percent of sales, with the rest going to Apple. The plan is to have 100 channels this year, Wood said. That will let Roku generate sales from subscriptions and advertisements, much like cable TV channels. “We’re not far away from the time when you’ll be able to get the same kinds of channels that any cable operator can offer,” he said. To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Adam Satariano in San Francisco at asatariano1@bloomberg.net

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Goldman’s O’Neill, Lifelong Manchester United Fan, Spurns Club’s Bond Sale

January 25, 2010

By Zijing Wu and John Glover Jan. 25 (Bloomberg) — Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill , a former shareholder and board member of Manchester United, said the club has too much debt and its bonds are unattractive. “There’s too much leverage going on with Manchester United,” O’Neill, a lifelong supporter of the 18-times English soccer champions, said in a Jan. 23 interview. “It’s not a good thing. I’m not a buyer of the bond.” The club issued more than 500 million pounds ($807 million) of seven-year bonds in pounds and dollars last week to refinance a similar amount of bank borrowing. The club took on the debt after the U.S. Glazer family bought it in a leveraged buyout in 2005. “I value my long-term support for Manchester United better than anything else,” said O’Neill, who held 1.66 million pounds of the club’s shares in 2005 when he stepped down from the board as the Glazers took the club private. A spokesman for the Glazer family declined to comment. Philip Townsend , a spokesman for the club, couldn’t immediately be reached for comment. The bonds include 250 million pounds of 8.75 percent notes priced at a discount to yield 9.125 percent, according to data compiled by Bloomberg. The $425 million of 8.375 percent notes were priced to yield 8.75 percent. Bonds Decline The pound-denominated bonds declined after the sale and were quoted at 95.5 pence on the pound to yield 9.5 percent, according to HSBC Holdings Plc prices on Bloomberg today. The dollar bonds were bid at 97.5 cents to yield about 8.9 percent, according to HSBC. “I don’t think the yield offers adequate return for the risk,” Jonathan Moore , a high-yield analyst at Evolution Securities Ltd. in London said in a note today. “Given my conversations with institutional investors over the past two weeks, it appears a lot of funds in Europe have similar concerns.” The club paid 54 million pounds to sell the bonds, according to the documentation for the issue. Bank of America- Merrill Lynch, Deutsche Bank AG, Goldman Sachs, JPMorgan Chase & Co., KKR & Co. and Royal Bank of Scotland Group Plc managed the deal. To contact the reporters on this story: Zijing Wu in London zwu17@bloomberg.net ; John Glover in London at johnglover@bloomberg.net

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Benmosche Becomes Fourth Straight AIG Chief to Preside Over Stock Decline

January 25, 2010

By Andrew Frye Jan. 25 (Bloomberg) — American International Group Inc. ’s Robert Benmosche became the fourth consecutive chief executive officer to preside over a stock decline at the bailed-out insurer. AIG fell $1.56 to $26.50 in the four days ended Jan. 22, the ninth decline in past 10 weeks of trading on the New York Stock Exchange. The insurer ended at $27.14 on Aug. 7, the last trading day before Benmosche replaced Edward Liddy . The shares have dropped 98 percent under the four CEOs who ran the firm since Maurice “Hank” Greenberg resigned in 2005. AIG’s five-month slide nullifies the rally Benmosche sparked in his first weeks by promising to rebuild what was once the world’s biggest insurer. In the year before his arrival, New York-based AIG reported the biggest loss in U.S. corporate history and accepted government bailouts valued at $182.3 billion in exchange for preferred stock and debt that subordinated common stockholders. “Regardless of who is at the helm, there are some numbers here that can’t be ignored,” said Catherine Seifert , an equity analyst with Standard & Poor’s. “If you’re going to be at the bottom end of the capital structure you need to know that there’s going to be something left for you” as a common shareholder. Investors suffered under each CEO since Greenberg ended a reign of more than three decades amid a probe by then-New York Attorney General Eliot Spitzer . The stock fell by almost half in three years under Martin Sullivan before he was ousted by the board in June 2008. Robert Willumstad , whose three-month term ended when he delivered the firm to the government, saw shares drop more than 90 percent. Out of Retirement Liddy, called out of retirement by the government after a career at home and auto insurer Allstate Corp., reported losses of $61.7 billion in the fourth quarter of 2008 and $4.35 billion in the first quarter of 2009 before returning to profit in the second. Shares fell by a third during his tenure, which lasted less than a year. Benmosche took control of a company whose funds had been drained by soured mortgage investments and bad derivative bets. The company was selling assets to repay its aid package, and top employees were fleeing to rivals. Some who remain are subject to pay curbs as a result of the bailout, and have been criticized by politicians and regulators who blamed the company for contributing to the credit crisis. “Benmosche had a very tough hand,” said Paul Newsome , an analyst with Sandler O’Neill & Partners LP. “Not only did he have a company that needed a lot of work, but he was facing an extremely skeptical stock market.” Mark Herr, a spokesman for AIG, declined to comment. Getting a Raise Benmosche, a former CEO at life insurer MetLife Inc., negotiated a $7 million annual salary, compared with Liddy’s $1. He fought for higher pay for managers after his predecessor asked some employees to return a portion of their bonuses. Benmosche told staff that regulators were to blame for the insurer’s meltdown and said he would get tough in talks with New York Attorney General Andrew Cuomo over compensation. “The worst thing that will ever happen to him is when he and I meet in the room and I close the door,” Benmosche, 65, said of Cuomo, according to a record obtained by Bloomberg. Cuomo was “unbelievably wrong” for demanding AIG employees return their bonuses and promising to publish the names of staff who didn’t comply, Benmosche said. Benmosche later apologized for the comments. AIG under Liddy planned to repay the government’s original September 2008 bailout of $85 billion in two years and hired Paula Reynolds as chief restructuring officer to raise the funds by selling businesses and other assets. Reynolds, the former Safeco Corp. CEO who sold that firm to Liberty Mutual Group Inc., left AIG after Benmosche took over. Benmosche, while still considering asset sales, has said he wants to slow the pace of deals to allow the units to generate profits that will boost their value. That objective is complicated by clients that have scaled back coverage in the recession and by rivals that are cutting prices to win business. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net .

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Texas Waterway Serving Four U.S. Refineries Is Closed Following Oil Spill

January 24, 2010

By Robert Tuttle and David Wethe Jan. 24 (Bloomberg) — The Sabine Neches Waterway, the Texas ship channel serving four refineries that process about 6.5 percent of total U.S. capacity, remained closed indefinitely after a collision between a tanker and vessel spilled about 11,000 barrels of oil, the U.S. Coast Guard said. Cleanup crews are working 24-hours daily, Coast Guard Petty Officer Richard Brahm said in a telephone interview from Port Arthur, Texas. The waterway may open to vessel traffic within five days, Dow Jones reported earlier, citing Capt. J.J. Plunkett of the Coast Guard. The Coast Guard expanded the safety zone around the spill from mile marker 278 to Mesquite Point, about 100 miles east of downtown Houston, after crews on the Coast Guard Cutter Manowar could smell sulfur, Brahm said. “Just to be safe, we went ahead and extended the safety zone,” he said. There are about 500 responders from nine agencies and a contract cleaning company working on the spill, Brahm said. Crews have placed around the spill more than 26,500 feet of so- called boom, which is the “ropish, plastic material that stops oil from flowing,” he said. There are 11 skimmers in the water picking up the oil. The tanker was bound for Exxon Mobil Corp. ’s Beaumont refinery when the collision happened yesterday at about 9:15 a.m. local time, Coast Guard Commander John Lovejoy said in a telephone interview. The tanker is known as the Eagle Otome and is owned by AET Tankers of Malaysia, the Coast Guard said. Coast Guard Estimate Crews were able to transfer 69,000 barrels of oil off the damaged 80,000-barrel tanker, leaving another 11,000 barrels unaccounted for, which is the spill estimate, Brahm said. The two vessels that collided separated over night. The gash on the Eagle Otome is at the water line, meaning some oil underneath the hole may not have spilled out, he said. “We’re hoping that’s also got oil in it,” Brahm said. “Now that they’ve separated, we’re going in and looking to see if there is anything.” The Associated Press reported earlier that oil was spread over a 2-mile stretch of the waterway. The reopening of the waterway depends on “all kinds of factors,” Brahm said. “Basically it comes down to when it’s cleaned up,” he said. “That’s all we know.” Four Refineries Exxon’s Beaumont plant is one of four refineries located near the waterway. The other three are operated by Royal Dutch Shell Plc’s Motiva Enterprises, Valero Energy Corp. and Total SA . The four plants have a combined processing capacity of 1.15 million barrels of oil a day. The waterway closure is not having any impact on production at Valero’s Port Arthur refinery “yet,” said Bill Day , a spokesman for the San Antonio-based company. The refinery’s capacity is about 325,000 barrels per day, he said. Verna Rutherford , a spokeswoman for Motiva, said in an e- mail that “it is customary for the Motiva Port Arthur refinery to be prepared for emergency situations around us with supplies and back-up plans in place.” Kathleen Jackson , a spokeswoman for Exxon’s Beaumont, Texas, plant, and Pat Avery , a spokeswoman for Total’s Port Arthur plant, did not immediately respond to messages seeking comment. To contact the reporters on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net ; David Wethe in Houston at dwethe@bloomberg.net .

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Video: WFP’s Hurford Says Haiti Aid Delays `Very Frustrating’

January 22, 2010

Jan. 22 (Bloomberg) — Caroline Hurford, a spokesman for the World Food Programme, talks with Bloomberg’s Andrea Catherwood about the challenges of distributing aid in Haiti.

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Bernanke Seeks to Defuse Criticism of Fed Over AIG With Call for GAO Audit

January 20, 2010

By Scott Lanman and Vivien Lou Chen Jan. 20 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke sought to defuse allegations that the central bank tried to conceal details about the $182.3 billion bailout of American International Group Inc., calling for a review of Fed actions by congressional auditors. In a letter yesterday to the Government Accountability Office, Bernanke pledged “all records and personnel necessary” for an audit. Separately, the New York Fed provided 250,000 pages of documents to a U.S. House committee in response to a Jan. 12 subpoena demanding all materials related to the decision to fully reimburse banks that bought protection from AIG . Bernanke’s moves coincide with preparations by Senate Democrats to hold a vote this week on whether to confirm him to a second four-year term. Lawmakers stepped up inquiries about the Fed’s oversight of AIG after e-mails released this month showed that the New York Fed asked the company to withhold information from the public about payments to banks. “Bernanke wants to do everything possible to dispel any doubt of any inappropriate actions related to AIG,” former Fed Governor Robert Heller said in an interview. An invitation to audit “will clear the air” and allow Bernanke to say “‘I’ve asked for a full GAO investigation,’” Heller said. Chuck Young, a spokesman for the GAO in Washington, said the agency will review Bernanke’s request “in the context of our future work priorities,” including requests from congressional committees. ‘Backdoor Bailout’ Representative Darrell Issa of California, the ranking Republican on the House Committee on Oversight and Government Reform who obtained e-mails showing the New York Fed asked AIG in 2008 to withhold information from public filings, has called federal aid to AIG a “backdoor bailout” of Goldman Sachs Group Inc. and other banks. The Fed chairman “seems unapologetic and unrepentant when it comes to the fact that he spent $62 billion of your tax dollars when $15 billion would have probably bought the paper on the street,” Issa said yesterday in a Bloomberg Television interview, referring to the payouts. The New York Fed said the documents it turned over to the committee show that the bank’s actions “assisted AIG in ensuring the accuracy of its disclosures and protected important U.S. taxpayer interests.” The New York Fed reiterated that Timothy F. Geithner , then its president and now Treasury secretary, had no role in or knowledge of the disclosure matters. One sentence about full-value payouts was marked by Fed attorneys for suggested deletion because it wasn’t “precisely accurate,” the New York Fed said. ‘Deflect Criticism’ “The timing suggests a very obvious attempt to deflect criticism” of Bernanke, said Lee Hoskins , former president of the Cleveland Fed and now senior fellow at the Pacific Research Institute in San Francisco. It’s also “a way to look like you’re not stonewalling,” Hoskins said. Mark Williams, a former Fed bank examiner who’s now a finance professor at Boston University, said Bernanke is aiming to head off legislation that could interfere with interest-rate policy. “He’s realizing he’s got to give a little,” Williams said. “If not, some drastic changes could be pushed down.” The House passed a bill last month that would remove a ban on GAO audits of monetary policy. The GAO gained authority to audit the AIG rescue in a law that went into force in May. Geithner agreed to testify Jan. 27 before the House oversight panel on the bailout. He said last week on CNBC that he wasn’t involved in the decision to limit disclosures. ‘Comprehensive Response’ Bernanke, 56, said in yesterday’s letter that a GAO audit would “afford the public the most complete possible understanding of our decisions and actions in this matter,” and “provide a comprehensive response to questions that have been raised by members of Congress.” “The Federal Reserve would welcome a full review by GAO of all aspects of our involvement in the extension of credit to AIG,” Bernanke said in the letter to Gene Dodaro , the GAO’s acting head. The bailout, which began with an $85 billion Fed loan in exchange for a stake of almost 80 percent in the New York-based insurer, was revised three times to prop up AIG. The rescue now includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury and up to $52.5 billion to buy mortgage-linked assets owned or backed by the insurer. The assistance included “significant conditions and protections for the taxpayers,” Bernanke wrote in the letter. That included new management for AIG and a government stake that “materially diluted existing shareholders of AIG,” he said. Value of Securities The market value of securities acquired by the Fed in the rescue has climbed to $45 billion from $29.6 billion, giving the Fed paper profits, the Financial Times reported, citing people familiar with the portfolio it didn’t identify. Bernanke may be acting because the AIG controversy is becoming distracting and time-consuming for him and other Fed officials, said Douglas Lee , who runs Economics from Washington, a consulting firm in Potomac, Maryland. “That kind of stuff can chew up an awful lot of time, and if you could head it off by simply saying, ‘Send in the GAO and audit us,’ that’s probably a good thing to do,” said Lee, a former congressional economist. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net ; Vivien Lou Chen in San Francisco at vchen1@bloomberg.net .

