industries

Paradigm Announces Promotions in Management Team

May 24, 2010

SALT LAKE CITY, UT–(Marketwire – May 24, 2010) – Paradigm Medical Industries, Inc. ( PINKSHEETS : PDMI ) President and Chief Executive Officer Stephen Davis announced today the following promotions to the Company’s management team: Julio Maximo has been named as Vice President of Operations. Mr. Maximo has over 10 years of engineering experience with Paradigm and was formerly the Director of Operations. Songyun You has been promoted to Manager of Finance. Ms. You has served the Company in the accounting department for six years and was formerly the accounting department manager. Jacob Matthews has been promoted to Manager of Marketing. Mr. Matthews has been with the Company for over two and a half years and formerly served as Sales Administrator and, more recently, as Sales and Marketing Coordinator.

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Iran Gasoline Sanctions Talks in Congress Spur Obama’s Request for Leeway

May 24, 2010

By Viola Gienger May 24 (Bloomberg) — President Barack Obama is pressing lawmakers for leeway in applying proposed U.S. gasoline sanctions against Iran so the penalties support a broader plan to prevent the Persian Gulf nation from gaining a nuclear bomb. National Security Adviser Jim Jones conducted a closed-door briefing in an attempt to sway lawmakers working out differences between House and Senate legislation that would penalize foreign companies selling gasoline to Iran. Both measures would roll back the president’s traditional prerogative on whether and how to impose the sanctions. Obama is seeking to exempt companies from countries he deems to be cooperating with U.S. efforts on Iran, according to a May 3 letter from six Republican and four Democratic senators. House and Senate negotiators aim to agree on final legislation this week. “The administration wants to make sure this legislation doesn’t compromise our efforts to work with other countries to increase international pressure on Iran,” Gary Samore , the White House coordinator for arms control and terrorism with weapons of mass destruction, told reporters on May 12. While it is the Middle East’s second-biggest oil producer, Iran relies on imported gasoline because it lacks enough refining capacity. The penalties on providing gasoline or refining equipment and services to Iran might hurt companies such as China Petroleum & Chemical Corp. China and Russia joined the U.S., U.K. and France last week to back a draft United Nations Security Council resolution that would bolster an arms embargo, enhance authority to stop and seize Iranian cargo suspected of ties to nuclear or missile programs and restrict financial transactions. Israel Lobby The American Israel Public Affairs Committee , a pro-Israel lobbying group based in Washington, applauded the UN accord, and said it should be followed by “crippling” U.S. and European sanctions. Israel says Iran’s nuclear and missile programs pose a threat to its existence. House Majority Leader Steny Hoyer said last week the UN sanctions agreement shouldn’t deter Congress from taking its own measures and that lawmakers should vote on the joint legislation before the end of the month. In Congress, Republican impatience that no president has ever applied existing U.S. penalties under the Iran Sanctions Act has spread to Obama’s own Democratic ranks in the past year. Congressional Backing The House passed the gasoline sanctions legislation on Dec. 15 by a vote of 412-12. The Senate approved its bill unanimously by voice vote on Jan. 28. Jones sought to reassure lawmakers during his May 10 briefing that the U.S. is carrying out a comprehensive economic, diplomatic, military and intelligence strategy for confronting the challenge posed by Iran, an administration official said on condition of anonymity. The proposed congressional sanctions are part of that plan, the official said. The Pentagon has estimated that Iran may be a year from having enough highly enriched uranium to produce a nuclear weapon and three to five years from assembling a bomb. Iran says it only seeks civilian use of nuclear power to generate energy. The congressional sanctions on gasoline would build on the Iran Sanctions Act’s existing penalties against companies investing more than $20 million in Iran’s energy industry during any one year. U.S. law separately prohibits American companies from investing. Refinery Development The House and Senate proposals would expand the list of violations to include selling refined gasoline to Iran, providing shipping insurance or other services for deliveries and helping build refineries in the country. The penalties against companies deemed to be violating the law would include barring financial transactions through U.S. institutions. The administration wants to retain “enough flexibility that it wouldn’t be compelled to impose sanctions if it deems such sanctions would cause a backlash” among partner nations, Kenneth Katzman , a Middle East specialist at the Congressional Research Service, said in a May 14 telephone interview. The U.S. Government Accountability Office, the investigative arm of Congress, in March found 41 businesses, including PetroChina Co., Petroleo Brasileiro SA of Brazil, Total SA of France, Russia’s OAO Gazprom and Indian Oil Corp., invest in Iran’s oil development. The office reported four companies involved in expanding Iran’s refining capacity, including China Petroleum & Chemical Corp. and Japan’s JGC Corp. India’s Reliance Industries Ltd. is among companies that said they have stopped selling fuel to Iran. Christophe de Margerie , chief executive officer of France’s Total SA, said in an interview last month that his company will stop shipping gasoline to Iran if any law imposing sanctions on such trade makes it illegal. To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net

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Billionaire Ambani Brothers Agree to Seek `Harmony,’ Deal on Gas Supplies

May 23, 2010

By Rakteem Katakey May 23 (Bloomberg) — India’s estranged billionaire Ambani brothers, who split the family empire in 2005, today agreed to compete against each other for the first time, easing a dispute that stalled a power generation project and a telecoms merger. Mukesh Ambani and Anil Ambani , the world’s richest siblings, scrapped all existing non-competition agreements between their business groups, and said they hoped “very soon” to negotiate a deal for supplies of gas from India’s largest field. India’s Supreme Court this month ordered the brothers to rework a gas-supply agreement that Anil Ambani said entitled his company buy the fuel below a government-set price. Negotiations will “eliminate any room for further disputes between the two groups,” according to the statements today. Reliance Industries Ltd. , run by Mukesh, and the Anil Dhirubhai Ambani Group Ltd., led by his younger brother, said in statements they will not compete in gas-based power generation. Reliance Industries won a lawsuit against Reliance Natural Resources Ltd. , an Anil Ambani group company, this month over the sale of natural gas from the KG-D6 field in the Bay of Bengal. In the years since the two brothers split their father’s company, their feud has halted plans for a major north Indian power plant and led to a court battle and a scuttled merger between Anil Ambani’s Reliance Communications Ltd. and South Africa’s MTN Group Ltd. ‘Hopeful and Confident’ The brothers’ companies said in statements they “are hopeful and confident that all these steps will create an overall environment of harmony, co-operation and collaboration between the two groups.” Boards of both groups have agreed to scrap the 2006 agreements that barred competition between them, the company statements said. Under the 2005 pact to split the Reliance group, Mukesh kept the petrochemicals, oil and gas units along with the flagship company, Reliance Industries. Anil got newer businesses such as power, telecommunications, financial services and entertainment. Both retained rights to the Reliance name. In October 2007, Anil’s side of the business complained to the Indian markets regulator that Reliance Industries was trying to stall the initial public offering of the younger brother’s Reliance Power Ltd. Nine months later, Anil’s mobile phone services company, Reliance Communications, called off merger talks with MTN Group after Reliance Industries threatened to block the sale if it wasn’t given the first option to buy shares in Reliance Communications. To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

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Boeing Fails to Resolve 787 Parts Delays From Suppliers as Costs Escalate

May 20, 2010

By Susanna Ray May 20 (Bloomberg) — Boeing Co. , more than two years behind schedule on producing the 787 Dreamliner, said it’s still struggling with incomplete parts from suppliers, requiring the planemaker’s employees to do 10 times more work than planned. Suppliers Spirit AeroSystems Holdings Inc. and Mitsubishi Heavy Industries Ltd. will increase the work they complete to 100 percent of what was expected within the next 10 aircraft sections delivered, Pat Shanahan , the head of Boeing’s commercial jet programs, said today. The former Vought Aircraft plant in North Charleston, South Carolina, that Boeing bought last year is still “cleaning up” disruptions caused by parts shortages, he said. Boeing is using a new manufacturing system for the Dreamliner that relies on suppliers around the world to build completed sections of the plane, flying them in to be snapped together. “Our challenge is Charleston,” Shanahan told investors in remarks broadcast online from Philadelphia. “That’s why we’re there.” Boeing, whose only larger commercial rival is Airbus SAS, has tried to improve the construction of fuselage sections at Vought since identifying it as a “problem” partner in 2008 and bought the factory to gain more control. The company decided last year to build a second 787 assembly plant in the area to prevent disruptions in the event of a strike at its Seattle manufacturing hub. Flight Testing The next fuselage section sent to Boeing’s Everett, Washington, plant — after a monthlong delivery freeze implemented in April to let suppliers catch up — will be 70 percent more complete than the last unit sent in 2009, Shanahan said. Vendors are starting to see the learning curve they’d expected, he said. Boeing fell $2.03, or 3.1 percent, to $64.18 at 2:46 p.m. in New York Stock Exchange composite trading. The shares have gained 19 percent this year. Flight-testing of the plane has gone “remarkably well” since its maiden flight in December, said Jim Albaugh , head of the company’s commercial division. “We’ve not seen anything in flight test that bothers us,” Albaugh said. “Knock on wood, it’s almost flying too well.” No major redesigns have been required, Shanahan said, and “every change we’ve had, we’ve been able to correct within a week.” The fifth of six jets planned for the test fleet will be in the air “in a few weeks,” he said. The 787 — the first airliner built from carbon-fiber composites — is scheduled to be delivered to the initial customer by the end of this year, after five delays from the original May 2008 target. Better Tests While the first four planes haven’t flown as much as Boeing had planned, crews have been able to make up time with more efficient tests and better data, said Mike Carriker, the chief test pilot. Icing tests that had been planned to last a week were done in five days because the company’s meteorology department located icing conditions, he said. Engineers are “in full swing” on designing the 787-9 and will have a firm configuration ready by the middle of this year, with production set to begin in the first quarter of 2012, Shanahan said. Boeing is retaining greater design responsibility for the derivative and is embedding engineers at suppliers’ sites to avoid some of the challenges faced by the first model, the 787- 8, he said. To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net .

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Junk Bonds’ Weakest Creditor Protection Since ’07 Doesn’t Deter New Issues

May 18, 2010

By Tim Catts May 18 (Bloomberg) — Two years after suffering $213.2 billion of losses when debt markets froze, investors in junk bonds are accepting what Moody’s Investors Service calls the weakest creditor protections since 2007. Even with housing starts hovering at their lowest levels on record, Beazer Homes USA Inc. managed to sell bonds this month on terms that allow it to add more debt. The Atlanta-based builder couldn’t even do that when it issued debentures at the height of the housing bubble in 2006 and its credit rating was seven levels higher. In a report last week Moody’s singled out CF Industries Inc. , Standard Pacific Corp. , AK Steel Corp. as borrowers offering debt on terms historically available only to higher-rated companies. “We got ourselves in trouble with that in the past and here it is again,” James Kochan , the chief fixed-income strategist at Wells Fargo Fund Management in Menomonee Falls, Wisconsin, said of the trend toward looser debt covenants. “It’s not that surprising, but it is disturbing,” said Kochan, who helps oversee $179 billion. Lenders are letting down their guard just as worsening government finances raise doubts about the sustainability of the global economic recovery. Money managers say they have little choice but to go along. They need to find a home for the record $29.4 billion that has flowed into high-yield bond mutual funds the past 16 months from retail investors seeking to join in a rally that has produced an average 69 percent return since the market bottom in March 2009. Weaker Safeguards About 60 percent of high-yield borrowers this year offered weaker investor safeguards than on debt they issued previously, according to Covenant Review LLC, a New York-based research firm that analyzes bond offerings. Those include no limits on the amount of debt companies can have and few restrictions on using assets as collateral for future borrowing, reducing what’s available to satisfy creditor claims in a bankruptcy. “This trend represents more than an episode of ‘back to the future,’” Moody’s analysts including Alex Dill , the firm’s senior covenant officer, wrote in their report. “It reflects a weakening in covenant protections even below those existing at the peak of the market, in 2006 and 2007.” Beazer sold $300 million of 9.125 percent bonds due in 2018 on May 4 that carry lighter restrictions than its 2006 issue on the amount of debt the builder can add and how it can use money raised from selling assets. The terms also allow Beazer to double its capacity to pay dividends to shareholders even after a 90 percent drop in its stock, according to Covenant Review. ‘Poor Standing’ The company’s senior unsecured bonds are rated Caa2, which Moody’s defines as “judged to be of poor standing and are subject to very high credit risk.” Beazer was rated Ba1, one step below investment grade, in June 2006, when it issued $275 million of 8.125 percent 10-year notes. Jeffrey Hoza , a vice president and treasurer of Beazer, and Chief Financial Officer Allan Merrill didn’t return calls seeking comment. Junk bonds are rated below Baa3 by Moody’s and less than BBB- by Standard & Poor’s. Overseas Shipholding Group Inc. , the largest U.S.-based oil-tanker owner, sold $300 million of bonds in March, its first offering in six years. Debtholders gave the company the leeway to sell assets, new secured debt and pay dividends to equity holders, according to Covenant Review. The bonds, due in 2018, are rated Ba3 by Moody’s and an equivalent BB- by S&P. ‘No Resistance’ “We were not going to do a deal if we were not able to get that kind of flexibility,” said Morten Arntzen , the chief executive officer of the New York-based company. “We had no resistance to it” from potential investors, he said. Proceeds from the sale were used to repay debt under a revolving credit facility, the company said in a March 29 statement. Overseas Shipholding’s covenants are “nearly useless,” according to Covenant Review. Investors bid up the debt anyway, pushing the 8.125 percent notes to as high as 102.25 cents on the dollar last month, according to Trace, the Financial Industry Regulatory Authority’s bond-price reporting system. “They’re a high-yield issuer that’s getting away with investment-grade covenants,” said Adam Cohen , founder of Covenant Review. “You shouldn’t have a high-yield bond that gives you less protection than a lot of the high-grade bonds out there.” Cash is flowing into mutual funds that specialize in high- yield debt at an accelerating pace. EPFR Global, a research firm in Cambridge, Massachusetts, estimates that before last week, investors put $8.57 billion into the funds, up from $7.33 billion in the same period of 2009. Soaring Issuance That money helped push down yields on speculative-grade bonds to 8.23 percent on April 27, the lowest since July 2007, from 21 percent in March 2009, Bank of America Merrill Lynch indexes show. Yields averaged 8.77 percent as of yesterday. Borrowers are taking advantage of the demand, issuing $109.1 billion of debt this year, compared with the record $162.7 billion in all of 2009, data compiled by Bloomberg show. Investors are also snapping up junk bonds as Federal Reserve policy makers pledge to hold interest rates near zero for an “extended period” to stoke the economy. Of the 460 companies in the S&P 500 that reported first-quarter results, 77 percent said earnings exceeded analysts’ estimates, Bloomberg data show. Gross domestic product may expand 3.2 percent this year, after contracting 2.4 percent in 2009, according to the median estimate of 72 economists surveyed by Bloomberg. Housing starts climbed to an annual rate of 626,000 in March, up 1.6 percent from February’s 616,000 pace, though still half the level from October 2007, according to Commerce Department data. Ratings Raised For all the concern about weaker creditor protections, Moody’s has raised the ratings on 156 junk-rated companies this year and lowered 111, based on data compiled by Bloomberg. The 1.41-to-1 ratio is the highest for any two-quarter period since at least 1999. S&P said last week the corporate default rate for speculative-grade-rated borrowers was 0.97 percent at the end of the first quarter. Relative yields that are high by historical measures offer some protection from loose covenants, according to Richard Inzunza , a money manager at Northern Trust Global Investments in Chicago, with $647 billion of assets. Junk-bond spreads average 6.36 percentage points, compared with the record low of 2.41 percentage points in June 2007, based on Bank of America Merrill Lynch indexes. “There are some deals that may have weaker covenants but we think we’re getting paid enough to participate in the issue,” said Inzunza, whose firm owns bonds of Overseas Shipholding. No End Martin Fridson , the chief executive officer of New York- based money manager Fridson Investment Advisors, said the loosening of covenants isn’t at a level yet that would signal the end of the bull market in junk bonds. Covenants are typically strengthened following periods in which high-yield issuers are blocked from the market, “and at the end of that cycle, there’s an ‘anything goes’ mentality,” said Fridson, 57, who was Merrill Lynch’s head high-yield strategist before leaving to form his own firm in 2002. “We haven’t reached that final stage.” Cracks in the junk bond rally are emerging on speculation that rising budget deficits in European countries such as Greece, Spain and Portugal may cause lawmakers to curb spending, slowing the global economy. Bond Losses High-yield bonds in the U.S. have lost 2 percent this month, according to Bank of America Merrill Lynch index data. This would be the first down month since February 2009, when they fell 3.47 percent. CF Industries, the Deerfield, Illinois-based fertilizer maker, sold $1.6 billion of bonds on April 20, before the upheaval. The debt doesn’t restrict liens on the company’s property, plants and equipment worth less than 1 percent of its assets or located outside the U.S., according to Moody’s. Previously, covenants typically had tougher restrictions that affected property worldwide. That could allow CF to use the property as security for future borrowings, reducing what’s available to pay investors in the notes in a default, according to Dill. Terry Huch , a CF spokesman, declined to comment. The loosened provision, typically used by investment-grade borrowers, first began appearing in debt sold this year, Dill said. It was included in $400 million of securities offered last month by West Chester, Ohio-based AK Steel, the third-largest maker of the metal by sales after Nucor Corp. of Charlotte, North Carolina, and Pittsburgh-based United States Steel Corp., according to Dill. ‘Like a Meme’ “Once you get a structure into the market, it replicates itself like a meme and it survives because the investors keep buying it,” Dill said. Rising demand for junk bonds has also allowed companies emerging from bankruptcy , including Houston-based Lyondell Chemical Co., which sold $2.75 billion of debt in dollars and euros on March 24 and Lear Corp. of Southfield, Michigan, which issued $700 million of notes on March 23, to borrow with few restrictions, Covenant Review’s Cohen said. Lyondell’s covenants offer no clear limits on the amount of additional secured debt the company can sell and permit it to shift as much as $1.25 billion of assets to units that aren’t covered by the bonds’ limitations, reducing the collateral available to creditors, according to a Covenant Review report. “In 2008, all the companies that we said would screw the bondholders did it,” said Cohen of Covenant Review. “Now, it feels like 2007 to me. We’re telling them they’re going to get screwed and they’re not paying attention.” To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

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Moynihan Becomes Obama’s Top Wall Street Ally on Financial-Rules Overhaul

May 13, 2010

By Julianna Goldman and Hans Nichols May 13 (Bloomberg) — The Obama administration has found a banker it can do business with: Bank of America Corp. ’s Brian Moynihan . While many U.S. banks’ chief executive officers publicly oppose at least some elements of President Barack Obama ’s plan for financial regulation, Moynihan, 50, is winning White House praise for his stance. He backs a consumer financial protection agency, addresses shortcomings the administration finds with his bank’s home-loan modification program, and pursues small- business initiatives in collaboration with the White House, Bloomberg Businessweek reports in its May 17 issue. “He has been willing to speak out bravely in his industry on the need for reform measures,” says Valerie Jarrett , Obama’s liaison to corporate America who has met with Moynihan at the White House several times. “And he has been willing to come to Washington and roll up his sleeves and work on the issue.” One of Moynihan’s assets may be that he is a fresh face. He took over as the bank’s CEO Jan. 1, and unlike his predecessor, Kenneth Lewis , isn’t tainted by public outrage over the $700 billion bailout for banks. Nor has he been targeted by a Securities and Exchange Commission suit — now settled — alleging that investors were misled about bonuses and losses during Bank of America’s 2009 acquisition of Merrill Lynch & Co. Earnings Rise Moynihan, who has also visited Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers , has proven that it is possible to please both the administration and shareholders. In April, Charlotte, North Carolina-based Bank of America, the largest U.S. bank , posted first-quarter profit of $3.18 billion, compared with a loss of $194 million in the fourth quarter of last year and a $1 billion loss in the quarter before that. Moynihan’s strategy is a “complete turnabout” from the Lewis era, says Anton Schutz , who manages $270 million of financial stocks, including shares of Bank of America, at Mendon Capital Advisors Corp. in Rochester, New York. “It’s really important that he continue to keep the image of Bank of America on the upward trajectory with the administration and with investors,” he says. “If you’re an embattled CEO, it’s going to reflect in your stock price.” Bank of America’s shares closed at $17.07 yesterday in New York Stock Exchange composite trading, up 13.35 percent since Moynihan took over. Administration officials say Moynihan’s cooperation has given him a distinctive place among bankers. Treasury Dinner Less than a month into his tenure as CEO, Moynihan attended a dinner at the Treasury with Geithner and other administration officials and the heads of several banks, including Bank of New York Mellon Corp. , US Bancorp and BB&T Corp . Throughout the Jan. 20 dinner, some executives criticized what they described as the administration’s populist tone toward Wall Street, an attendee says. Moynihan was more attuned to the public anger toward his industry and called on the group to help restore trust in banks, the attendee says. “In addition to being an active leader of his bank, he has also expressed a willingness to work with the administration and have a level of corporate responsibility beyond the bank,” Jarrett says. “We appreciate that effort.” Moynihan, in an April 30 interview with Fox Business Network, said there is a “tough” tone in Washington, though Obama had done “a great job” and is “working hard to try to figure out a solution.” Critic Dimon That praise stands in contrast with comments by JPMorgan Chase & Co.’s CEO, Jamie Dimon . He has visited the White House at least four times in the past seven months, records show, and was largely supportive of the administration’s efforts to rescue the economy last year. As the regulatory overhaul was introduced, he took a more combative stance. Last June, when Obama previewed his proposal, Dimon warned in the Wall Street Journal against the “pendulum swinging too far.” In January, he criticized Obama’s plan to tax recipients of financial bailout funds that had repaid their loans, saying “using tax policy to punish people is a bad idea.” Joseph Evangelisti , a spokesman for New York-based JPMorgan, said in an interview, “Jamie Dimon has said publicly that he has no problem with banks paying for bailouts in their own industries, but not for companies in other industries.” Last month, in a Chicago speech, Dimon said banks support 80 percent of the overhaul plan. Jarrett dismisses any suggestion of a popularity contest among bankers. “This isn’t about relationships,” she says. “It’s about issues.” Just His Style Anne Finucane , Bank of America’s chief marketing officer, says the cooperative attitude is part of Moynihan’s management style. “I don’t think that Brian’s way of leading a company is to start with a stick in the eye,” she says. Still, Finucane says Moynihan isn’t on board with all the regulatory proposals . His bank wants any regulation to pre-empt tougher state laws, even on the proposed consumer agency, and he has misgivings about a proposal to restrict derivatives trading by commercial banks, she says. “There is going to be regulatory reform and while we may not be comfortable with every part of it, I think we know it’s a reality,” Finucane says. Cooperation with the administration makes business sense for the CEO of a bank that has more than 10 percent of U.S. deposits and about 60 million individual and small-business customers, Finucane says. “These actions weren’t taken to win friends in Washington,” she says. “The industry has experienced a low moment in its reputation, and we are very anxious to get back to business.” To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net ; Hans Nichols in Washington at hnichols2@bloomberg.net

