World financial news

Standard & Poor’s stripped General Electric Co of its AAA credit rating, citing the performance of its finance unit, but its shares rose 13.7 percent as investors breathed a sigh of relief that the cut was not deeper.

S&P said a sharp deterioration in world economies would lead to rising credit losses across GE’s finance portfolio.

“We’re expecting really no earnings and no cash flow for GE Capital this year or next year,” said S&P analyst Robert Schulz in an interview. “Now that we’re at a lower rating, we think that ’stable’ was more appropriate given our expectation for the company’s performance, and that’s referring to the industrial cash flow.”

S&P lowered its outlook on GE’s ratings to “negative” in December. A month later, Moody’s Investors Service took a stronger step, putting its ratings on review for possible downgrade. Moody’s put GE on review on January 28 and typically tries to complete its reviews within 90 days.

Their stance was unchanged even after the company cut its dividend by 68 percent, in a move GE said would save $9 billion a year.

“It’s good to see it not drop lower, and it’s heartening to see that the outlook is stable. The ratings agencies can see more of that portfolio (than the average investor),” said Daniel Holland, equity analyst at Morningstar in Chicago. “Back in December when they flipped to negative, pandemonium broke loose, so it’s good to see them to go stable.”

GE stock jumped $1.17 to $9.66 in midday trading on the New York Stock Exchange, reaching their best level since February 20 and helped boost the overall stock market quick cash.

The cost of insuring debt of GE’s finance arm against default fell.

NOT OUT OF THE WOODS

Attention turned to next week’s investor meeting, in which GE could revise lower its profit target for the finance unit.

“Management will provide more details on its balance sheet stress test, which will likely focus on the triggers for rising credit losses and further asset value impairments,” Deutsche Bank analyst Nigel Coe wrote in a research note.

GE, in a statement released just after the downgrade, said it does not anticipate significant operational or funding impact from the change and said it is one of the only financial services companies with a rating as high as AA-plus.

Spokesman Russell Wilkerson called the downgrade “a good outcome under the circumstances.” S&P’s “stable” outlook means the rating is unlikely to change in the next six months to two years, GE said.

Still, GE has plenty of issues with which it will have to contend, from the credit performance of its portfolio to the value of its assets, said Alex Vallecillo, senior portfolio manager with Allegiant Asset Management, which manages assets of $28 billion but does not own GE shares.

“They are not out of the woods yet by any stretch,” Vallecillo said. “I would have thought that they would at least downgrade it to AA. There’s a good chance they (S&P) are behind the curve on this.” 

Read more

AMC Entertainment Inc. has asked to borrow the remaining $185 million under its revolving credit facility because of the economic uncertainty.

The Kansas City-based movie theater operator said in a Wednesday filing with the Securities and Exchange Commission that it would use the money for general corporate purposes. The request, submitted Tuesday, would max out its $200 million revolving credit facility, other than funds to be used for letters of credit, the filing read.

“AMCE submitted the borrowing requests in light of the continuing uncertainty in the credit market and general economic conditions,” the company said in the filing.

The revolving credit facility was created by an $850 million credit agreement dated Jan. 26, 2006.

AMC also generated money from the Dec. 29 sale of its Mexican movie theater subsidiary for $315 million in cash, minus about $66.9 million in debt. AMC expects later tax payments and refunds of $11 payday loan lenders.7 million.

In February, AMC reported a loss of $82 million for the quarter that ended Jan. 1, compared with a loss of $11.2 million a year earlier. That included a noncash impairment charge of $73.5 million for fixed theater assets, internal-use software and assets held for sale. Revenue for the quarter was $538.9 million, up from $520.8 million the prior year.

AMC is privately held but required to report to the SEC because some of its debt is publicly held. On Oct. 31 , the company said it wouldn’t proceed with plans for a public stock offering.

As of Jan. 1, AMC owned, operated or had interests in 309 theaters and 4,628 screens, with 99 percent of its screens in the United States and 1 percent in China (Hong Kong), France and the United Kingdom.

Source

Top executives of leading U.S., Japanese and European banks will meet in London this month to discuss regulation and other issues key to the future of the financial system, two industry sources said.