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Kraft Snares Cadbury for $19.7 Billion

January 19, 2010

By Andrew Cleary, Zachary R. Mider, and Duane D. Stanford Jan. 19 (Bloomberg) — Cadbury Plc’s board agreed to an 11.9 billion-pound ($19.7 billion) takeover offer from Kraft Foods Inc. , ending more than four months of resistance after the U.S. company raised its bid. Cadbury investors will get 840 pence a share, including 500 pence in cash and the rest in stock, Kraft said in a statement today. Cadbury will also pay its holders an additional 10-pence dividend once the offer is unconditional. The revised bid is about 9 percent higher than Kraft’s previous bid of 769 pence, and consists of 40 percent stock and 60 percent cash. “This is a great deal for both parties,” James Bevan , chief investment officer at CCLA Investment Management Ltd., said in a Bloomberg Television interview today. “Cadbury shareholders should accept this,” said Bevan, who manages both Cadbury and Kraft shares at CCLA. Kraft Chief Executive Officer Irene Rosenfeld increased the original bid after Cadbury rejected it as “derisory” and Hershey Co. prepared to mount a rival offer. A purchase by Kraft would create a company with about $50 billion in annual sales, adding Cadbury’s Trident gum and Creme Eggs to Kraft’s Oreo cookies, Toblerone chocolate and Tang powdered drinks. Cadbury rose as much as 3.8 percent to 838 pence in London trading. Hershey is unlikely to top Kraft’s offer, two people familiar with the matter said before Kraft’s final offer was released. Kirk Saville , a spokesman for the Pennsylvania-based candy maker, declined to comment. Price Discipline As recently as Jan. 14, Cadbury called Northfield, Illinois-based Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Kraft had to raise its bid to at least 850 pence to win over Cadbury investors, according to a Bloomberg survey of nine holders. Rosenfeld faced pressure from her own shareholders to get the price right. Billionaire investor William Ackman last week joined Warren Buffett , Kraft’s biggest shareholder, in saying Kraft risked diminishing the merits of a Cadbury takeover by issuing too much stock to pay for it. The increased offer values Cadbury at 13 times 2009 earnings before interest, tax, depreciation and amortization, according to Kraft’s statement. Comparable deals in the industry valued the businesses at 14.3 times to 18.5 times, Cadbury said in its Jan. 12 defense document to shareholders. The acquisition is “the lowest multiple in the industry over the last decade,” said Andrew Wood , a senior analyst at Sanford C. Bernstein in New York. “A year from now, Kraft will be singing the praises of what a great deal they got.” Buffett’s Stake Kraft has informed Buffett of the revised deal with Cadbury, according to a person with knowledge of the matter. Buffett didn’t immediately return a request for comment sent to his assistant, Debbie Bosanek . Buffett’s Berkshire Hathaway Inc. said in a Jan. 5 statement it may support a Cadbury takeover if it concludes that the final offer “does not destroy value for Kraft shareholders.” Ackman’s Pershing Square Capital Management LP bought a $950 million stake in Kraft, or 2 percent of the company, Ackman said in a Jan. 15 interview. A purchase of Cadbury makes “tremendous sense,” he said. Kraft advanced 46 cents to $29.58 in New York Stock Exchange composite trading on Jan. 15. The stock didn’t trade yesterday because of a holiday in the U.S. Kraft said it no longer needs to have the deal approved by its own shareholders because it reduced the number of shares it plans to issue to less than 20 percent of its existing stock. Pizza Sale “It’s certainly a coup for Kraft,” said Simon Marshall- Lockyer , an analyst at Jefferies International Ltd. in London. An agreed deal is “a friendly outcome to what has been an acrimonious few months between the companies.” Kraft said this month it would sell pizza brands including DiGiorno and Tombstone to Nestle SA and use proceeds from the $3.7 billion deal to boost the cash component of its Cadbury bid. The Toblerone maker has until Feb. 2 to gain acceptance from a majority of Cadbury investors. “Kraft provides some strength in the U.S. that Cadbury doesn’t have, and Cadbury provides some strength internationally that Kraft doesn’t have,” said Don Yacktman , founder of Yacktman Asset Management Co., which holds Kraft shares. Lazard Ltd., Centerview Partners, Citigroup Inc., and Deutsche Bank AG are advising Kraft on the deal. Cadbury is using Goldman Sachs Group Inc., Morgan Stanley, and UBS AG. Cadbury CEO Todd Stitzer embarked on a week-long blitz in London and New York in December to persuade Cadbury shareholders not to accept Kraft’s offer, then worth about 733 pence a share. Rosenfeld also met with investors and said on a November earnings call that Kraft was well positioned for “top-tier performance” with or without Cadbury. Forbes List Some analysts had projected the U.K. company would fetch 900 pence a share after Kraft disclosed its offer in September. Those estimates began to drop when Kraft made its offer formal Nov. 9 without raising the bid and no competing ones emerged. Rosenfeld, 56, spent more than 25 years at Kraft, with a two-year interruption in 2004 to run PepsiCo Inc.’s Frito-Lay snack-food unit. Last year, Forbes magazine ranked her No. 6 on its list of the world’s most powerful women, three behind PepsiCo CEO Indra Nooyi . To contact the reporters on this story: Andrew Cleary in London at acleary7@bloomberg.net ; Zachary Mider in New York at zmider1@bloomberg.net ; Duane D. Stanford in Atlanta dstanford2@bloomberg.net .

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Kraft Said to Be in Talks to Buy Cadbury With Increased $19.8 Billion Bid

January 18, 2010

By Zachary R. Mider Jan. 18 (Bloomberg) — Kraft Foods Inc. is in talks with Cadbury Plc about buying the U.K. chocolate maker for as much as 850 pence a share, according to a person with knowledge of the matter. The companies are talking about a price of 840 pence to 850 pence a share, said the person, who declined to be identified because the talks are private. Kraft’s current 11 billion-pound ($18 billion) cash-and-stock bid values the U.K. chocolate maker at 769 pence a share, below Cadbury’s closing share price of 808 pence today. A deal between the companies would end more than four months of resistance by Cadbury, the maker of Creme Eggs and Dairy Milk chocolate bars. As recently as Jan. 14, Cadbury called Northfield, Illinois based Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Trevor Datson , a spokesman for Cadbury, and Michael Mitchell , a Kraft spokesman, declined to comment. Hershey Co. has also been considering a bid for Uxbridge, England-based Cadbury and was waiting until Kraft’s final offer to make a decision, people familiar with the matter said last week. Kirk Saville , a spokesman for the Pennsylvania-based candy maker, declined to comment. To contact the reporter on this story: Zachary Mider in New York at zmider1@bloomberg.net

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Alan Grayson Introduces Bills To Fight Corporate Money In Politics

January 14, 2010

Anticipating a Supreme Court decision that could free corporations to spend unlimited amounts of money on political campaigns, Rep. Alan Grayson (D-Fla.) introduced five bills on Wednesday to choke off the expected flood of corporate cash. “We are facing a potential threat to our democracy,” Grayson said in an interview with HuffPost. “Unlimited corporate spending on campaigns means the government is up for sale and that the law itself will be bought and sold. It would be political bribery on the largest scale imaginable.” At issue in the Supreme Court case is whether the government can limit corporate spending during presidential and congressional campaigns. The case is pitting Citizens United, a conservative group, against the Federal Election Commission. The FEC banned ads for Citizens United’s film bashing Hillary Clinton during the 2008 election season. Grayson introduced a handful of bills on Wednesday — the Business Should Mind Its Own Business Act, the Corporate Propaganda Sunshine Act, the End Political Kickbacks Act, and two other measures. The Business Should Mind Its Own Business Act would impose a 500 percent excise tax on corporate contributions to political committees and on corporate expenditures on political advocacy campaigns. The Corporate Propaganda Sunshine Act would require public companies to report what they spend to influence public opinion on any matter other than the promotion of their goods and services. The End Political Kickbacks Act would restrict political contributions by government contractors. The other measures would apply antitrust regulations to political committees and bar corporations from securities exchanges unless the corporation is certified in compliance with election law. “This case is basically about an effort to get around that. Citizens United took corporate money and tried to influence an election,” said Lisa Gilbert of the U.S. Public Interest Research Group. “These are all pieces of good policy. I hope they draw attention to the potential frightening implications of Citizens United.” ABCNews reported on Wednesday that Democratic leadership is hard at work on a legislative response to the Supreme Court’s expected ruling. Grayson told HuffPost that he had consulted with leadership before launching his preemptive strike. Jeff Patch, a spokesman for the Center for Competitive Politics, an organization that advocates for lifting campaign finance restrictions, said Grayson’s bills were too focused on corporate spending. “These are totally targeted at corporations, but Citizens United is widely believed to affect corporations and unions and nonprofits equally.” Grayson disagreed. “One year’s profit for Exxon is greater than the entire political expenditure of all unions put together,” he said. Grayson added that he wanted to send the message that people are paying attention to the Supreme Court. “This issue transcends the usual political arguments. I don’t think the teabaggers would be very happy if our government was bought and paid for by a huge national corporation,” he said. The Supreme Court’s ruling, which has been expected for months, could come as soon as Jan. 20.

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NBC Universal’s Zucker Starts Fixing Prime-Time Damage Caused by Leno Move

January 11, 2010

By Andy Fixmer and Ronald Grover Jan. 11 (Bloomberg) — NBC Universal Chief Executive Officer Jeffrey Zucker’s next step, having decided to yank Jay Leno’s 10 p.m. talk show, is to fix the damage done to the network’s prime-time viewership by the four-month experiment. Executives at the network, last among U.S. broadcasters in prime time, begin meeting today on how to fill the five-hour-a- week hole left by Leno, Jeff Gaspin , chairman of NBC Universal Television Entertainment, told reporters yesterday in Pasadena, California. Gaspin outlined his ideas. “There will probably be two scripted hours, another reality show, ‘Dateline’ or some re-runs,” Gaspin said, referring to the news magazine “Dateline NBC.” “I’ve been thinking about that as long as I’ve been thinking I may have to make a change at 10 p.m.” NBC lost 4.6 percent of its primetime viewers since Leno began airing at 10 p.m. weeknights, replacing more expensive scripted dramas. The move, starting in September, helped CBS Corp. increase its advertising share, Nina Tassler , president of CBS Entertainment, said Jan. 9. The switch also provided lower audiences for NBC local TV news and late-night programs. The network will return to a traditional prime-time lineup and is developing the most pilots since 2003. The so-called upfronts presentations in New York, previewing next season’s shows to advertisers, will also return to a more typical format, Gaspin said. Last year, NBC’s presentation was abbreviated and executives traveled to meet with ad buyers. “They said, ‘mea culpa,’ and they’re trying to fix it,” Laura Martin , an analyst at Needham & Co. in Pasadena, California, said in an interview. “It’s better than if they decided to stay the course just because they don’t want to admit defeat.” ‘Dateline NBC’ NBC will stop broadcasting “The Jay Leno Show” at 10 p.m. next month, Gaspin said yesterday. Leno is working on a half- hour show that would return him to his former 11:35 p.m. starting time after a hiatus for the Vancouver Olympics, which run Feb. 12 to Feb. 28, Gaspin said. The move would push “The Tonight Show With Conan O’Brien ” a half-hour later to 12:05 a.m., and “Late Night With Jimmy Fallon ” would start at 1:05 a.m. Eliminating Leno from the prime-time lineup leaves 10 p.m. open on weeknights. “Dateline NBC” has become a solid ratings performer in earlier slots at 9 p.m. on Fridays and 7 p.m.-9 p.m. on Sundays, Gaspin said. He didn’t rule out moving or expanding reality show “The Biggest Loser,” now running for two hours on Tuesdays at 8 p.m., into to the 10 p.m. slot. Allison Gollust , a spokeswoman for NBC Universal in New York, said Zucker, 44, was unavailable for interviews. NBC must still resolve the late-night lineup. The hosts haven’t agreed to the changes and were given the weekend to mull them over before further discussions this week, Gaspin said. Conan’s Choices Gaspin said he hopes O’Brien, 46, will stay with NBC. News Corp. ’s Fox and other TV networks have expressed interest in the “Tonight Show” host, people with knowledge of the talks said last week. ABC doesn’t plan to pursue O’Brien, a spokesman for Burbank, California-based Walt Disney Co. ’s broadcast network said on Jan. 8. CBS is “very close” to renewing contracts with David Letterman and Craig Ferguson that will keep the late-night hosts “deep into 2012,” Tassler said on Jan. 9. NBC, CBS and News Corp. are based in New York. O’Brien didn’t return telephone messages left with “Tonight Show” Executive Producer Jeff Ross . O’Brien’s lawyer, Leigh Brecheen, referred calls to Ross. Leno Move The decision to move Leno to prime time was made when Ben Silverman was co-chairman of NBC under Zucker. Silverman left the network in September. Angela Bromstad was made president of prime-time programming in December 2008, and Gaspin was handed oversight of the broadcast network in July. Zucker was working under financial constraints imposed by NBC Universal’s majority owner, General Electric Co., said Nicholas Heymann , an analyst at Sterne Agee & Leach Inc. in New York. The ratings decline had an unanticipated “domino effect” that hurt ratings for local news and late-night programming, Agee said. “What you have to understand is that Zucker was handcuffed, that they were cutting costs,” said Heymann. “I don’t think that they fully understood that would end up resulting in the ratings falling” so far. Comcast Corp. , which plans to acquire control of NBC Universal through a joint venture with GE, had no role in the most recent scheduling changes, Gaspin said. Philadelphia-based Comcast, the largest cable operator, rose 2 cents to $16.94 at 9:34 a.m. on the Nasdaq Stock Market and had climbed 3.6 percent in the 12 months before today. GE, based in Fairfield, Connecticut, increased 15 cents to $16.75 in New York Stock Exchange composite trading and had gained 3.8 percent in the past year. Audience Drop Through nine months of 2009, NBC’s sales and profit declined 11 percent and 27 percent, respectively. In the season that started in September, its prime-time audience has dropped 9.8 percent among the 18- to 49-year-old audience advertisers target, according to data from researcher Nielsen Co. NBC will introduce “Parenthood,” a drama based on Ron Howard’s 1989 movie, on March 1, and comedian Jerry Seinfeld’s “The Marriage Ref” on March 14, Bromstad said in a Dec. 21 interview. The network plans 18 pilots for next season, including concepts from “Star Trek” director J.J. Abrams and producer Jerry Bruckheimer , and expects to bring back “Law & Order,” she said. Resolving the lineup will cost NBC money, Martin said. Adding scripted shows will be an expense, and the company may have to spend more to keep O’Brien, she said. Zucker was named CEO of the venture when it was announced in December. Regulatory approval may take nine to 12 months. Martin, a critic of Zucker’s stewardship, credits him for undoing the late-night mistake. “It was a worthy experiment,” Martin said. “Sometimes innovations don’t work, but that doesn’t mean you stop experimenting.” To contact the reporters on this story: Andrew Fixmer in Los Angeles at afixmer@bloomberg.net ; Ronald Grover in Los Angeles at Rgrover5@bloomberg.net

