Financial News

Billion-dollar bankruptcies are at their highest in five years only half way through 2008, according to bankruptcy filing tracker BankruptcyData.com.

A total of seven U.S. companies with more than a billion dollars in assets have filed for bankruptcy protection so far this year, it said.

Fremont General Corp FMNTQ.PK, which was one of the largest U.S. providers of subprime mortgages before regulators ordered it to stop making the loans, was the largest filing of the year with $13 billion in pre-petition assets, BankruptcyData.com said. Fremont filed for Chapter 11 bankruptcy protection in May, after arranging to sell bank branches and deposits to CapitalSource Inc (CSE.N: Quote, Profile, Research, Stock Buzz).

SemGroup LP, the energy trader which filed for bankruptcy protection from creditors last week, was the second-largest bankruptcy filing of the year with $6 billion in pre-petition assets.

“We seem to be in the midst of a ‘perfect storm’ leading to more bankruptcies: high levels of debt, high energy and raw materials costs and weakness in the U.S no fax payday advance. economy,” George Putnam, III of New Generation Research, which publishes BankruptcyData.com said in a statement.

He forecast bankruptcies could peak as early as the middle of 2009 or continue rising well into 2010.

The recent spike in billion-dollar bankruptcies, comes only about half way through 2008 and is well above the previous levels. In 2007 only one company listed more than $1 billion in pre-petition assets, New Century Financial Corp. In 2006, auto parts maker Dana Corp had the largest filing, listing $9 billion in pre-petition assets.

The last year in the previous bankruptcy wave was 2003, when there were 15 billion-dollar bankruptcies filed. The number of billion-dollar bankruptcies peaked in 2001 when there were 25, according to BankruptcyData.com. 

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United Airlines parent UAL Corp. stock soared 68% Tuesday after it reported a second-quarter net loss of $2.7 billion Tuesday due to the soaring price of fuel and announced thousands of new job cuts.

UAL Corp. (UAUA, Fortune 500) said its loss of $21.47 per share stemmed from $2.6 billion in previously recorded accounting charges, including a $2.3 billion special charge for "goodwill impairment."

Excluding these charges, the parent of the nation’s second-largest airline reported a loss of $151 million for the quarter, or $1.19 per share.

But that was better than the loss of $2.05 per share that analysts surveyed by Thomson/First Call had expected on that basis.

The company’s stock ended the day $3.42 higher to $8.41 a share.

United said operating revenue totaled $5.37 billion, falling just short of the $5.40 billion analysts had expected.

"Our industry continues to be challenged, perhaps as never before, by fuel prices that continue to march higher," United Chief Executive Glenn Tilton said in a webcast with analysts. "We’re taking the difficult but imperative action of cutting jobs throughout the company."

Jack Brace, chief financial officer, said United plans to cut 7,000 jobs, or 12% of its total workforce, by the end of 2009, much larger than the previously announced cuts of approximately 1,500 jobs. Brace also said the airline will eliminate 100 of its least fuel-efficient airplanes from its fleet.

John Tague, chief operating officer, said United will also eliminate its least fuel-efficient routes, aiming for a 13% capacity reduction by the end of 2009.

"At current fuel prices, the economics of certain routes just don’t make sense right now," said Tague. "Routes that cannot withstand the pressure of elevated fuel costs will be eliminated."

United also announced that it extended its Mileage Plus bank card partnership with Chase Bank, meaning that United will receive a $600 million payment from Chase, and increase its cash flow over the next two years by $200 million.

Other airlines struggling with rising fuel prices also posted quarterly losses Tuesday.

But airline stocks rose as oil prices prices plunged. US Airways (LCC, Fortune 500) jumped nearly 59% on Tuesday and JetBlue (JBLU) climbed almost 16% by the end of the day.

"The market probably liked what it heard on the conference call with the capacity cuts," said Ray Neidl, airline analyst for Calyon Securities. "But I think the biggest thing is the change in oil prices."