The British government will host the meeting on March 24, after a gathering of Group of 20 (G20) finance ministers in London this weekend and ahead of a summit of G20 leaders there on April 2, according to the sources, who declined to be identified because the meeting has not been made public payday loans no credit check.

(Reporting by Taro Fuse; Editing by Jean Yoon)

Read more

Anheuser-Busch InBev is pushing through economic turmoil and a massive combination of companies with an eye toward more aggressive cost-cutting.

Announcing financial results Thursday, the world’s biggest brewer said it now wants to achieve much larger "synergies" from the buyout of Anheuser-Busch. It is aiming for $2.25 billion in savings, up from a $1.5 billion target. Most of the savings will come from the company’s practice of making departments justify their budgets from scratch every year, as well as from extracting better terms from suppliers.

The Belgian brewer also signaled that its staffing levels are right and that executives do not expect significant job cuts this year.

A-B InBev’s revenue rose more than 5 percent last year and 4.2 percent in the fourth quarter, thanks in part to price increases. But full-year profits slid 41 percent and fourth-quarter profits dropped 95 percent because of finance charges from the $52 billion, debt-financed takeover of A-B. Unexpectedly steep jumps in materials costs didn’t help.

Despite market conditions that pose "significant challenges," A-B InBev said it expects its profit margins to expand this year.

The company’s stock price rose 4 percent in European trading. "These numbers are on average comforting enough to bring more investors into this big story," ING analyst Gerard Rijk wrote in a research note. A-B InBev is "changing the rules of the game."

Anheuser-Busch acquitted itself well in its first period as a subsidiary of Anheuser-Busch InBev, based in Leuven, Belgium. Anheuser-Busch gained half a point of market share in the U.S. last year, and its Bud Light Lime was the year’s most successful beer launching. A-B’s shipments of domestic beer have grown nearly 5 percent since Nov. 18, when InBev took over. Over the full year, Anheuser-Busch’s sales of domestic beers such as Bud Light grew 1 equifax free credit report.6 percent, faster than the overall U.S. industry. By comparison, sales of InBev’s imports in the U.S. — including Leffe and Hoegaarden — fell 1 percent.

Despite Anheuser-Busch’s growth, the newly combined company struggled to increase its overall beer sales in 2008. It said beer industry sales volumes were weak throughout its markets.

Anheuser-Busch InBev’s beer volumes fell by three-tenths of a percentage point in 2008, and dropped faster — 2 percent — in the fourth quarter. Measured in liquid, sales of Beck’s and Stella Artois — two of the company’s top brands — grew only three-tenths of a point last year.

The company managed to outperform competitors and gain market share in the U.S., Germany, Canada and the U.K., among other markets.

But A-B InBev lost market share in Russia and slipped in the three Chinese provinces that contribute 80 percent of its Chinese business. China is the world’s biggest beer market.

As a result of missing performance targets, CEO Carlos Brito and most members of the company’s executive board will not receive bonuses this year.

The company said it wants to "rapidly" pay off debt, partly by selling off at least $7 billion in assets. It will cut capital expenditures by at least $1 billion this year.

Anheuser-Busch InBev is "the shrewdest, most brilliant financial operator we’ve ever met in the beverage industry," said Credit Suisse analyst Carlos Laboy. "They will find these synergies."

jmcwilliams@post-dispatch.com

314-340-8372

Source

McCormick & Schmick’s Seafood Restaurants Inc. profits evaporated in 2008 even as revenue rose on the opening of new locations around the country.

The Portland-based chain of seafood restaurants (NASDAQ: MSSR) reported a 2008 loss of $69.6 million on $390.7 million in revenue. Revenue rose nearly 9 percent over the year but was dragged down by fourth quarter losses of $73.4 million on earning of $98.7 million.

The company said the fourth quarter performance was hampered by the economy. It also recorded $73.4 million in charges, including a $54.4 million charged related to impairment of its trademarks and trade names.

The company reported a year-end loss of $4.73 per share. Fourth quarter losses were partly offset by increased revenue from the addition of three new restaurants, in Scottsdale, Ariz., Houston, Texas, and Naples, Fla.

For restaurants open more than a year, comparable sales dropped 7.5 percent in 2008.