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Fox, Other Networks Said to Be Interested as Conan O’Brien Studies Options

January 8, 2010

By Andy Fixmer Jan. 8 (Bloomberg) — News Corp. ’s Fox is among several TV networks interested in hiring “Tonight Show” host Conan O’Brien if the comedian decides to leave NBC, according to people with knowledge of the situation. O’Brien, 46, who took over as host of “The Tonight Show” in June, told his representatives he will begin considering options after taping today’s show, said one of the people, who declined to be identified because the deliberations are private. The comedian, who prefers to stay at NBC, isn’t concerned that by changing networks he may have to compete with Jay Leno , one of the people said. NBC is considering moving “The Jay Leno Show” from its current 10 p.m. slot to 11:35 p.m. to bolster prime-time and late-night ratings, according to network officials with knowledge of the situation. The change would push “The Tonight Show” back one-half hour. “To move or replace talent you have to give them something, money or something else,” Laura Martin , an analyst at Needham & Co. in Pasadena, California, said in an interview. Rebecca Marks , an NBC spokeswoman, declined to comment. She pointed to a statement yesterday that the network is committed to keeping O’Brien on the air. Fox, controlled by News Corp. Chairman and Chief Executive Officer Rupert Murdoch , said it’s interested in adding late- night programs and views O’Brien as a natural candidate. O’Brien’s contract with General Electric Co. ’s NBC remains an obstacle, according to Los Angeles-based Fox. The Wall Street Journal reported earlier that O’Brien was considering a move. Wait and See Fox is waiting to see how events unfold at NBC. Comcast Corp. , the largest U.S. cable company, plans to acquire control of NBC Universal through a joint venture with GE. ABC is happy with its current late-night schedule and doesn’t plan to approach O’Brien, according to a spokesman for the network, owned by Burbank, California-based Walt Disney Co. NBC aims to settle the programming questions by Jan. 21, when executives hold a regular meeting with representatives of affiliate stations, one of the people said. GE, based in Fairfield, Connecticut, gained 35 cents to $16.60 today in New York Stock Exchange composite trading . Comcast, based in Philadelphia, dropped 5 cents to $16.92 on the Nasdaq Stock Market, while News Corp. Class A added 12 cents to $14.12. Leno, 59, moved to prime time to make way at “The Tonight Show” for O’Brien. NBC announced O’Brien would take over five years earlier. To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

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Tishman Tells New York Councilman It Will Miss a Stuyvesant Bond Payment

January 8, 2010

By Oshrat Carmiel Jan. 8 (Bloomberg) — Tishman Speyer Properties LP and BlackRock Inc. will miss a bond payment today on debt from their $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village in 2006, according to a spokesman for New York City Councilman Daniel Garodnick. Tishman Speyer called Garodnick yesterday to say it won’t make the payment, said Dan Pasquini, the councilman’s spokesman, in a telephone interview. Garodnick is a resident of Peter Cooper Village. To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net

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Berkshire Plans to Keep Symetra Shares After IPO in `Vote of Confidence’

January 6, 2010

By Jamie McGee Jan. 6 (Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. and White Mountains Insurance Group Ltd. , the two largest shareholders in insurer Symetra Financial Corp. , won’t cut their stakes when the company sells stock to the public this year. Berkshire and White Mountains led the investor group that formed the life and health insurer in 2004 and each will keep their 26.9 million common shares when the company completes a planned initial public offering, Bellevue, Washington-based Symetra said today in a registration statement. Symetra said in previous regulatory filings that the companies might sell their stakes, which each equal 26 percent of existing shares. “It’s certainly a vote of confidence regarding Warren Buffett’s long-term view of the business,” said Paul Bard , vice president of research at Renaissance Capital, an IPO research firm in Greenwich, Connecticut. “When he makes an investment call, investors take notice.” Stock picks by Buffett, the second-richest American, are watched by mutual funds and individuals hoping to duplicate his investing success. Omaha, Nebraska-based Berkshire kept its stake in Verisk Analytics Inc. when that company went public in October, while other owners such as American International Group Inc. and Travelers Cos. sold shares. Verisk, which sells actuarial data to insurers, has jumped 39 percent. Symetra plans to raise as much as $434.7 million in an initial public offering of 31 million shares, today’s filing said. The target figure was scaled back from a planned sale of as much as $575 million that had been listed in a Dec. 29 registration statement. ‘A Great Sign’ Investors formed Symetra in 2004 by buying insurance and investment units from Safeco Corp. , the property insurer bought by Liberty Mutual Group Inc. in 2008. Berkshire’s decision to retain the shares is “a great sign,” said Francis Gaskins , president of IPOdesktop.com in Marina del Rey, California. “The fact that he is holding his stock is a definite plus,” Gaskins said. “It gives the institutional investors a feeling of security.” Berkshire, where Buffett is chairman and chief executive officer, typically gets about half its profit from insurance units including General Re Corp. and car insurer Geico Corp. Symetra has reinsurance agreements with General Re, sold medical and life protection with Berkshire’s MidAmerican Energy Holdings Co. in 2006, and provided part of the coverage for Berkshire’s Nebraska Furniture Mart last year, today’s filing said. Symetra’s life unit held $3.6 million in Berkshire Class B shares on Sept. 30, the company said in the filing. Buffett didn’t respond to a request for comment sent in an e-mail to assistant Carrie Kizer . Eric Brielmann , a spokesman for White Mountains, declined to comment. Bank of America Corp. , JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc are co-managing the stock sale. To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net

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Hershey Board Said to Be Divided Over Cadbury Bid

January 6, 2010

By Zachary Mider and Duane D. Stanford Jan. 6 (Bloomberg) — Hershey Co. ’s executives and board members are divided on whether to make a bid for Cadbury Plc and have yet to arrange financing for an offer, according to people with knowledge of the matter. The board met on Jan. 4 without reaching a decision, said the people, who declined to be identified because the talks are private. Some members of Hershey’s controlling trust, led by former Pennsylvania Attorney General LeRoy Zimmerman , have been advocating a deal, while Chief Executive Officer David West is among those concerned about the debt a purchase would entail, the people said. An offer would compete with Kraft Foods Inc. ’s 10.9 billion-pound ($17.5 billion) hostile bid and would involve swallowing a company more than twice Hershey’s size. To fund a purchase, Hershey may pledge to sell assets such as the U.S. rights to the Kit Kat and Rolo brands or Cadbury operations in certain countries, the people said. “A bid does make a lot of sense but they would have to incur some debt,” said Roy Behren , who helps manage $2.4 billion at Westchester Capital Management in Valhalla, New York. “I don’t know to what extent they’re willing to risk the investment grade credit rating.” Standard & Poor’s has an A rating on Hershey’s debt, or five levels above junk, with a negative outlook. Kirk Saville , a spokesman for Hershey, declined to comment. Tim Reeves , a spokesman for the Hershey Trust, declined to comment. Looking for Investors Kraft said yesterday it would boost the cash portion of its offer, as investor Warren Buffett objected to Kraft’s proposal to issue millions of shares to finance the deal. The larger cash component was expected by Hershey and doesn’t preclude a bid for Uxbridge, England-based Cadbury, the people said. About 1.5 percent of Cadbury investors have so far accepted Kraft’s offer, Kraft said in a statement today. “If Hershey was seriously thinking about making an offer for Cadbury , the last 24 hours’ news makes it easier for them to make it attractive to Cadbury shareholders,” said Sachin Shah , a special situations and merger arbitrage strategist at Capstone Global Markets LLC in New York. Hershey, with the help of former Goldman Sachs Group Inc. banker Byron Trott and his new firm, BDT Capital Partners, is looking for investors such as wealthy individuals to buy equity in the combined company , the people said. JPMorgan Chase & Co. and Bank of America Corp. are in talks over providing billions of dollars in loans for the deal, they said. A spokeswoman for BDT Capital declined to comment. Formal Commitments Hershey hasn’t yet obtained formal commitments for either the equity or the loans as it continues to debate whether to move forward, the people said. The company is unlikely to team up with private-equity firms, they said. Cadbury’s Chairman Roger Carr in December said the Cr‘eme Egg maker has told Hershey “very clearly what the rules of the game are” and said Cadbury would be willing to sit down and talk with Hershey if the U.S. company develops a “compelling offer” that was fully financed. Cadbury Chief Executive Officer Todd Stitzer on Dec. 19 told investors in New York that Hershey could expect higher earnings per share than Kraft by buying the U.K. confectioner, even though a Kraft deal would present more cost-cutting opportunities, according to three people who heard the statement. Hershey has “an excellent position in chocolate, a strong route to market and great heritage,” Stitzer said in a Dec. 23 interview in the Daily Mail. Hershey Trust Hershey’s trust holds about 80 percent of Hershey’s voting power and 31 percent of common shares. Besides Zimmerman, the other trust members on Hershey’s board are James Nevels , chairman of the Swarthmore Group, an independent investment and financial advisory firm he co-founded in Philadelphia, and Robert Cavanaugh, who graduated from the Milton Hershey School. Hershey rose 95 cents, or 2.6 percent, to $37.17 yesterday in New York Stock Exchange composite trading , while Cadbury dropped 26 pence to 779 pence in London. Kraft added $1.34 to $28.77. Based on that closing price , Kraft’s cash-and-stock offer values Cadbury at 766 pence a share. To contact the reporters on this story: Zachary Mider in New York at zmider1@bloomberg.net ; Duane D. Stanford in Atlanta dstanford2@bloomberg.net .

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Hershey Board Members Are Said to Be Divided on Cadbury Bid to Rival Kraft

January 5, 2010

By Zachary Mider and Duane D. Stanford Jan. 5 (Bloomberg) — Hershey Co. ’s executives and board members are divided on whether to make a bid for Cadbury Plc and have yet to arrange financing for an offer, according to people with knowledge of the matter. The board met yesterday without reaching a decision, said the people, who declined to be identified because the talks are private. Some members of Hershey’s controlling trust, led by former Pennsylvania Attorney General Leroy Zimmerman , have been advocating a deal, while Chief Executive Officer David West is among those concerned about the debt a purchase would entail, the people said. An offer would compete with Kraft Foods Inc. ’s 10.9 billion pound ($17 billion) hostile bid and would involve swallowing a company more than twice Hershey’s size. To fund a purchase, Hershey may pledge to sell assets such as the U.S. rights to the Kit Kat and Rolo brands or Cadbury operations in certain countries, the people said. “A bid does make a lot of sense but they would have to incur some debt,” said Roy Behren , who helps manage $2.4 billion at Westchester Capital Management in Valhalla, New York. “I don’t know to what extent they’re willing to risk the investment grade credit rating.” Kirk Saville , a spokesman for Hershey, declined to comment. Tim Reeves , a spokesman for the Hershey Trust, declined to comment. Kraft said today it would boost the cash portion of its offer, as investor Warren Buffett objected to Kraft’s proposal to issue millions of shares to finance the deal. The larger cash component was expected by Hershey and doesn’t preclude a bid for Uxbridge, U.K.-based Cadbury, the people said. Looking for Investors “If Hershey was seriously thinking about making an offer for Cadbury , the last 24 hours’ news makes it easier for them to make it attractive to Cadbury shareholders,” said Sachin Shah , a special situations and merger arbitrage strategist at Capstone Global Markets LLC in New York. Hershey, with the help of former Goldman Sachs Group Inc. banker Byron Trott and his new firm, BDT Capital Partners, is looking for investors such as wealthy individuals to buy equity in the combined company , the people said. JPMorgan Chase & Co. and Bank of America Corp. are in talks over providing billions of dollars in loans for the deal, they said. A spokeswoman for BDT Capital declined to comment. Hershey hasn’t yet obtained formal commitments for either the equity or the loans as it continues to debate whether to move forward, the people said. The company is unlikely to team up with private-equity firms, they said. Hershey rose 95 cents, or 2.6 percent, to $37.17 today in New York Stock Exchange composite trading , while Cadbury dropped 26 pence to 779 pence in London. Kraft added $1.34 to $28.77. Based on that closing price , Kraft’s cash-and-stock offer values Cadbury at 766 pence a share. To contact the reporters on this story: Zachary Mider in New York at zmider1@bloomberg.net ; Duane D. Stanford in Atlanta dstanford2@bloomberg.net .