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Moynihan Becomes Obama’s Top Wall Street Ally on Financial-Rules Overhaul

May 13, 2010

By Julianna Goldman and Hans Nichols May 13 (Bloomberg) — The Obama administration has found a banker it can do business with: Bank of America Corp. ’s Brian Moynihan . While many U.S. banks’ chief executive officers publicly oppose at least some elements of President Barack Obama ’s plan for financial regulation, Moynihan, 50, is winning White House praise for his stance. He backs a consumer financial protection agency, addresses shortcomings the administration finds with his bank’s home-loan modification program, and pursues small- business initiatives in collaboration with the White House, Bloomberg Businessweek reports in its May 17 issue. “He has been willing to speak out bravely in his industry on the need for reform measures,” says Valerie Jarrett , Obama’s liaison to corporate America who has met with Moynihan at the White House several times. “And he has been willing to come to Washington and roll up his sleeves and work on the issue.” One of Moynihan’s assets may be that he is a fresh face. He took over as the bank’s CEO Jan. 1, and unlike his predecessor, Kenneth Lewis , isn’t tainted by public outrage over the $700 billion bailout for banks. Nor has he been targeted by a Securities and Exchange Commission suit — now settled — alleging that investors were misled about bonuses and losses during Bank of America’s 2009 acquisition of Merrill Lynch & Co. Earnings Rise Moynihan, who has also visited Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers , has proven that it is possible to please both the administration and shareholders. In April, Charlotte, North Carolina-based Bank of America, the largest U.S. bank , posted first-quarter profit of $3.18 billion, compared with a loss of $194 million in the fourth quarter of last year and a $1 billion loss in the quarter before that. Moynihan’s strategy is a “complete turnabout” from the Lewis era, says Anton Schutz , who manages $270 million of financial stocks, including shares of Bank of America, at Mendon Capital Advisors Corp. in Rochester, New York. “It’s really important that he continue to keep the image of Bank of America on the upward trajectory with the administration and with investors,” he says. “If you’re an embattled CEO, it’s going to reflect in your stock price.” Bank of America’s shares closed at $17.07 yesterday in New York Stock Exchange composite trading, up 13.35 percent since Moynihan took over. Administration officials say Moynihan’s cooperation has given him a distinctive place among bankers. Treasury Dinner Less than a month into his tenure as CEO, Moynihan attended a dinner at the Treasury with Geithner and other administration officials and the heads of several banks, including Bank of New York Mellon Corp. , US Bancorp and BB&T Corp . Throughout the Jan. 20 dinner, some executives criticized what they described as the administration’s populist tone toward Wall Street, an attendee says. Moynihan was more attuned to the public anger toward his industry and called on the group to help restore trust in banks, the attendee says. “In addition to being an active leader of his bank, he has also expressed a willingness to work with the administration and have a level of corporate responsibility beyond the bank,” Jarrett says. “We appreciate that effort.” Moynihan, in an April 30 interview with Fox Business Network, said there is a “tough” tone in Washington, though Obama had done “a great job” and is “working hard to try to figure out a solution.” Critic Dimon That praise stands in contrast with comments by JPMorgan Chase & Co.’s CEO, Jamie Dimon . He has visited the White House at least four times in the past seven months, records show, and was largely supportive of the administration’s efforts to rescue the economy last year. As the regulatory overhaul was introduced, he took a more combative stance. Last June, when Obama previewed his proposal, Dimon warned in the Wall Street Journal against the “pendulum swinging too far.” In January, he criticized Obama’s plan to tax recipients of financial bailout funds that had repaid their loans, saying “using tax policy to punish people is a bad idea.” Joseph Evangelisti , a spokesman for New York-based JPMorgan, said in an interview, “Jamie Dimon has said publicly that he has no problem with banks paying for bailouts in their own industries, but not for companies in other industries.” Last month, in a Chicago speech, Dimon said banks support 80 percent of the overhaul plan. Jarrett dismisses any suggestion of a popularity contest among bankers. “This isn’t about relationships,” she says. “It’s about issues.” Just His Style Anne Finucane , Bank of America’s chief marketing officer, says the cooperative attitude is part of Moynihan’s management style. “I don’t think that Brian’s way of leading a company is to start with a stick in the eye,” she says. Still, Finucane says Moynihan isn’t on board with all the regulatory proposals . His bank wants any regulation to pre-empt tougher state laws, even on the proposed consumer agency, and he has misgivings about a proposal to restrict derivatives trading by commercial banks, she says. “There is going to be regulatory reform and while we may not be comfortable with every part of it, I think we know it’s a reality,” Finucane says. Cooperation with the administration makes business sense for the CEO of a bank that has more than 10 percent of U.S. deposits and about 60 million individual and small-business customers, Finucane says. “These actions weren’t taken to win friends in Washington,” she says. “The industry has experienced a low moment in its reputation, and we are very anxious to get back to business.” To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net ; Hans Nichols in Washington at hnichols2@bloomberg.net

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Stuart Whatley: The Capitalist Hagiography Has Little Room for Saints

May 3, 2010

Perhaps the most enervating element of the BP-Deepwater Horizon disaster is its eery familiarity — the sheer, inexorable predictability of it all. There is poetic injustice in its propinquity on the calendar to the Obama administration’s decision to expand offshore drilling last month, and to the Supreme Court decision just this year that further did away with any distinction between ‘corporate rights’ and ‘individual rights’. Equally predictable is the route the story will take, the revelations that will arise, and the conclusions that will be reached. Talk of lax regulatory standards already runs rampant through a wide array of media outlets. Righteous cries of ‘I told you so’ resound. Surely this disaster was avoidable…it must have been. But from Goldman Sachs to Massey Energy to — now — British Petroleum (and, unsurprisingly, possibly Halliburton ), how much will things change? Ultimately the recourse is dictated by the laws we already have in place. And constantly these laws and regulatory structures turn out to have been rendered obsolete and toothless by precisely the entities they purport to oversee. The gulf story will likely be no more about corporate corner-cutting than a broken political system — the recurring motif of this year. And regrettably, in a nation that incarcerates people by the hundreds of thousands for victimless crimes of self-indulgence it is yet inconceivable that those who wreck global ecological and financial systems could ever suffer anything exceeding the “cost of doing business.” When a corporation falls short of regulatory standards it does not do so accidentally or unwittingly. Rather, it is a calculated choice based on risible enforcement efforts and piddling penalties passed by legislators on the political take. Massey Energy’s Upper Big Branch explosion that left 29 miners dead last month was a teachable tragic moment. As Mine Safety and Health News’s Ellen Smith thoroughly documented here at HuffPost and elsewhere, dozens of past violations did nothing to alter the toxic cynicism that prioritizes profit margin before safety and lives. Whether those pointless deaths and the pressure from survivors’ families will yield real changes to that reality is yet to be seen. But either way, the likelihood of true justice for this incident seems low. As Smith writes , “Curiously the only individuals who might be held personally liable under the Mine Act for the current disaster are the mine supervisors and foremen. There are no provisions to hold accountable those people who are responsible for safety policies and procedures, or the corporate executives who insisted it was more important to “run coal” than to build ventilation controls, or the board of directors, which is ultimately responsible for the conduct of the corporation.” Despite lofty guarantees from the president, the same may as well be said for the Deepwater Horizon explosion and its so far cataclysmic aftermath. As the New York Times reports , “Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government, although they are responsible for the cost of containing and cleaning up the spill.” Beyond the costs of actual clean-up, will BP suffer in the long run? Will Americans stage mass boycotts against the company through consumer discrimination? Will it become the industry pariah that politicians ostracize, even if it provides jobs in their states and districts? Don’t count on it. With gasoline prices already on the uptick and likely to rise more going into the summer season the lowest price per gallon will sell, no matter who you are. This is why the greed always pays off, and it is why neither producer nor consumer can realistically be expected to fix things. Solutions must come from an intermediary in the form of good governance. Unfortunately we can’t count much on that these days either. It is little wonder that our regulatory structures are so reliably unreliable. And even if there turns out to have been no regulatory failure in the case of BP, the resolution and restitution regime for disasters of this scale is obviously lacking. The fact that OpenSecrets.org — the Center for Responsive Politics website that closely tracks political contributions and special interest “heavy hitters” — is suffering site traffic overloads this week is telling. OpenSecrets does indeed label BP a heavy hitter because in the 2008 election cycle it “contributed half a million dollars to federal candidates. About 40 percent of these donations went to Democrats. The top recipient of BP-related donations during the 2008 cycle was President Barack Obama himself, who collected $71,00.” It also reports that in 2009 BP spent $16 million on lobbying and that in the first quarter of 2010 it’s already expensed $3.53 million for the same purpose, putting it second behind ConocoPhillips for the industry. Though it’s chump change in BP’s overall budget, half a million bucks in an election cycle can go an astoundingly long way. In their “Iceberg Theory of Campaign Contributions,” [ pdf ] Marcos Chamon of the IMF and Ethan Kaplan of Stockholm University explain the power of special interest threats (made far more credible by Citizens United ) as a part of lobbying and electioneering. It basically goes as follows: We’ll give two-thousand bucks to your reelection campaign, but if we’re not pleased with your vote, we’ll give your challenger ten. Taking into account the leveraging that goes into these threats (spending $2,000 for $12,000 of influence), $500,000 all of a sudden becomes much, much more. Chamon and Kaplan cite the U.S. sugar industry for their example, which in 1998 turned $2.8 million in campaign contributions into over $1,000,000,000 in federal subsidies. And sugar doesn’t even compare to “black gold”. Firms like BP, Massey and Goldman Sachs (to name Public Enemies one, two, and three these days) are the definition of a “special interest”. There is no political, ideological or religious component to their wants. It’s all about the money, and no potential friend on the Hill is precluded. Legislators from both parties enter office with implicit agreements all the time to include this or that subsidy, or to go soft on this or that regulation to hold up their end of the bargain with their electoral benefactors. And when it’s all told one is left with bodies of legislation that appear to be (sometimes actually are ) written completely for and by the industry itself. BP will hang its head for now, but when the class action lawsuits come rolling in from the industries destroyed by Deepwater Horizon don’t expect to see an overly munificent defendant ready to make amends. And don’t expect it to not scapegoat the owner of the rig, Transocean, Ltd. In the end John Galt will always capitalize and Joe Six-Pack will always look for the best bargain. Ignoring rudimentary economic axioms won’t change anything. If corporations may participate in political expression, will they also be subjected to potential political or criminal repercussions that make the cost of doing certain kinds of business too much to even consider? Will “limited liability” continue to apply to unethical and illegal behavior as well as investment? Will stakeholders such as employees, customers and the surrounding environment be kept in mind alongside profits? The compounded frustration with BP, Massey, Goldman and anyone else lurking behind the next crisis will shunt many important questions like these to the forefront of policy discussions. But in the background will always be the money that oils the gears of a perversely incentivizing political system. Until that sees fundamental change, mine ventilation could easily remain inadequate, emergency stop valves optional, and casino-style financial products hidden in the shadows. Related Readings: Citizens United , the Roberts Court, and the Future of American Electioneering Obama’s State of the Union Falls Short on Correcting Citizens United American Plutocracy: Corruption Is In the Eyes of the Beholder Obama’s Agenda: Hope, Change, and Lobby-Cencricity

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Siemens, GE Lured to Hydro Hub by Singapore’s Push to End Water Dependency

April 29, 2010

By Frederik Balfour April 29 (Bloomberg) — Singaporeans splash their way through 2 meters (6.5 feet) of rain each year on average, three times as much as Londoners. Yet the island nation’s economy depends on water imports from its rival, Malaysia. That reliance will ease May 3 when the country opens its newest of five water recycling facilities. The 50-million- gallon-a-day plant is a showcase for the expertise Singapore is using to tap a global market in water management — from treating sewage to desalination — that market consultants Frost & Sullivan say will more than triple to $1.38 trillion by 2020. General Electric Co. and Siemens AG are among companies that have invested in Singapore, lured by the government’s commitment to water treatment technology in the world’s fastest- growing region. Water companies are seeking to supply countries such as China and India, where increasing wealth means consumers each use more and compete for resources with the chip factories, refineries and farms needed to sustain economic growth. “A lot of our knowhow in water technology comes from our drive to be self-sufficient,” said Beh Swan Gin , chief executive officer of the Economic Development Board of Singapore, a government agency. While Paris-based Veolia Environnement and Compagnie de Suez and London’s Thames Water Holdings have worked on water technologies for decades, it is government support that gives Singapore’s industry an edge, said Melvin Leong, a Kuala Lumpur- based consultant at Frost & Sullivan. In the past three years, the city-state’s companies have won over 100 projects in more than 15 countries, valued at $5.6 billion, according to the Public Utilities Board of Singapore. Founding Father When Singapore was ejected from the Federation of Malaya in 1965, founding father Lee Kuan Yew set water self sufficiency as a national goal. The country cut Malaysian imports to 50 percent of its needs from 80 percent by building reservoirs, recycling waste and constructing desalination plants. Singapore will be able to recycle 30 percent of its water once the new plant is opened, the most among the world’s major cities, according to the International Water Association , an industry body. With no natural resources, the country of five million people evolved from low-wage manufacturer to Asia’s only economy whose debt is rated triple-A by Standard & Poor’s. It is home to the world’s largest container port and oil refining hub, and the region’s biggest bio-tech and private banking centers. To woo global water companies, the government is investing $240 million in research. Last year, the water division of GE opened a joint $108 million research lab with Singapore National University . It expects to double the number of scientists there to 70 by next year, said Kevin Cassidy, who heads the Fairfield, Connecticut-based company’s water business in the region. Talent Pool “We are taking advantage of the talent here and Singapore’s willingness to test technologies,” he said. Siemens opened a $33 million lab in 2007 that will be the Munich-based company’s biggest water research facility within two years. Almost $15 million in grants to help build the plant and find better desalination processes was instrumental in the choice of Singapore, said Ruediger Knauf, the facility’s chief. One company that may gain most from Singapore’s ambitions is Hyflux Ltd ., a maker of filtration membranes, which was founded on the island in 1989. Hyflux opened its own desalination plant, designed and built in 2005. In 2008, Hyflux outbid GE and others to win a $468 million contract to build and operate the world’s largest filter-based desalination plant in Mactaan, Algeria. Track Record “We have a track record in Singapore we can take everywhere else,” said Sam Ong, deputy chief executive officer. Hyflux’s net income rose 21 percent last year to S$75 million ($54 million). Its shares doubled to S$3.55, outpacing the 64 percent advance by the benchmark Straits Times Index. “Because of the experience Hyflux got in their home market they manage to export and have pretty strong results abroad,” said Arnaud Bisschop , who holds Hyflux stock among the $3.32 billion he manages at Pictet & Cie’s water fund in Geneva. The growing expertise is helping other local companies win contracts abroad. Keppel Corp., a government-linked company with interests ranging from shipbuilding to real estate, will open next year a $1.1 billion plant in Doha, Qatar, to treat municipal waste water that will be recycled for irrigation. Sembcorp Industries Ltd., also partly state-owned, is building a $1.7 billion water desalination facility in Fujairah, United Arab Emirates. It is also building a $1 billion combined desalination and power plant in Oman, and is investing $206 million in water treatment projects in China. The company’s new $130 million water recycling plant in Singapore, Asia’s biggest, is built 200 feet underground so waste water can flow from 20 miles away without pumping. Inside the central hub, waste is fed into a labyrinth of pipes that can turn sewage into drinking water. “Singapore is the closest to the city of the future in terms of water sustainability,” said David Garman , president of the London-based International Water Association. To contact the reporter on this story: Frederik Balfour in Hong Kong at fbalfour@bloomberg.net

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Siemens, GE Lured to Hydro Hub by Singapore’s Push to End Water Dependency

April 29, 2010

By Frederik Balfour April 29 (Bloomberg) — Singaporeans splash their way through 2 meters (6.5 feet) of rain each year on average, three times as much as Londoners. Yet the island nation’s economy depends on water imports from its rival, Malaysia. That reliance will ease May 3 when the country opens its newest of five water recycling facilities. The 50-million- gallon-a-day plant is a showcase for the expertise Singapore is using to tap a global market in water management — from treating sewage to desalination — that market consultants Frost & Sullivan say will more than triple to $1.38 trillion by 2020. General Electric Co. and Siemens AG are among companies that have invested in Singapore, lured by the government’s commitment to water treatment technology in the world’s fastest- growing region. Water companies are seeking to supply countries such as China and India, where increasing wealth means consumers each use more and compete for resources with the chip factories, refineries and farms needed to sustain economic growth. “A lot of our knowhow in water technology comes from our drive to be self-sufficient,” said Beh Swan Gin , chief executive officer of the Economic Development Board of Singapore, a government agency. While Paris-based Veolia Environnement and Compagnie de Suez and London’s Thames Water Holdings have worked on water technologies for decades, it is government support that gives Singapore’s industry an edge, said Melvin Leong, a Kuala Lumpur- based consultant at Frost & Sullivan. In the past three years, the city-state’s companies have won over 100 projects in more than 15 countries, valued at $5.6 billion, according to the Public Utilities Board of Singapore. Founding Father When Singapore was ejected from the Federation of Malaya in 1965, founding father Lee Kuan Yew set water self sufficiency as a national goal. The country cut Malaysian imports to 50 percent of its needs from 80 percent by building reservoirs, recycling waste and constructing desalination plants. Singapore will be able to recycle 30 percent of its water once the new plant is opened, the most among the world’s major cities, according to the International Water Association , an industry body. With no natural resources, the country of five million people evolved from low-wage manufacturer to Asia’s only economy whose debt is rated triple-A by Standard & Poor’s. It is home to the world’s largest container port and oil refining hub, and the region’s biggest bio-tech and private banking centers. To woo global water companies, the government is investing $240 million in research. Last year, the water division of GE opened a joint $108 million research lab with Singapore National University . It expects to double the number of scientists there to 70 by next year, said Kevin Cassidy, who heads the Fairfield, Connecticut-based company’s water business in the region. Talent Pool “We are taking advantage of the talent here and Singapore’s willingness to test technologies,” he said. Siemens opened a $33 million lab in 2007 that will be the Munich-based company’s biggest water research facility within two years. Almost $15 million in grants to help build the plant and find better desalination processes was instrumental in the choice of Singapore, said Ruediger Knauf, the facility’s chief. One company that may gain most from Singapore’s ambitions is Hyflux Ltd ., a maker of filtration membranes, which was founded on the island in 1989. Hyflux opened its own desalination plant, designed and built in 2005. In 2008, Hyflux outbid GE and others to win a $468 million contract to build and operate the world’s largest filter-based desalination plant in Mactaan, Algeria. Track Record “We have a track record in Singapore we can take everywhere else,” said Sam Ong, deputy chief executive officer. Hyflux’s net income rose 21 percent last year to S$75 million ($54 million). Its shares doubled to S$3.55, outpacing the 64 percent advance by the benchmark Straits Times Index. “Because of the experience Hyflux got in their home market they manage to export and have pretty strong results abroad,” said Arnaud Bisschop , who holds Hyflux stock among the $3.32 billion he manages at Pictet & Cie’s water fund in Geneva. The growing expertise is helping other local companies win contracts abroad. Keppel Corp., a government-linked company with interests ranging from shipbuilding to real estate, will open next year a $1.1 billion plant in Doha, Qatar, to treat municipal waste water that will be recycled for irrigation. Sembcorp Industries Ltd., also partly state-owned, is building a $1.7 billion water desalination facility in Fujairah, United Arab Emirates. It is also building a $1 billion combined desalination and power plant in Oman, and is investing $206 million in water treatment projects in China. The company’s new $130 million water recycling plant in Singapore, Asia’s biggest, is built 200 feet underground so waste water can flow from 20 miles away without pumping. Inside the central hub, waste is fed into a labyrinth of pipes that can turn sewage into drinking water. “Singapore is the closest to the city of the future in terms of water sustainability,” said David Garman , president of the London-based International Water Association. To contact the reporter on this story: Frederik Balfour in Hong Kong at fbalfour@bloomberg.net

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Saudis Tightening Chinese Energy Ties to Move Away From Dependence on U.S.