Oil plunged as much as $5.41 a barrel in Tuesday trading, before settling $3.09 lower, due to concerns about energy use in a troubled economy and reduced fears that a tropical storm in the Gulf of Mexico will hurt production faxless cash advance.

"Oil prices going down has certainly had an impact," said U.S. Airways Chief Executive Doug Parker in an analyst call, when asked to comment on the rising stock prices.

The Tuesday trading is in stark contrast to the airlines’ performance so far this year. Year-to-date, the Amex Airline Index (XAL) has plunged 50%.

US Airways, the nation’s No. 6 carrier, reported a narrower second-quarter loss than had been forecast on revenue that came roughly within expectations.

The airline posted a net loss of $101 million, or $1.11 per share. Analysts had expected a loss of $1.29 per share. Excluding charges, the net loss was $567 million, or $6.16 per share, the company said.

The carrier reported total operating revenue of $3.25 billion, versus Wall Street’s projections for sales of $3.27 billion.

JetBlue Airways booked a net loss of $7 million, or a loss of 3 cents a share, as operating revenue surged 17.7% to $859 million.

Analysts had projected a loss of 7 cents per share on revenue of $856 million.

Rising fuel prices are squeezing the money-losing airline industry, which is in its worse state since the fallout immediately following the terrorist attacks of Sept. 11, 2001.

Sales gains "are clearly not keeping pace with the extraordinary increase in the price of jet fuel," JetBlue Chief Executive Dave Barger said in a statement.

US Airways CEO Parker echoed that view. Losses "reflect the unprecedented rise in fuel prices that are impacting our industry," he said.

The Air Transport Association expects fuel costs to jump to $61.2 billion this year, up nearly 50% from $41.2 billion in 2007. Airlines have also increased fares, added fees to services that once came for free, cut thousands of jobs and reduced capacity by eliminating their least fuel-efficient flights.

Parker said these a la carte charges, which include charging fees for the first checked bag, will result in an additional $400 million to $500 million in annual revenue.

Other measures, such as removing the in-flight entertainment system, will save the company $15 million a year from "reduced fuel burn," he said. 

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A major rescue package for the U.S. housing market is scheduled to come to a vote in the House of Representatives on Wednesday, with lawmakers agreeing final language late on Tuesday and congressional analysts putting a $25-billion potential price tag on a new provision.

Designed to bolster Fannie Mae and Freddie Mac, the nation’s biggest mortgage companies, the provision drafted by the Bush administration was added to a bill that has been in the works for months.

The overall measure now has wide, bipartisan support in both the House and the Senate, said Massachusetts Democratic Rep. Barney Frank, chief architect of the legislation.

The added provision, proposed by Treasury Secretary Henry Paulson, would give beleaguered Fannie and Freddie access to new, government capital in the form of loans or equity purchases.

The stock prices of both Fannie and Freddie have seesawed wildly in recent days on investor concern about whether the two government-sponsored enterprises, or GSEs, will be able to ride out the worst U.S internet payday loans. housing market slump in decades.

The firms own or guarantee almost half of the nation’s $12 trillion in outstanding residential mortgage debt. They are playing an increasingly vital role in the housing market, with foreclosures up, home values down and global capital in full retreat from private markets for securitized mortgage debt.

In estimating the potential cost to taxpayers of the Paulson proposal, the nonpartisan Congressional Budget Office (CBO) said it was uncertain whether the GSEs would ever need to tap the capital line that Paulson wants to offer.

The CBO’s $25-billion estimate was couched in language that made clear the cost could also be zero, if the capital line is never tapped. At the same time, the CBO said there was a slim chance that the GSEs’ losses could top $100 billion. 

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IBM (IBM.N: Quote, Profile, Research, Stock Buzz) and other technology companies whose products help big corporations save money or expand data storage capacity are faring better than those relying on consumers as the economy slows.