“Our sales trends were consistent with what many other restaurant and retail companies experienced during the holiday shopping season free online credit report. Our results were further impacted by unusually harsh winter weather in the Pacific Northwest and lower than expected banquet activity,” said Douglas Schmick, chairman.

William Freeman, McCormick & Schmick’s new CEO, said the company will work on guest loyalty programs to bolster business in 2009. He said McCormick & Schmick’s will limit plans to open new stores to just two locations already opened, in Roseville, Calif., and St. Louis, Mo.

However, he said comparable restaurant sales are expected to remain negative in 2009. As of Feb. 28, its comparable restaurant sales were consistent with those of the fourth quarter of 2008.

McCormick & Schmick’s operates 94 restaurants, including one at The Greene town center in Beavercreek.

Source

Ailing telecom equipment maker Nortel Networks dismissed a newspaper report on Wednesday that said the company was hoping to emerge from bankruptcy protection by the middle of the year.

"Nortel is not providing any guidance on timing of emergence, but hopes to have a business plan in place by May that can be shared with employees and the public – pending further discussions with the creditors," company spokesman Mohammed Nakhooda said on Wednesday.

His comments came after the Financial Times quoted Chief Executive Officer Mike Zafirovski as saying the company plans to complete its reorganization plan "over the next few weeks" before submitting it for approval to the board toward the end of the month.

This timeline isn't new, as Zafirovski told Reuters on Feb car loan rates. 26 that the company will complete its plan by March or April and hopes to make it public in May.

However, the Financial Times also said Nortel hopes to emerge from court protection by the middle of the year.

Earlier this week, Toronto-based Nortel reported a $2.14 billion quarterly loss as it booked noncash writedowns and saw its sales plunge.

In January, the company filed for bankruptcy protection in Canada, the United States and elsewhere, in a bid to try to restructure while keeping creditors at bay.

It had about $2.4 billion in cash when it sought protection and about $4.5 billion in long-term debt.

Source

Offshore tax havens used by rich Americans in Switzerland, the Cayman Islands and other nations are targeted for shutdown by bills offered on Monday by Democrats in both chambers of the Congress.

The Senate bill expands on one co-sponsored last year by then-Senator Barack Obama and Senator Carl Levin, who has sought a broad crackdown on tax dodgers estimated to deprive the U.S. government of more than $100 billion a year.

A thriving business in tax evasion developed in recent years on Wall Street among consulting firms, hedge funds and other elite financial players. Some purveyors even sought patent protection for their off-the-shelf schemes.

The Levin bill would ban patenting of tax avoidance plans, target dozens of offshore “secrecy jurisdictions” for attention, and put a greater burden on taxpayers to show that their tax arrangements are legitimate.

“Offshore tax haven and tax shelter abuses are undermining the integrity of our tax system,” said Levin, of Michigan, in a statement. “We cannot tolerate $100 billion in offshore tax abuses burning a hole through our budget each year.

“We can fight back against secrecy jurisdictions and shut down offshore tax abuses if we have the political will.”

Three provisions have been added since last year to the Levin bill. One would classify U.S.-controlled foreign corporations as domestic for income tax purposes. Another would close an offshore tax dividend loophole that lets people dodge payment of U auto loans for bad credit.S. taxes on U.S. stock dividends.

The third provision would expand tax reporting requirements for passive foreign investment corporations.

Similar legislation was introduced in the House by Texas Democrat Lloyd Doggett and more than 40 co-sponsors.

“It is long past time to take effective action to stop offshore tax dodging,” Doggett said in a statement. “These outrageous tax havens add to the soaring budget deficit and shift the tax burden to small businesses and families, who play by the rules.”

UBS HEARING AHEAD

The bills came two days ahead of a Senate hearing where a senior UBS AG executive is due to testify about a U.S. investigation alleging that well-to-do Americans used secret UBS accounts to avoid paying U.S. taxes.

The case puts Swiss banking secrecy on the line and was raised at a meeting on Monday in Washington between U.S. officials and Swiss Justice Minister Eveline Widmer-Schlumpf.

The minister told reporters she was assured by officials that the Obama administration is “not intent on having an escalation but they are willing to work for a resolution.”

Mark Branson, chief financial officer of UBS Global Wealth Management and Swiss Bank, is scheduled to be a witness at a hearing on Wednesday before the Senate Permanent Subcommittee on Investigations, which is chaired by Levin. 