April 20, 2010

By Henry Meyer April 20 (Bloomberg) — Li Wei, a Chinese diplomat in Riyadh, had only just seen off a Ministry of Commerce delegation to Saudi Arabia this month when he started preparing for another Chinese governmental visit in two weeks. “Every month we have delegations coming to Saudi Arabia,” said Li, who works in the Chinese Embassy’s commercial section in the Saudi capital. “We are too busy.” China, the world’s second-largest oil consumer, and Saudi Arabia, holder of about a fifth of global crude reserves, are forging ever closer ties as the Persian Gulf kingdom responds to a Chinese drive to feed its rising energy needs. China in November overtook the U.S. as the main buyer of Saudi oil, and Saudi Arabian Oil Co. and Saudi Basic Industries Corp. are investing in refinery and petrochemicals projects in China. The partnership between Saudi Arabia and China is part of a broader strategy by the world’s largest oil exporter to tap Asian markets and extend global influence. It also helps Saudi Arabia reduce reliance on the U.S., which since World War II has protected Saudi security in return for stable oil supplies, said Ben Simpfendorfer , Hong Kong-based chief China economist at the Royal Bank of Scotland Plc. “China’s rise has provided Saudi Arabia with an excuse to knock on Washington’s door and to say, you are not our only partner,” he said. Compared with the U.S., whose support for Israel has created friction with Saudi Arabia, “with China, there is less baggage, there are easier routes to mutual benefit,” said Prince Turki al-Faisal , a former Saudi ambassador to the U.S. and brother of Foreign Minister Saud al-Faisal , in an interview. Booming Trade Since Saudi Arabia and China established diplomatic ties in 1990, two-way trade has grown to more than $40 billion in 2008 from $290 million. Oil lies at the heart of the relationship. With about a fifth of China’s crude imports now coming from Saudi Arabia, or about 1 million barrels a day compared with 455,000 barrels a day in 2005, the kingdom is investing to expand Chinese capacity for refining of Saudi heavy crude. Saudi Aramco, the world’s biggest crude producer, teamed with China Petroleum & Chemical Corp. and Irving, Texas-based Exxon Mobil Corp. to triple capacity at a refinery in China’s Fujian province to 240,000 barrels a day last year. Dhahran- based Saudi Aramco is in talks with the same Chinese partner, Beijing-based Sinopec, to take a stake in a 200,000-barrel-a-day plant in Shandong. Petrochemical Complex Riyadh-based Saudi Basic Industries Corp., the world’s largest petrochemicals maker, collaborated with Sinopec to build a petrochemical complex in the northern Chinese port city of Tianjin that starts up this year. “China is a country that has the greatest market for our products, so there is no politics behind this, it is only straight business,” Mohammed Al-Mady , the chief executive officer of the company known as Sabic, said in an April 10 interview at a conference on the Chinese island of Hainan. China’s need for oil is prompting it to seek greater influence in the Middle East , said Shi Yinhong, a professor of international relations at Renmin University in Beijing. Increasing economic ties to Saudi Arabia “will play some role in gradually eroding American preponderance over that country, but this is not a very elaborate and conscious objective of China’s relationship with Saudi Arabia,” Shi said. “This is a by-product. China’s objective is energy.” China and Energy Chinese demand for refined products is forecast to jump 7.2 percent this year to 9.12 million barrels a day, according to the International Energy Agency’s monthly Oil Market Report on April 13. Demand climbed 20 percent in February from a year earlier. U.S. demand for crude oil and petroleum products will average 18.84 million barrels a day this year, the Energy Department said on April 6. That will be a 9.4 percent drop from the 2005 peak of 20.8 million barrels a day, according to data from the U.S. Energy Information Administration. That mirrors a decline throughout the developed world. Consumption in the 30 industrialized countries that belong to the Paris-based Organization for Economic Cooperation and Development will average 45.4 million barrels a day this year, down 8.3 percent from 2006, according to the International Energy Agency, which coordinates the energy policy of 28 developed nations. Military Security China isn’t looking to provide Saudi Arabia with the protection it gets from the U.S., which maintains air, naval and army bases in the Gulf, including one in Saudi Arabia. In 1991, the U.S. assembled a coalition to reverse the Iraqi occupation of Kuwait and, before that, defended neighboring Saudi Arabia from a threatened Iraqi attack. Now it is enlisting Saudi help to pressure Iran to rein in its nuclear program. Saudi Arabia was the biggest foreign buyer of U.S. weapons between 2005 and 2008, agreeing to purchase $11.2 billion worth, according to the Congressional Research Service in Washington. “It shouldn’t surprise anyone that the Chinese are buying more Saudi oil than ever before,” Robert Hormats , the U.S. undersecretary of state for economics, energy and agriculture, said in an April 11 interview in Hainan. “But the fact is that our relationship with Saudi Arabia is much deeper and broader than oil.” King Abdullah , 86, picked China as the first destination on his maiden foreign tour in January 2006, months after becoming king. Chinese President Hu Jintao has been twice to Saudi Arabia since 2006, most recently in February last year. More Trade More than 90 Chinese companies do business in Saudi Arabia, including 70 construction firms employing 20,000 Chinese people, according to a study by John Sfakianakis , chief economist at Riyadh-based Banque Saudi Fransi. Among recent contracts won by Chinese companies in Saudi Arabia was a $1.8 billion award to a Saudi-Chinese consortium including Beijing-based China Railway Construction Corp. in March 2009, for a new high-speed line between the holy cities of Mecca and Medina. To cater to the influx, Riyadh’s Sheraton hotel last year started to offer a Chinese breakfast of rice porridge, dim sum and steamed buns along with Arab, continental and U.S. dishes. “We try to satisfy the cultural preferences of our Chinese guests,” said Farid al-Aauuar, director of rooms at the hotel. To contact the reporter on this story: Henry Meyer in Riyadh via the Dubai newsroom at hmeyer4@bloomberg.net .

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Dewey & LeBoeuf Issues Bonds to Refinance Debt, as Law Firms Seek Capital

April 17, 2010

By Carlyn Kolker April 17 (Bloomberg) — Dewey & LeBoeuf LLP raised $125 million in a bond offering to refinance existing bank debt, a rare action by a U.S. law firm, according to two people familiar with the transaction. The New York-based, 1,200-attorney firm announced the private placement yesterday without disclosing the amount. Partner Richard Shutran declined to reveal the interest rate for the bonds, saying it was more favorable than the firm’s bank loans. Debt in a private placement is sold directly to institutional or private investors and isn’t registered with the U.S. Securities and Exchange Commission. Law firms typically rely on bank loans and partners’ contributions to provide capital rather than outside investors, according to bankers and consultants. “You don’t hear a lot of open talk in the market about firms looking to raise outside capital,” said Kent Zimmermann , a Zeughauser Group consultant. “It could be one of those things that once one or two firms do it with success, the pack will follow.” Units of banks including JPMorgan Chase & Co. , Citigroup Inc. , Wells Fargo & Co. , Barclays Plc and Bank of America Corp. have groups dedicated to law firm lending. In recent years, the banks have bolstered or formed such groups to take advantage of an industry with conservative borrowing habits. Owning Law Firms Ethics rules and state laws prohibit nonlawyers from owning law firms, which prevents raising capital by selling shares . They must raise money in other ways, said Stephen Gillers , a legal-ethics professor at New York University. “In the United States, you cannot have nonlawyers with ownership interests in law firms, and you cannot have passive equity investments in law firms,” Gillers said. “On the other hand, law firms can borrow money. As long as it’s debt, it’s OK.” Firms might tap alternative financing sources as they try to expand market share, Zimmermann said. The Dewey bond buyers were insurance companies, Shutran said, with maturities of three to 10 years. JPMorgan was the placement agent. Dewey & LeBoeuf is the product of the 2007 merger of Dewey Ballantine with LeBoeuf, Lamb, Greene & MacRae. Clients include Deutsche Bank AG, Walt Disney Co., JPMorgan and MetLife Inc. The firm says it had gross revenue of $914 million in 2009. Dewey’s Placement Dewey’s is the first law firm private placement since the credit market seizure and one of just a handful ever, according to more than a dozen bankers, lawyers and consultants. “They tend not to get a lot of coverage because they are by their nature private,” said Tony Williams , a consultant at London-based Jomati Consultants . Predecessor Dewey Ballantine issued a private placement in 1990 to fund the firm’s move to a building in Midtown Manhattan, Shutran said. Private placements offer law firms the chance to borrow for 10 to 15 years instead of the typical bank term of three to five years, said Keith Wetmore , chairman of Morrison & Foerster, a 1,000-lawyer firm based in San Francisco. “You need a pretty good balance sheet to interest institutional investors.” Wetmore said. “Not every law firm is going to have that.” The firm issued bonds in 2001 and again in 2002 to refinance debt that had been incurred to finance office build- outs, and may consider another in the future, Wetmore said. Fees, Covenants Deterrents include fees, which can exceed $5 million, and loan covenants that may require the borrowers to maintain certain levels of cash flow or profitability, Williams said. The U.S. rules on law firm ownership are intended to protect the attorney-client relationship, said Gillers of New York University. “It amounts to the American view that nonlawyers should not have ownership or management control of law firms, because that will threaten the devotion of law firms to their clients,” he said. England and Wales will allow law firms to sell shares on an exchange and merge with companies for the first time in 2011, when a law passed in 2007 goes into effect. Australia was the first country in the world to allow outside public investments in law firms. In 2007, Melbourne- based Slater & Gordon Ltd. began selling shares. Bank Loans U.S. law firms tap banks for revolving credit or term loans. The banks offer business services such as payroll, retirement accounts, currency exchanges and investment advice and loans to law partners. “We’re not just talking about a credit relationship,” said Sharon Weinberg, managing director at JPMorgan Private Bank and head of the law firm group. “We’re talking about an array of relationships. The more complex the firm, the more we can offer it.” Law firms have typically weathered the financial recession better than other industries, making them attractive customers to banks, said Jeffrey Grossman of Wells Fargo’s law firm group. “As revenue decreased, they protected their profitability,” Grossman said. “That’s not what happened to the rest of corporate America.” Law firms starting in 2007 have fired attorneys, cut pay, delayed start dates for incoming associates, and closed offices and reduced promotions to partner during the recession. While law firms aren’t rated by rating firms banks create their own models to review the firms’ balance sheets, Grossman said. ‘Investment Grade’ “If law firms were rated, they would typically be investment grade,” he said. Citigroup has focused on law firm banking for more than 35 years, according to Dan DiPietro , chairman of Citi Private Bank ’s law firm group. JPMorgan and Wachovia, now a unit of Wells Fargo, established dedicated law firm groups in the past six years with hires from Citigroup. More law firms tapped their lines of credit or set up new ones during the credit crisis, said DiPietro. Loans to law firms from Citigroup increased 30 percent in 2008 and another 10 percent in 2009, he said. The bank has about $5 billion of loans outstanding to law firms, he said. Law firms are increasingly asking their partners for more contributions to fund a firm’s capital, DiPietro said. “We have entered a period of much greater uncertainty,” DiPietro said. “Firms want to be more conservative. They want more capital to ride through times of uncertainty.” To contact the reporter on this story: Carlyn Kolker in New York at ckolker@bloomberg.net .

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Ron Ashkenas: Does Tax Time Need To Be So Taxing?

April 7, 2010

Cross-posted from Harvard Business Online If there is anything that unites politicians and the general public it’s the belief that the U.S. tax system is too darn complicated. Yet somehow the process of paying taxes has resisted almost every attempt at simplification. It’s an amazing paradox: The one thing we all agree on seems to be the one area where it is virtually impossible to make progress. What’s going on? Let me start by saying that I am not referring to fundamental changes in tax policy, such as the introduction of a “flat tax” or replacing incomes taxes with a national sales tax. While these proposals may simplify the process, for this post I’m assuming that we will continue to have a tax system with different rates for different income levels. However, within our current system, even the Commissioner of Internal Revenue Service, Douglas Shulman, admits that he uses a professional tax preparer for his returns because the tax code is too complex. Thus it is no surprise that virtually every president and every Congress for the last 20 years has vowed to simplify taxes, including President Obama. Almost a year ago, he condemned what he called the “monster tax code,” which has grown to more than 5600 pages and 3.7 million words. To slay this monster, he asked Paul Volcker, chairman of the President’s Economic Recovery Advisory Board , to appoint a tax reform task force that would develop recommendations by the end of 2009. But to date the task force has not presented anything. Meanwhile, other proposals have been tossed on the table, the latest a bipartisan plan by Senators Judd Gregg (R-NH) and Ron Wyden (D-OR). And the chances of this bill passing? You get the point. So, I ask again, what’s going on? Here’s one possibility: Over the years, the government turned the tax code over to technical experts, who wrote the regulations, forms, and processes in their own language without regard for the end-user, the citizen, who would be required to use them. As the language and process became more and more arcane, fewer end-users could actually do their own taxes, so an industry of “tax preparers” formed to provide an interface between the tax payer and the taxing authorities. It is estimated that there are at least one million tax preparers in the United States; and that this year 60% of all taxpayers will use a professional and another 20% will use tax preparation software (another industry). In essence, the government has created a process for citizens that most citizens can’t navigate. Now if the government was a private sector company, and there were competitive alternatives, many of the alienated and disenfranchised customers would have gone elsewhere. But there is no alternative to paying taxes — so the pressure for reform doesn’t really exist as it would with a private company. At the same time, the industries that the technical tax process has spawned are now very powerful, with significant lobbying and communication ability. It’s in their best interest for the tax process to continue to be complex, and therein lies the cause for the stalemate. There is, however, a glimmer of hope for simplification. Oddly enough, it comes from the IRS itself. There is nothing to stop the IRS, if it has the will and courage, to simplify the language and process of paying taxes. And in the past year, under the leadership of Commissioner Shulman, positive steps have indeed been taken in that direction. For example, more than half of all 2009 returns will be filed electronically, a process that the IRS has finally embraced. The IRS has also set up a permanent “Office of Taxpayer Correspondence,” which identifies and acts on ideas for simplifying communication and has already streamlined various tax collection “notice letters” and inserts. The IRS also is beginning a process of certifying professional tax preparers, which is probably a good thing (even if it reinforces the power of the technical industry). To be sure, filing taxes is still a long way from simple. But a little bit of progress is certainly better than no progress at all. What’s been your experience this tax season?

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West Virginia Mine Blast Kills 25 in Worst Case Since 1984; Four Missing

April 6, 2010

By Samantha Zee (Corrects location spelling in second paragraph.) April 6 (Bloomberg) — Massey Energy Co. , the largest coal producer in the Central Appalachian region, said 25 miners were killed after an explosion yesterday at its Upper Big Branch coal mine in West Virginia. Four are still missing. Two miners are hospitalized and rescue work has been halted because of “conditions underground,” Richmond, Virginia-based Massey said in a PRNewswire statement today. The incident is the worst U.S. mine disaster since 1984, the Associated Press said. “Rescue efforts will resume as soon as conditions allow,” according to the statement from Massey, a coal producer with operations in West Virginia, Kentucky and Virginia. “Tonight we mourn the deaths of our members at Massey Energy,” Chief Executive Officer Don Blankenship said in the statement. U.S. Mine Safety and Health Administration District Manager Robert Hardman was leading rescue efforts at the mine site, U.S. Secretary of Labor Hilda Solis said in a statement earlier. The agency was notified of the explosion at about 3 p.m. local time yesterday. “Our number one priority is to locate the missing miners and bring them to safety,” Solis said. MSHA Coal Mine Safety and Health Administrator Kevin Stricklin is also at the mine and in touch with Assistant Secretary of Labor for Mine Safety and Health Joe Main. MSHA sent officials to liaise with miners’ relatives, Amy Louviere , a spokeswoman for the agency, said in an e-mailed statement. ‘Major Industries’ The mine is operated by Performance Coal Co., a unit of Richmond, Virginia-based Massey. “It is a difficult time for us,” said Roger Hendriksen , a spokesman for Massey. He declined to say how many employees were working at the mine in Raleigh County at the time of the blast. President Barack Obama , who spoke with West Virginia Governor Joe Manchin at about 8 p.m. local time yesterday, said the federal government is ready to offer whatever assistance is needed in the rescue effort. “There are miners that were injured from the initial blast, who weren’t trapped, who are being treated, but there are fatalities and there are still miners trapped,” said Leslie Fitzwater, a spokeswoman for the West Virginia Department of Commerce. “Coal is one of our major industries so we have people trained to respond to these incidents,” she said. Rescue Teams The MSHA said five rescue teams from Conso Energy and Massey were at the scene, the Associated Press reported. The mine has a total of 200 workers, according to the AP. As of Jan. 31, Massey operated 56 mines, including 42 underground and 14 surface mines, in West Virginia, Kentucky and Virginia, according to a regulatory filing. “We’ve offered help,” said Phil Smith , a spokesman for the United Mine Workers of America. The MSHA “will be working in conjunction with the state and the company to develop a plan for affecting a rescue effort,” he said. Rescue workers “are putting their lives on the line, entering a highly dangerous mine to bring any survivors to safety,” United Mine Workers International President Cecil E. Roberts said in a statement. The Upper Big Branch mine is a “non-union mine,” he said. Ron Wooten, director of the West Virginia Office of Miners’ Health Safety and Training, didn’t immediately return a call and e-mail seeking comment. There were at least three fatalities related to coal mining operations in West Virginia last year, according to the agency. Mine Accidents Upper Big Branch was the site of two fatal accidents in the past decade, the agency Web site shows . An electrician was electrocuted while splicing a trailing cable on a shuttle car in 2003, and a continuous miner operator was struck by rock after a section of mine roof fell in 2001. He died days later from his injuries. In 1998, a general laborer at the mine died after a section he was working on collapsed and crushed him. Two miners were killed by a fire on a conveyor belt at Massey’s Aracoma Alma Mine No. 1 at Melville in Logan County, West Virginia, in January 2006, according to the mining safety agency’s Web site. The incident occurred late in the same month an explosion at the Sago mine in West Virginia operated by International Coal Group killed 12 miners. Massey fell $3.09, or 5.7 percent, to $51.60 at 7:19 p.m. in New York in trading after the market closed. In regular trading on the New York Stock Exchange, the shares gained $1.64, or 3.1 percent, to $54.69 and touched a 52-week high of $54.80. To contact the reporter on this story: Samantha Zee in San Francisco at szee@bloomberg.net .

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U.S. Service Industries Grow at Fastest Pace Since May 2006, Creating Jobs

April 5, 2010

By Shobhana Chandra April 5 (Bloomberg) — Service industries expanded in March at the fastest pace since in more than three years, a sign the U.S. recovery is extending beyond manufacturing and starting to create jobs. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 55.4, the highest level since May 2006, from 53 in the prior month. Today’s figure exceeded all forecasts in a Bloomberg News survey. Readings above 50 signal expansion. Pending home sales in February posted the biggest gain since 2001, another report showed today. The manufacturing rebound that helped the world’s largest economy dig out of the worst recession since the 1930s is starting to extend to other industries, benefiting companies such as Carnival Corp. and Best Buy Inc. A government report last week showed employment rose 162,000 in March, the most in three years, making a sustained recovery more likely. “You’re seeing a broadening of the recovery from manufacturing into services,” said Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York. “Given these two areas of the economy — the services sector and home sales — have been lagging, it’s comforting to see they’re making progress.” Pending Home Sales More Americans signed contracts in February to buy previously owned homes, according to the National Association of Realtors. The index of purchase agreements, or pending home sales, rose 8.2 percent, the second-biggest gain on record and the largest since October 2001. A measure of U.S. job prospects rose in March for a seventh consecutive month, signaling the labor market is likely to add more workers, a private report showed. The Conference Board’s Employment Trends Index increased 0.7 percent to 94.4 from 93.7 the previous month, the New York-based private research group said today. The measure is up 5.5 percent from a year ago. Stocks extended gains and Treasury securities fell after the reports. The Standard & Poor’s 500 Index rose 0.8 percent to 1,187.04 at 10:51 a.m. in New York. The 10-year Treasury note declined, pushing up the yield to 3.99 percent from 3.95 percent on April 2. Estimates before the Tempe, Arizona-based group’s gauge ranged from 51 to 55, according to the Bloomberg survey of 68 economists. Factory Rebound Manufacturing grew in March at the fastest pace in more than five years, the supply managers’ group reported on April 1. The factory index jumped to 59.6, the highest level since July 2004. Today’s report showed the non-manufacturing gauge of new orders rose to 62.3, the highest since August 2005, from 55 the prior month, and the index of employment increased to 49.8 from 48.6. The measure of new export orders jumped to 57.5 in March, the highest level since June 2007, from 47, while the index of prices paid rose to 62.9 from 60.4. Categories in the ISM services survey include utilities, health care, housing, transportation and finance and insurance. The unemployment rate was 9.7 percent in March for a third month, the Labor Department reported April 2. Payrolls rose for the third time in the past five months and by the most since March 2007, signaling companies are becoming more confident that the economy is healing. Service-producing companies added 82,000 workers to their payrolls in March, the third straight gain and the largest increase since November, the Labor Department’s data showed. Consumer Demand Retailers experiencing a pickup in demand include Best Buy, the largest U.S. electronics retailer. The Richfield, Minnesota- based company last month reported fourth-quarter profit that exceeded analysts’ estimates as discounts helped to boost sales. Carnival, the biggest cruise-line operator, last month raised its full-year profit forecast as ticket prices rebounded from 2009’s lows amid more bookings. “The booking environment continued to improve,” Chief Executive Officer Micky Arison said in a March 23 statement. “We returned to top line revenue growth after a challenging 2009.” To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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11 Ways The iPad Could Change Business (PHOTOS)

April 3, 2010

By now, you’ve heard the near hysteric hype , the prognosticating and the i nevitable backlash against Apple’s latest bold new product, the iPad. But if you’re bearish on Apple’s attempt to reinvigorate the tablet market, we suggest you examine Apple’s track record. To recap, in the last 20 years or so, Steve Jobs & Friends have been remarkably successful at creating huge new markets out of whole cloth — including the user-friendly PC, the portable MP3 player, the touch screen-enabled smart phone, the App economy — each of which has had profound effects on a myriad of other industries. (Does anyone remember the recording industry before the iPod?). The expectations for the iPad may be more muted than the iPhone’s, but (and this is a big but) we’d like to argue that Apple’s entering a new market at least as important than the quality or success of its actual product. Almost instantaneously, the iPad’s launch means that the rest of the business world is presented with huge new opportunities. With that in mind, we’ve come up with some of the biggest effects the iPad could have on the way we do business. Check them out below and vote for how you think the iPad will have the biggest business impact. (Daniele Sahr contributed to this report)

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Takeovers Creep Higher as More Cross-Border, Hostile Deals Herald Recovery