International Business Machines Corp, the world’s biggest technology company, impressed investors by easily beating quarterly profit expectations and raising 2008 forecasts when it reported along with other big tech companies on Thursday.

In contrast, Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) missed estimates amid concern about its online business and the economy, while Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz) also disappointed. The Web leader told investors it was operating under “uncertain economic conditions” after a weaker-than-expected 35 percent quarterly profit increase.

Darren Bagwell, director of equity research at Thrivent Asset Management, which manages $73 billion, reckons IBM’s results point to strong performances for companies like EMC Corp (EMC.N: Quote, Profile, Research, Stock Buzz), the world’s biggest maker of corporate storage gear guaranteed payday loan. EMC releases its results on July 23.

“IBM’s mainframe business was on fire,” he said, pointing to a new line of computers that IBM introduced in February. They sold out at the end of the second quarter after the company’s first major upgrade to its mainframes in almost three years. They are used in “green” data centers that help businesses save money on energy and maintenance costs.

In a teleconference with analysts and reporters on Thursday, IBM said demand from companies in developed countries looking to expand data centers contributed to its better-than-expected 22 percent rise in quarterly profit.

Bagwell noted both Microsoft and Google said they plan to invest heavily to develop larger, more sophisticated data centers so they can better compete with each other.

“They are spending a lot of money to build out the infrastructure they need,” he said. “Someone is going to get the benefit of that, obviously.” 

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World No. 2 home appliances maker Electrolux warned on Thursday that flagging consumer demand will hit full-year earnings harder than thought, sending its shares down nearly 9 percent.

The company — whose brands include AEG, Zanussi and Frigidaire as well as its own name — said it expected operating income for the year of 3.3 billion to 3.9 billion Swedish crowns ($654 million), excluding items affecting comparability.

The news overshadowed forecast-topping second-quarter numbers from Electrolux, which said earnings before interest and tax for the period were 793 million Swedish crowns — excluding extraordinary items.

This was below a prior-year 921 million but beat a mean forecast of a 716 million in a Reuters poll of 10 analysts.

“The new guidance is lower than what was expected and that will lead to forecast downgrades,” said one analyst quick payday loan. “If we say that the market will pull down its estimates 10 percent, the share price fall is understandable.”

Electrolux shares were down 3.6 percent to 67.50 crowns by 1029 GMT against a 3 percent gain in the broader market.

The Swedish producer of washing machines, fridges and other white goods — dethroned as world No. 1 appliance maker when Whirlpool bought rival Maytag in 2006 — had previously seen operating income at the lower end of a single-digit percentage rise or fall from last year.

“When I talked about our outlook earlier this year we had a more positive view of the market. Previously we thought that the U.S. market would pick up pace again during the second half of the year,” Chief Executive Hans Straberg told Reuters. 

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It is hard to know how far the global financial crisis still has to run, with the extent of further credit losses hinging on what happens to the U.S. housing sector, IMF chief Dominique Strauss-Kahn said on Wednesday.

“What is sure is that the consequences for the real (economy) sector of the financial crisis are still in front of us,” Strauss-Kahn, the International Monetary Fund’s managing director, said in an interview.

With sky-high food and oil prices adding to the economic pain caused by financial strains, Strauss-Kahn said the IMF was fairly pessimistic about global growth prospects this year and, especially, in 2009.

But he told a news conference later that softening growth was less of a threat than inflation, which he said was rampant in some countries.

“In developed countries, central banks have taken it into account and have the correct monetary policy stance http://savingpaydayloans.com. In emerging countries and some low-income countries, in some of them at least, inflation is out of control. That means monetary policy probably has to be tightened in coming weeks or coming months.”

Strauss-Kahn said the lesson from the 1970s and 1980s was that inflation can last for years, or even decades, if central banks and governments choose the wrong policy settings.

“That’s why it’s very important today, and that’s what the IMF is doing, to draw attention to this question,” he said.