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Goldman Said to Plan to Convert Sumitomo Mitsui Shares as Bank Mulls Sale

January 5, 2010

By Takahiko Hyuga and Finbarr Flynn Jan. 6 (Bloomberg) — Goldman Sachs Group Inc. plans to convert 100 billion yen ($1.09 billion) of preferred shares in Sumitomo Mitsui Financial Group Inc. into common stock as early as April, a person familiar with the matter said. Goldman Sachs, the world’s most profitable securities firm, may convert its 33,400 preferred shares in the fiscal year starting April 1, the person said, declining to be identified. Separately, Sumitomo Mitsui, Japan’s second-largest bank by market value, plans to sell 800 billion yen of shares, people with knowledge of the matter said yesterday. Sumitomo Mitsui President Teisuke Kitayama is under pressure to boost capital that trails the average among global rivals, according to Standard & Poor’s. Kitayama said last month he doesn’t want to be “slow off the block” in following larger competitor Mitsubishi UFJ Financial Group Inc. to sell shares. The Nikkei English News earlier reported that Sumitomo Mitsui asked Goldman Sachs to convert its preferred shares into common stock, without saying where it got the information. Goldman Sachs’s Tokyo-based spokeswoman Hiroko Matsumoto declined to comment. Kyosuke Hattori , a spokesman for Sumitomo Mitsui, said no decision has been made about asking Goldman Sachs to convert its preferred shares. The New York-based firm bought 150.3 billion yen of preferred shares in Sumitomo Mitsui in 2003 to help bolster the bank’s capital, eroded by losses on stockholdings and bad loans. Goldman Sachs converted a third of the securities into common stock in April 2008. Sumitomo Mitsui shares closed at 2,653 yen yesterday, down from 8,950 yen on April 30, 2008. The stock climbed 4 percent today as of 11 a.m. in Tokyo trading. To contact the reporters on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

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Brevan Howard Founding Partner Blochet Will Join Moore Capital as Manager

January 5, 2010

By Katherine Burton and Saijel Kishan Jan. 5 (Bloomberg) — Moore Capital Management LP, the $14 billion hedge-fund firm run by Louis Moore Bacon , hired Jean- Philippe Blochet , a founding partner of Brevan Howard Asset Management LLP, as a senior portfolio manager based in London. Blochet will start by the middle of this month, said Shawn Pattison , a spokesman for New York-based Moore. French-born Blochet, 46, was part of the Brevan Howard’s macro team, focusing on currencies, interest rates and other investments linked to global economic trends, and left the firm in November after taking a sabbatical in 2008. Bacon has added employees and in 2008 hired GLG Partners Inc.’s Greg Coffey as co-chief investment officer for Moore’s European business. Moore’s main fund, Moore Global Investments, returned 21 percent last year through Dec. 24 and has posted an average annual return of about 21 percent since it was started in 1990. Blochet had worked with Alan Howard , the firm’s co-founder, on Credit Suisse First Boston’s proprietary fixed-income trading desk before starting the London-based money manager in 2002. The first part of the Brevan Howard’s name is derived from the initials of founding partners Blochet, Christopher Rokos , James Vernon and Trifon Natsis . Blochet will mainly trade a macro strategy that seeks to profit from broad economic trends through stocks, bonds and commodities. He completed the Marathon des Sables, a six-day, 151-mile (243 kilometer) foot race across the Sahara desert, in 2006. Competitors cover the equivalent of five and a half marathons over six days in temperatures reaching 120 degrees Fahrenheit (49 Celsius), with packs for food and sleeping gear on their backs. The race, which raises money for charities, was described as “The Toughest Footrace on Earth” in the 2007 book “Seven Days in the Sahara” by an event competitor. Blochet finished the race 157th out of 800 participants, according to Marathon des Sables’ Web site. To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net ; Saijel Kishan in New York at skishan@bloomberg.net ;

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AT&T Ends Sponsorship Agreement With Tiger Woods After Infidelity Scandal

December 31, 2009

By Crayton Harrison Dec. 31 (Bloomberg) — AT&T Inc. , the biggest U.S. phone company, ended its sponsorship deal with Tiger Woods after the golfer’s admissions of marital infidelity. “We are ending our sponsorship agreement with Tiger Woods and wish him well in the future,” Michael Coe, a spokesman for AT&T, said in an e-mail today. The company began a multiyear agreement in February to place its logo on Woods’s golf bag and has sponsored his annual Tiger Jam benefit concerts. The carrier follows Accenture Plc and Procter & Gamble Co. in severing ties with Woods, who said this month that he’s taking a leave of absence from golf to work on improving his marriage. Nike Inc. and Upper Deck Co. have stood by the athlete, whose 14 major tournament wins are second only to Jack Nicklaus . Accenture, which had built its marketing around 34-year-old Woods, ended its six-year relationship with the athlete on Dec. 13. The day before that, Procter & Gamble said it would phase the golfer out of its Gillette TV and print ads. AT&T will continue to sponsor the PGA Tour’s National tournament, which Woods has hosted, Coe said. Neither Woods’s agent, Mark Steinberg, nor his spokesman, Glenn Greenspan, immediately responded to e-mails seeking comment. AT&T, based in Dallas, dropped 13 cents to $28.19 at 10:06 a.m. in New York Stock Exchange composite trading . Before today, the shares were little changed this year. To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

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Eight American Civilians Killed in Suicide-Bomb Attack at Afghanistan Base

December 30, 2009

By Viola Gienger and Tony Capaccio Dec. 31 (Bloomberg) — Eight American civilians died in a suicide-bomb attack on an American military base in Afghanistan, a U.S. official said. The terror assault occurred as the U.S. expands its involvement in the war in Afghanistan. A single attacker was responsible for the blast yesterday, which also caused an unspecified number of injuries, according to the official, who asked not to be identified. A Pentagon spokeswoman, Lieutenant Colonel Almarah Belk, said the Americans died at Forward Operating Base Chapman in Khost province. An attack on a base is particularly threatening because the sites are regarded as sanctuaries, said retired U.S. Army General Jack Keane, a member of the advisory Defense Policy Board. “So when you’re able to penetrate that, you achieve a level of terror and intimidation that the attacks outside the bases, even though they happen daily, do not achieve.” U.S. officials haven’t yet described the affiliations of the slain civilians. The U.S. has been expanding the ranks of civilian aid experts in Afghanistan in parallel with the surge of military reinforcements aimed at the Taliban insurgency. Belk said she didn’t know what installations or agencies are located at the base. “We mourn the loss of life in this attack, and are withholding further details pending notification of next of kin,” State Department spokesman Ian Kelly said in an e-mailed statement. The State Department and the U.S. Agency for International Development aim to strengthen the government of President Hamid Karzai and local officials to demonstrate to Afghans the benefits of backing elected leaders and defeating the Taliban. Civilian Strategy General Stanley McChrystal , the commander of U.S. and other NATO-led forces in Afghanistan, has said civilian aid will be pivotal in solidifying gains the military makes with the 30,000 additional troops that President Barack Obama authorized earlier this month. The number of civilians working on reconstruction, improving governance and bolstering health and education services is due to triple to about 1,000 in January compared with a year earlier. As of October, U.S. civilians worked at about 52 locations in Afghanistan, according to Deputy Secretary of State Jacob Lew . “In some cases, they’re moving into areas that have just been cleared with the military as the clearing process is under way,” Lew told reporters in Washington on Oct. 26. “They go in groups of two to 10 to 15. They’re surrounded by locally employed staff, by Afghan nationals who are working in a civilian capacity and by” employees of non-governmental organizations, he said. Blast Probed Lieutenant Colonel Todd Vician , a spokesman for the North Atlantic Treaty Organization-led force in Afghanistan, said the base explosion is under investigation. Khost is located in eastern Afghanistan, along the border with Pakistan. Southern and eastern Afghanistan are areas where the Taliban have made the biggest inroads. The additional U.S. troops will bring the number of American forces in Afghanistan to almost 100,000 in 2010. Obama’s strategy is to roll back the Taliban, which harbored al- Qaeda before being ousted from power after the attacks of Sept. 11, 2001, in time to begin a drawdown of troops in July 2011. In testimony to Congress this month after Obama announced his revised approach, officials including Defense Secretary Robert Gates cautioned that the increasing activity also was bound to lead to higher U.S. and allied casualties until the momentum turns. To contact the reporter on this story: Anthony Capaccio in Washington at acapaccio@bloomberg.net ; Viola Gienger in Washington at vgienger@bloomberg.net

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Iran Detains 1,000 in Crackdown on Opposition Protests, Rights Group Says

December 30, 2009

By Henry Meyer and Ali Sheikholeslami Dec. 30 (Bloomberg) — Iran has detained about 1,000 people in a continuing crackdown after the biggest anti-government demonstrations in six months, a human rights group said. The Iranian police warned it will crush any further protests. The New York-based International Campaign for Human Rights in Iran said it feared that the detainees, who include prominent opposition activists and journalists, would be tortured to produce false confessions that the protests were instigated by foreign governments. “It may be assumed that many detainees will be subjected to torture followed by ‘show trials’ and convicted of crimes that carry the death penalty in the Islamic Republic,” a spokesman for the group, Aaron Rhodes , said in an e-mailed statement late yesterday. The figure for the number of arrests is based on the group’s monitoring of reports by rights activists and opposition Web sites inside Iran, Rhodes said in a telephone interview today. Iran yesterday accused Western countries of inciting the Dec. 27 clashes between opposition supporters and security forces in the capital Tehran and other cities, which killed at least eight people, according to state media reports. The U.S. and European Union states have condemned the crackdown, a factor that could harden Iran’s stance toward its nuclear dispute with the West, analysts said. Police Warning General Esmail Ahmadi-Moghaddam, Iran’s police chief, said police will deal severely with anyone who takes part in opposition rallies, the state-run Fars news agency reported. He said that what he called a period of leniency was over, Fars said. The police arrested 500 people on Dec. 27, Ahmadi-Moghaddam said, adding that 120 officers were injured during that day’s clashes. Some more demonstrators have since been arrested by intelligence services, he said. President Mahmoud Ahmadinejad , whose disputed re-election in June sparked the unrest, called the latest protests a foreign-backed “nauseating masquerade” in comments cited by the state-run Islamic Republic News Agency . Supreme Leader Ayatollah Ali Khamenei and Ahmadinejad have repeatedly linked the demonstrations to Western efforts to undermine Iran, rejecting opposition allegations of vote fraud. The renewed unrest comes as the U.S. and its allies step up pressure on Iran to prove it’s not seeking to build nuclear weapons. Nuclear Tensions The U.S. government has threatened to impose more sanctions after a Dec. 31 deadline unless Iran responds to diplomatic efforts aimed at securing international controls over its nuclear work in return for better ties with the West. Kazakhstan today denied a report that it planned to supply Iran with a large consignment of uranium, Russian state news service RIA Novosti reported, citing a spokesman for the Kazakh Foreign Ministry. The Iranian mission at the United Nations also issued a statement denying the report. The Associated Press said that Iran was close to agreeing on a deal to clandestinely import 1,350 tons of purified uranium ore from Kazakhstan. It cited an intelligence report. The transfer of any uranium yellowcake to Iran would constitute a clear violation of UN Security Council sanctions, State Department Spokesman Ian Kelly wrote in an e-mail yesterday. “The transfer of uranium to Iran is prohibited,” Kelly said. Uranium Enrichment Iran has refused UN demands to suspend enrichment of uranium, which can produce material for a bomb or to fuel power stations. The oil-rich Persian Gulf country says its nuclear activities are purely aimed at generating electricity. The U.S. is preparing limited sanctions against Iran that would target elements of the regime rather than broad-based economic sanctions that could alienate the Iranian people, the Washington Post said today, citing unidentified U.S. officials. “The U.S. should be very careful not to impose broad-based sanctions that hurt the people, not the regime,” said Trita Parsi, head of the Washington-based National Iranian American Council, the largest U.S.-Iranian association. The worst thing the Obama administration could do right now is to provide ammunition for efforts to “wipe out the opposition,” Parsi said in a phone interview from New York. Opponents of Ahmadinejad have been protesting since the June election, which sparked the largest anti-government demonstrations since the overthrow of the Shah in the 1979 Islamic Revolution. The protests were violently suppressed. The government said 36 people were killed in the aftermath of the vote, while the opposition said twice as many died. About 4,000 protesters were detained and more than 140 have been put on trial. Unrest flared again this month at the funeral of a leading clerical opponent of Khamenei, Grand Ayatollah Hossein Ali Montazeri. “We’re seeing a pattern of the government shooting itself in the foot with brutality,” Parsi said. “At the moment, the momentum seems to be with the opposition.” To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net ; Ali Sheikholeslami in London at alis2@bloomberg.net .

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Iran Detains 1,000 in Crackdown on Opposition Protests, Rights Group Says

December 30, 2009

By Henry Meyer and Ali Sheikholeslami Dec. 30 (Bloomberg) — Iran has detained about 1,000 people in a continuing crackdown after the biggest anti-government demonstrations in six months, a human rights group said. The Iranian police warned it will crush any further protests. The New York-based International Campaign for Human Rights in Iran said it feared that the detainees, who include prominent opposition activists and journalists, would be tortured to produce false confessions that the protests were instigated by foreign governments. “It may be assumed that many detainees will be subjected to torture followed by ‘show trials’ and convicted of crimes that carry the death penalty in the Islamic Republic,” a spokesman for the group, Aaron Rhodes , said in an e-mailed statement late yesterday. The figure for the number of arrests is based on the group’s monitoring of reports by rights activists and opposition Web sites inside Iran, Rhodes said in a telephone interview today. Iran yesterday accused Western countries of inciting the Dec. 27 clashes between opposition supporters and security forces in the capital Tehran and other cities, which killed at least eight people, according to state media reports. The U.S. and European Union states have condemned the crackdown, a factor that could harden Iran’s stance toward its nuclear dispute with the West, analysts said. Police Warning General Esmail Ahmadi-Moghaddam, Iran’s police chief, said police will deal severely with anyone who takes part in opposition rallies, the state-run Fars news agency reported. He said that what he called a period of leniency was over, Fars said. The police arrested 500 people on Dec. 27, Ahmadi-Moghaddam said, adding that 120 officers were injured during that day’s clashes. Some more demonstrators have since been arrested by intelligence services, he said. President Mahmoud Ahmadinejad , whose disputed re-election in June sparked the unrest, called the latest protests a foreign-backed “nauseating masquerade” in comments cited by the state-run Islamic Republic News Agency . Supreme Leader Ayatollah Ali Khamenei and Ahmadinejad have repeatedly linked the demonstrations to Western efforts to undermine Iran, rejecting opposition allegations of vote fraud. The renewed unrest comes as the U.S. and its allies step up pressure on Iran to prove it’s not seeking to build nuclear weapons. Nuclear Tensions The U.S. government has threatened to impose more sanctions after a Dec. 31 deadline unless Iran responds to diplomatic efforts aimed at securing international controls over its nuclear work in return for better ties with the West. Kazakhstan today denied a report that it planned to supply Iran with a large consignment of uranium, Russian state news service RIA Novosti reported, citing a spokesman for the Kazakh Foreign Ministry. The Iranian mission at the United Nations also issued a statement denying the report. The Associated Press said that Iran was close to agreeing on a deal to clandestinely import 1,350 tons of purified uranium ore from Kazakhstan. It cited an intelligence report. The transfer of any uranium yellowcake to Iran would constitute a clear violation of UN Security Council sanctions, State Department Spokesman Ian Kelly wrote in an e-mail yesterday. “The transfer of uranium to Iran is prohibited,” Kelly said. Uranium Enrichment Iran has refused UN demands to suspend enrichment of uranium, which can produce material for a bomb or to fuel power stations. The oil-rich Persian Gulf country says its nuclear activities are purely aimed at generating electricity. The U.S. is preparing limited sanctions against Iran that would target elements of the regime rather than broad-based economic sanctions that could alienate the Iranian people, the Washington Post said today, citing unidentified U.S. officials. “The U.S. should be very careful not to impose broad-based sanctions that hurt the people, not the regime,” said Trita Parsi, head of the Washington-based National Iranian American Council, the largest U.S.-Iranian association. The worst thing the Obama administration could do right now is to provide ammunition for efforts to “wipe out the opposition,” Parsi said in a phone interview from New York. Opponents of Ahmadinejad have been protesting since the June election, which sparked the largest anti-government demonstrations since the overthrow of the Shah in the 1979 Islamic Revolution. The protests were violently suppressed. The government said 36 people were killed in the aftermath of the vote, while the opposition said twice as many died. About 4,000 protesters were detained and more than 140 have been put on trial. Unrest flared again this month at the funeral of a leading clerical opponent of Khamenei, Grand Ayatollah Hossein Ali Montazeri. “We’re seeing a pattern of the government shooting itself in the foot with brutality,” Parsi said. “At the moment, the momentum seems to be with the opposition.” To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net ; Ali Sheikholeslami in London at alis2@bloomberg.net .

