Wednesday, October 7, 2009

Wednesday Morning

After opening nearly flat, US stocks are down about half a percent a few minutes into trading. Earnings season opens this afternoon, when Dow component Alcoa (AA) reports September results after the close.

Clear Channel has a LOT of debt.
In July 2008, Bain Capital and THL Partners bought Clear Channel, which boasts 110 million radio listeners a week, in a highly leveraged $27 billion buyout. Now, the company is in danger of exceeding a loan requirement that its senior debt equal no more than 9.25 times its cash flow. Banks are saying the company has no options left -- which could be a form of payback.

Delta Airlines, not quite destroyed by high fuel prices, might be finished off by labor unions.
No trucks from Mexico, no new trade agreements, a sweet deal for the United Auto Workers at GM and Chrysler, tariffs on Chinese tires, and now Big Labor has another demand of the Obama Administration: Overturn 75 years of labor policy to sandbag Delta Airlines and unionize transportation workers. Will it get that too? The latest looming political favor features the National Mediation Board, the federal agency established in 1934 under the Railway Labor Act to oversee labor relations in the air and rail industries. A department of the AFL-CIO last month sent a letter demanding that the board tear up longstanding rules requiring that a majority of all airline or rail workers vote in favor of union representation to win union certification.

Support is building for - wait for this novel idea - a TAX CREDIT, to increase hiring. Novel.
“There is a lot of traction for this kind of idea,” said Representative Eric Cantor of Virginia, the Republican whip. “If the White House will take the lead on this, I’m fairly positive it would be welcomed in a bipartisan fashion.”

Still hard to get a securitized loan
The debt-securitization markets finance corporate loans, home mortgages, student loans and more. In good times, they enabled banks to package their loans into securities and resell them to investors. That process, known as securitization, freed banks to lend even more money. Many investors have lost trust in securitization after losing huge sums on packages of subprime mortgages that had high default rates. The government has since spent more than $1 trillion trying to restore the markets, with mixed success.

Monsanto beat earnings estimates, making two pennies per share in the 4th fiscal quarter, versus the 1 penny expected.
Chief Executive Officer Hugh Grant is cutting 8 percent of the workforce as farmers spend less and Chinese competitors sell cheaper generic versions of the company’s Roundup herbicide. Monsanto repeated its 2010 earnings forecast after two earlier cuts in the outlook for the glyphosate-based weed killer. “We expect continued growth in seeds and genomics gross profit, offset by a sharp decline in Roundup/glyphosate,” Donald Carson, a New York-based analyst at UBS AG, said in an Oct. 5 report. “We anticipate a cautious start to fiscal 2010.” He rates the shares “buy.”

So when does Target start monetizing assets? The sale-leaseback transaction.

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