DOLLAR NEAR FAIR VALUE, YUAN TOO CHEAP 

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Spats over the last remaining leveraged takeovers forged during the private equity boom have mostly been resolved, but Wall Street banks, buyout firms and the companies they target have been left more than a little bruised.

A crucial issue for future deals is private equity firms, banks and buyers finding ways to protect themselves and ensure others can’t easily pull out of deals or litigate.

But some of the trust that once existed between major parties in the business is now in doubt.

It seems every banker, lawyer and private equity executive has a war story about deals that have been scuttled, delayed or revamped in the past year.

The private equity buyers are facing up to the idea that they probably overpaid during their zealous shopping sprees for companies in 2006-2007. Some of these investments may now run into trouble in an economic downturn which could be ugly and prolonged, especially given how debt-laden many are following the leveraged takeovers.

The Wall Street banks that financed the deals, meanwhile, had to write down billions in leveraged loans after getting stuck with debt they had trouble syndicating http://us-fast-cash-now.com. They may be on the hook for more if companies in deals they financed fail to produce enough cash flow to pay off the debts and need restructuring.

For the shareholders of the companies where takeover-financing collapsed, the situation is already grim as share prices remain well below the original price of the deals.

“Private equity firms, by and large, have come out quite nicely, the banks have taken some hits and overall the sellers came out worse,” said Joel Greenberg, partner and co-chair of law firm Kaye Scholer LLP’s Corporate and Finance Department. 

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Goldman Sachs said it lowered its rating on the U.S. broker industry because of continued deterioration of the banking industry and the prospect of a lengthy recovery.

"We are lowering our coverage view on the brokers to Neutral from Attractive, as we see limited near term catalysts," read the report, published Wednesday by Goldman Sachs (GS, Fortune 500) analyst William Tanona. "Fundamentals continue to deteriorate as expected, but the pace of deterioration appears to be far worse than we originally anticipated."

In his report, Tanona said he upgraded the group to "attractive" after the collapse of Bear Stearns in March because he did not see a high probability of another bank failing. He said he downgraded the industry because he doesn’t see many prospects for improvement in the near future.

"Although we still believe that to be the case, we are hard pressed to find a catalyst that will move the group significantly higher over the next few months as fundamentals continue to deteriorate," wrote Tanona faxless payday loans. "In addition, we also believe a recovery will take longer than originally anticipated."

Goldman Sachs also downgraded Citigroup (C, Fortune 500) to "conviction sell." Tanona expects the firm to take an additional $8.9 billion in writedowns in the second quarter. The analyst also expects "significant" writedowns for Merrill Lynch.

"We see multiple headwinds for Citigroup including additional writedowns, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," read Tanona’s report.

The firm maintained its "conviction buy" for Morgan Stanley (MS, Fortune 500). 

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Business activity in the U.S. Midwest contracted in June for a fifth straight month but at a less severe rate, even as production and new orders both slipped, a report showed on Monday.

The National Association of Purchasing Management-Chicago business barometer rose to 49.6 from 49.1 in May, and was the strongest since January.

Economists had forecast the index at 48.0. A reading below 50 indicates contraction.

“The fact that we are hanging around 50 is consistent with an economy that is hovering right above recession level, but is not in a recession,” said Mark Vitner, economist at Wachovia Securities in Charlotte, North Carolina.

The employment component of the index rose to 46.7 from 41.2 in May — also the strongest since January.

Still, new orders fell to 52.0 from 56.1 and production was down to 45.1 from 51.5.

“On balance, results came in relatively mixed, contributing to a modest further increase in the headline measure,” said strategists at IDEAglobal in New York payday loans in 1 hour. “Most subcomponents remain weak.”

Businesses face continued high input costs. The prices paid index slipped to 85.5 from 87.5, which was the highest since June 2006, and was above 80 for a fourth straight month. 

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