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AIG Rises Most in S&P 500 Index After Aid Cap on Freddie, Fannie Is Lifted

December 28, 2009

By Jamie McGee Dec. 28 (Bloomberg) — American International Group Inc. , recipient of a $182.3 billion taxpayer-funded rescue, gained the most in the Standard & Poor’s 500 Index after the government removed caps on aid to Freddie Mac and Fannie Mae. The U.S. Treasury Department said on Dec. 24 it would provide assistance to the two mortgage financers as needed for the next three years, after giving the companies a combined $400 billion lifeline. New York-based AIG’s rescue helped the insurer survive losses related to the subprime mortgage crisis. “The assumption is that with the government owning effectively 80 percent of AIG, they will do the same thing and they will backstop everything in AIG’s book,” said Malcolm Polley , chief investment officer at Stewart Capital Advisors LLC in Indiana, Pennsylvania, which oversees about $1 billion. “A lot of people are grasping at straws trying to find a way they can justify having paid what they paid for AIG if they bought it recently or continuing to own AIG if they never sold it.” AIG rose $1.88, or 6.2 percent, to $32 at 12:38 p.m. in New York Stock Exchange composite trading. Earlier today it hit $32.80, the insurer’s highest price this month. Freddie Mac climbed 26 cents, or 20 percent, to $1.52 and Fannie Mae rose 18 cents, or 17 percent, to $1.23. Short Sellers “If AIG holds a lot of Freddie and Fannie paper, this could end up helping their assets as well,” said Jud Pyle , a market analyst at Chicago-based options trading firm PEAK6 Investments LP. “I still wouldn’t put my money in AIG. There are better places to put it, but this could cause people who are short it to think twice.” A short position is a bet the stock will decline. Mark Herr , a spokesman for the insurer, didn’t immediately return a call seeking comment. AIG has reported two straight quarterly profits after bad bets on subprime mortgages contributed to more than $100 billion in net losses in the 18 months ended March 31. The insurer’s stock traded at more than $1,400 a share at the end of 2006. The insurer’s $182.3 billion rescue includes a $60 billion Federal Reserve credit line , a Treasury Department investment of as much as $69.8 billion, and up to $52.5 billion to buy mortgage-linked assets owned or backed by the company. AIG agreed to turn over a stake of almost 80 percent in connection with its September, 2008 bailout. To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net .

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Air Travelers to U.S. Face Stay-Seated Rule After Christmas Bomb Attempt

December 26, 2009

By Jonathan D. Salant and Jeff Bliss Dec. 26 (Bloomberg) — Airline passengers traveling to the U.S. from other countries were ordered to remain seated for the last hour in flight, and were limited to one carry-on item in response to an attempted terrorist attack yesterday on a Northwest Airlines flight to Detroit from Amsterdam. New U.S. Transportation Security Administration rules also prohibit passengers from getting anything from their carry-on bags or having anything in their laps in the final hour of flight, the agency said. Air Canada and British Airways informed passengers of the rules in statements on their Web sites. “Clearly, aviation remains in the target zone,” said Kip Hawley , a former TSA administrator. U.S. authorities took Umar Farouk Abdulmutallab , a 23-year- old Nigerian, into custody after he allegedly set off a device containing explosive materials on Flight 253. He was charged in a formal complaint today with attempting to destroy an aircraft and with placing a destructive device on board the plane. President Barack Obama , who is on vacation in Hawaii, conferred by telephone with national security and counter- terrorism officials on the investigation and “heightened air travel safety measures,” according to a statement from White House spokesman Bill Burton . “The president will continue to actively monitor the situation,” Burton said. Additional Screening Travelers to the U.S. should expect additional screening and longer check-in times, Homeland Security Secretary Janet Napolitano said in a statement. Former Federal Aviation Administration security chief Billie Vincent said it’s easier for terrorists to target international flights coming into the U.S. rather than those going out. “The closer you are to areas of major political instability, the closer you are to being able to get your hands on those things that you need,” Vincent said. Paul Flaningan , a spokesman for Dallas-based Southwest Airlines Co., said the limits on passengers’ moving about the cabin applied only to carriers flying to the U.S. from overseas. Southwest operates only within the U.S. “From a regulatory standpoint, these rules haven’t affected our operations to date,” Flaningan said. “We’ve really felt no operational impact.” The Senate Commerce Committee and the House Homeland Security Committee will hold hearings next month on the incident, the committees’ chairmen, Senator Jay Rockefeller , a West Virginia Democrat, and Representative Bennie Thompson , a Mississippi Democrat, said in separate statements today. To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net ; Jeff Bliss in Washington jbliss@bloomberg.net .

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Freeport Wins 38% Reduction in Copper Refining, Processing Fees From Japan

December 22, 2009

By Jae Hur and Chanyaporn Chanjaroen Dec. 23 (Bloomberg) — Freeport-McMoRan Copper & Gold Inc. , the world’s largest publicly traded copper producer, secured a 38 percent cut in calendar-year processing fees from Japanese smelters, according to two people familiar with the agreement. The company will pay $46.50 a metric ton and 4.65 cents a pound in so-called treatment and refining charges next year, the two people said yesterday, declining to be identified as the agreements aren’t public. Bill Collier , a spokesman for Phoenix- based Freeport, declined to comment in an e-mail. Copper in London has more than doubled this year as China’s imports rose to a record. The fees for producing metal from semi-processed ore, known as concentrate, were lower than estimates and usually drop when there is a shortage as smelters compete for supplies. “The difference between the availability of concentrate and the smelting capacity is still growing and that will continue for the foreseeable future,” Eleni Joannides, copper research manager at London-based research company CRU, said yesterday by phone. The global deficit of the raw material may rise fivefold to 1 million tons next year, Christine Meilton , an analyst at CRU, said Nov. 9. CRU had forecast the 2010 charges to be about or just less than $50 per ton and five cents per pound. Fees Down Next year’s fees are down from $75 a ton for smelting and 7.5 cents a pound for refining for calendar 2009 and from $50 and 5 cents for midyear contracts started July. Midyear contracts typically cover less than 20 percent of the smelters’ needs, according to Atsushi Yamaguchi , a Tokyo-based analyst at UBS AG. Freeport rose 49 cents to $78.45 in Dec. 22 New York Stock Exchange composite trading. The shares have more than tripled this year. Copper for delivery in three months fell $54 to $6,881 a metric ton on the London Metal Exchange. Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper contained in the concentrate. The fees are deducted from the price paid by smelters to miners for the concentrate. “Given current foreign exchange rate trends, copper prices and sulfuric acid prices, around 13 cents a pound may be the level at which the Japanese operators can remain profitable,” Yamaguchi said in a note on Nov. 6. The 13-cent-per-pound level is equivalent to $55 a ton and 5.5 cents a pound, he said. The shortage of concentrate emerged after China expanded smelting capacity, CRU’s Joannides said. “If smelters don’t get enough concentrate, they will have to shut,” she said. To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net ; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net .

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Retail Sales in U.S. Slow as East Coast Snowstorm Keeps Shoppers at Home

December 22, 2009

By Allison Abell Schwartz Dec. 22 (Bloomberg) — U.S. retail sales rose at the slowest pace in 15 weeks after record snowfalls shut stores early and kept consumers at home during one of the biggest shopping days of the year. Sales at stores open at least a year climbed 0.4 percent in the week ended Dec. 19 from a year ago, the International Council of Shopping Centers and Goldman Sachs Group Inc. said today in a statement. Sales in December will rise about 2 percent, Michael Niemira , chief economist of the New York-based ICSC, reiterated today. Super Saturday, the last Saturday before Christmas that in many years has been highest volume shopping day of the year, was a “super disappointment,” Niemira said. Retailers may be able to make up for sales they lost from the weekend’s East Coast storm by extending promotions into the few days before Christmas, according to Marshal Cohen , chief industry analyst with NPD Group Inc. “Retailers will pull out all the stops this week to make up for it,” Cohen said yesterday in a Bloomberg Television interview. The National Retail Federation, a Washington-based trade group, said the storm’s impact wasn’t enough to prompt it to change its forecast for a 1 percent drop in holiday sales. Retailers in the Washington area closed early on Dec. 19 and opened to fewer shoppers Dec. 20 than is typical for the last weekend before Christmas. As much as 24 inches (61 centimeters) of snow fell on Bethesda, Maryland, while 16 inches were measured at the National Mall in Washington and 23.2 inches were recorded at Philadelphia International Airport, the National Weather Service said. Many consumers who were stuck at home shopped online instead, helping Internet sales grow 13 percent last weekend from a year earlier, according to data released today by ComScore Inc. Christmas Shopping Shopping during the past weekend probably trailed the one following Thanksgiving, Aaron Martin , a spokesman for researcher ShopperTrak RCT Corp., said in an e-mail on Dec. 20. The firm had anticipated the weekend would be the best of the season. In October, it forecast a 1.6 percent increase in total holiday sales. ShopperTrak will report Dec. 19 sales and traffic today. More consumers are waiting until the last minute to complete their gift purchases this year, according to a survey by BIGresearch released last week by the NRF. Consumers on average had done 47 percent of their shopping by the second week in December, the lowest level since 2004, the NRF said. Intense Catch-Up “The catch-up will be intense as consumers complete their holiday gift-buying this week,” Niemira said in today’s release. Target Corp. , Toys “R” Us Inc. and Borders Group Inc. said they will extend store hours this week in areas that were affected by the snowstorm. The 10 days before Christmas can account for as much as 40 percent of holiday sales, which include November and December, according to Joseph Feldman , research analyst at New York-based Telsey Advisory Group. The ICSC predicts holiday sales will climb 1 percent from a year ago. Some investors consider comparable-store sales the best measure of results because they exclude the effect of location openings and closings in the past year. To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net

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AIG Said to Halt Chartis Stock Sale as CEO Benmosche Deems It Core Asset

December 22, 2009

By Hugh Son Dec. 22 (Bloomberg) — American International Group Inc. , the insurer rescued by the U.S. government, halted preparations for an initial public offering of its Chartis property-casualty unit, people familiar with the matter said. Robert Benmosche , who started as AIG’s chief executive officer in August, told employees that he considers the business a core holding, according to two people who declined to be identified because an announcement hasn’t been made. New York- based AIG said in April it was accelerating the separation of the unit from the parent firm to prepare for a sale or public offering of a minority stake. “He’s looking at Chartis and thinking that could be more of an ongoing insurer than people previously thought,” said Robert Haines , an analyst at CreditSights Inc. in New York. “He’s more inclined to try to build up the company than quickly selling a chunk to investors.” Benmosche, 65, is slowing the pace of divestitures to boost the value of assets needed to repay loans in the $182.3 billion bailout. He halted at least two auctions, including that of Japanese life insurers and a U.S. investment advisory unit, saying the businesses were important to AIG and higher prices will be gained by waiting for markets to recover. Chartis executives including CEO Kristian Moor met in the first half of the year with financial advisers and lawyers about a public offering, and preparations stopped after Benmosche took charge, the people said. The unit assembled its own senior management team and hired a separate public-relations staff. Chartis’s Reach Chartis, which combines the U.S. and overseas property- casualty operations of AIG, has 34,000 employees and more than 40 million clients in over 160 countries and jurisdictions. Coverage offered by the New York-based insurer includes commercial buildings, corporate boards, airplanes and homes. “Public valuations for property-casualty companies are very low by historic standards, so anybody thinking about doing a public offering right now would really have to think twice about that,” said Paul Newsome , an insurance analyst at Sandler O’Neill Partners LP. The unit was renamed twice this year to distance itself from AIG. It was called AIU Holdings in March and Chartis in July. Benmosche told staff he didn’t see the appeal of the Chartis name, derived from the Greek word for “map,” and they shouldn’t be ashamed to be linked to AIG, the people said. Chartis heralded its new brand as an “important milestone in our progress toward ensuring a strong and independent future,” according to letters sent to customers. Mark Herr , a spokesman for AIG and John Jones of Chartis declined to comment. Selling Assets AIG, rescued last year after losses tied to housing markets, secured agreements to sell more than $12 billion in holdings, including an auto insurer and an equipment guarantor, both of which were part of property-casualty operations. Moor, 50, got a $1.6 million retention bonus in October after Kenneth Feinberg , the Obama administration’s special master on executive pay, said he was “particularly critical to AIG’s long-term financial success.” AIG’s property-casualty premiums dropped 13 percent to about $8.1 billion in the third quarter from a year earlier as clients scaled back coverage amid the recession and competitors poached AIG’s staff and customers. AIG cut its Federal Reserve debt by $25 billion this month by handing over stakes in two overseas life-insurance units. The insurer plans to sell the units to competitors or private-equity buyers or hold IPOs, depending on the market conditions. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net .