March 31, 2010

By Serena Saitto April 1 (Bloomberg) — Mergers and acquisitions gained momentum in the first quarter with more than 2,034 cross-border transactions and 10 hostile takeovers signaling a recovery from the worst deal market in six years. Global takeovers rose 5 percent to $498.24 billion from a year ago, according to data compiled by Bloomberg. Purchases by companies outside their home markets more than doubled to $249 billion, while $17.46 billion of hostile acquisitions were announced compared with $4.29 billion a year earlier. Chief executive officers are gaining confidence as stock markets rally and a thaw in credit markets makes it easier to fund deals. The Standard & Poor’s 500 Index rose 4.9 percent in the quarter, extending last year’s 23 percent climb. Interest rates slashed during the global economic crisis are at historic lows in the U.S., the U.K. and the 16-nation euro region. “Assuming the economy doesn’t double dip, we are cautiously optimistic for the rest of the year,” said Mark Shafir , global head of M&A at Citigroup Inc. , which advised American International Group Inc. on the $35.5 billion sale of its Asian life insurance unit to Prudential Plc, the quarter’s largest deal. Mergers and acquisitions may increase 15 percent to 20 percent from 2009, said Shafir, returning to “more familiar conditions” than last year, when takeovers slumped 27 percent to $1.8 trillion, the lowest level since 2003 Hostile Takeovers A pickup in hostile takeovers that began in the fourth quarter “reflects increased confidence on the part of some corporate clients,” said Shafir, whose firm advised Kraft Foods Inc. on its $21.4 billion hostile takeover of Cadbury Plc. The companies reached a deal in February after a four-month battle. Citigroup, based in New York, ranked fifth among takeover advisers in the quarter after Goldman Sachs Group Inc., Zurich- based Credit Suisse Group AG, Frankfurt-based Deutsche Bank AG and JPMorgan Chase & Co., Bloomberg data show. This year’s hostile deals include Astellas Pharma Inc. ’s $3.5 billion bid for OSI Pharmaceuticals Inc. in March and Air Products & Chemicals Inc.’s $5.1 billion unsolicited offer for Airgas Inc. in February. Citibank is advising Astellas. “We’re likely to see more hostile M&A activity because companies have access to capital that allows them to pay in cash,” said Jeffrey Kaplan , global head of M&A and corporate finance at Bank of America Merrill Lynch, which is advising Airgas in its defense against Air Products. “Equity values have increased such that buyers are willing to use their stock as well.” Debt Markets Company debt rallied for the fourth-straight quarter as U.S. consumer confidence gained in March and corporate defaults declined from record levels, according to a Bank of America Merrill Lynch index. Borrowing costs declined in the first quarter to the lowest since 2005. Kraft sold $9.5 billion of debt to finance the cash portion of its takeover of Cadbury in the biggest bond offering by a non-financial company in almost a year. The market recovery also created buying opportunities for companies looking to expand abroad. More than half of the 20 biggest deals of the quarter were cross border, including the $10.7 billion acquisition of Zain Africa BV by Billionaire Sunil Mittal’s Bharti Airtel Ltd. ‘Opportunistic’ Buying Deals in Latin America got off to the best start in at least a decade, driven by consolidation in the commodities, food and telecommunications industries in Brazil and Mexico. America Movil SAB’s $25.7 billion all-stock purchase of Carso Global Telecom SAB in Mexico was the No. 2 takeover of the quarter. ”This is an opportunistic moment in which buyers can pay a full price at fair multiples,” said Andrew Bednar , head of M&A at Perella Weinberg Partners LP, the New York-based boutique investment bank. ”As M&A heats up the equity markets follow and it becomes more challenging to pay an acceptable premium without correspondingly higher multiples.” Perella advised Merck KGaA on its $6 billion acquisition of Millipore Corp. in March. Inc., people close to the situation said. Merck’s offer was 15.3 times Millipore’s earnings before interest, taxes, depreciation and amortization, according to Bloomberg data. Merck offered 42 percent more than the shares were worth before the deal was announced. The average premium paid for companies in the first quarter was 20 percent, down from 31.44 percent in the same period a year ago, according to Bloomberg data. The decline signals a return to a more normal conditions, said Citigroup’s Shafir. While the market for takeovers is improving, the recovery has been less robust than after the downturn in 2003. In the first quarter of 2004, takeovers more than doubled compared with the year-ago quarter. European Firms ”I expected M&A activity in the U.S. to be more vibrant at this point of the year,” said Jeff Raich , head of M&A at Moelis & Co., a New York-based investment bank that advises on deals. U.S. takeovers rose 33 percent to $250.5 billion in the quarter, while acquisitions involving Asian companies more than doubled to $185.5 billion, according to Bloomberg data. Europe also curbed the recovery. Takeovers by European companies were flat at $185.7 billion in the quarter, as Greece’s fiscal crisis and a slower economic recovery made executives more cautious about pursuing deals. Completing deals remains a challenge. Siemens AG shelved a possible sale of its hearing-aid unit in March after bids fell short of the 2 billion euros ($2.7 billion) sought, two people familiar with the plan said. In February, Sichuan Tengzhong Heavy Industrial Machinery Co. couldn’t win Chinese approval to buy General Motors Co.’s Hummer, the maker of military-inspired sport-utility vehicles. ”In spite of a high level of dialogue going on, these discussions have not resulted in many announced transactions,” said Moelis’s Raich. Private Equity LyondellBasell Industries AF rejected a purchase offer by India’s Reliance Industries Ltd. in March, saying it had a superior recovery plan for the chemical maker. Lyondell filed for bankruptcy in January 2009 after a leveraged buyout in 2007 saddled it with more than $22 billion of debt. Takeovers by private equity-firms are starting to return after the market froze during the credit crunch. Since Jan. 1, companies have raised more than $5 billion in the high-yield, high-risk leveraged-loan market to finance buyouts, Bloomberg data show. No similar transactions were arranged in the comparable period last year. ”The environment for M&A is healthy with deals that make good strategic sense,” said Bruce Evans , head of M&A for the Americas at Deutsche Bank. “While leveraged buyout activity has returned, we will not see the volume back to the level we saw in 2007 anytime soon.” To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net .

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Oil Exploration Off U.S. East Coast to Be Allowed in Obama’s Energy Plan

March 31, 2010

By Nicholas Johnston and Kim Chipman March 31 (Bloomberg) — President Barack Obama said today he will allow oil and natural-gas drilling off the U.S. East Coast and cancel development in Bristol Bay, Alaska. The president proposed permitting exploration in the Atlantic Ocean from Delaware south and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida. “Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources,” Obama said at an event at Andrews Air Force Base in Maryland. Obama’s comments are his most detailed to date on coastal exploration, a topic that has divided lawmakers and now threatens to derail efforts to reach a compromise on climate- change legislation. Democratic senators such as Bill Nelson of Florida have said they won’t support a bill providing for unlimited exploration, while U.S. oil companies press to increase domestic exploration. The expanded exploration will help reduce the nation’s reliance on foreign sources of oil while it begins to transition to new energy sources, the president said. ‘Broader Strategy’ “This announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy,” Obama said. “The answer is not drilling everywhere all the time.” The decision to scrap leasing in Bristol Bay overturns former President George W. Bush’s action lifting a long-time ban on drilling in the region. “It’s about protecting places that are special as well as looking at additional places that should be opened up for oil and gas development,” Interior Secretary Ken Salazar said earlier in an interview on Bloomberg Television. In the Atlantic Ocean, Obama is proposing immediate exploration 50 miles off the coast of Virginia and further study elsewhere for new oil and natural gas fields. “It’s absolutely a big change in policy because these areas have been closed for years,” said Stuart Traver, principal adviser at consultant Gaffney, Cline & Associates Ltd. in Singapore. “We’re really talking probably years before we see an impact in terms of new production.” Oil Prices Oil prices have swung from less than $20 a barrel in 2001 to a record $147.27 a barrel in July 2008 as investors bet demand growth would outstrip new findings. Crude oil rose 0.2 percent to $82.55 a barrel at 11:23 a.m. in New York trading, paring a rally of as much as 1.7 percent. “Our member companies are very interested in access and want to see areas opened up,” said Randall Luthi , president of the National Ocean Industries Association. The Washington-based trade group represents companies in the offshore energy industry, such as Irving, Texas-based Exxon Mobil Corp. A federal ban on drilling off the East and West Coasts and in parts of Alaska expired in 2008. Virginia Governor Bob McDonnell , a Republican, supports drilling off the coast of his state and this month signed legislation on how to distribute royalty revenue from energy production. Under Obama’s proposal, the Interior Department will allow the drilling off Virginia’s coast and open up the rest of the outer continental shelf in the south- and mid-Atlantic to oil exploration. Alaska Study In Alaska, along with proposing to cancel leases in Bristol Bay, sales in the Chukchi and Beaufort seas would be scrapped to allow further scientific study. “We will not be moving forward with respect to leasing in those areas until we develop information,” Salazar said. A sale in Alaska’s Cook Inlet will proceed. Obama said he expected to be criticized for his decision by critics on the right and left. To soften the blow, he spoke from an Air Force hanger at Andrews Air Force Base, highlighting an F-18 fighter and the light armored vehicle parked behind him. The Army and Marine Corps have been using a mixture of biofuels in the vehicle, and the Navy fighter jet, called a Green Hornet, will be flown for the first time on Earth Day in a few weeks, using a mix of biofuels. The Air Force had the first successful biofuel-powered test flight just last week, the president said. To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net ; Kim Chipman in Washington at KChipman@bloomberg.net

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Obama to Allow Oil Exploration Off U.S. East Coast as Part of Energy Plan

March 31, 2010

By Nicholas Johnston and Kim Chipman March 31 (Bloomberg) — President Barack Obama said today he will allow oil and natural-gas drilling off the U.S. East Coast and cancel development in Bristol Bay, Alaska. The president proposed permitting exploration in the Atlantic Ocean from Delaware south and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida. “Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources,” Obama said at an event at Andrews Air Force Base in Maryland. Obama’s comments are his most detailed to date on coastal exploration, a topic that has divided lawmakers and now threatens to derail efforts to reach a compromise on climate- change legislation. Democratic senators such as Bill Nelson of Florida have said they won’t support a bill providing for unlimited exploration, while U.S. oil companies press to increase domestic exploration. The expanded exploration will help reduce the nation’s reliance on foreign sources of oil while it begins to transition to new energy sources, the president said. ‘Broader Strategy’ “This announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy,” Obama said. “The answer is not drilling everywhere all the time.” The decision to scrap leasing in Bristol Bay overturns former President George W. Bush’s action lifting a long-time ban on drilling in the region. “It’s about protecting places that are special as well as looking at additional places that should be opened up for oil and gas development,” Interior Secretary Ken Salazar said earlier in an interview on Bloomberg Television. In the Atlantic Ocean, Obama is proposing immediate exploration 50 miles off the coast of Virginia and further study elsewhere for new oil and natural gas fields. “It’s absolutely a big change in policy because these areas have been closed for years,” said Stuart Traver, principal adviser at consultant Gaffney, Cline & Associates Ltd. in Singapore. “We’re really talking probably years before we see an impact in terms of new production.” Oil Prices Oil prices have swung from less than $20 a barrel in 2001 to a record $147.27 a barrel in July 2008 as investors bet demand growth would outstrip new findings. Crude oil rose 0.2 percent to $82.55 a barrel at 11:23 a.m. in New York trading, paring a rally of as much as 1.7 percent. “Our member companies are very interested in access and want to see areas opened up,” said Randall Luthi , president of the National Ocean Industries Association. The Washington-based trade group represents companies in the offshore energy industry, such as Irving, Texas-based Exxon Mobil Corp. A federal ban on drilling off the East and West Coasts and in parts of Alaska expired in 2008. Virginia Governor Bob McDonnell , a Republican, supports drilling off the coast of his state and this month signed legislation on how to distribute royalty revenue from energy production. Under Obama’s proposal, the Interior Department will allow the drilling off Virginia’s coast and open up the rest of the outer continental shelf in the south- and mid-Atlantic to oil exploration. Alaska Study In Alaska, along with proposing to cancel leases in Bristol Bay, sales in the Chukchi and Beaufort seas would be scrapped to allow further scientific study. “We will not be moving forward with respect to leasing in those areas until we develop information,” Salazar said. A sale in Alaska’s Cook Inlet will proceed. Obama said he expected to be criticized for his decision by critics on the right and left. To soften the blow, he spoke from an Air Force hanger at Andrews Air Force Base, highlighting and F-18 fighter and the light armored vehicle parked behind him. The Army and Marine Corps have been using a mixture of biofuels in the vehicle, and the Navy fighter jet, called a Green Hornet, will be flown for the first time on Earth Day in a few weeks, using a mix of biofuels. The Air Force had the first successful biofuel-powered test flight just last week, the president said. To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net ; Kim Chipman in Washington at KChipman@bloomberg.net

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Obama Will Propose Allowing Oil, Gas Drilling in Atlantic, Gulf of Mexico

March 31, 2010

By Nicholas Johnston and Kim Chipman March 31 (Bloomberg) — U.S. President Barack Obama will today announce proposals to allow oil and natural-gas drilling off U.S. coastlines in the Atlantic Ocean and Gulf of Mexico when he delivers a speech on energy security. Obama will propose allowing exploration off the coast of Virginia and, if a Congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the coast of Florida, according to an administration official speaking on the condition of anonymity. The new policies are designed to reduce the nation’s dependence on foreign oil and create jobs while taking environmental risks into account, the official said. “It’s absolutely a big change in policy because these areas have been closed for years,” said Stuart Traver, principal adviser at consultant Gaffney, Cline & Associates Ltd. in Singapore. “While it’s interesting, we’re really talking probably years before we see an impact in terms of new production.” Obama is providing his most detailed comments to date on coastal drilling, a topic that has long divided lawmakers and now threatens to derail efforts to reach a compromise on climate-change legislation. Democratic senators such as Bill Nelson of Florida have said they won’t support a bill providing for unlimited exploration, while U.S. oil companies press to increase domestic exploration. Oil prices have swung from less than $20 a barrel in 2001 to a record $147.27 a barrel in July 2008 as investors bet demand growth would outstrip new findings. Crude traded at $82.35 a barrel on the New York Mercantile Exchange at 3:02 p.m. Singapore time. Ban Expired “Our member companies are very interested in access and want to see areas opened up,” said Randall Luthi , president of the National Ocean Industries Association. The Washington-based trade group represents companies in the offshore energy industry, such as Irving, Texas-based Exxon Mobil Corp. A federal ban on drilling off the East and West Coasts and in parts of Alaska expired in 2008. Virginia Governor Bob McDonnell , a Republican, supports offshore drilling off his state and this month signed legislation on how to distribute royalty revenue from energy production. Under Obama’s proposal the Department of the Interior will allow drilling 50 miles off the coast of Virginia and open up the rest of the outer continental shelf in the south- and mid- Atlantic to oil exploration, the official said. In Alaska, Obama is proposing to cancel leasing in Bristol Bay, and cancel sales in the Chukchi and Beaufort seas to allow for further scientific study, the official said. A sale in Cook Inlet will proceed. Along with the announcement on offshore drilling, Obama will announce a final rule on increased fuel efficiency standards for cars and the purchase by the federal government of 5,000 hybrid cars and trucks. To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net ; Kim Chipman in Washington at KChipman@bloomberg.net

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Obama to Propose Allowing Oil, Gas Drilling in Atlantic, Gulf of Mexico

March 30, 2010

By Nicholas Johnston and Kim Chipman March 31 (Bloomberg) — U.S. President Barack Obama will today announce proposals to allow oil and natural-gas drilling off U.S. coastlines in the Atlantic Ocean and Gulf of Mexico when he delivers a speech on energy security. Obama will propose allowing exploration off the coast of Virginia and, if a Congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the coast of Florida, according to an administration official speaking on the condition of anonymity. The new policies are designed to reduce the nation’s dependence on foreign oil and create jobs while taking environmental risks into account, the official said. Obama is providing his most detailed comments to date on coastal drilling, a topic that has long divided lawmakers and now threatens to derail efforts to reach a compromise on climate-change legislation. Democratic senators such as Bill Nelson of Florida have said they won’t support a bill providing for unlimited exploration, while U.S. oil companies press to increase domestic exploration. “Our member companies are very interested in access and want to see areas opened up,” said Randall Luthi , president of the National Ocean Industries Association. The Washington-based trade group represents companies in the offshore energy industry, such as Irving, Texas-based Exxon Mobil Corp. Ban Expired A federal ban on drilling off the East and West Coasts and in parts of Alaska expired in 2008. Virginia Governor Bob McDonnell , a Republican, supports offshore drilling off his state and this month signed legislation on how to distribute royalty revenue from energy production. Under Obama’s proposal the Department of the Interior will allow drilling 50 miles off the coast of Virginia and open up the rest of the outer continental shelf in the south- and mid- Atlantic to oil exploration, the official said. In Alaska, Obama is proposing to cancel leasing in Bristol Bay, and cancel sales in the Chukchi and Beaufort seas to allow for further scientific study, the official said. A sale in Cook Inlet will proceed. Along with the announcement on offshore drilling, Obama will announce a final rule on increased fuel efficiency standards for cars and the purchase by the federal government of 5,000 hybrid cars and trucks. To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net ; Kim Chipman in Washington at KChipman@bloomberg.net

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RBC Capital Plans to Be Among the Top Ten Investment Banks in U.S. Market

March 30, 2010

By Doug Alexander March 30 (Bloomberg) — RBC Capital Markets plans to be a top 10 investment bank in the U.S. by attracting business from American companies worth as much as $10 billion, five times larger than its traditional client base. “Our goal over the next two to three years is to be top 10 in the U.S. market,” said Blair Fleming , who heads the U.S. investment-banking unit of Royal Bank of Canada in New York. RBC Capital Markets is expanding its investment-banking services to target larger companies and take U.S. market share from rivals such as Goldman Sachs Group Inc. and Deutsche Bank AG. Previously, the firm focused on “mid-market” businesses with a market value of $2 billion. “Our strategy is to basically build on the mid-market practice that we’ve had, but extend that up into the mid-cap space,” Fleming, 48, said in a March 25 interview in New York. RBC ranked 14th in the U.S. for managing equity financings last year, with $1.27 billion in deals. The Toronto-based lender was 21st for advising companies on takeovers, with 45 announced transactions worth $11.9 billion, according to Bloomberg data. Top-ranked JPMorgan Chase & Co. advised on $34 billion of stock sales while Morgan Stanley ranked No. 1 for mergers, with 136 deals worth $331.7 billion. RBC faces tough odds in trying to crack the top 10 for U.S. investment banks, according to Michael Holland , who oversees more than $4 billion as chairman of Holland & Co. in New York. “The history is not promising; it’s going to be an uphill climb for them,” Holland said in an interview. “The business is incredibly competitive and a lot of it has to do with relationships.” New Hires RBC hired 24 senior bankers from Wall Street firms in the past year to gain those relationships and add coverage of industries such as transportation, restructuring, and aerospace. The firm is also bulking up in areas such as leveraged finance, high-yield debt and acquisitions. “That’s very smart,” Holland said, of RBC’s recruitment efforts. “They’re increasing their odds of success by doing that.” RBC’s strategy may be paying off. The firm was the sole adviser for Triumph Group Inc.’s $984 million takeover of Vought Aircraft Industries Inc. from Carlyle Group announced March 23. That purchase came about eight months after the firm hired James Caldwell from Banc of America Securities to create an aerospace and defense business in New York. “This is exactly the kind of company we want,” Fleming said. “We wouldn’t have had that a year ago because we didn’t have the industry coverage.” Adds Bankers RBC has 254 investment bankers in the U.S. and is looking to hire more as it targets a top-10 ranking in mergers advice and equity sales. “Our pace has slowed down a bit, but you’ll still see us making significant additions over the next quarter,” he said. “What we’re looking to do is continue to broaden the bankers and clients that we have.” Fleming was appointed head of U.S. investment banking in January after leading the bank’s global syndicated loan business from Toronto. Royal Bank is Canada’s largest lender and the fifth-biggest commercial bank in North America by market value. Royal Bank fell 37 cents to C$59.45 in trading yesterday on the Toronto Stock Exchange. To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

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Triumph Carlyle Ink 144B Vought Deal

March 27, 2010

Aircraft components maker Triumph is acquiring Vought Aircraft Industries

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Stocks Show Economy Revving in U.S. as Cyclical Companies Crush Telephones