Read more

The pound fell against the dollar after U.K. house prices dropped the most since at least 2001 and stocks declined, reducing demand for riskier assets.

The British currency also slipped versus the yen and the Swiss franc as U.K. banks granted fewer mortgages than economists forecast in January. House prices declined 10 percent last month from a year earlier as rising unemployment and fewer loans discouraged buyers, Hometrack Ltd. said in a report today.

“Sterling can’t hold up in the face of those strong dollar gains,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “Stocks continue to be pummeled globally. It’s all about risk today.”

The pound dropped 1.2 percent against the dollar to $1.4141 as of 12:01 p.m. in London. It weakened 1.7 percent to 137.29 yen. Against the Swiss franc, the British currency fell 0.7 percent to 1.6617. The pound slipped 0.8 percent to 89.23 pence per euro.

Loans for home purchase held at 31,000, the same as in December, the Bank of England said today in London. Economists predicted 33,000, according to the median of 24 forecasts in a Bloomberg News survey. Overall net consumer lending rose on the month by 1.1 billion pounds, a 15-year low, the Bank of England said.

Foreclosures on so-called non-conforming mortgages included in 35 billion pounds of bonds rated by Standard & Poor’s climbed to 3.47 percent in the fourth quarter, from 2.77 percent in the previous three-month period, S&P said in a separate report published today.

Interest Rate Decision

The FTSE 100 Index declined 4.2 percent, sliding to the lowest level in six years, led by HSBC Holdings Plc, which said it plans to raise 12.5 billion pounds ($17.7 billion) in a share sale. U.S. stock-index futures also retreated.

The Bank of England probably will reduce its benchmark interest rate to a record low of 0.5 percent from 1 percent on March 5, according to the median forecast of 60 economists surveyed by Bloomberg payday loans guaranteed no fax. The central bank may signal intent to boost the money supply by as much as 100 billion pounds in a process known as quantitative easing, the London-based Sunday Times reported yesterday, without saying where it got the information.

U.K. government bonds rose, with the yield on the 10-year gilt falling six basis points to 3.56 percent. The 4.50 percent security due March 2019 increased 0.55, or 5.5 pounds per 1,000- pound face amount, to 107.90.

The two-year gilt yield dropped three basis points to 1.40 percent. Bond yields move inversely to prices. A basis point is 0.01 percentage point.

‘Exploding Supply’

The British Treasury plans to sell 3.75 billion pounds of 3.25 percent bonds due 2011 tomorrow. The U.K. will hold a record 20 auctions of gilts in the first quarter as the government seeks cash to offset a slump in tax revenue amid a looming recession.

“The ability of Gilts to move to lower yields and to consolidate short term gains is very much tempered by concerns over the exploding supply outlook, which is manageable only if the Bank of England is deemed likely to imminently begin buying the market in very large size,” said John Wraith, head of sterling-rate strategy at RBC Capital Markets in London.

The Bank of England may buy between 85 billion pounds and 170 billion pounds of U.K. government bonds, beginning this month, as part of its so-called quantitative-easing program, JPMorgan Chase & Co. said last week.

U.K. bonds lost investors 3.3 percent this year, Treasuries fell 3.6 percent and German government bonds returned 0.15 percent, according to Merrill Lynch & Co.’s U.K. Gilts, U.S. Treasury Master and German Federal Governments indexes.

Source

The Federal Reserve’s efforts to bolster credit markets and revive growth pose a long- term risk of provoking inflation and worsening other problems that must be solved quickly when the crisis wanes, Fed policy makers said.

Central bank officials, after cutting interest rates almost to zero and more than doubling Fed assets to $1.9 trillion, should design an “exit strategy” that will enable them to steadily reduce credit, Philadelphia Fed President Charles Plosser said yesterday. He spoke at a New York conference that included economists and five other Fed district bank presidents.

The Fed, already facing congressional criticism for invoking emergency power to expand its balance sheet, may face political pressure to keep interest rates low and credit abundant when economic growth resumes, Plosser said. Inflation may surge unless the Fed can withdraw monetary stimulus in a timely manner and fulfill its mandate to keep prices stable, he said.