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Eurostar Cancels Channel Tunnel Trains a Second Day, Citing French Weather

December 19, 2009

By Thomas Biesheuvel and Anne-Sylvaine Chassany Dec. 20 (Bloomberg) — Eurostar Group Ltd., operator of high-speed passenger trains between London, Paris and Brussels, canceled all services for the second consecutive day, citing “continuing severe weather” in northern France. The company “hopes” to resume running tomorrow, London- based spokesman Paul Gorman said in a phone interview. About 28,000 passengers are affected by today’s suspension, he said. They can request a refund or reschedule their journey, he said. All services were suspended yesterday, disrupting more than 31,000 passengers, after four Eurostar trains broke down in the Channel Tunnel the night before and a fifth was delayed. Eurostar Chief Executive Richard Brown said in an interview with Sky News that the temperature change on entering the tunnel created condensation that caused the electrical systems in the locomotives to fail. “Eurostar does not want to cause its passengers any further disruption and will be conducting a program of ‘test trains’ to better understand the problems that have been occurring,” spokeswoman Lesley Retallack said in an e-mailed statement yesterday. Temperatures in northern France fell to as low as -8 Celsius (17 Fahrenheit) on Friday night Dec. 20, “significantly lower than usual,” Eurostar’s Gorman said. “The more humid, warmer environment in the 30-mile (48- kilometer) tunnel affects the electrical systems” in the train engines, he said. In the 15-year history of Eurostar, such incidents “have not occurred on this scale before,” he said. In northern France today, temperatures are forecast to hover about 0 Celsius with snow possible, according to the French meteorological office. Freight services through the Channel tunnel, operated by Groupe Eurotunnel SA , were suspended toward France yesterday after French authorities closed motorways to trucks due to weather conditions, John Keefe, a U.K.-based spokesman for Eurotunnel said in a telephone interview. “Several thousand” trucks were backed up on the M20 motorway in the south-east English county of Kent as a result, he said. Trucks coming from Dover were stuck at Calais port because France’s A16 motorway was closed to them, Gerard Baron, a spokesman for Port de Calais, said yesterday. About 8 inches (20 centimeters) of snow fell in the region on Friday night, he said. Passenger and car shuttle services through the tunnel between Folkestone and Calais ran on a reduced basis with “significant delays” yesterday, Eurotunnel said. Eurotunnel said its locomotives and shuttles were maintained so that rapid temperature changes do not affect them. “It’s absolutely unprecedented,” Eurotunnel’s Keefe said. “The knock-on effect on passenger shuttle services and freight shuttle services is huge.” To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net .

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Eurostar Cancels Service Amid `Severe Weather’, 31,000 Passengers Affected

December 19, 2009

By Thomas Biesheuvel Dec. 19 (Bloomberg) — Eurostar Group Ltd., operator of high-speed trains between London, Paris and Brussels, canceled all services today due to severe weather conditions in France. “We are not going to be running any services today because of the continuing weather conditions in northern France,” Eurostar spokeswoman Emelle Mouhaddib said. The decision will affect more than 31,000 passengers, she said. Services were suspended after four Eurostar trains broke down in the Channel Tunnel overnight, and a fifth was delayed, trapping more than 2,000 passengers, Mouhaddib said. The company will issue an update on tomorrow’s services at 4 p.m. London time today. Freight services across the English Channel have also been suspended after the French authorities closed motorways to lorries following severe weather conditions, John Keefe, U.K.- based spokesman for Groupe Eurotunnel SA , operator of the tunnel, said in a telephone interview. “Several thousand” trucks remain backed up on the M20 motorway in the south-east English county of Kent as a result, he said. Gerad Baron, a spokesman for Port de Calais, didn’t immediately answer telephone calls today. Passenger shuttle services through the tunnel between Folkestone and Calais are currently running a “limited service” with “significant delays” and will be affected for the rest of the day, Keefe said. ‘Unprecedented’ “It’s absolutely unprecedented,” he said. “The knock- on effect on passenger shuttle services and freight shuttle services is huge.” A Kent Police statement said “Operation Stack” has been implemented on the M20, where 2,300 trucks have been parked on the motorway More than 2,000 people were trapped for several hours in the tunnel in trains without heating and lighting, in some cases, the British Broadcasting Corp. reported today. Passengers from two services were moved to different trains, while two others trains were pushed out, the BBC said. All passengers have now been removed from the tunnel, Mouhaddib said, adding that the trains broke down because of the temperature difference between the cold air and warm tunnel. Eurostar Chief Executive Officer Richard Brown apologized for the inconvenience caused to passengers. The company’s staff “did everything they could” for those involved, Brown told Sky News in an interview. As much as 6 inches (15 centimeters) of snow fell in southeast England yesterday and temperatures dropped to as low as minus-2 Celsius (24 Fahrenheit) overnight, according to the U.K. Metrological Office’s Web site . To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net

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China Will End Subsidies to `Famous Brands’ to Settle U.S. WTO Complaint

December 19, 2009

By Mark Drajem Dec. 19 (Bloomberg) — China resolved a trade dispute with the U.S. by agreeing to end dozens of subsidies that promote its exports, the Obama administration said. The agreement settles a year-old U.S. complaint at the World Trade Organization accusing China of violating global trade rules by providing cash grants, loans and research funding to makers of so-called famous brands products including apparel, agriculture goods and electronics. “We have signed an agreement with China confirming full elimination of the numerous subsidies we identified as prohibited under WTO rules,” U.S. Trade Representative Ron Kirk said yesterday in an e-mailed statement. The WTO case was filed by the Bush administration, which said it uncovered 70 different subsidies that are prohibited by global trade rules because they are aimed at boosting exports. That total rose to 90 counting provincial subsidies, the U.S. trade office said yesterday. The Obama administration also has challenged China’s trade policies, imposing tariffs of 35 percent on tire imports from China in September and filing a WTO complaint against China’s use of export curbs on raw materials used in steel production and manufacturing. U.S. trade officials have said the amount of subsidies for famous brands is difficult to calculate because China’s system isn’t transparent. Aid to textile and apparel firms alone totaled hundreds of millions of dollars, according to the National Council of Textile Organizations. The U.S. was joined by Mexico and Guatemala in its WTO complaint, which said the subsidies were improperly used to promote exports. Wang Baodong , a spokesman for the Chinese Embassy in Washington, said that China “has been standing for settling disputes with the U.S. on the basis of mutual respect and mutual accommodation of each other’s concerns, and by following international trade rules.” To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

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TCF Financial Warrant Sale Nets $9.45 Million for Treasury’s Bailout Fund

December 16, 2009

By Josh Fineman and Peter Eichenbaum Dec. 16 (Bloomberg) — The U.S. Treasury Department auctioned warrants for TCF Financial Corp. at $3 each, netting $9.45 million for the U.S. bailout fund. The sale represents the last of the Treasury’s stake in the Wayzata, Minnesota-based banking company and will be officially completed on Dec. 21, according to a statement today from the agency in Washington. The Treasury obtained 3.2 million warrants when TCF accepted $361.2 million from the Troubled Asset Relief Program, which has since been repaid. Linus Wilson , an assistant finance professor at the University of Louisiana at Lafayette, said in an e-mail that he expected the warrants to sell for $1.82 to $4.89. The Treasury is under pressure to maximize profit on the warrants, which were demanded from TARP recipients to reward the public for bailing out the financial system. Regulators and Congress are debating whether TARP will result in a gain or loss, and President Barack Obama said Dec. 14 he’s “determined to recover every last dime for the American taxpayer.” Andrew Williams , a spokesman for the Treasury, declined to comment in an interview before the official announcement. Deutsche Bank Securities Inc. managed the sale. To contact the reporter on this story: Joshua Fineman in New York at jfineman@bloomberg.net To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

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Citigroup Says Abu Dhabi Wants Out of Accord to Buy $7.5 Billion of Stock

December 16, 2009

By Dakin Campbell Dec. 16 (Bloomberg) — Citigroup Inc. said the Abu Dhabi Investment Authority is seeking to end an agreement to buy the bank’s stock for more than eight times its current price, or to receive more than $4 billion in damages if the deal is upheld. ADIA, as one of the world’s top two sovereign wealth funds is known, filed a claim alleging “fraudulent misrepresentations” tied to its agreement to buy $7.5 billion of common stock, Citigroup said yesterday in a statement. The claims have no merit, Citigroup said. ADIA would buy the shares for $31.83 to $37.24 apiece under the agreement. The New York-based bank announced this week that it would sell common shares to help repay $20 billion in bailout funds to the U.S. government. “It is going to be tough” for ADIA to evade losses tied to the agreement, said Eric Barden , chief investment officer of Barden Capital Management in Austin, Texas. “They are pushing the limit in terms of how much they think Citigroup is willing to subsidize a mistaken investment,” he said in a telephone interview. Citigroup shares declined 89 percent since the end of November 2007. They fell 14 cents to $3.56 yesterday in New York Stock Exchange composite trading. Citigroup spokesman Stephen Cohen declined to comment, as did a spokesman for ADIA. “Citi believes the allegations are entirely without merit and intends to defend against them vigorously,” according to the statement. Equity Agreement ADIA purchased Citigroup equity units in November 2007, the bank said. The units require Citigroup to remarket junior- ranking debt securities, then proceeds would be used to buy Citigroup common stock in four equal installments starting next March, according to a 2007 statement. The bank, the only major U.S. lender still dependent on what the government calls “exceptional financial assistance,” said this week it will sell at least $20.5 billion of equity and debt to exit the Troubled Asset Relief Program. The U.S. Treasury Department also plans to sell as much as $5 billion of common stock it holds in the company, and will unload the rest of its stake during the next six to 12 months. The company also plans to substitute “substantial common stock” for cash compensation, Citigroup said in a statement on Dec. 14. The U.S. government agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal to repay TARP, the Washington Post reported today, citing an exception to long-standing tax rules issued by the Internal Revenue Service on Dec. 11. The IRS exception will allow Citigroup to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors, the Washington Post report said. ‘Unhappy’ Jacob Frenkel , a former U.S. Securities and Exchange Commission lawyer now in private practice, said “it is impossible to draw any conclusions” about how the ADIA claim may affect Citigroup’s plans. “Whenever an investor is unhappy with an investment the natural thought is to sue,” he said in a telephone interview. “The goal may not be the damages they claim. It could well be as simple as renegotiating the terms of the securities.” ADIA, created in 1976, managed $328 billion at the end of last year, according to estimates by economists at the Council on Foreign Relations. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

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Japan’s Ruling Party May Propose Ban on Subsidiaries Listing on Exchanges

December 14, 2009

By Finbarr Flynn and Shingo Kawamoto Dec. 15 (Bloomberg) — Toyota Motor Corp. and Hitachi Ltd. would be among Japanese companies forced to sell stakes or buy full control of listed subsidiaries under legislation proposed by a Democratic Party of Japan lawmaker. Tsutomu Okubo , a member of the Diet’s upper house financial committee and former managing director at Morgan Stanley, said new legislation is needed to protect minority shareholders and rejuvenate the Tokyo Stock Exchange. “Managers of companies need to choose where to concentrate their resources, but they have avoided it because of Japan’s lenient capital market policies,” Okubo, 48, said in an interview Dec. 10. “To stimulate Japan’s stock markets, we can’t allow policies that will allow minority shareholders to be pushed around.” Okubo’s plan could affect about 400 subsidiaries listed on exchanges in Japan, according to data compiled by Kengo Nishiyama , a strategist at Nomura Securities Co. Hitachi, which had a 787 billion yen loss ($8.88 billion) last fiscal year across more than 900 businesses, plans to buy out five of 16 listed units to make the company more efficient. Toyota had four units trading on Japanese exchanges, including minicar maker Daihatsu Motor Co. and truckmaker Hino Motors Ltd. Toyota had a five-year average return on equity of 10.6 percent to March 31, according to Bloomberg data, compared with 1.7 percent at Hino . Investors in Hitachi got an average return of minus 9.8 percent during the same period, while the average at its 16 listed units was 2.6 percent, data compiled by Bloomberg show. Takanori Yokoi , a spokesman for Toyota, and Masanao Sato , a spokesman for Hitachi, declined to comment. Okubo said his plan could take at least six years to take effect. Operating Margins “On average, if you compare listed parents and listed unit companies, the operating profitability and share prices of the units on a price-earnings basis are lower,” said Nishiyama. “The trend is towards prohibiting or restricting the listing of unit companies of listed parent firms.” The median operating margin at 417 listed subsidiaries was 4.5 percent in the fiscal year ended March 31, 2007, compared with a median of 7.5 percent at 400 major companies tracked by Nomura, according to Nishiyama. The price-to-earnings ratio at units for the same period was 16.4 times compared with 21.9 for the other 400 companies. Okubo, a member of Prime Minister’s Yukio Hatoyama’s ruling party, which swept to power in August promising to revive a stagnant economy, said legislation should ensure that units are not run to benefit parents at expense of other investors. He led Morgan Stanley’s interest rate derivatives business in Japan among other posts before entering politics. Minority Protection “We’ll seek to prohibit the listing of units, where the parent is publicly traded,” Okubo said. “It would be a big problem for large firms if we did this immediately, so it would be phased in.” Given the adjustments required of companies and the legislative process, it would probably take at least three years for a law to be passed, he said. Companies would probably be given three to five years to buy out the minority stakes in existing listed after legislation coming into effect, he added. Japan’s Financial Services Agency said in a June report on corporate governance there is a “fear” that minority shareholder interests aren’t being protected. NEC Corp.’s control of listed unit NEC Electronics Corp. was challenged last year by New York-based hedge fund Perry Capital LLC, which sought more independent board members and changes including the diversion of funds to its profitable microcontroller business. NEC in September agreed to merge NEC Electronics with Renesas Technology Corp., the chipmaker established by Hitachi and Mitsubishi Electric Corp. Investor Talks NEC had an average return on equity in the five years to March 31 of minus 4.68 percent, compared with minus 18.25 percent at NEC Electronics, according to Bloomberg data. Okubo and a team of lawmakers examining corporate laws have been meeting since March 2007 with parties interested in new rules, including investors, the Tokyo Stock Exchange and Keidanren, Japan’s biggest business lobby, according to a July report by the project team. He said talks with the Justice Ministry will begin this month. Japan’s six main stock exchanges, including the TSE and the Osaka Stock Exchange, currently allow the listing of units. The exchanges said in a joint statement in October 2007 that they would be more cautious in judging applications by units to list. There were 2,322 listed companies on the Tokyo Stock Exchange at the end of November, with a total market value of 283.3 trillion yen, according to data from the exchange. To contact the reporter on this story: Finbarr Flynn in Tokyo at Fflynn3@bloomberg.net Shingo Kawamoto in Tokyo at skawamoto@bloomberg.net .