March 22, 2010

By Nick Baker and Rita Nazareth March 22 (Bloomberg) — Retailers erased their stock market losses since the collapse of Lehman Brothers Holdings Inc. and transportation companies doubled in a year, signs the advance in U.S. equities is just getting started. Amazon.com Inc. and Gap Inc. have wiped out declines of as much as 63 percent since the bear market began in October 2007 amid forecasts retailers’ profits will increase 63 percent through 2012. The Dow Jones Transportation Average, where earnings are projected to almost triple in two years, is beating the Standard & Poor’s 500 Index by 32 percentage points since March 2009, the widest gap for a rally since 1990. Investors seeking signals equities will keep rising are finding them in industries most tied to the economy, the basis for a century-old forecasting technique known as Dow Theory. While bears say the gains aren’t justified by earnings and that shares are climbing too fast , Stephen Lieber of Alpine Woods Capital Investors LLC and David Darst of Morgan Stanley are buying on speculation the expansion will revive profit growth. “This is not a junk stock rally,” said Lieber, who helps manage more than $7 billion in Purchase, New York. “This is a restoration-of-confidence rally. This is a business confidence rally.” Lieber owns Intel Corp. , the Santa Clara, California-based semiconductor maker that climbed to an 18-month high of $22.24 last week amid optimism sales to business customers are growing. Winning Streak The S&P 500 increased 0.9 percent and the MSCI World Index of stocks in 23 developed nations climbed 0.3 percent as both measures advanced for a third week. Government reports showing higher consumer spending and lower-than-expected inflation have pushed the Dow Jones Industrial Average up 3 percent in 2010, according to data compiled by Bloomberg. Futures on the S&P 500 slipped 0.8 percent as of 10:00 a.m. in London today. An exchange-traded fund that matches the performance of the U.S. benchmark index, the SPDR S&P 500 ETF Trust , rose 14 straight days through March 17, the longest streak in its 17- year history. The 11-day winning streak by the Dow transports that ended last week was the best since 1992, data compiled by Bloomberg show. Companies whose profits are most tied to changes in U.S. gross domestic product are beating those with the smallest connection to the economy by the widest margin on record. The Morgan Stanley Cyclical Index , a measure of 30 stocks from Dearborn, Michigan-based Ford Motor Co. to U.S. Steel Corp. in Pittsburgh, has surged 209 percent since March 6, 2009. It topped the Morgan Stanley Consumer Index, a gauge of companies such as Pfizer Inc. and ConAgra Foods Inc. that do relatively well during a contraction, by 147 percentage points. Twice the Gain The cyclical index has also provided almost double the return since Feb. 8, when the S&P 500 began rebounding from a three-week drop that erased 8.1 percent, according to data compiled by Bloomberg. Manufacturing and industrial stocks in the S&P 500 are up 11 percent in 2010, beating nine other groups in the index by at least 2 percentage points, data compiled by Bloomberg show. This is the first time since 1985 that the measure, which includes Chicago-based Boeing Co. , the world’s second-largest commercial plane-maker, and General Electric Co. in Fairfield, Connecticut, the biggest supplier of power turbines, has led this far into a year, according to Birinyi Associates Inc., the Westport, Connecticut-based research firm founded by Laszlo Birinyi . “We are still bullish on risk assets,” said Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, which oversees $1.6 trillion. “We see a multiyear cyclical bull market.” High Velocity The speed of the rebound in stocks since Feb. 8 is reason to doubt its sustainability, says Andrew Lapthorne , global head of quantitative strategy at Paris-based Societe Generale. The relative strength index using 14 days of data for the SPDR S&P 500 ETF rose to 76.76 on March 17, the highest level since October 2006. Surges in the RSI mean a security may have climbed too far, too fast. Rallying stocks have pushed the S&P 500’s price relative to earnings in the last 12 months to 18.6 times . The average multiple over the last 56 years is 16.6, according to data compiled by Bloomberg. “The long-term valuation expectations are way, way too high,” said Lapthorne. “I don’t think there is much value in the markets. It has the potential to drive violently downwards.” Amazon, Old Navy Investors should bet that companies with the best earnings prospects will outperform, Robert Buckland , an equity strategist at Citigroup Inc. in London, wrote in a March 17 report. Stocks that fell the most in the 2007 to 2009 bear market helped propel the S&P 500 during the past 12 months and cyclical stocks will help lead the market in the next two years, Buckland said. Amazon , the Seattle-based owner of the world’s biggest Internet retailer, has doubled since the stock market bottomed in 2009 and gained 12 percent over the last six weeks. San Francisco-based Gap, which runs namesake clothing stores and Old Navy, is up 22 percent in the past six weeks. Both stocks helped send the S&P 500 Consumer Discretionary Index , a measure of companies reliant on Americans’ spending, past its level on Sept. 12, 2008, just before Lehman’s bankruptcy froze credit markets and $1.7 trillion in bank losses spurred the worst recession in seven decades. Buffett’s Indicator The average analyst estimate for Amazon’s 2011 earnings has increased 14 percent to $4.78 a share this year. Gap’s has risen 4.8 percent to $1.73. Profit for companies in the consumer discretionary index are forecast to surge an average of 57 percent to $21.66 a share through the end of 2012, according to data compiled by Bloomberg. Warren Buffett said on Nov. 3 that he made an “all-in wager” on the strength of the U.S. economy when he bought Fort Worth, Texas-based railroad Burlington Northern Santa Fe Corp. for $27 billion, the biggest purchase of his career. Buffett, 79, the billionaire chairman of Berkshire Hathaway Inc. in Omaha, Nebraska, told ABC News last year that U.S. rail- freight traffic is among the most important measures of economic health. Trains hauled 287,837 carloads for the week ended March 13, near the highest level in a year, data from the Washington- based Association of American Railroads show. ‘Coming Back’ The rebound in shipping has helped push the Dow Jones Transportation Average up 104 percent since the market low, compared with the S&P 500’s 71 percent jump. Companies in the gauge are projected to report a 173 percent increase in profits in the next two years, led by a sixfold gain at Honolulu-based Alexander & Baldwin Inc. , which operates barges, data on operating profits compiled by Bloomberg show. By comparison, earnings among S&P 500 companies may grow 52 percent during that time, the data show. “The cyclical stocks are coming back because the economy is coming back,” said Jeffrey Saut , the chief investment strategist at Raymond James & Associates, which manages $230 billion in St. Petersburg, Florida. “I’m still bullish into the summer.” Dow Theory, developed by Wall Street Journal co-founder Charles Dow in the 1800s, suggests the rally in U.S. equities may continue. Dow’s transportation and industrial averages both reached the highest levels since October 2008 last week. Stocks that fell the most during the bear market plunge have been the biggest winners in the rebound, according to data compiled by Bloomberg. Financial shares in the S&P 500 have risen 152 percent in the past year. Investors from Paulson & Co. to Fairholme Capital Management are loading up on the group. Regulatory filings show banks, brokerages and insurers make up 19 percent of hedge fund equity holdings, the biggest allocation compared with other industries. “I’m bullish,” said John Carey , a Boston-based money manager at Pioneer Investment Management, which oversees more than $220 billion. “The economy is improving, corporate earnings look good and there’s still great value in the market.” To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloombeg.net .

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Sahara Group, Rendezvous Sports to Pay $703 Million for IPL Cricket Teams

March 21, 2010

By Madelene Pearson and Jay Shankar March 21 (Bloomberg) — Sahara Group and Rendezvous Sports World Ltd. won the rights to own the ninth and 10th teams in the Indian Premier League , the world’s richest cricket franchise, for a combined $703 million. Sahara Adventure Sports Ltd. bid $370 million for the team representing the western Indian city of Pune, while Rendezvous won the franchise for Kochi, in southern Kerala state, with a $333 million offer, IPL Commissioner Lalit Modi said in a televised conference today. The Sahara Group sponsors India’s national cricket team. The $370 million bid is more than triple the $112 million that Mukesh Ambani , Asia’s richest man, paid to buy the Mumbai team in 2008. The popularity of the three-hour version of cricket that the teams play has helped the IPL more than double its brand value to $4.13 billion in 2010 from $2.01 billion in 2009, according to London-based Brand Finance Plc. “The bidding was extremely competitive” with winners selected from a field of five, Modi said. “We are extremely happy that we have got two robust bids, it goes to show that the Indian Premier League is on the upward trend.” The amount bid for the two new teams exceeds the total price paid for the other eight teams, Modi said today. The eight original team owners include Ambani, chairman of Reliance Industries Ltd. ; billionaire Vijay Mallya , chairman of UB Group; Rupert Murdoch’s son, Lachlan ; and Indian movie actor Shah Rukh Khan . Brand Finance increased the IPL’s valuation after Multi Screen Media Pvt., a unit of Tokyo-based Sony Corp. , signed a nine-year broadcast deal before the 2009 season for a total of 82 billion rupees ($1.8 billion). Other Bidders The latest auction was initially scheduled for March 7. Bidders originally were required to have a net worth of at least $1 billion and to pay an advance bank guarantee of $100 million if they won. IPL’s Modi dropped those requirements after several companies complained. Other bidders for the two new teams included Adani Enterprises Ltd. and a group backed by Videocon, Modi said. The IPL is unlikely to add teams in the near future, he said. “We have 10, we are going to go with 10 for the time being, I don’t foresee an expansion of the IPL for many, many years to come, but you never know,” Modi said. The IPL is fortified by the world’s second-fastest growing major economy, where gross domestic product may expand 8.2 percent in the fiscal year starting April 1, the Finance Ministry said Feb. 25. That’s up from an estimated 7.2 percent this year. To contact the reporters on this story: Madelene Pearson in Mumbai on mpearson1@bloomberg.net ; Jay Shankar in Bangalore at jshankar1@bloomberg.net

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Teva Said to Beat Pfizer, Actavis in $4.8 Billion Ratiopharm Acquisition

March 18, 2010

By Aaron Kirchfeld and Naomi Kresge March 18 (Bloomberg) — Teva Pharmaceutical Industries Ltd. is close to an agreement to buy Ratiopharm GmbH for about 3.5 billion euros ($4.78 billion), ending a nine-month battle for Germany’s second-biggest maker of generic medicines, two people familiar with knowledge of the sale said. Petah Tikva, Israel-based Teva beat Pfizer Inc. and Actavis Group hf, which also competed in the auction, according to the people, who declined to be named as the process isn’t public. It is Teva’s biggest purchase since buying Barr Pharmaceuticals Inc. for $7.4 billion in 2008. Ratiopharm would give the Israeli drugmaker a top spot in the $8.6 billion German market for copied drugs, the world’s second-largest after the U.S., according to Norwalk, Connecticut-based IMS Health Inc. Teva would be paying about 2.2 times 2009 sales, more than the 1.5 times multiple Cephalon Inc. agreed to pay for Ratiopharm’s Swiss affiliate Mepha Gruppe last month. “It’s the last major piece in the jigsaw for Teva in Europe,” said Frances Cloud , an independent analyst in London, in an interview before the agreement was announced. “It will put them comfortably in the frame to deliver their 2015 targets for Europe.” Teva spokesman Yossi Koren declined to comment. Ratiopharm, based in Ulm, has scheduled a press conference for 2 p.m. local time in Cologne today. Vivien Kremer , a spokeswoman for Ratiopharm’s investment holding, also declined to comment. Takeovers and growth outside the U.S., Teva’s largest market, are part of Chief Executive Officer Shlomo Yanai ’s goal to more than double annual revenue to $31 billion by 2015 as rising health-care costs push patients and policy makers toward lower-priced copied drugs. Teva gets less than 25 percent of its sales in Europe. Competition The Israeli company, which is the world’s largest maker of generic drugs, is targeting $6.8 billion in net income five years from now while absorbing $1 billion in lost revenue as a result of competition for Copaxone, its top-selling product, Yanai told analysts in New York in January. Ratiopharm was put up for sale in June as owner Ludwig Merckle sought funds to repay debt amassed by his father Adolf Merckle , Ratiopharm’s founder, who committed suicide in January 2009 after making wrong-way bets on the stock market. Mepha was also sold by the Merckles. The German company reported 307 million euros in earnings before interest, tax, depreciation and amortization last year on 1.6 billion euros in revenue. The takeover would catapult Teva into the top three generic-drug makers in Germany, alongside Novartis AG’s Hexal unit and Stada Arzneimittel AG . The deal also gives it 3 of the top 10 generic products by volume in the German retail drug market and 5 of the top 10 generic drugs sold to hospitals, according to data from IMS Health. The Israeli drugmaker up to now had none of the top generics in Germany. Teva last year bought stakes in OncoGenex Pharmaceuticals Inc., gaining rights to an experimental cancer therapy, and Taisho Pharmaceutical Industries Ltd., increasing its access to the Japanese generic-drug market. To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net ; Naomi Kresge in Zurich at nkresge@bloomberg.net

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Teva Said to Beat Pfizer, Actavis in $4.8 Billion Ratiopharm Acquisition

March 18, 2010

By Aaron Kirchfeld and Naomi Kresge March 18 (Bloomberg) — Teva Pharmaceutical Industries Ltd. is close to an agreement to buy Ratiopharm GmbH for about 3.5 billion euros ($4.78 billion), ending a nine-month battle for Germany’s second-biggest maker of generic medicines, two people familiar with knowledge of the sale said. Petah Tikva, Israel-based Teva beat Pfizer Inc. and Actavis Group hf, which also competed in the auction, according to the people, who declined to be named as the process isn’t public. It is Teva’s biggest purchase since buying Barr Pharmaceuticals Inc. for $7.4 billion in 2008. Ratiopharm would give the Israeli drugmaker a top spot in the $8.6 billion German market for copied drugs, the world’s second-largest after the U.S., according to Norwalk, Connecticut-based IMS Health Inc. Teva would be paying about 2.2 times 2009 sales, more than the 1.5 times multiple Cephalon Inc. agreed to pay for Ratiopharm’s Swiss affiliate Mepha Gruppe last month. “It’s the last major piece in the jigsaw for Teva in Europe,” said Frances Cloud , an independent analyst in London, in an interview before the agreement was announced. “It will put them comfortably in the frame to deliver their 2015 targets for Europe.” Teva spokesman Yossi Koren declined to comment. Ratiopharm, based in Ulm, has scheduled a press conference for 2 p.m. local time in Cologne today. Vivien Kremer , a spokeswoman for Ratiopharm’s investment holding, also declined to comment. Takeovers and growth outside the U.S., Teva’s largest market, are part of Chief Executive Officer Shlomo Yanai ’s goal to more than double annual revenue to $31 billion by 2015 as rising health-care costs push patients and policy makers toward lower-priced copied drugs. Teva gets less than 25 percent of its sales in Europe. Competition The Israeli company, which is the world’s largest maker of generic drugs, is targeting $6.8 billion in net income five years from now while absorbing $1 billion in lost revenue as a result of competition for Copaxone, its top-selling product, Yanai told analysts in New York in January. Ratiopharm was put up for sale in June as owner Ludwig Merckle sought funds to repay debt amassed by his father Adolf Merckle , Ratiopharm’s founder, who committed suicide in January 2009 after making wrong-way bets on the stock market. Mepha was also sold by the Merckles. The German company reported 307 million euros in earnings before interest, tax, depreciation and amortization last year on 1.6 billion euros in revenue. The takeover would catapult Teva into the top three generic-drug makers in Germany, alongside Novartis AG’s Hexal unit and Stada Arzneimittel AG . The deal also gives it 3 of the top 10 generic products by volume in the German retail drug market and 5 of the top 10 generic drugs sold to hospitals, according to data from IMS Health. The Israeli drugmaker up to now had none of the top generics in Germany. Teva last year bought stakes in OncoGenex Pharmaceuticals Inc., gaining rights to an experimental cancer therapy, and Taisho Pharmaceutical Industries Ltd., increasing its access to the Japanese generic-drug market. To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net ; Naomi Kresge in Zurich at nkresge@bloomberg.net

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Middle Class Losing Health Insurance Faster Than The Rich Or Poor

March 16, 2010

It’s the biggest “doughnut hole” of them all: Members of the middle class are losing their health insurance faster than any other income group, according to a new report from the Robert Wood Johnson Foundation. The number of middle-income earners covered by employer health insurance fell by three million from 2000 to 2008, and government programs and the individual market aren’t picking up the slack. The total number of uninsured middle-income earners rose from 10.5 million to 12.9 million, representing 16.2 percent of the income bracket — a bigger increase than for any other income group. “It really underscores how the problem of uninsurance is not something simply affecting lower-income Americans but is increasingly affecting the middle class,” said Brian Quinn, the foundation’s research and evaluation office. The most recent Census Bureau estimate puts the total uninsured population at 46.3 million. Just 66 percent of people in families earning between $45,000 and $85,000 are insured through an employer plan — 52.7 million people, down from 55.5 million eight years prior — a drop of nearly seven percentage points. People who earn less money were more likely to lose employer coverage, but also more likely to be covered by a government program like Medicaid. According to the report, only about half of the decline in employer-sponsored coverage for middle-income earners was offset by government insurance programs. Those who missed the safety net have been flung into the cold-hearted individual market, where insurance companies deny coverage based on preexisting conditions and charge exorbitant, ever-increasing premiums. (Insurance companies, whose executives earn million-dollar salaries, routinely plead that other industries within the health sector have much fatter profit margins.) “For a lot of middle class Americans, the individual market is not a real option,” said Quinn. According to the report, the cost for an employer to offer individual and family plans to workers increased 43 percent and 55.6 percent, respectively, during the eight-year period. The amount employees paid for the single and family programs increased 64.5 percent and 80.5 percent. Median household income has fallen 3.5 percent to $51,233. Click HERE to download a PDF of the report, prepared for the Robert Wood Johnson Foundation by researchers at the State Health Access Data Assistance Center, University of Minnesota–Using data from the U.S. Census Bureau (1999, 2000, 2007 and 2008) and the Medical Expenditure Panel Survey, conducted by the Agency for Healthcare Research and Quality (1999-2001 and 2008).

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Gilbert B. Kaplan: If China Throws Out Google, We Should Throw Out their Computers

March 16, 2010

The concept of reciprocity in trade has a long and storied history, and one that ought to be remembered today. Simply put, if we allow market access for the fruits of the great Chinese industrial machine, creating jobs for 100 million Chinese workers (the number of Chinese employed in manufacturing), they need to allow access to our creative enterprises, such as Google. But not only is Google being forced out by a series of actions and deliberate inactions of the Chinese government, but Google’s affiliate, YouTube, was never even let into China in the first place. It is perennially blocked by their “great firewall”. Nor do most other U. S. websites have unfettered access to China. eBay has left China. Many newspaper websites are regularly censored. The Chinese competitive sites that are willing to go along with the censorship and the dictates of the Chinese government, like Baidu and Alibaba, are the dominant players on the Chinese internet. This is not only a question of freedom of speech. It is also a trade barrier and a major economic problem for the United States. Google alone has over 20,000 employees, many in the United States, and they and the company are undercut by these actions, as are the workers at eBay and other website companies. We are struggling to rebuild our manufacturing sector, but while that occurs, we need to make sure companies like Google have full access to the largest internet market in the world, China. If a company cannot access the largest market in the world for its product it loses enormous revenue opportunities. And as a matter of economies of scale and ability to move down the learning curve, it becomes economically disadvantaged versus its competitors going forward. There had been an implicit agreement about the internet made between China and the United States. The United States agreed to lower all its tariffs on high technology manufactured goods to zero, and we agreed to let in all that China could send over here, no questions asked. What is the result of that? The result is that substantially all United States computers are now made in China. We even went so far as to allow the first U. S. PC maker, IBM, to sell its PC division to a Chinese company, Lenovo. That sale could have been stopped, under a U. S. law called the Exon-Florio Act, but not only did we not stop it, we did not even question it. Why? Because we believed that as China industrialized and moved along the economic and knowledge highway they would become a great market for those goods where we continue to have an advantage, things like search engines, and streaming video, and innovative web sites. We believed they would keep their side of the bargain. But they have not. So we are now in a completely untenable position, as a country and as an economy. The hardware of the internet, computers, disk drives, semiconductors, peripherals, are all made in China, not here. Much of the software of the internet, which is made here, advanced here, and continually reinvented here, is banned from China. So their industries grow, they develop more jobs, their economy avoids the recession. Our economy shrinks, our job base deteriorates, and our creative enterprises suffer because they are denied access to the largest internet market in the world. And the trend is only getting worse. More and more high-tech producers are moving their factories to China, because of subsidies, cheap labor, low environmental standards, and currency manipulation. Ironically, it was only a short time ago that we thought computers and semiconductors were the kind of creative industries we would always keep in the U. S. But they have now basically left our shores, though the even more creative side of the internet has not (yet). The largest computer manufacturing area in the world is in Guangdong Province, north of Hong Kong, where Foxconn employs 200,000 people as a subcontractor to many U. S. and other worldwide computer brands. While this is occurring, thousands of U. S. engineers and assembly line workers are unemployed. The Chinese government wants trade to be a completely one-sided affair where China builds up knowledge and industrial might and trade reserves and we get nothing. If there is any area where we clearly have a comparative advantage it is the complex and dynamically creative space that Google occupies. In 2009, China exported $126 billion of computers and electrical equipment to the United States. We exported a paltry $14 billion to them. Given these favorable terms of trade, one would think they would be careful with our further downstream internet companies, but they are not. Demanding reciprocity is not protectionist and should not subject us to criticism from China, the WTO, or even the most free of free traders. Reciprocity is what the trade agreements of the world are about. We let you sell in our market the goods you can make more efficiently and more creatively. You let us sell in your market the goods and services we produce. If China shuts out our internet companies, we need to shut out their hardware that the internet runs on.

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Aaron Harber: Set America’s CEOs Free: Why Corporate Chieftains Should Talk More

March 15, 2010

At the recent IHS CERA Week — considered the world’s premiere international energy conference — a phalanx of chief executive officers made their cases to a generally friendly audience filled with energy industry leaders. The audience — whose members paid $7,500 to attend the elite event — was surprised at times by the differences in viewpoints and opinions each executive expressed — with many disagreeing with the others in what proved to be a thought-provoking, almost existential “debate” on issues ranging from future energy prices to the roles to be played by competing energy resources to corporate responsibility to Climate Change. The common element throughout the event, however, was how impressive the executives were in their knowledge, articulateness, and ability to make the case for their perspectives. Most even exhibited a keen sense of humor — a necessity when speaking any time after lunch. Conference keynote speakers such as Energy Secretary Steven Chu, Presidential Economic Adviser and former Treasury Secretary Larry Summers, CNN Senior Analyst and Harvard Professor David Gergen, and Washington Post columnist David Ignatius were expected to be smart, articulate, entertaining, and humorous — and were. But the private sector professionals were their equals in every respect — demonstrating superb speaking abilities. Andrew Liveris, CEO of DOW Chemical, brought down the house when he mentioned his company’s annual utility bill was $30 billion and then, after pausing before the 2,000 energy industry attendees, said “You’re welcome.” It was obvious when top industry leaders such as Saudi ARAMCO President Khalid Al-Falih, ConocoPhillips CEO James Mulva, Edison International CEO Ted Craver, GDF SUEZ President Jean-Francois Cirelli, Apache CEO Steve Farris, Baker Hughes CEO Chad Deaton, TOTAL Gas & Power President Phillippe Boisseau, PG&E CEO Peter Darbee, Spectra Energy CEO Greg Ebel, American Electric Power CEO Michael Morris, RasGas CEO Hamad Rashid Al Mohannadi or Southern Company CEO David Ratliffe spoke, they knew the issues and had the answers — and could deliver information in a compelling and engaging manner. Today many CEO’s hide behind communications and public relations staffs. This is a mistake and represents a loss for companies who waste such a valuable resource. While their time is limited due to their responsibilities, CEO’s often are the best spokespersons for their organizations. And when it comes to public policy related to energy issues, they need to become far more engaged — making the case for their perspectives and being willing to debate the issues with those who have different views. The conference demonstrated there are no better people to do this than CEO’s — the people who know better than anyone else the issues, their industries, their companies, their business partners, their customers, and the public policies under which they function. These men and women should not shy away from those who disagree with them. If CEOs more actively engaged in public debate, it would give everyone the chance to hear what the needs and concerns of all stakeholders are. And that would be good for CEO’s to hear other opinions as well. In addition, such an initiative creates the opportunity to create relationships which can serve the interests of companies, their customers, other stakeholders, and members of the public. Furthermore, this has the potential to positively impact regulatory requirements under which different industries labor. Although not every CEO is a great public speaker and or a great debater, most are. They rarely obtained their positions by being wallflowers. It’s time to let them bloom and get out in the public arena more than ever before. If they do, everyone will benefit from the information they have, the knowledge they can share, the caring and commitment they can convey, and the sense of humor they have. It also is an opportunity for the CEOs to get new information and better understand the concerns of others. Let a thousand CEOs bloom! ========================================================================= Aaron Harber hosts ” Colorado Election 2010 TM” seen Mondays at 8:00 pm on COMCAST Entertainment Television and viewable 24/7 at www.Colorado2010.com. He also hosts ” The Aaron Harber Show ” seen on CET and at www.HarberTV.com. Send e-mail to Aaron@HarberTV.com. (C) Copyright 2010 by Aaron Harber and USA Talk Network, Inc. All rights reserved. =========================================================================

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CF Industries, Terra Agree to $4.7 Billion Merger After Yara Withdraws Bid

March 12, 2010

By Serena Saitto March 13 (Bloomberg) — Terra Industries Inc. , the fertilizer maker selling itself to CF Industries Holdings Inc. , will be paid more than twice CF’s original bid after rebuffing its suitor for more than a year while holding talks with rivals including Yara International ASA. CF’s bid climbed from an original $2.1 billion in January 2009 to the $4.7 billion offer that Sioux City, Iowa-based Terra said yesterday it accepted. Following CF’s first bid, Terra Chief Executive Officer Michael Bennett held preliminary conversations with competitors in the crop-nutrient industry to gauge their interest in an alternative deal, Terra said in the filing yesterday. A Terra spokeswoman declined to identify the other companies. After CF made public its original offer for Terra on Jan. 15, 2009, Yara CEO Joergen Ole Haslestad telephoned Bennett to express Yara’s continued interest in a takeover. Terra had rebuffed advances from Yara after talks between Bennett and then-Yara CEO Thorleif Enger from May to July 2008, according to the filing. As the year progressed, Terra rejected seven unsolicited offers from CF before Yara made its offer public. “No doubt that Terra did a great job for its shareholders,” said Stephen Velgot , a special situations analyst at Susquehanna International Group LLP in New York who wasn’t involved in the transaction. While pursuing Terra, Deerfield, Illinois-based CF fended off its own hostile suitor, Calgary-based Agrium Inc., which yesterday said it would allow its $5.43 billion offer for CF to expire. CF fell $3.88, or 3.9 percent, to $96.73 yesterday in New York Stock Exchange composite trading , paring its gain so far this year to 6.6 percent. Terra climbed 44 percent in the same period, while Agrium gained 12 percent. ‘Emptied Its Pockets’ Velgot said CF stock is likely to outperform its peers, given its currently discounted valuation. CF said it “emptied its pockets” with its seventh offer for Terra on Dec. 4 and “had at most nickels and quarters left in the context of signing a transaction,” according to the filing. The company withdrew its bid on Jan. 14. Yara agreed to buy Terra a month later for $4.1 billion. Only then did CF understand that Terra was up for sale, said a person familiar with CF’s strategy, explaining why CF waited for Yara’s move to double its first offer. The waiting added $123 million to CF’s tab for Terra, since CF paid the break-up fee its target owed to Oslo-based Yara, according to the filing. “CF went to great pain to sustain its independence from Agrium,” Velgot said. “Only time will tell if it was the right thing to do.” To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net .