“It is difficult to make credible commitments to price stability when the implementation of policy is disconnected from such an important policy objective,” Plosser said. “The absence of an exit strategy, or an entrance strategy, creates uncertainty.”

The need to start curtailing credit isn’t pressing, central bank officials said.

Economy Contracts

The economy contracted at a 6.2 percent annual rate in the fourth quarter of 2008, the worst performance in 26 years, the Commerce Department said yesterday. GDP was previously estimated to have declined by 3.8 percent last quarter.

Stocks declined after yesterday’s report, sending the Standard & Poor’s 500 Index to a 12-year low. Stocks also fell on the government government’s third rescue of Citigroup Inc.

The consensus of economists surveyed by Bloomberg is for contraction of 5 percent in the first quarter of this year, with some estimates ranging as high as 8 percent.

The economy will probably “shrink significantly in the first half of this year,” Boston Fed Bank President Eric Rosengren said at the U.S. Monetary Policy Forum, a conference sponsored by the University of Chicago Booth School of Business and the Brandeis International Business School. He doesn’t vote on the Federal Open Market Committee this year.

Balance Sheet

Some time in the second half of the year, growth will probably resume, the Fed officials said. The central bank will need to begin raising interest rates and shrinking its balance sheet to ensure liquidity provided during the crisis doesn’t stoke inflation, they said.

“When things go back to normal, it is extremely important to get out of this business” of providing emergency credit, former Fed Governor Frederic Mishkin said. “It does leave you wide open to a lot of political problems.”

Government officials, reluctant to increase spending and compound the federal budget deficit, may push the Fed to expand the money supply to boost growth, he said.

High levels of unemployment may also discourage the Fed from quickly withdrawing credit. The jobless rate is forecast to remain above 8 percent through 2010, according to the Bloomberg survey quick guaranteed personal loans.

Yellen, Evans

Attending the conference along with Plosser and Rosengren were San Francisco Fed Bank President Janet Yellen, St. Louis Fed Bank President James Bullard, Minneapolis Fed Bank President Gary Stern and Chicago Fed Bank President Charles Evans.

The Fed’s lending programs are designed to wind down as markets strengthen, automatically shrinking the balance sheet.

The central bank provides credit at higher interest rates than private lenders, so borrowers will probably return to private markets when the crisis abates. Interest rates in the commercial paper market have fallen below the 2.24 percent the Fed charges to buy unsecured debt under its Commercial Paper Funding Facility.

Other Fed programs will probably continue as the economy recovers, and many of the assets the Fed is buying, such as mortgage-backed securities, are long-term. The central bank may need to swap less-liquid assets on its balance sheet for Treasuries so it can more easily raise interest rates once the economy recovers, Plosser said.

Agreement With Treasury

He proposed the Fed seek an agreement with the Treasury Department to swap non-Treasury assets and non- discount-window loans for Treasuries, transferring credit risk to the U.S. fiscal authority. The move would provide the Fed with easier-to-sell securities, facilitating its efforts to tighten credit.

“Plosser’s sentiments can only go so far — the Fed’s board is in control,” said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. “Nevertheless, as a top Fed official his remarks will be used as ammunition by those worried about the way in which the Fed is enlarging its balance sheet.”

Plosser, 60, a former economics professor who does not vote on policy this year, said policy makers must “clarify the criteria under which we choose to step in as a lender of last resort,” to prevent market-roiling speculation about the Fed’s intent. He also reiterated his support for the Fed to adopt an explicit numerical inflation “target” and commit to achieving the objective over a period of time.

Long-Term Forecasts

Last week, the Fed released the first long-term forecasts by policy makers for inflation, economic growth and unemployment, moving closer to an inflation goal without making it explicit. That should help “reinforce inflation expectations of around 2 percent,” Yellen, 62, said.

The Fed’s inflation-fighting credibility sustained public confidence in price stability as the price of oil rose to a record last year, she said.

Continued attention to inflation should help moor price expectations amid signs of disinflation now, the Fed officials said.

Longer-term, as the economy rebounds, the central bank must reinforce that commitment to price stability, said Yellen, who votes on monetary policy this year. “The Fed must always be vigilant in guarding its inflation credibility.”

Source