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Boeing’s Rebound at Stake as Delayed Dreamliner Faces First Flight Tests

December 14, 2009

By Peter Robison Dec. 14 (Bloomberg) — Boeing Co. ’s delayed 787 Dreamliner, scheduled to take flight for the first time tomorrow, may encounter more turbulence during at least nine months of testing if history is a guide. Originally meant to fly in August 2007 and reach customers in May 2008, Boeing delayed the plane five times because of unexpected hurdles with new composite plastics and an outsourced supply chain that stretched to 135 sites around the world. The novelty of the plastics adds another layer of complexity to Boeing’s flight-test program, which in the past has turned up its own set of surprises, according to former Boeing test pilots and aerospace industry consultants. “The model is about 20 percent — there’s about 20 percent more work than what you plan for,” said Jerry Whites , a test pilot who retired this year. “You always find something. If something totally unexpected happens, the saying around here is, ‘Well, now we’ve got a flight-test program.’” The next round of scrutiny may put pressure on the shares, which have rallied by more than a third since a fifth delay was announced in June. Boeing plans to deliver the first plane in 2010’s fourth quarter to Tokyo-based All Nippon Airways Co. “If they have any glitches, they will hurt the share price,” said Wolfgang Demisch , a partner at Demisch Associates LLC, an aerospace financial consultant in New York. “Success is essentially priced in at this point, and any sort of further hint at trouble would be unfortunate.” It’s normal to find problems at this stage, said Jim Proulx , a spokesman for Chicago-based Boeing. “Flight test is just that: testing,” Proulx said. “We expect that we will find and identify issues, and we build time into our schedule to deal with issues as we find them.” Testing Programs As a former test pilot, Whites knows the value of identifying an aircraft’s limits and capabilities in flight long before anyone else buckles in. He was testing the rudder pedals of an E-6A jet in 1989, seven months after the same routine caused a broken tail and a near-catastrophe, when the plane shook and he heard a voice in his headset. “Whoa, whoa, whoa,” called the pilot assigned to fly behind him, watching as a third of the test plane’s tail snapped off, Whites recalled. He wrestled the plane down again, and engineers later redesigned the rudder power control unit. Successful 787 flights would help validate both a new model and a new way of building aircraft. The 787 is the first airliner made mostly from composite plastics, rather than aluminum, to reduce fuel consumption. It’s Boeing’s fastest- selling model, with 840 orders valued at about $140 billion at list prices. Getting the plane in the air may benefit both Boeing shares and the broader aerospace industry, Rob Stallard , a New York- based analyst at Macquarie Capital Inc., wrote in a Dec. 11 note to clients. Even so, there’s a risk that initially some investors will “buy on the rumour, sell on the news,” he said. Boeing Performance Boeing, the No. 2 commercial planemaker after Airbus SAS of Toulouse, France, rose 59 cents to $55.60 on Dec. 11 in New York Stock Exchange trading. While the stock remains about 45 percent below its price before the first delay in October 2007, Boeing has rallied since June on speculation that the plane’s problems are behind it. “Some of this expectation regarding first flight is probably priced into the stock, but we think that there is probably some way to go,” said Stallard, who raised his Boeing target price to $60 from $53. The 787 completed high-speed taxi tests over the weekend and Boeing says the plane will take off tomorrow at 10 a.m. Pacific time from Paine Field next to the Boeing factory in Everett, Washington, weather permitting. The commander is to be Mike Carriker , a former U.S. Navy flier who also taught at the U.K.’s Empire Test Pilots’ School in Boscombe Down, England. Battery of Tests If that flight goes well, Boeing expects to run six airplanes through a battery of tests under various conditions, from freezing temperatures to high winds. Advances in computer modeling software make it more likely that major issues with the 787 already have been discovered, said Hans Weber , chief executive of Tecop International Inc., a San Diego-based consultant. Still, so many new materials are involved that bugs probably will crop up, he said. “Don’t let us forget — whenever you introduce new technology, it never goes smoothly,” Weber said. Boeing found issues with both the 737 and 747 in flight tests, said Brien Wygle , a former Boeing test pilot. He was at the controls for the 737’s first flight in 1967 and co-pilot for the 747’s in 1969. Landing Gear ‘Shimmied’ The landing gear on the 737 “shimmied very badly,” Wygle said. “And our reversers were ineffective; we had to redesign the reversers. They were just things that had to be fixed if you wanted to put the airplane on the market.” An hour after the 747 took off from Paine Field, there was a bang when the pilots moved the wing flaps, Wygle recalled. They cut the flight short. It was a minor engineering fix to redesign the flaps, he said. Later, more pressing issues emerged. The plane was overweight and the engines weren’t reliable, he said. “It was a tough program, but the facts were that we delivered the first airplane on schedule,” said Wygle, 85, adding that the 787’s delays surprised him. “Decade after decade, we delivered on schedule — not always on budget .” When Whites had his mayday moment in the E-6A, he was in “the absolute last test plane to be flown,” he said. The Navy started taking delivery that same year. “What we do in flight test is verification of computer modeling,” said Whites, 63. “And they’re usually pretty accurate. But if they were 100 percent accurate, you’d build the airplane, put a ribbon on it, shove it out the door and say, ‘Mr. United, enjoy your airplane.’” To contact the reporter on this story: Peter Robison in Seattle at robison@bloomberg.net

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GM Said to Push a Full Sale of Saab Auto, With Spyker Becoming Frontrunner

December 13, 2009

By Jeff Green, Ola Kinnander and Adam Ewing Dec. 13 (Bloomberg) — General Motors Co. has adjusted its plan for Saab to focus on selling the entire unit, with Spyker Cars NV emerging as a frontrunner, according to people familiar with the plan. Spyker, the Dutch maker of $235,000 sports cars, is negotiating details of an agreement with GM over the weekend in Zurich, said two people, who asked not to be identified because the talks are confidential. GM has separately reached a preliminary deal to sell some technologies for Saab’s 9-3 and 9-5 models to Beijing Automotive Industry Holding Co. and an agreement may be announced soon, a person said. The Detroit automaker is trying to sell or wind down the Swedish unit after Koenigsegg Group AB backed out of a purchase agreement last month. A sale of Saab will also depend on Sweden’s guarantee and European Union’s approval for a 400 million-euro ($585 million) loan from the European Investment Bank, the people said. “A sale to Spyker would be a step in the right direction,” Mike Tyndall , an automotive analyst at Nomura Securities in London, said in a telephone interview today. “I’m not sure if it will be viable in the long term given Saab’s small scale and weakened brand image.” The sale of Saab as well as the Saturn, Hummer and Pontiac brands was part of GM’s plan to return to profit after a $50 billion U.S. government-backed bankruptcy from which it emerged July 10. GM has said it will review bids for Saab and decide by the end of this month whether to sell or shut the unit. Spyker’s Bid Gunilla Gustavs , a spokeswoman for Saab, and Mike Stainton, a spokesman for Spyker Cars, declined to comment. GM Europe’s Frank Klaas couldn’t immediately be reached. Beijing Auto plans to announce “new progress” on Saab “as soon as possible,” Zheng Gang , a spokesman for the Chinese company, said by telephone. Spyker is bidding in a partnership with Vladimir Antonov’s RMC Convers Group Holding Ltd, Spyker Chief Executive Officer Victor Muller said in a Dec. 2 interview. While Spyker hasn’t made a profit since its initial public offering in 2004, the Zeewolde, Netherlands-based company is better positioned than rivals because it most resembles Koenigsegg, the Swedish maker of $1.2 million sports cars, said one of the people. Trollhaettan Factory Spyker divested its unprofitable Formula One racing team in 2007 and sold 12 vehicles in the third quarter. Its C8 Aileron, which accelerates to 60 miles per hour in 4.5 seconds, retails for at least $235,000 excluding taxes in the U.S., the company’s main market. Saab is retooling its plant in Trollhaettan to begin production of a 9-5 sedan, the company’s first new model in seven years. The carmaker reported a 59 percent slump in European sales and a 62 percent drop in the U.S. in the first 10 months of 2009. Saab is likely to win European Commission approval for the EIB loan, Johnny Kjellstroem, the Swedish official negotiating the case with the European Union’s regulatory arm, said last week. The loan was a key element of Koenigsegg’s plan. While a deal with Koenigsegg has collapsed, the financing is still seen as crucial to any transaction aimed at saving the unit. To contact the reporters on this story: Jeff Green in Southfield, Michigan, at Jgreen16@bloomberg.net ; Ola Kinnander in Stockholm at okinnander@bloomberg.net ; Adam Ewing in Stockholm at aewing5@bloomberg.net

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Senate Democrats Said to Reach Agreement to Drop Health `Public Option’

December 8, 2009

By Laura Litvan Dec. 8 (Bloomberg) — Senate Democrats reached an agreement to drop plans to establish a government-run health insurance program, a person familiar with the negotiations said. They opted instead to set up a program that would let private insurers sell coverage under the oversight of the U.S. Office of Personnel Management, the person said. The agreement was negotiated by 10 Senate Democrats seeking an alternative to the government-run program. Jim Manley, a spokesman for Senate Majority Leader Harry Reid, said that the leader sent “several options” to the Congressional Budget Office, including the proposal by the group of senators to allow the federal agency to administer national insurance plans. He said that some might see that as another form of the public option. To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

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Simon Property to Purchase Prime Outlets for $2.33 Billion, Including Debt

December 8, 2009

By John Gittelsohn and Daniel Taub Dec. 8 (Bloomberg) — Simon Property Group Inc. , the largest U.S. shopping mall owner, made its biggest purchase in five years with an agreement to buy Prime Outlets Acquisition Co. for $2.33 billion including debt. The deal gives Indianapolis-based Simon Property an additional 22 retail outlet centers, increasing its total to more than 60. It will pay $700 million for closely held Prime Outlets, 80 percent in cash and 20 percent in common operating partnership units, Simon Property said in a statement. Chief Executive Officer David Simon amassed about $3.7 billion in cash in the past year to fund acquisitions and last month hired Lazard Ltd. to consider purchasing the assets of mall owner General Growth Properties Inc. In an interview in March, Simon said he wanted to “hoard” cash to take advantage of opportunities in the market. “It’s a good deal,” said Alexander Goldfarb , an analyst at Sandler O’Neill & Partners LP, who has a “buy” rating on Simon Property shares. “Simon’s done a good job with Chelsea, and this makes sense. It just fits well within the outlet portfolio.” Simon Property acquired Chelsea Property Group Inc. in 2004 for $3.5 billion in cash and stock, giving it retail outlets including Woodbury Common, near New York City. As of Sept. 30, Simon Property owned 325 properties in the U.S., including 41 outlet centers. Prime Outlets, based in Baltimore, owns outlets in markets including Washington D.C., Baltimore, San Antonio and Orlando. The centers were 92 percent occupied as of June 30 and generated sales of about $370 a square foot. Outlet centers sell designer merchandise at discount prices. Good Opportunity “Prime Outlets is an excellent opportunity for Simon as it represents a strong strategic fit for our existing premium outlet portfolio and enhances our leadership position in the outlet business,” David Simon said in a statement. “Following the completion of this transaction our outlet portfolio will have 63 centers comprising approximately 25 million square feet.” Simon Property’s outlet centers had annual sales of $492 per square foot as of Sept. 30, more than the $438 per foot at its regional malls. The company’s outlet centers also had higher occupancies, at 97.5 percent, compared with 91.4 percent at regional malls. The company has completed $25 billion in mergers and acquisition transactions since the company went public in 1993, Simon said in a Sept. 15 interview with Bloomberg Television. Quality Real Estate “We’re focused on quality retail real estate, so it’s more than just malls,” he said. “It could be outlets. It could be international opportunities.” The CEO is expanding amid signs that the economy is starting to mend. More than half of North American consumers said they plan to increase spending once economic prospects improve, after cutting back over the past year, according to an International Council of Shopping Centers survey issued yesterday. Shares of Simon Property rose 85 cents, or 1.2 percent, to $74.75 at 10:52 a.m. in New York Stock Exchange composite trading. The stock is up 36 percent in the 12 months through yesterday. Simon Property said it intends to fund the cash portion of the deal with existing capital. Simon Property was advised by UBS AG and JPMorgan Chase & Co. and was represented by Fried, Frank, Harris, Shriver & Jacobson LLP. The company may complete the transaction in the first or second quarter of next year. Advisers Prime Outlets was advised by Citigroup Global Markets and advised Paul, Weiss, Rifkind, Wharton & Garrison LLP. The value of Simon Property’s operating units will be based on the 10-day trading average of Simon Property common stock before the closing of the deal, subject to a 10 percent collar, the company said. Les Morris , a spokesman for Simon Property, declined to comment today. Simon Property may have purchased Prime Outlets after being thwarted in an effort to purchase General Growth assets. General Growth President Thomas Nolan said in a Dec. 2 interview that his company would likely emerge from bankruptcy without selling its most prized shopping malls. Designer Names Prime Outlet centers feature designer merchandise from Gucci, Giorgio Armani, Burberry, Kate Spade, Michael Kors, St. John and Juicy Couture, according to its Web site. The centers also include stores from Saks Fifth Avenue Off 5th and Neiman Marcus Last Call. Its largest centers are in Orlando, with more than 773,000 square feet, and Birch Run, Michigan, with 681,000 square feet. The company is developing 1 million square feet of new centers and plans to expand to San Francisco and Dallas/Fort Worth, according to its Web site. To contact the reporters on this story: John Gittelsohn in New York at johngitt@bloomberg.net ; Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Morgan Stanley’s Gorman Said to Have Kelleher, Taubman Run Securities Unit

December 8, 2009

By Christine Harper Dec. 8 (Bloomberg) — Morgan Stanley’s James Gorman , set to be promoted to chief executive officer at year’s end, may unveil management changes including a new role for Chief Financial Officer Colm Kelleher , said a person familiar with the matter. Kelleher, 52, would be co-head of the institutional- securities business with Paul Taubman , the 48-year-old chief of investment banking, according to the person, who declined to be identified because the plans aren’t public. Gorman, the co-president who is taking over the CEO role from John Mack , would be installing his own team of people at the New York-based firm. The Financial Times reported the possible changes earlier today. Morgan Stanley , the second-biggest U.S. securities firm behind Goldman Sachs Group Inc. before both companies converted to banks, combined its retail-brokerage division with Citigroup Inc.’s Smith Barney earlier this year. The deal, hatched by Gorman, sharpens a focus on providing individuals with investment advice. Kelleher, who has worked at Morgan Stanley since 1989, held management positions in fixed income and global capital markets before becoming CFO in 2007. Taubman, who started his career at the firm in 1982, helped make Morgan Stanley the No. 1 adviser on global mergers and acquisitions this year, according to data compiled by Bloomberg. Mark Lake , a spokesman for Morgan Stanley, declined to comment. Kelleher and Taubman didn’t respond to requests for comment. Institutional securities, which includes mergers and acquisitions, underwriting and sales and trading, has lagged behind Goldman Sachs this year. The company is hiring 400 employees for sales and trading. Gorman, 51, is likely to remain president after becoming CEO, according to the person familiar with the matter. Walid Chammah , the 55-year-old co-president with Gorman, is giving up that role and keeping his other position of chairman of Morgan Stanley International in London. To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net .