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CF Industries, Terra Agree to $4.7 Billion Merger After Yara Withdraws Bid

March 12, 2010

By Serena Saitto March 13 (Bloomberg) — Terra Industries Inc. , the fertilizer maker selling itself to CF Industries Holdings Inc. , will be paid more than twice CF’s original bid after rebuffing its suitor for more than a year while holding talks with rivals including Yara International ASA. CF’s bid climbed from an original $2.1 billion in January 2009 to the $4.7 billion offer that Sioux City, Iowa-based Terra said yesterday it accepted. Following CF’s first bid, Terra Chief Executive Officer Michael Bennett held preliminary conversations with competitors in the crop-nutrient industry to gauge their interest in an alternative deal, Terra said in the filing yesterday. A Terra spokeswoman declined to identify the other companies. After CF made public its original offer for Terra on Jan. 15, 2009, Yara CEO Joergen Ole Haslestad telephoned Bennett to express Yara’s continued interest in a takeover. Terra had rebuffed advances from Yara after talks between Bennett and then-Yara CEO Thorleif Enger from May to July 2008, according to the filing. As the year progressed, Terra rejected seven unsolicited offers from CF before Yara made its offer public. “No doubt that Terra did a great job for its shareholders,” said Stephen Velgot , a special situations analyst at Susquehanna International Group LLP in New York who wasn’t involved in the transaction. While pursuing Terra, Deerfield, Illinois-based CF fended off its own hostile suitor, Calgary-based Agrium Inc., which yesterday said it would allow its $5.43 billion offer for CF to expire. CF fell $3.88, or 3.9 percent, to $96.73 yesterday in New York Stock Exchange composite trading , paring its gain so far this year to 6.6 percent. Terra climbed 44 percent in the same period, while Agrium gained 12 percent. ‘Emptied Its Pockets’ Velgot said CF stock is likely to outperform its peers, given its currently discounted valuation. CF said it “emptied its pockets” with its seventh offer for Terra on Dec. 4 and “had at most nickels and quarters left in the context of signing a transaction,” according to the filing. The company withdrew its bid on Jan. 14. Yara agreed to buy Terra a month later for $4.1 billion. Only then did CF understand that Terra was up for sale, said a person familiar with CF’s strategy, explaining why CF waited for Yara’s move to double its first offer. The waiting added $123 million to CF’s tab for Terra, since CF paid the break-up fee its target owed to Oslo-based Yara, according to the filing. “CF went to great pain to sustain its independence from Agrium,” Velgot said. “Only time will tell if it was the right thing to do.” To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net .

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Stocks in U.S. Fluctuate as Drop in Consumer Confidence Offsets Sales Data

March 12, 2010

By Rita Nazareth March 12 (Bloomberg) — U.S. stocks drifted between gains and losses a day after the Standard & Poor’s 500 Index closed at a 17-month high as a drop in consumer confidence overshadowed an unexpected increase in retail sales Declines in Walt Disney Co. and Boeing Co. dragged on the Dow Jones Industrial Average as the decrease in the Reuters/ University of Michigan preliminary consumer sentiment index signaled continuing concern over the job market. Pfizer Inc. slid 1 percent after its drug failed to halt the progression of advanced breast tumors. Supervalu Inc. surged 5.7 percent on takeover speculation. “It looks like confidence is beginning to wane,” said Michael Mullaney , who manages $9 billion at Fiduciary Trust Co. in Boston. “Confidence is going to suffer until we get real improvement on the jobs front. In addition, the stock market is a little bit extended right now. It wouldn’t surprise me if we get a minor pullback from here.” The S&P 500 rose less than 0.1 percent to 1,150.51 at 2:13 p.m. in New York. The Dow rose 8.92 points, or less than 0.1 percent, to 10,620.76. Both gauges retreated at least 0.2 percent earlier. U.S. stocks rose for a third day yesterday, sending the S&P 500 Index to the highest level since October 2008, as Citigroup Inc. led a rally in bank shares. The S&P 500 closed at a 15-month high of 1,150.23 on Jan. 19, and then plunged 8.1 percent through Feb. 8 on concern that European nations including Greece will fail to pay back debt and speculation that the Fed will need to rein in emergency stimulus measures as the economy improves. The index has since erased that loss to extend its rebound since March 9, 2009, to 70 percent through yesterday. ‘Half Full’ “The glass may be half full, but people are not quite certain they can hold on to the glass,” said Jason Pride , director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia, which manages $18 billion. “ The market is jittery. Every little piece of news will make people nervous or happy. On top of that, the excess debt situation throughout the developed markets is a big headwind. That will keep economic growth at a subpar level.” Health-care stocks had the second-biggest decline among 10 groups in the S&P 500, dropping 0.4 percent collectively. Pfizer retreated 1 percent to $17.11. The world’s largest drugmaker said the cancer drug Sutent failed to halt the progression of advanced breast tumors in two studies. The company also stopped a trial of an experimental medicine to treat lung malignancy. Abbott, Citigroup Abbott Laboratories fell 2.5 percent to $54.15. The maker of the arthritis medicine Humira was cut to “sell” from “hold” at Citigroup Inc., which said the company may face “underlying profitability trouble” this year. Citigroup Inc. fell for the first time in nine days after Oppenheimer & Co. said the stock is fairly valued and under a “cloud” as long as the U.S. government remains a major shareholder. Citigroup dropped 3.7 percent to $4.03, after yesterday rising to the highest since November. Still, financial shares in the S&P 500 advanced for an 11th straight day, the group’s longest winning streak since at least 1989. United Technologies Corp. slipped 0.8 percent to $71.44. The maker of Pratt & Whitney jet engines said it expects 2010 earnings per share of $4.40 to $4.65. The average estimate of analysts surveyed by Bloomberg was $4.64 a share. Schwab, Pall Charles Schwab Corp. sank 2.4 percent to $18.65. after saying it expects first-quarter earnings to be as much as 4 cents a share lower than its fourth-quarter results. Fourth- quarter net income was 14 cents. The average estimate of analysts surveyed by Bloomberg was for a first-quarter profit of 15 cents a share. Pall Corp. slumped 4.8 percent to $38.88. The producer of filters for drugmakers and refineries forecast 2010 earnings excluding some items of $2.05 a share at most. On average, the analysts surveyed by Bloomberg estimated profit of $2.07. CF Industries Holdings Inc. lost 3.6 percent to $96.97 after Agrium Inc. said it will let its $5.43 billion offer for the fertilizer producer expire and won’t try to elect nominees to CF’s board. Separately, Yara International ASA declined to raise its $4.1 billion offer for Terra Industries Inc. , leaving the way open for rival suitor CF Industries. Terra said March 10 it favored a $4.71 billion offer from CF Industries and planned to terminate an earlier agreement with Yara unless the Norwegian company counterbid. Terra’s shares fell 1.3 percent to $46.28. Small Caps Bets against smaller U.S. stocks have reached the highest level in seven months as traders speculate the group’s record valuation will lead to declines. Investors boosted bearish bets in 2010 even as the shares rallied on signs the U.S. economy is strengthening. More than 8 percent of shares among companies in the Russell 2000 Index have been sold short, the highest level in at least a year. Benchmark indexes advanced at the start of trading after the Commerce Department said purchases at U.S. retailers increased 0.3 percent last month, compared with a 0.2 percent drop forecast in a Bloomberg survey of economists. ‘Grinding Slog’ “While I don’t have any reason to think the 2010 equity market will be as strong as 2009 was, you can probably have a reasonably close to average year,” said Stephen Wood , who helps manage $176 billion as chief market strategist for Russell Investments in New York. “There’s going to be a measureable, discernable upward bias. It’s going to be a grinding slog, but the equity market will be up higher a year from now than it is today.” A gauge of S&P 500 retailers advanced 1.6 percent. Sears Holdings Corp. and Macy’s Inc , the largest U.S. department-store companies, gained at least 1.4 percent. Monsanto Co. rose 1.2 percent to $72.46. The company, facing antitrust probes into its genetically modified seeds, may benefit from previous court rulings in which intellectual property rights trumped competition concerns, according to antitrust lawyers. Supervalu Inc. surged 5.7 percent to $16.99 on speculation the second-largest grocery chain will be acquired. RF Micro Devices Inc. advanced 4 percent to $4.92. The maker of semiconductor products rose after it was picked by CNBC’s “Mad Money” television show host Jim Cramer on potential growth and market-share gains. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net .

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Lyondell Will Pursue $3.25 Billion of Debt Financing After Bankruptcy Exit

March 12, 2010

By Jeran Wittenstein and Tiffany Kary March 12 (Bloomberg) — Lyondell Chemical Co. plans to borrow $3.25 billion to repay some existing debt after it emerges from bankruptcy protection. The chemical maker, based in Houston, plans to sell senior secured bonds and borrow through a senior term loan, according to a statement distributed by PRNewswire. It also plans to raise $2.8 billion in a rights offering. Lyondell said March 8 that its plan to reorganize by repaying its $8 billion bankruptcy loan and giving an equity stake in the new company to lenders is a better deal for creditors than a $14.5 billion purchase offer by India-based Reliance Industries Ltd. U.S. Bankruptcy Court Judge Robert Gerber in Manhattan yesterday approved Lyondell’s reorganization terms valuing the company at $15.2 billion over the objections of a group of lenders. Gerber said Lyondell’s disclosure statement has enough information about how the company is valued, paving the way to the company’s planned April 30 exit from bankruptcy. Gerber also approved a settlement among unsecured creditors and senior lenders over Lyondell’s $22 billion buyout in 2007. The group of lenders, who said the company was being undervalued, said backers of the rights offering — Access Industries Holdings LLC, Apollo Management LP and Ares Corporate Opportunities Fund III — could benefit from an artificially low valuation by getting stock at a discount. Bank lenders would also benefit from a low valuation because they could be overpaid on their claims, and management would get stock at a lower price too, lawyers for the group said in court documents. Bridge Loans Lyondell characterized the objectors as a small group that held only about $250 million, or 2.6 percent, of the bridge loans. David Harpole , a Lyondell spokesman, didn’t immediately return a voicemail message seeking comment after regular business hours yesterday. The proceeds from the sale of the notes, together with the loan and a new European securitization facility, will be used to repay debts including the chemical maker’s debtor-in-possession loan and an existing European securitization facility. The case is In re Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporters on this story: Jeran Wittenstein at jwittenstei1@bloomberg.net ; Tiffany Kary in New York at tkary@bloomberg.net .

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12 Industries That Will Be Adding Jobs Very Soon (PHOTOS)

March 11, 2010

Are we nearing a rebound in hiring? If the anecdotal evidence is any indication, we certainly are. According to Manpower’s quarterly Employment Outlook Survey, hiring in almost every sector is about to get better. The staffing company’s assessment, which surveys employers in thirteen industries, found that twelve of the thirteen have net positive employment outlooks for the second quarter of this year. Even in the lone sector with a net negative outlook — government — 10 percent of employers said they expected to hire more people next quarter. Here’s Manpower : Of the more than 18,000 employers surveyed across the nation, 16% anticipate an increase in staff levels during Quarter 2 2010, while 8% expect a decrease in payrolls, resulting in a Net Employment Outlook of +8%. When seasonally adjusted, the Net Employment Outlook becomes +5%… Keep in mind that Manpower’s survey examines expectations only, and does not measure companies that are actually hiring now .But some industries are undoubtedly ramping up for growth. Check out the industries with the most promising employment outlooks below:

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Essar Buys First Overseas Coal Mine as Recovery Tightens Supply in India

March 7, 2010

By Natalie Obiko Pearson March 8 (Bloomberg) — Essar Group said its purchase of Trinity Coal Corp. , the Indian company’s first overseas coal mine acquisition, will help lock in raw materials with coal and iron ore prices poised to rise as the global economy recovers. The $600 million buyout of West Virginia-based Trinity raises Essar’s total U.S. investment to $4 billion, Chief Executive Officer Prashant Ruia said. The Mumbai-based group has since 2007 bought an iron ore mine in Minnesota and a Canadian steel plant. The latest purchase adds 200 million metric tons of coal reserves to Essar’s portfolio. “The objective here is to secure the raw materials, first in terms of availability, and secondly in terms of cost at which we can acquire it,” Ruia said at a weekend news conference. Half of Trinity’s 7 million tons in annual output will be shipped to Essar’s Algoma steel plant in Ontario to reduce costs, he said. Steelmakers are bracing for a rebound in the prices of raw materials like coking coal and iron ore used to make steel as annual negotiations are under way to fix benchmark contract prices starting April 1. Last week, BHP Billiton Ltd. , the world’s largest coking-coal exporter, won a 55 percent price increase from Japan-based JFE Holdings Inc.’s steel unit in the first three-month contract ever signed for coking coal. ‘Pricing Pressure’ “We see pricing pressure for commodities. We see a big push up currently in coal,” Ruia said of JFE’s decision to accept a quarterly contract. “There are bigger players who are right now trying to determine the contours of long-term agreements. We’ll just have to see what comes out.” Ruia said Trinity’s coking-coal output will fully meet the needs of the 4 million-ton-a-year Algoma steel plant. Trinity’s remaining output of thermal coal used in power generation will continue to be sold to U.S. utilities, he said. “Given the growth in India and our own business, we will continue to look at acquisitions and further consolidation in this mineral space,” Ruia said. “Demand for minerals in India is high and only growing. There aren’t sufficient resources in India to meet that.” Essar is planning an $8 billion London share sale for its oil and power business, the Sunday Telegraph reported yesterday. The company has appointed JPMorgan Cazenove as adviser for an initial public offering of its refinery, power, exploration and production units, the newspaper said, citing an unidentified source. Essar Group spokesman Swastayan Roy declined to comment on the report. Competition Essar, controlled by billionaire brothers Shashi and Ravi Ruia , faces competition from Indian and foreign rivals in the hunt to secure mining assets as the costs of coal and iron ore escalate. South Korea’s Posco , Asia’s most profitable steelmaker, will “aggressively” pursue investments in overseas mines, Chief Executive Chung Joon Yang said Feb. 26. New Delhi-based Jindal Steel & Power Ltd. vied with China’s Meijin Energy Group to takeover Australian coal producer Rocklands Richfield Ltd. The Sydney-based miner rejected Jindal Steel’s A$170 million ($154 million) offer in February. Jindal Steel Chief Financial Officer Rajesh Bhatia said Feb 5 it still wants to pursue a deal. JSW Steel Ltd., India’s third-biggest producer, may spend $500 million to buy coal mines overseas to secure supplies, Managing Director Sajjan Jindal said in an interview Nov. 17 after the company failed to find coking coal in Mozambique. Rising Demand India’s top three steel producers – Tata Steel Ltd. , state- run Steel Authority of India Ltd., and JSW Steel – will jointly need 25.5 million tons of coking coal in 2010 to 2011. Half of that will need to be imported, according to figures released by the companies last week. Those imports come amid forecasts of a steep surge in international prices. Coking-coal prices will double in the next two years, Nomura Holdings Inc. said in a March 1 report. Contract prices are $129 a ton for the year ending March 31. Starting April, JFE agreed to pay Melbourne-based BHP $200 a metric ton for a three-month supply. BHP was seeking $240 this year, UBS AG said Feb. 18. Including thermal coal needed for power generation, imports by India, the world’s second-most populous nation, will rise 30 percent to 76 million tons in the 2010 fiscal year, according a January estimate by mjunction Services Ltd., a Web-based trader backed by the country’s biggest steel producers. Imports will rise to 110 million tons in 2012, it said. Expansion Ruia said it would take “a couple of years” to raise Trinity’s output to 10 million tons per year. Trinity owns and operates six mining complexes in Kentucky and West Virginia. Essar paid $1.7 billion in 2007 to buy Minnesota Steel Industries LLC and is investing an additional $1 billion in the unit to develop an iron-ore mine and set up a steel plant, Ruia said. It paid $1.63 billion in 2007 to buy Algoma Steel Inc. Essar may sell stakes in its oil and shipping units as part of a global expansion plan to add steel capacity, Ruia said in an interview Oct. 8. The group’s annual steel capacity is 14 million tons, which it plans to raise to 25 million tons, according to its Web site. Essar also holds a stake in a steel plant in Indonesia. To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

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Reliance Said to Have No Plans to Raise $14.5 Billion Offer for Lyondell

March 3, 2010

By Natalie Obiko Pearson March 4 (Bloomberg) — Reliance Industries Ltd. has no plans to increase its bid for bankrupt chemicals maker LyondellBasell Industries AF after creditors rejected a $14.5 billion offer, two people briefed on the matter said. Market conditions didn’t justify raising the offer further, the people said yesterday declining to be identified because they aren’t authorized to speak to the media. Chairman Mukesh Ambani , Asia’s richest man, may be prompted to spend Reliance’s $3.5 billion of cash elsewhere, analyst Victor Shum said. “Paying any more than Reliance have offered makes the deal unattractive,” Shum of energy consultants Purvin & Gertz Ltd. said by telephone from Singapore today. “Lyondell would have given Reliance assets outside India and access to its marketing network in the U.S., but Reliance already markets globally and the synergies between the two companies are not that great.” The Mumbai-based oil refiner and explorer’s shares have climbed 4.7 percent this week after its bid was rejected for a second time this year. Reliance is seeking asset abroad to reduce the risk of investing mostly in India, where it is battling a lawsuit over natural-gas supplies with a company owned Mukesh’s estranged brother, Anil Ambani . Alok Agarwal , chief financial officer at Reliance couldn’t be reached at his office after hours. Rising crude oil prices coupled with weak global demand for fuels and chemicals are prompting companies to sell assets. Bid History Rotterdam-based LyondellBasell had earlier rejected a revised Reliance bid that valued it at $13.5 billion, the Wall Street Journal reported Jan. 8. India’s largest company by market value had raised its offer for a controlling stake to $14.5 billion, two people with knowledge of the offer said on Feb. 22. The company initially offered an undisclosed amount on Nov. 21 and has yet to make public the value of its bid. Oklahoma-based Devon Energy Corp ., the biggest independent U.S. oil and gas producer, on Nov. 16 announced it was putting oil blocks from the Gulf of Mexico to the Caspian Sea up for sale to raise $7.5 billion to cut debt and fund onshore developments. Houston-based ConocoPhillips plans to sell $10 billion of assets in two years to cut debt that may include exploration and production holdings in North America and gas properties in the North Sea, Chief Executive Officer Jim Mulva said in October. ‘Global Footprint’ Reliance operates India’s biggest natural gas field, owns the world’s largest refining complex at Jamnagar in Gujarat state, and has cash holdings of 160 billion rupees ($3.5 billion). While it has interests in overseas oil blocks, including in Peru, Iraq and Australia, only one in Yemen is producing at 4,400 barrels a day, according to Reliance’s earnings statement for the three months ended Dec. 31. Reliance seeks a “far more widespread global footprint” in the near term, Ambani told shareholders Nov. 17. The company may buy oil fields in the Gulf of Mexico and Brazil to hedge the risk of investing mainly in India, P.M.S. Prasad, president of its oil and gas business, said Sept. 14. In December, Reliance hired Walter van de Vijver , a former exploration chief at Royal Dutch Shell Plc , to head its overseas business. “Reliance has a very strong position in India but it doesn’t internationally,” Nathan Schaffer, an analyst at PFC Energy, said by phone from Houston. “There will be plenty of opportunities to pick up some attractive assets.” To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net .

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U.S. Service Industries Grow at Fastest Pace Since October 2007, ISM Says

March 3, 2010

By Bob Willis March 3 (Bloomberg) — Service industries in the U.S. expanded in February at the fastest pace since October 2007, a sign the recovery is broadening. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 53 from 50.5 the prior month. The February figure exceeded the median forecast for a gain to 51, according to a Bloomberg News survey of economists. Readings higher than 50 signal growth. The factory rebound that helped the economy emerge from the worst recession since the 1930s is starting to generate improvement in other industries, giving a boost to companies such as Macy’s Inc. The group’s measure of employment rose to the highest level since April 2008, signaling the economy may be on the cusp of creating the job growth necessary to encourage spending. “The strength in the nation’s manufacturing sector is now spreading to the services economy,” Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “With services activity picking up and manufacturing continuing to show strong gains, the economic outlook looks to be self-sustaining. We are probably just months away from seeing broad-based increases in hiring.” The index of non-manufacturing exceeded the highest estimate in the Bloomberg survey of 73 economists. Forecasts ranged from 48.5 to 52.9. Companies cut an estimated 20,000 jobs in February, the smallest drop in two years, after a revised 60,000 reduction a month earlier that was larger than previously estimated, data from ADP Employer Services showed today. The decline in February was the smallest in two years. Fewer Job-Cut Announcements A separate report from the job placement firm Challenger, Gray & Christmas Inc. showed employers in February announced the fewest job cuts in more than three years. Planned firings fell 77 percent in February from a year earlier, the Chicago-based firm said today. The non-manufacturing gauge of business activity, a measure of sentiment, increased to 54.8 in February from 52.2 in January. The index of new orders rose to 55 from 54.7, and a gauge of employment increased to 48.6 from 44.6 the prior month. A measure of prices paid fell to 60.4 from 61.2 and a gauge of backlogs rose to 46 from 45.5. The Labor Department will issue its February employment data on March 5. Job losses may have accelerated last month, partly reflecting the blizzards on the East Coast and winter storms in the South that closed some businesses and prompted temporary shutdowns of government offices, economists forecast. February Payrolls Payrolls fell by 58,000 employees last month after a decline of 20,000 the prior month, according to the survey median. Airlines are among companies cutting staff. Continental Airlines Inc. last month said it will eliminate 600 additional reservation-agent jobs, about 23 percent of its total, as more travelers book their own flights. The lack of jobs may be one reason some merchants are forecasting the improvement in sales this year will pale in comparison to the 2009 drop. Atlanta-based Home Depot, the largest U.S. home-improvement retailer, last month projected comparable-store sales will climb 2.5 percent in 2010 after dropping 6.6 percent last year. Cincinnati-based Macy’s said sales at established stores will grow by as much as 2 percent after slumping 5.3 percent in 2009. ‘Business Feels Better’ “Business feels better, there is no question about it,” Macy’s Chairman and Chief Executive Officer Terry J. Lundgren said on a Feb. 23 conference call. “We still have high unemployment, and I still see tight credit on consumers.” The ISM services survey includes industries like retailing, utilities, health care, housing, transportation and finance and insurance. The measure has lagged behind the group’s manufacturing gauge , which registered a reading of 56.5 in February, the seventh consecutive month of expansion. Factories account for 12 percent of the economy. The world’s largest economy will grow 3 percent this year after contracting 2.4 percent in 2009, according to the median estimate of economists surveyed last month. Consumer spending, which accounts for about 70 percent of the economy, is forecast to climb 2 percent this year. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Peerless Industries Consolidating International Operations

March 1, 2010

Peerless Industries is consolidating operations, inking a full-building lease just west of Chicago. The manufacturer of television and speaker mounts plans to add about 85 jobs over the next three years, and retain its 405 local employees. Peerless…

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BTIG Hires Greenfield, Piecyk of Pali Capital to Establish Research Group

March 1, 2010

By Josh Fineman and Jeff Kearns March 1 (Bloomberg) — BTIG LLC, a New York-based broker- dealer that has gone from five employees in 2002 to more than 375, started a research group and hired former Pali Capital analysts Rich Greenfield and Walter Piecyk to lead the effort. Greenfield, who covers entertainment, was most recently at Pali. He moved there after four years at Fulcrum Global Partners LLC, and before that was at Goldman Sachs Group Inc. for eight years. Piecyk, who covers telecommunications, also worked at Pali and Fulcrum. He previously held positions at PaineWebber Inc. and Nextel Communications Inc. BTIG has expanded in the past 18 months by hiring former employees of Pali, Lehman Brothers Holdings Inc. and Bear Stearns Cos. Last week, BTIG hired Pali’s Brad Berk and Michael Stamberger as senior traders. Earlier this month it tapped five sales traders for its London office, four of them from Pali. “Our goal at BTIG from a research standpoint is to really focus on interesting market opportunities across our sectors and not be focused at all on the traditional maintenance-type research that you see out of a lot of Wall Street analysts,” Greenfield said in an interview. “We take a lot of pride on being able to make good short calls.” Greenfield and Piecyk will cover the media, satellite, cable and telecommunications industries. They will also do pre- initial public offering research on their industries, which they had done at Pali, Greenfield said. “We’re never really shy about our opinions,” Piecyk said in the interview. Pali, the New York-based broker-dealer that had been in merger talks with Braver Stern Securities Corp. and former Bear Stearns Chief Financial Officer Samuel Molinaro , said Feb. 16 that it will shut after the discussions broke down last month. To contact the reporters on this story: Josh Fineman in New York at jfineman@bloomberg.net ; Jeff Kearns in New York at jkearns3@bloomberg.net .

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Buffett Says U.S. Housing Will Recover by 2011 on Lower Supply of Homes

March 1, 2010

By Andrew Frye March 1 (Bloomberg) — Billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that’s how long it will take demand for homes to catch up with the supply. “Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.” The worst housing decline since the Great Depression has left one in five U.S. mortgage holders owing more than their houses are worth. Record foreclosures last year flooded a real estate market already glutted with unsold property, causing new construction to fall to the lowest in at least 50 years. The fall in homebuilding is the only fix unless the U.S. decides to “blow up a lot of houses,” Buffett joked. “People thought it was good news a few years back when housing starts — the supply side of the picture — were running about two million annually,” said Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire. “But household formations — the demand side — only amounted to about 1.2 million.” Berkshire, which owns a real-estate brokerage, a business that constructs pre-fabricated houses and units that make products used in homebuilding, has suffered amid the slump. Profit at Clayton Homes, the pre-fab housing business, fell about 9 percent to $187 million before taxes, while earnings at carpet manufacturer Shaw Industries fell 30 percent. “High-value houses and those in certain localities where overbuilding was particularly egregious” will take longer to recover, he wrote. ‘Deeply Invested’ “He’s very deeply invested in this,” said Tom Russo , partner at Gardner Russo & Gardner, which holds Berkshire stock. “Across his industrial companies, he’s massively poised to gain” from a housing recovery, Russo said. Buffett joked that curbing home construction was the best of three ways to reduce supply. The other two, he said, would be to explode homes in a “tactic similar to the destruction of autos that occurred with the ‘cash-for-clunkers’ program” or “speed up householder formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers.” Buffett’s annual communications with shareholders have won him a following of professional money managers and the moniker “the Oracle of Omaha.” He’s written passages in past years that compare investing to baseball , derivatives to venereal disease , and Wall Street bankers to Pied Pipers . The letters have been compiled into a book for those who want to study his pronouncements. Transformative Buffett, 79, built Berkshire into a $198 billion company through investments in firms he believes have superior management and lasting competitive advantages. His deals transformed Berkshire from a failing textile mill into an enterprise that makes candy, produces power and sells flight time on private jets. The shares traded at about $15 when he took control in 1965; the Class A stock last closed at $119,800. Still, he and Vice Chairman Charlie Munger passed up opportunities when they weren’t able to evaluate the future of a business, even in a compelling industry, he said. That strategy has allowed the company to perform better than the benchmark Standard & Poor’s 500 in every year when both Berkshire and the index have fallen. Playing Defense “In other words, our defense has been better than our offense,” Buffett wrote. Last year, he said, Berkshire should have made more purchases of corporate and municipal bonds because they were “ridiculously cheap” when compared with U.S. Treasuries. “When it’s raining gold, reach for a bucket, not a thimble,” he said. Corporate bonds returned 26 percent in 2009, compared with negative 11 percent in 2008, according to data compiled by Bank of America Corp. Merrill Lynch. State and local government bonds yielded 14 percent last year, compared with negative 4 percent in 2008. Berkshire did extend financing to companies including Goldman Sachs Group Inc. , General Electric Co. and Dow Chemical Co. during the credit crisis as other investors were withholding funds. The private deals pay dividends and interest of $2.1 billion annually, Berkshire said in a filing disclosing 2009 results. Berkshire’s net income of $8.06 billion rose 61 percent from 2008. ‘Climate of Fear’ “We’ve put a lot of money to work during the chaos of the last two years,” Buffett wrote. “It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.” Buffett has used past letters to discuss plans for his successor, praise Berkshire managers and confess his failings. He admitted this year to a “very expensive business fiasco” with his move to issue credit cards to policyholders at his company’s Geico Corp. auto-insurance subsidiary. Last year, he said the U.S. economy was “in shambles” after reckless lending caused the worst financial “freefall” he ever saw. He chastised the media in the new letter for “terrible journalism” in seizing on that comment from the prior year without also reporting that he made no predictions about the direction of the stock market. CEO Responsibility Buffett said this year that the CEOs and boards of companies that failed during the credit crisis shouldn’t be allowed to pass blame to underlings. Boards should insist on CEOs taking full responsibility for the risk of collapse, he said. “If he’s incapable of handling that job, he should look for other employment,” Buffett wrote. Shareholders weren’t responsible for the botched operations at some of the country’s largest financial institutions, Buffett said, “yet they have borne the burden with 90 percent or more” of their holdings wiped out in cases of failure. Still, he said, using year-to-year stock prices to evaluate a company’s progress can be an “extraordinarily erratic” measure. Even a decade can fail to give the proper picture, as Microsoft Corp. CEO Steve Ballmer and GE’s Jeffrey Immelt found when they took over with their shares at “nosebleed” prices. GE shares have dropped about 60 percent since Immelt took over in September 2001; Microsoft has fallen about 47 percent under Ballmer’s tenure. Berkshire shares have risen more than 160 percent in the past decade, compared with the 17 percent decline in the S&P 500. Buffett’s company joined that index last month when it completed the largest deal of his 40-year tenure, the $27 billion takeover of railroad Burlington Northern Santa Fe Corp. ‘We Sleep Well’ Berkshire had $30.6 billion in cash and so-called near cash like U.S. Treasuries as of Dec. 31, compared with $26.9 billion three months earlier, after Buffett sold stock to add to the company’s cash cushion in advance of the rail deal. Buffett used about $8 billion of that cash to help fund the acquisition. “We pay a steep price to maintain our premier financial strength,” Buffett wrote. “The $20 billion-plus of cash- equivalent assets that we customarily hold is earning a pittance at present. But we sleep well.” To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net .

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Lyondell Chemical, U.S. Said to Settle Dispute Over Environmental Cleanup

February 26, 2010

By Tiffany Kary Feb. 26 (Bloomberg) — Lyondell Chemical Co. ’s bid to shed some environmental claims brought by the U.S. will be settled without going before a federal district court judge, a person familiar with the negotiations said. The parties reached an agreement in principle to settle the U.S.’s dispute with Lyondell , which filed for bankruptcy court protection last year, the person said. The person declined to elaborate on the terms of a settlement, saying it hadn’t yet been written. The U.S. previously sought a claim of as much as $5 billion related to contaminated sites. U.S. District Judge Alvin Hellerstein in Manhattan had been scheduled to hear Lyondell’s dispute with U.S. agencies and decide whether it falls under the bankruptcy code or federal environmental law, an issue the district court is better equipped to evaluate. Lyondell, reorganizing in a Chapter 11 bankruptcy, said it opposed the government’s attempt to claim future cleanup costs at sites across the U.S. that Lyondell says it doesn’t own. Janice Oh , a spokeswoman for the U.S. Attorney’s Office wasn’t immediately available for comment yesterday. Andrew Troop, a lawyer for Lyondell, didn’t immediately return a call seeking comment yesterday. Lawyers for the Environmental Protection Agency and California state agencies had asked to have the dispute heard in district court, saying Houston-based Lyondell is trying to use the bankruptcy court to get an order “discharging” it from compliance with federal environmental law. PCBs, TCE Lyondell makes solvents, resins and other chemicals, many of them related to the refining industry. It has been named by the EPA as a potentially responsible party at sites where suspected carcinogens, including PCBs and trichloroethylene, or TCE, have been detected. The company hasn’t disputed that it releases hazardous substances that endanger human health, or that it has cleanup orders for the sites under federal law, lawyers for the EPA wrote in court documents. “If their hazardous waste has been dumped or otherwise released onto a third-party site, however, the debtors contend that the U.S. and the California environmental agencies are precluded from requiring the debtors to comply with their obligations under federal and state environmental laws,” the lawyers said in court documents. Creditor Objections Lyondell and its creditors objected to having the decision about environmental liabilities made in federal district court. The U.S.’s claims for environmental costs are the same as other claims in a bankruptcy, and should be discharged, lawyers for creditors said. “This issue is a core task of the bankruptcy court,” the creditors’ lawyers wrote in court documents. David Harpole , a Lyondell spokesman, said the company is “continuing to work toward a settlement with the EPA on this matter, which covers a variety of environmental issues for legacy properties.” The U.S. sought a claim of as much as $5 billion for cleanup costs, environmental damages and penalties at 11 so- called third-party sites where Lyondell isn’t the current owner of the polluted property, Lyondell said. The U.S. also sought to hold the company responsible for unknown costs at seven of those sites. The dispute in the lawsuit involved a separate category of claims that covered the seven sites, and all claims about Lyondell’s obligations for environmental damage that can be connected to the company’s pre- bankruptcy conduct, even if the U.S. hasn’t made a claim about it yet, lawyers for Lyondell said. 11 Sites Of the 11 sites, three are in Texas and two are in Pennsylvania. The remainder are in California, Iowa, Maryland, Michigan, New Jersey and Oklahoma. Lyondell’s outline of its plan to reorganize is set to be considered by U.S. Bankruptcy Judge Robert Gerber on March 8. Reliance Industries Ltd. , India’s biggest company, has expressed interest in the bankrupt chemical maker. Lyondell has also proposed reorganizing by repaying its $8 billion bankruptcy loan and giving an equity stake in the new company to lenders, including sponsors of a $2.8 billion rights offering. The main case is In re Lyondell Chemical Co., 09-10023, and the adversary case is 09-01375, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net .

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Homebuilding Stocks Seen Rising Too Far, Too Fast: Chart of the Day

February 22, 2010

By David Wilson Feb. 22 (Bloomberg) — Homebuilders’ soaring share prices this year are anything but “a signal of things to come,” according to Brian Belski , chief investment strategist at Oppenheimer & Co. “Earnings growth and operating performance remain deeply depressed” three years after they collapsed, and the industry is unlikely to return to profitability any time soon, Belski wrote today in a report. As the CHART OF THE DAY shows, the Standard & Poor’s 500 Homebuilding Index — composed of D.R. Horton Inc. , Lennar Corp. and Pulte Homes Inc. — ended last week with a 21 percent gain for the year. The advance compares with a 0.5 percent loss for the S&P 500. Homebuilders were the year’s third-best performers among 134 industry groups in the S&P 500, according to data compiled by Bloomberg. The groups that did better each had one member: Eastman Kodak Co. for photo products and Harman International Industries Inc. for consumer electronics. Rising home prices are largely responsible for builders’ stock gains, Belski wrote. The S&P/Case-Shiller 20-city price index hit bottom last April and had gained 5 percent from its low through November. December’s reading is due tomorrow. “Higher prices are, of course, a key component of a sustainable recovery,” he wrote. “But they’re not enough by themselves.” Housing starts and building permits don’t bode well for an industry rebound, in his view, and neither does the yield differential between mortgage securities and Treasuries. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Emerging-Market Stocks, Won Rally as Fed May Keep U.S. Interest Rates Low

February 22, 2010

By Justin Carrigan Feb. 22 (Bloomberg) — High-yielding currencies rose, led by the South Korean won, and emerging-market stocks rallied on speculation Federal Reserve Chairman Ben S. Bernanke may signal that U.S. interest rates will stay near record lows. The won was the biggest gainer against both the yen and the dollar, increasing 1.1 percent against the U.S. currency at 10:27 a.m. in London, and the New Zealand dollar advanced. The MSCI Emerging-Markets Index advanced for the first time in three days, while Europe’s Dow Jones Stoxx 600 Index was little changed and futures on the Standard & Poor’s 500 Index gained 0.1 percent. Copper fell. Bernanke may tell Congress Feb. 24 that last week’s increase in the discount rate isn’t intended to drive up borrowing costs amid a weak jobs market. Taiwan and Thailand exited recessions in the fourth quarter, expanding 9.2 percent and 5.8 percent respectively, government reports showed today. “There are a few positive things for the market to grab hold of this morning, and that’s resulted in a correction at the expense of the dollar and the yen,” said Ian Stannard , a foreign-exchange strategist at BNP Paribas SA in London. The won rose the most in almost seven weeks, as sales at South Korea’s largest department stores rose in January for an 11th month. Korea’s Kospi stock index rose 2.1 percent and Taiwan’s Taiex Index increased 1.6 percent, helping lift the MSCI Emerging Markets Index 1.3 percent. Hungary’s BUX Index rose 1.2 percent after an economic-sentiment gauge advanced to the highest level in 17 months. Japan, China The MSCI Asia Pacific Index advanced 2.4 percent, its biggest gain since November. Suruga Bank Ltd. rallied 7.4 percent in Tokyo on stock-buyback plans. Hong Kong’s Hang Seng Index jumped 2.4 percent, led by real-estate developers after Sun Hung Kai Properties Ltd. won the city’s first land auction for the year. The Shanghai Composite Index fell 0.5 percent on the first day of trading after a weeklong break. Reliance Industries Ltd. rose 1 percent in Mumbai. The owner of the world’s largest oil-refining complex raised its offer for bankrupt LyondellBasell Industries AF to about $14.5 billion, according to two people with knowledge of the offer. European stocks fluctuated between gains and losses, with retailers and automakers declining. Inditex SA, the world’s biggest owner of clothing stores, fell 1.5 percent in Madrid after Exane BNP Paribas downgraded the shares. Bank of Ireland Plc slumped 7.1 percent in Dublin. The country’s biggest lender by market value said it will give the Irish government a stake of almost 16 percent instead of a dividend. Allied Irish Banks Plc slid 4 percent. U.S. Futures The gain in U.S. futures indicated the S&P 500 may advance for fifth straight day. Bernanke will probably assure Congress that the Fed is mindful of the lack of job growth in the U.S. and an increase in the benchmark interest rate isn’t imminent. The central bank chief will deliver his semi-annual report on the economy to House and Senate panels Feb. 24-25. Smith International Inc. rose as much as 16 percent in German trading after Schlumberger Ltd., the world’s largest oilfield-services provider, agreed to buy the company for $11 billion. Greek stocks and bonds rose on optimism the nation will be able to find funding as it struggles to narrow a budget deficit that is more than four times the European Union limit. The ASE Index advance for a third day, gaining 0.5 percent, and the yield on the government two-year note declined 4 basis points to 5.47 percent. Credit-Default Swaps Credit-default swaps on the Markit iTraxx Crossover Index of 50 European companies with mostly high-yield ratings dropped 12 basis points to a two-week low of 456, according to JPMorgan Chase & Co. prices. The index is a benchmark for the cost of protecting bonds against default and a decline signals improvement in perceptions of credit quality. Treasuries fell, with the yield on the 10-year note rising 2 basis points to 3.80 percent. The U.S. government will sell a record $126 billion of securities this week, starting with $8 billion of 30-year inflation-protected bonds today. Copper for delivery in three months fell 0.8 percent to $7,370.50 a metric ton on the London Metal Exchange, the first decline in three days. Aluminum, nickel and zinc also retreated. Gold for immediate delivery added 0.2 percent to $1,121.80 an ounce, for a third gain. Crude oil for March delivery, which expires later today, was unchanged at $79.81 a barrel on the New York Mercantile Exchange. To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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Reliance Said to Increase Bid for Bankrupt Lyondell to About $14.5 Billion

February 21, 2010

By Jonathan Keehner Feb. 22 (Bloomberg) — Reliance Industries Ltd. , owner of the world’s largest oil-refining complex, raised its offer for bankrupt LyondellBasell Industries AF to about $14.5 billion, according to two people with knowledge of the offer. The revised bid allows Lyondell creditors to opt for cash or equity as part of the deal, said the people, who declined to be identified because the talks are private. Reliance, the Mumbai-based refiner and energy explorer controlled by billionaire Mukesh Ambani , offered an undisclosed amount on Nov. 21 to buy a controlling stake in the chemicals and fuels maker. Buying LyondellBasell would create a company with more than $80 billion in revenue and give Reliance chemical plants and two crude oil refineries in the U.S. and Europe. The chemicals maker rejected a previously revised Reliance bid that valued the company at $13.5 billion, the Wall Street Journal reported Jan. 8. Reliance had outstanding debt of 700 billion rupees ($15 billion) and cash and cash equivalents of 159.6 billion rupees as of Dec. 31, the company said . Reliance has raised about $2 billion selling shares since September, Chief Financial Officer Alok Agarwal said last month. David Harpole , a Lyondell spokesman, declined to comment on the revised offer. Manoj Warrier , a spokesman for Reliance, didn’t immediately return a message before regular business hours in India. To contact the reporters on this story: Jonathan Keehner in New York at jkeehner@bloomberg.net ;

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Fed Sets Goal of `Eventual’ Exit From Housing Finance to Protect Autonomy