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Pakistan Bomb Explosions in Lahore, Peshawar Kill at Least 20, Injure 100

December 7, 2009

By Khalid Qayum Dec. 7 (Bloomberg) — Twin blasts in a market in the northeastern Pakistan city of Lahore killed at least 10 people and injured more than 50 following an earlier blast in the northwestern city of Peshawar which killed another 10. The Lahore market is one of the city’s busiest and the injured included dozens of women and children, Lahore Police Superintendent Shafiq Gujar told reporters. The Peshawar explosion wounded 44 people, according to Mujahid Khan, a spokesman for the Edhi Foundation, the biggest ambulance service in the country. To contact the reporter on this story: Khalid Qayum in Islamabad at kqayum@bloomberg.net .

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BHP, Rio Tinto Said to Be Nearing Agreement on Australian Iron Ore Venture

December 4, 2009

By Brett Foley and Matthew Newman Dec. 5 (Bloomberg) — BHP Billiton Ltd. and Rio Tinto Group are close to agreeing on the terms of their proposed iron ore joint venture and may announce the deal as early as today, said two people familiar with the situation. The details of the venture are being completed and the companies expect to make an announcement on or close to the Dec. 5 deadline they set six months ago, said the people, who declined to be identified because the talks are private. Australia’s BHP and London-based Rio, the second- and third-biggest iron ore producers, said June 5 they would combine their Western Australian mines, railways and ports in a 50-50 venture that would save more than $10 billion. The companies said they would reach a binding accord in six months. Rio is “focused on finalizing the details of the agreement and we are still on track for completion in the near future,” Nick Cobban , Rio’s spokesman in London, said yesterday. Ruban Yogarajah, a spokesman for BHP, declined to comment. A deal would come more than a year after BHP scrapped a hostile bid for Rio because of the U.K. company’s debt, falling commodity prices, and regulatory hurdles. BHP has made only one acquisition since walking away from Rio, the purchase of Australian mining company United Minerals Corp. for A$204 million ($188 million). BHP had $5.6 billion of net debt as of June 30, or a debt-to-equity ratio of 12 percent, the company said Aug. 12. It generated net operating cash flow of $18.9 billion in the year to June 30. Excess Cash With funds to spare, BHP needs to generate a return from the cash. The venture “is more important for BHP because their balance sheet is lazy and if they don’t consummate this deal, then there would be more pressure from their shareholders to do another transaction or find a use for the excess cash,” said Paul Cliff , an analyst in London at Nomura Securities Co. Ltd. who has a “reduce” recommendation on BHP and “buy” on Rio. BHP offered to pay Rio $5.8 billion to balance the two sides’ contribution to the venture, as BHP was judged on June 5 to own 45 percent of the Australian assets. The payment is too low and Rio may seek more favorable terms, Barclays Capital analyst Christopher LaFemina wrote in a report. “We felt that BHP was getting the better part of the deal because we never felt the asset split was 45-55,” said Rebecca O’Dwyer , an analyst at Investec Securities Ltd. in London The possibility of “the deal failing is a bigger concern for BHP because it is a higher-cost producer” of iron ore, she said. Share Buyback BHP may use cash to buy back its shares rather than seek an acquisition, Credit Suisse Group AG said last month in a report. BHP’s Chief Executive Officer Marius Kloppers said last week the company was committed to the planned venture and expected antitrust submissions to be made by the year-end. The European Commission, the antitrust authority of the European Union, said last year it had “serious doubts” about BHP’s offer for Rio because the enlarged company would control more than a third of seaborne iron-ore exports. The venture should be blocked by the commission, the World Steel Association, representing 19 of the world’s biggest producers, said Oct. 12. Steel companies argue the venture will curb competition and development of additional mining capacity. Brazil’s Vale SA is the world’s largest iron ore producer. To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net ; Matthew Newman at mnewman6@bloomberg.net

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EMI Said to Be Nearing Revenue-Sharing Agreement With Vevo Music Web Site

December 4, 2009

By Adam Satariano and Kristen Schweizer Dec. 4 (Bloomberg) — EMI Group Ltd. , the record label of Coldplay and Norah Jones , is close to a revenue-sharing agreement with Vevo, the Web site backed by Universal Music Group and Sony Corp. , a person with knowledge of the talks said. EMI, owned by Terra Firma Capital Partners Ltd., won’t hold an equity stake in the venture, unlike Vivendi SA’s Universal Music, Sony Music Entertainment and Abu Dhabi Media Co., said the person, who declined to be identified because the talks are private. EMI, based in London, will supply Vevo with music videos and will share the revenue from advertisements shown with the clips, under the licensing accord that may be announced as soon as next week, the person said. Terms weren’t disclosed. Vevo, to be introduced on Dec. 8, aims to make up for declining album sales for music companies by generating revenue from advertising. Vevo, being built by Google Inc. ’s YouTube, emulates Hulu, the free advertiser-backed Web site for television shows. Vevo also will feature material from CBS Corp. ’s radio stations. Maria Ho-Burge , a spokeswoman for Universal Music, the largest shareholder in Vevo, declined to comment. Jeanne Meyer , a spokeswoman for EMI, said talks with Vevo are “ongoing.” With EMI joining Vevo, Warner Music Group Corp. will be the only one of four major record labels that isn’t part of the venture. Negotiations are continuing, people familiar with the matter said. Will Tanous , a spokesman for Warner Music, declined to comment. Warner Music, based in New York, reached a revenue-sharing agreement in September to sell advertisements alongside its videos on YouTube. To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net Kristen Schweizer in London at kschweizer1@bloomberg.net

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Pakistan Mosque Bombed by Militants During Prayers, Killing at Least 28

December 4, 2009

By Farhan Sharif and James Rupert Dec. 4 (Bloomberg) — A suspected suicide attacker exploded a bomb during weekly prayers at a mosque in the Pakistani army’s headquarters city of Rawalpindi, Pakistan TV reports and rescue officials said. The explosion was followed by volleys of gunfire, said Mohammed Akram, a spokesman for the Edhi Ambulance Service. He said an unknown number of injuries were feared. The bomb struck a mosque in Rawalpindi’s Qasim Market, a district several minutes’ drive from the army’s general headquarters complex. Numerous people were injured or killed at the mosque, according to Dawn News television. The channel showed Pakistani police and soldiers directing traffic away from the neighborhood, and helicopters hovering overhead. To contact the reporters on this story: Farhan Sharif in Karachi at Fsharif2@bloomberg.net ; James Rupert in New Delhi at jrupert3@bloomberg.net .

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Comcast, GE Said to Value Comcast’s Cable-TV Channels at Up to $7 Billion

December 1, 2009

By Kelly Riddell and Rachel Layne Dec. 1 (Bloomberg) — Comcast Corp. and General Electric Co. have valued Comcast’s channels at as much as $7 billion, potentially lowering the amount of cash the cable company would have to pay over time to form a venture with NBC Universal, according to a person familiar with the matter. Comcast, which is in talks to merge its cable channels with GE’s NBC entertainment assets, would probably also contribute about $6 billion in cash to the new company, said the person, who declined to be identified because the talks are private. GE owns 80 percent of NBC Universal and is in talks to buy Vivendi SA’s 20 percent stake. The Comcast assets, which include the Golf Channel and E! Entertainment, are valued by the companies at $6.5 billion to $7 billion, according to two people. Sanford C. Bernstein analyst Craig Moffett had estimated them to be worth about $6 billion. The higher valuation may mean Comcast can pay less up front to GE than originally discussed or receive a greater portion of the joint venture’s cash flow when the deal closes, the person said. Comcast would initially own 51 percent of the new company, gaining control of NBC Universal’s broadcast network, people familiar with the matter have said. The company also would get NBC Universal’s theme parks, movie studio and cable-television channels. Vivendi? Any deal between Comcast and GE is dependent on Vivendi selling its stake. GE and Vivendi agreed on a $5.8 billion valuation for the 20 percent stake in NBC Universal, two people with knowledge of the discussions said yesterday. The Paris- based company can notify GE during an annual window between Nov. 15 and Dec. 10. Comcast and GE value the assets of New York-based NBC Universal at about $30 billion, people familiar with the matter said last month. GE Chief Executive Officer Jeffrey Immelt didn’t provide details on the transaction when asked about it at a conference in Washington today. None of the companies have confirmed the discussions publicly. “I can’t talk too much about it,” said Immelt, 53. “I just think you always have to be thinking about what’s next in every industry you’re in, stay strategically agile, and I’ll leave it at that.” John Demming , a spokesman for Philadelphia-based Comcast, declined to comment, as did Vivendi spokesman Antoine Lefort . Comcast rose 26 cents to $14.92 at 1:54 p.m. New York time in Nasdaq Stock Market trading. GE, based in Fairfield, Connecticut, advanced 7 cents to $16.09. Vivendi climbed 76 cents to 19.95 euros in Paris trading . To contact the reporters on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net ; Rachel Layne in Boston at rlayne@bloomberg.net

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Delta Lloyd Aims to Sell First Dutch Mortgage-Backed Securities Since 2007

December 1, 2009

By Esteban Duarte Dec. 1 (Bloomberg) — Delta Lloyd NV, the financial services company owned by insurer Aviva Plc, is planning the first public sale of bonds backed by Dutch home loans since the credit crisis started in 2007. Delta Lloyd is issuing about 900 million euros ($1.4 billion) of mortgage-backed notes through its Arena bond program, which packages loans into securities, the Amsterdam- based company said in a statement. The notes pool home loans originated by Amstelhuys, a subsidiary of Delta Lloyd. Investors are being offered a total 832.5 million euros of top-rated notes in two portions, said David Brilleslijper , a spokesman for Delta Lloyd. The remainder will be retained by the issuer. The last public sale of Dutch mortgage-backed bonds was by Lehman Brothers Holdings Inc., which issued 700 million euros of the debt in 2007 through its Eurosail program, JPMorgan Chase & Co. data show. “This is another important step in getting the European securitization market working,” said Alexander Fagenzer , who helps manage 22 billion euros of fixed-income assets at Union Investment in Frankfurt and was invited to buy the notes. “The Dutch market is one of the largest so it is a good template for issuers from the rest of Europe.” Prices Rally Prices in the 2.2 trillion-euro market for bonds backed by consumer debt, corporate loans and real estate have rallied amid growing investor confidence that the worst of the global recession may be over. Asset values had plunged to record lows after securities linked to U.S. subprime mortgages tumbled and credit markets began to freeze in August 2007. Delta Lloyd is issuing the bonds as the yield on top-rated five-year notes backed by prime Dutch mortgages has shrunk to 145 basis points more than benchmark rates, the tightest spread since September 2008, JPMorgan Chase data show. The gap was 425 in January. A basis point is 0.01 percentage point. Delta Lloyd’s sale includes a 189 million-euro portion of class A1 notes with an average life of two years that may be priced to yield about 120 basis points over the euro interbank offered rate , said Brilleslijper, in Amsterdam. A 643.5 million- euro piece of A2 notes with a 4.9-year duration may have a spread of about 150. The spread offered on the A1 notes is “very attractive,” said James Zanesi , a Munich-based securitization analyst at UniCredit SpA. Natixis, Rabobank Netherland NV and Royal Bank of Scotland Group Plc are managing the deal, according to the statement. To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

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Senate Bill Contains A Gift For Big Banks

November 30, 2009

Despite bipartisan consensus on Capitol Hill that the size and interconnectedness of major financial institutions poses a grave risk to the system as a whole, Senate banking reform legislation includes a provision that will help them get even bigger. The provision — long desired by the big banks — would allow them to open new branches in states regardless of local laws. This is known as de novo branching. The provision was first put forward by the Treasury Department in the financial regulation reform bill that it sent to Congress. House Financial Services Committee Chairman Barney Frank (D-Mass.) initially included the provision in his bill, but removed it after a Democratic committee member, Rep. Alan Grayson of Florida, asked that it be taken out. Florida doesn’t allow de novo branching and its local banks are vocal opponents of changing the law. They went to Grayson, and Grayson took their concerns to Frank, who said he had no problem removing it. Frank told HuffPost that Treasury didn’t object to his removal of their provision. “I don’t get much from pushback from Treasury,” Frank said. “They need me. I don’t need them.” The lobby representing small banks — the Independent Community Bankers Association — was glad to see the gift to big banks taken back, Steve Verdier, an ICBA senior vice president, told HuffPost. But weeks later, when Senate Banking Chairman Chris Dodd unveiled his new financial reform package , the de novo language popped up again — a verbatim copy of the Treasury language. That had observers scratching their heads at the resilience of the language. The conformity to Treasury’s wording was no coincidence. “That was just something we pulled straight from the administration’s proposal,” Kirstin Brost, a spokesman for Dodd’s banking committee, told HuffPost. Now that community banks are expressing concern, the provision will get a fresh look, she said, emphasizing that Dodd’s bill is a discussion draft only. Treasury, however, still wants it. “This eliminates a difference between thrifts and banks. While banks are subject to these limits, thrifts are not,” said Treasury spokeswoman Meg Reilly. “Although we are proposing to eliminate the thrift charter, this is an important step towards increased competition in banking and will reduce costs for consumers.” The little banks don’t see it that way. “ICBA opposes this part of the bill; we’d prefer to let the states handle this issue, as they have for years,” said Verdier.

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