February 18, 2010

By Craig Torres Feb. 18 (Bloomberg) — Federal Reserve officials set a long-term goal to keep only U.S. government securities in their portfolio as they debated how and when to pull back on the most aggressive monetary policy in U.S. history. Central bankers are planning to eventually remove $1.43 trillion of housing debt from the balance sheet after critics such as Stanford University economist John Taylor accused them of straying beyond monetary policy. Philadelphia Fed President Charles Plosser said yesterday that the Fed’s purchases of housing debt expose it to demands from politicians to support other industries. Some of the Fed’s emergency actions “blurred the line between monetary policy and fiscal policy, thereby increasing the risk to the Fed’s independence,” Plosser said in a speech . “These policies have veered toward deciding how public money should be allocated across firms and sectors of the economy.” Policy makers agreed that it “will eventually be appropriate” to “return to holding only securities issued by the U.S. Treasury,” according to minutes of their January 26-27 meeting released yesterday. “They are putting down a marker, as much as a signal to the administration as anything else, that they don’t want to be in the credit-allocation game,” said Dino Kos , managing director at Portales Partners LLC in New York and former executive vice president at the New York Fed. U.S. central bankers are channeling credit to housing markets through purchases of $1.25 trillion in mortgage-backed securities and $175 billion in housing agency debt. Those programs end next month. Chairman Ben S. Bernanke has said the purchases are needed to support housing markets, whose collapse triggered the worst crisis since the Great Depression. Discount Rate Fed officials in their January meeting also agreed that it would “soon be appropriate” to raise the discount rate, at which banks borrow directly from the central bank, and reduce the maturity of the loans to overnight from 28 days. The Fed’s actions to combat the financial crisis have created scrutiny of the central bank in Congress, which is taking up the most extensive rewrite of financial regulation since the 1930s. The House voted Dec. 11 to approve a proposal by Representative Ron Paul , a Republican from Texas, to end a ban on audits of monetary policy over Bernanke’s warnings the measure threatens to compromise Fed independence. The Fed typically uses the purchase and sale of Treasury securities to change the benchmark federal funds rate by making bank reserves less or more available. At the start of 2007, the central bank’s securities portfolio was made up of mostly Treasuries. Allocating Credit Before the crisis, the Fed avoided allocating credit to specific markets. In a study of open-market operations published in 2002, the central bank’s staff warned about changing the composition of the Fed’s portfolio. The mission of the Fed “is statutorily cast in terms of macroeconomic outcomes,” the document said. “Outcomes for specific sectors and for relative prices of credit or assets are within the purview of private markets and fiscal policy.” A return to a policy of holding only Treasury securities, even if it’s a goal for now, indicates Bernanke is seeking to assure investors the Fed is committed to independence and to its mandate to maintain stable prices and full employment, former officials said. “What the Fed is doing is showing markets a rope,” said Vincent Reinhart , a resident scholar at the American Enterprise Institute in Washington and the former director of Monetary Affairs at the Fed’s Board of Governors. “They are trying to provide a safe port and show the Federal Reserve will always do what is right and has a long-run strategy.” Emergency Lending Fed officials closed four emergency lending programs this month and are now considering the timing and use of several tools to remove or neutralize more than $1 trillion in excess reserves from the banking system. “Most judged that a future program of gradual asset sales could be helpful” to shrink the balance sheet, while some officials were concerned about disrupting financial markets and the economy, the minutes said. “Several thought it important to begin a program of asset sales in the near future,” including spreading sales “over a number of years,” according to the report. Bernanke also said in congressional testimony on Feb. 10 that the U.S. central bank would “before long” raise the discount rate to widen the spread over the federal funds rate. In December 2008, the Fed cut the discount rate to 0.5 percent as it lowered the benchmark federal funds rate, which banks use for overnight loans to each other, to a range of zero to 0.25 percent. Both rates have been unchanged since then. Before August 2007, the discount rate was set at one percentage point above the federal funds rate. As bank lending began to freeze that month, the Fed reduced the difference to a half-point and narrowed it again, to a quarter-point, in March 2008 in conjunction with its rescue of Bear Stearns Cos. To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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Billionaire Len Blavatnik Takes On JPMorgan Over $98 Million Subprime Loss

February 17, 2010

By Thom Weidlich and Linda Sandler Feb. 17 (Bloomberg) — Billionaire Len Blavatnik said JPMorgan Chase & Co. , his bank for 15 years, lost a tenth of the $1 billion he had it manage and, for redress, he did something he never did before: He sued. JPMorgan, the second-biggest U.S. bank , put twice as much money into risky mortgages as Blavatnik’s investment guidelines allowed while Jamie Dimon , the bank’s chief executive, was unloading such investments from its own books, according to the complaint. Blavatnik tried for a year to resolve the $98 million loss before suing in June in New York state court, he said. The dispute between the billionaire and the bank spotlights a common difference investors and their money managers have in the wake of a financial crisis that wiped out at least $1.73 trillion of wealth. Blavatnik blames the bank for his reverses; the bank blames the market. “This is my first litigation that I initiated,” Blavatnik said in an interview in his conference room overlooking the Plaza Hotel and Central Park in New York. “I made several attempts to reach a solution.” Both sides on Jan. 28 appealed a judge’s December order that tossed out two of Blavatnik’s claims while keeping two others alive. The case, which hinges on the definition of an “asset-backed security,” has begun the information-gathering, or discovery, phase. The suit is “an improper attempt” to “use the courts to collect reimbursement for investment losses that have resulted from an extraordinary and unprecedented economic crisis that no one could have anticipated,” New York-based JPMorgan said in its court papers. “The lawsuit is a classic example of pleading with the benefit of 20/20 hindsight.” Bank Comment Mary Sedarat , a JPMorgan spokeswoman, said the bank, which ranks behind Bank of America Corp. in assets, wouldn’t comment on the litigation. In the interview, Blavatnik, 52, detailed his rags-to- riches life before the dispute: He was born in Ukraine, grew up near Moscow and attended that city’s Transportation Engineering Institute. He and his parents emigrated to the U.S. in 1978. After earning a master’s degree in computer science from Columbia University in New York, he landed jobs at the Arthur Andersen accounting firm and Macy’s Inc. He also has a master’s from Harvard Business School in Cambridge, Massachusetts. Showing an entrepreneurial bent, he began investing in New York co-op apartments. Later, he took interests in privatized companies in Russia amid the fall of the Soviet Union. New York- based Access Industries Group , which he founded in 1986, owns energy, chemical, aluminum, media and real-estate companies. Soccer Fan Blavatnik, a soccer fan and World War II history buff, is now a U.S. citizen worth $7 billion, according to three people familiar with his finances. That includes a $1 billion gain made Jan. 22 as a minority owner of Moscow-based aluminum producer United Co. Rusal, which conducted an initial public offering in Hong Kong, the people said. He is also a suitor for Metro- Goldwyn-Mayer Inc., owner of a 4,100-film library with titles that include “Rocky,” according to two people familiar with the situation. “I think like any successful businessman he has strongly held views when he believes he’s right,” said Edgar M. Bronfman Jr ., chairman and chief executive officer of Warner Music Group Corp. , on whose board Blavatnik sat until 2008. “I know Len’s a highly principled guy and would not do something unless he thought he was in the right.” Bronfman said he wasn’t familiar with the JPMorgan lawsuit. Loaded Up Blavatnik says JPMorgan loaded his Access Industries fund with subprime and so-called Alt-A mortgages at the same time CEO Dimon was ridding his bank of such exposure. “One of the issues that we will be exploring in discovery is whether JPM sold the Access fund subprime securities that it owned and thereby reduced its subprime exposure,” said Richard I. Werder Jr ., a New York partner at Los Angeles-based Quinn Emanuel Urquhart Oliver & Hedges LLP, the 400-lawyer litigation firm Blavatnik hired to handle the case. JPMorgan said in court papers that the instruments it sold were different from those in the Access Industries account. Other companies have accused the bank in lawsuits of stuffing portfolios with too much subprime-mortgage risk as it rid itself of the securities. They include bond insurer Ambac Financial Group Inc. and New Millennium Homes LLC, a homebuilder in Calabasas, California. On Jan. 28, JPMorgan won dismissal of a similar suit brought by reinsurer Assured Guaranty Ltd., which has appealed that ruling. Investment Goals The investment objective for Blavatnik’s fixed-income portfolio that JPMorgan began managing in May 2006 was “to provide a high level of current income consistent with low volatility of principal,” according to the guidelines cited in his complaint. Access Industries said its units needed to tap the money for their operations. “Frankly, no one even said they were sorry — they said it was the market,” Blavatnik said of the $98 million loss. “It’s unfair. It’s not a way to treat one of your customers.” Justice Melvin L. Schweitzer of New York State Supreme Court in Manhattan threw out Blavatnik’s claims for negligence and breach of fiduciary duty. He refused to dismiss accusations of breach of contract and negligent misrepresentation. Schweitzer limited the contract claim to the question of whether JPMorgan exceeded the guidelines’ 20 percent cap on mortgage-backed securities. Those investments eventually topped 46 percent, according to the complaint. JPMorgan Disagrees JPMorgan, which earned more than $1 million managing the account, according to the complaint, disagrees. The guidelines listed asset-backed securities separately from mortgage-backed securities. The bank categorized certain instruments backed by real-estate collateral, such as home- equity loans or second-lien mortgages, as asset-backed, according to the complaint. Blavatnik argues that the real-estate instruments tagged as asset-backed are really mortgage securities. Because the bank’s statements didn’t break out the asset-backed securities into subgroups such as auto and student loans, Access Industries didn’t know the asset-backed category included exposure to mortgages, according to the complaint. The bank said in court papers that it’s an industry practice to classify certain instruments, such as Asset-Backed Securities Home Equity Loans, as asset-backed. It also said its reports to Access Industries identified which securities were so categorized. Alt-A Securities Alt-A securities “are a type of mortgage-backed security and thus capped by the guidelines at 20 percent,” JPMorgan wrote. Subprime securities “are a type of asset-backed security and thus capped by the guidelines at 40 percent,” it wrote. Subprime mortgages are loans made to people with poor credit scores. Alt-A mortgages are loans made to people with higher credit scores than subprime borrowers who still don’t meet underwriting criteria established by government-sponsored entities such as the Federal Home Loan Mortgage Corp., or Freddie Mac. According to JPMorgan, the “over-concentration” of mortgage-backed securities happened because Blavatnik made “large cash withdrawals.” For example, in February 2007 he took out $455 million, or 24 percent of the account’s book value, which brought the mortgage securities up to 20.8 percent of the portfolio from 13.2 percent, the bank said. “To the extent cash withdrawals skewed the allocation of the portfolio away from the guidelines, JPMorgan had a duty to adjust,” Access Industries argued in court papers. Rebalancing Impact Rebalancing the account by selling off mortgage securities would have generated losses, for which Blavatnik “would doubtlessly be suing,” the bank counterargued. JPMorgan stuffed the portfolio with risky mortgages even though it knew the real-estate market was ebbing, according to the complaint. In October 2006, Dimon, JPMorgan’s CEO, told William King, then its head of securitized products, that they needed to start selling its subprime-mortgage positions, Access Industries claimed in the complaint. By late 2006, JPMorgan had offloaded $12 billion in such mortgages that it had originated and was advising clients to follow suit, according to the complaint. Access Industries didn’t name the other clients. At the same time, the bank told Access Industries to increase its subprime exposure, Blavatnik says. By January 2007, the portfolio had 23 percent in “risky residential real-estate securities” and, by the end of that July, more than 46 percent, according to the complaint. First Losses That was the first month the portfolio began to show big losses, shrinking in value by more than $2.1 million, according to the complaint. JPMorgan calls the 46 percent figure “bogus,” a result of Access Industries’ combining mortgage- and asset-backed securities. It also says Dimon was referring to collateralized- debt obligations and structured-investment vehicles — different entities subject to different risks than the ones Access Industries held. “These statements therefore have nothing to do with the subprime or Alt-A mortgage-backed securities held in the account,” the bank wrote in court papers. By November 2007, Access Industries couldn’t withdraw cash it needed, and by April 2008 the portfolio had lost more than $106 million, $98 million of which it blames on the residential real-estate investments, according to the complaint. Access Industries said that when it started to complain about losses, JPMorgan told it the securities were backed by government agencies. Swift Correction JPMorgan said that was a “swiftly corrected error.” As of December 2007, only two of 52 collateralized-mortgage obligations, accounting for $9 million, or just over 1 percent of the portfolio, had government backing, Access Industries says. Blavatnik, while eschewing the filing of suits himself, has been involved in litigation and other disputes. In December, unsecured creditors of his bankrupt Lyondell Chemical Co. said he undercut them by settling a lawsuit they brought against bank lenders, including Citigroup Inc., three days before it was to be tried. The creditors accused Blavatnik and the lenders of crippling the company with $22 billion in debt when he bought it in 2007. The creditors, who called the $300 million settlement “woefully inadequate,” told a bankruptcy judge yesterday that they had secured a new accord to pay them $450 million. BP Dispute Blavatnik and three Russian-billionaire partners were embroiled in more than three months of public acrimony in 2008 when they accused BP Plc of treating their 50-50 joint venture in Russia like a subsidiary, ignoring their interests. The London-based oil company rejected those complaints. The dispute was resolved with the Dec. 1 resignation of Robert Dudley , the venture’s CEO, whom the billionaires accused of mismanagement. Vice President Maxim Barsky will replace him next year. In the interim, Mikhail Fridman , one of the four owners, will run the company. “I find him to be a very perceptive partner,” said Thomas H. Lee , head of New York buyout firm Lee Equity Partners. “He’s a guy who likes to invest for the future.” Blavatnik and Lee were partners in the purchase of Warner Music from Time Warner Inc. in 2004, when Lee was still with his Thomas H. Lee Partners LP. Lee said he and Blavatnik have teamed up on other private investments, which he declined to name. The case is CMMF LLC v. J.P. Morgan Investment Management Inc., 601924-09, New York State Supreme Court (Manhattan). To contact the reporters on this story: Thom Weidlich in New York at tweidlich@bloomberg.net ; Linda Sandler in New York at lsandler@bloomberg.net .

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Yara International Agrees to Buy Terra Industries for $4.1 Billion in Cash

February 15, 2010

By Vibeke Laroi Feb. 15 (Bloomberg) — Yara International ASA , the world’s largest fertilizer producer, agreed to buy Terra Industries Inc. for $4.1 billion to expand its sales in the U.S. Yara will pay $41.10 in cash for each Terra share and will sell as much as $2.5 billion of shares in a rights offer to fund the deal, Oslo-based Yara said in a statement today. The offer is 24 percent more than Terra’s closing share price of $33.25 in New York on Feb. 12. The takeover will close in about June, Yara said. “Yara is committed to the U.S. market, and this transaction presents an attractive opportunity for both companies to strengthen their positions in the U.S.,” Yara Chief Executive Officer Joergen Ole Haslestad said in the statement. Yara’s bid comes a month after Deerfield, Illinois-based CF Industries Holdings Inc. dropped its offer for Sioux City, Iowa- based Terra. CF had sought to acquire Terra since January 2009 while fending off a hostile bid from Agrium Inc. At stake in the three-way battle was whether Agrium or CF would be the world’s second-largest publicly traded maker of nitrogen-based fertilizers after Yara. To contact the reporter on this story: Vibeke Laroi in Oslo at vlaroi@bloomberg.net

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Gilbert B. Kaplan: A Trade Policy as Great as the American People

February 12, 2010

Most Americans think we are giving it away for free when it comes to trade, and in many respects they are right. The last decade has not been a good one for the United States in the international trade arena. We have lost over five million manufacturing jobs, and total manufacturing employment in the U.S. is at a historic low of about twelve million. At the same time there are about 100 million people at work in manufacturing in China. This picture doesn’t bode well for people looking for jobs in the U.S. If we want to turn it around we have to radically change what we are doing here in the trade arena. The simple fact is that U.S. jobs are flowing off-shore. We can create more, which President Obama and Congress are trying to do, but then they will flow off-shore too. The conditions of competition in this country do not favor keeping jobs here. President Obama’s plan to double exports is very unlikely to change this. The Chinese, the Koreans, the Taiwanese did not create an export driven economy by simply setting an export goal of doubling exports. They changed the basic terms of trade in their countries, by creating big tax benefits for exports, big subsidies to build-up industries, and closed markets to allow their industries to have a secure base with no competition from which to export. We will not double exports without a major shift in trade policy, nor will we bring jobs back home that should have never left in the first place. What should our trade policy be? First, the President has to take action to off-set Chinese currency manipulation. The President has talked about this problem recently, and I applaud him for doing that. Now he has to solve it, and he could do that today by simply applying our anti-subsidy law (also called the countervailing duty law) to exports from China, putting on a duty to off-set this currency subsidy. President Obama should also announce stronger action against China related to its internet censorship. U.S. companies trying to access the Chinese internet — now having the largest number of users in the world — have to somehow transverse the Chinese “great firewall.” This firewall should be brought down, and there are trade laws and negotiation mechanisms, including bringing a WTO case, that can make that happen. In his State of the Union address, President Obama was right to say that we should conclude the long-stalled Doha Round. But the President at this point should demand a clear deadline for negotiations, and if we can’t reach it, we should set off in a new, more important direction. What would that direction be? I would propose a three-fold agenda. First, we should focus on free, unfettered, and unencumbered access for United States’ innovation and creativity-based products anywhere in the world. Secondly, we need to switch our focus to helping U.S. manufacturing. This is where we have lost millions of United States jobs and seen entire towns shut down by unfair trade practices. And thirdly we need to equalize the tax treatment our exports get in comparison to exports from other countries. Due to a grossly unfair peculiarity in the WTO system, when foreign producers export their products, they receive a rebate of their VAT taxes. U.S. exporters do not get a rebate of the income taxes they pay, creating a disadvantage equal to as much as a 17% in every potential shipment from our shores. President Obama should also call on the Congress to do a major overhaul of the U.S. trade laws, making them faster, more accessible, and more reliable tools for US companies and workers harmed by unfair trade. There are a series of bills that have been proposed over time, by Senator Rockefeller, Senator Snowe, Congressman Levin and others, that could make a real difference, and these changes should be put in place now. In addition there should be fast, real recompense to companies and workers harmed by unfair trade, and these payments should be financed by duties on the unfairly traded goods, so they would not increase the deficit. We also need to deal with the problems of foreign subsidies to industry and agriculture in one of two ways. Either we need to reach agreements to eliminate these subsidies — a world-wide stand-still agreement on subsidies — or we need to give our producers and workers the same benefits. We can’t expect them to compete against foreign governments empty handed. Enforcement of existing trade laws and agreements should be a key part of the trade policy. This is a goal the President and Commerce Secretary Gary Locke have already spoken up on forcefully. They should now create an Unfair Trade Strike Force that would work across agency and sectoral lines to take strong, quick action on unfair trade. Cases should be self-initiated and problems solved on a real time basis. We cannot wait one or two years for issues to be resolved. The Strike Force should also take action against circumvention and evasion of existing trade case orders. In the trade and environmental area, President Obama needs to lead the way in resolving the apparent conflict between strong U.S. environmental laws and their potential trade effect on U. S. companies and workers. We cannot require U.S. manufacturers to pay millions of dollars to clean up their plants if our foreign competitors do not have the same requirements. We will simply become uncompetitive and there will be substantial “leakage” of U.S. jobs abroad. One way to deal with this is border measures, pursuant to which imports that come from plants that are not environmentally sound and that are causing global warming have to pay an extra tax at the border. Finally, we need to take a stronger stand when it comes to our existing free trade agreements. To some extent these agreements have helped U. S. companies and workers, but there have also been significant downsides. Our trade deficit with Mexico, for example, has steadily been increasing over the last decade, and more and more factories are moving down there. It is hard to find an example of a Mexican company coming to the U. S. and adding jobs here. With employment stuck at over 10 percent and the job base migrating outside the country, it is time to revisit this issue. The high levels of unemployment we have in this country are caused not just by the recession, but also by the unfair terms of trade that our manufacturers and workers are subjected to. We will not solve one problem without dealing with the other. The American job base cannot fight bare-handed against foreign governments arming their industries with enormous structural advantages. The program above will create jobs in the United States, and consistent with one of the President’s other goals, with the exception of personnel costs in the trade agencies, it is free.

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Most Asian Stocks Drop on Growing Europe Deficit Concerns; Macquarie Falls

February 8, 2010

By Shani Raja and Anna Kitanaka Feb. 9 (Bloomberg) — Most Asian stocks fell, led by banks and material companies, amid mounting concern budget deficits in Europe will derail the global economic recovery. Macquarie Group Ltd. , Australia’s largest investment bank, slumped 6.2 percent after its second-half profit forecast disappointed some investors. Westpac Banking Corp. dropped 2.5 percent as the cost of protecting Australian government bonds from default jumped. Mitsubishi Materials Corp., Japan’s No. 3 copper producer, sank 2.6 percent as it swung to a nine-month net loss. Toshiba Corp. fell 2.6 percent after Nikkei English News reported the company and its partners lost a bid in Vietnam. About five stocks declined for every three that rose on the MSCI Asia Pacific Index , which fell 0.2 percent to 113.94 as of 11:16 a.m. in Tokyo. The gauge has fallen 10 percent from a 17- month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle curbing deficits. “Investors remain cautious as the correction continues,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “Markets are climbing the wall of worry and are yet to be fully convinced that a workable solution is in the offing regarding highly-indebted European countries such as Greece and Spain.” Japan’s Nikkei 225 Stock Average lost 0.4 percent, while South Korea’s Kospi index added 0.6 percent. Australia’s S&P/ASX 200 Index declined 0.8 percent. Hong Kong’s Hang Seng Index gained 0.4 percent. Government Bonds Futures on the U.S. Standard & Poor’s 500 Index added 0.1 percent. Europe concerns dragged the gauge down by 0.9 percent yesterday. Credit-default swaps, or the cost of insuring against losses on sovereign debt, on Spain and Portugal jumped to a record, according to CMA DataVision. Those for Greece also hovered near an all-time high. Macquarie slipped 6.2 percent to A$47.21. The company said net income in the six months to March 31 may climb 10 percent from the first half. That indicates second-half profit of A$526.9 million ($457 million), below the A$586 million average estimate of three analysts surveyed by Bloomberg. Today’s forecast is “slightly below the more bullish analysts,” said Angus Gluskie , who oversees $300 million at White Funds Management Pty in Sydney. “Some investors were looking for a greater upgrade, so on a short-term basis are happy to close out positions given the softness in the market.” Sales Slump Westpac Banking, Australia’s second-largest lender by market value, sank 2.5 percent to A$22.68. Commonwealth Bank of Australia , the largest, lost 1.7 percent to A$51.85. The cost of protecting Australian government bonds from default jumped to almost a nine-month high today, according to Deutsche Bank AG. Mitsubishi Materials slumped 2.6 percent to 223 yen. The company said it swung to a nine-month net loss of 31.7 billion yen from net income of 19.6 billion yen a year earlier, as sales dropped by a third. Toshiba fell 2.6 percent to 412 yen. Toshiba, Mitsubishi Heavy Industries Ltd., and Hitachi Ltd., which together bid for a nuclear plant project in Vietnam, lost the order to Russia’s state-run Rosatom, Nikkei English News reported, citing sources it didn’t identify. Hitachi and Mitsubishi Heavy Industries both dropped at least 1 percent. Koito Industries Ltd., which makes seats for trains and airplanes, plunged 34 percent to 159 yen. The company will fix about 150,000 passenger seats in some 1,000 commercial airliners after saying that it falsified test results and made unauthorized design changes. Among stocks that rose today, Sumitomo Mitsui Financial Group Inc. , Japan’s No. 2 bank by value, increased 1.8 percent to 2,825 yen after profit beat analyst estimates. NCSoft Corp., an on-line games developer, advanced 2.1 percent to 123,000 won in Seoul as it reported increased quarterly profit. In Sydney, David Jones Ltd. , Australia’s second-biggest department store chain, advanced 1.3 percent to A$4.67. David Jones raised its earnings forecast after posting 2.4 percent sales growth for the second-quarter. Cochlear Ltd. , maker of the world’s best-selling hearing implant, climbed 4.4 percent to A$64.08 after first-half profit rose 8 percent on new product sales. To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net ; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net .

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