Financial News

Bank of America’s stock fell 9 percent Friday after the bank posted a 3 percent drop in earnings and said that new financial regulations could cost California’s largest bank as much as much as $4.3 billion a year.

The Charlotte, N.C., bank also told investors that it will take a third-quarter charge of $7 billion to $10 billion due to a drop in the value of its credit card business once financial reform becomes law.

BofA is also getting slammed as the nation’s largest issuer of debit cards, which has been one of the most lucrative areas of retail banking. New restrictions on what the bank can collect every time a merchant swipes a customer’s debit card will hit the bank’s bottom line by $1.8 billion to $2 no fax pay day loan.3 billion annually. The bank also said its decision to not allow overdrafts on debit cards, doing away with the infamous $40 cup of coffee, will cost BofA another billion dollars.

The bank’s second-quarter performance failed to lift investors’ spirits. BofA saw profit decline among several units, including Merrill Lynch and its residential mortgage business.

The bank’s second-quarter provision for loan losses fell to $8.11 billion from $9.81 billion in this year’s first quarter. BofA’s pace of charge-offs fell to 3.98 percent from 4.44 percent in this year’s first quarter.

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Sales at major retailers rose for a 10th straight month in June, but mixed results reported Thursday signaled that consumers are still cautious.

According to sales tracker Thomson Reuters, which looks at monthly sales for 28 leading chains such as Macy’s (M, Fortune 500), Target (TGT, Fortune 500), Costco (COST, Fortune 500) and J.C. Penney (JCP, Fortune 500), June same-store sales rose 3.1%. That was slightly below the firm’s initial estimate for an increase of 3.2%.

Same-store sales, a key gauge of a retailer’s performance, measure sales at stores open at least a year.

While consumers may still be hesitant to open up their wallets, June’s gain was stronger than May’s 2.5% increase and a significant jump from the 4.9% drop in same-store sales reported in June of last year.

"The bottom line is that consumer spending is continuing to grow, but only modestly and not at the fast pace we saw at the beginning of the year," said Scott Hoyt, a retail economist at Moody’s Economy.com.

"Unemployment is still high, wealth is probably falling again with the declines in the stock market, and overall confidence is very low, so there are just a number of constraints on the consumer right now," he added.

Out of the 28 stores, 44% beat analysts’ expectations, while 56% missed.

Sluggish sales: Sales at discount and apparel stores were the most disappointing in June. Discount store sales rose an average of 2.9% last month, compared with an expected 3 pay day loans.6% jump, while sales at apparel stores increased 2.9%, much lower than the 3.5% rise that had been forecast.

Discounter BJ’s Wholesale (BJ, Fortune 500) said sales rose 3.8% in June, missing estimates of a 5.3% increase, while sales at Target increased only 1.7%, lower than the 2.7% jump that had been expected.

In the apparel arena, sales at Gap Inc.’s Gap, Old Navy, Banana Republic stores dragged the overall apparel sector down in June. Same-store sales at Gap Inc. (GPS, Fortune 500) stores remained flat on average in June, while analysts had expected a 3.4% gain.

Excluding Gap Inc.-owned stores, apparel retailers gained 3.8% on average, slightly beating expectations of a 3.5% rise.

Biggest gainers: Department stores, boosted by promotions and steep discounts, posted the largest increase last month, gaining an average 5.8%.

JC Penney (JCP, Fortune 500), Nordstrom (JWN, Fortune 500) and Macys were among the best performers, all beating expectations in June.

Teen retailers also fared well last month, posting an overall gain of 3.7%, compared to the forecast 2.4% rise.

Abercrombie & Fitch (ANF), Hollister, Aeropostale and Zumiez (ZUMZ) posted some of the biggest gains, while other teen retailers like the Buckle (BKE) and Wet Seal struggled to lure in back-to-school shoppers.  

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State Treasurer Dean Martin has pulled out of the race for governor of Arizona and will support Gov. Jan Brewer in her re-election bid.

Martin said in a release that he didn’t want the primary race for governor to be a “distraction,” in a time when “serious debate about the fiscal condition of our state is needed.”

Martin’s term will end in December, and he said at that time he will take some “much-needed time off.”

The full text of Martin’s letter is below:

It has been an honor to serve the people of Arizona. Public service takes dedication and many long hours to accomplish the business of the people who elected us. I am humbled to have had the support of the people for these past 10 years.

Elected office was never my intended career path; I am a small business owner who was drafted to run for the Arizona State Senate and then later Arizona State Treasurer. I am proud of my service and I am forever grateful for the support you have given me over the years. I especially want to thank my friends and colleagues who stood by my side last year during the tragic death of my wife Kerry and my son Austin. I will never forget your support.

Today, I am announcing that I am suspending my campaign for Governor of Arizona. During a time when the Obama Administration has filed a frivolous lawsuit against our great state, a budget deficit is looming, and our economy is still shaky, I feel a contested primary would be a distraction. While a serious debate about the fiscal condition of our state is needed, the heavy hand of the Obama Administration will not allow this debate to continue. I fully intend to support the Governor in her battle with the Obama Administration and its relentless attack on the people of Arizona.

In that regard, I urge the Governor to file suit against the Federal Government for the costs of not securing our border no checking account payday advance. Earlier this year I sent former Arizona Governor and now Homeland Security Secretary Janet Napolitano a bill for one billion dollars of uncompensated costs due to incarceration of illegal immigrants who have committed felonies in Arizona. This is a good start and trust the Governor will follow through. As a state we need to stand together to fight the overreaching federal government that has failed to secure our border with Mexico.

I want to thank the countless volunteers who have been part of this campaign since January. Their dedication to the campaign and Arizona is second to none. But our state and the residents of Arizona are more important than playing politics. The Obama Administration’s lawsuit is a blatant attempt to divide us and I will not be part of the problem; rather I intend to be part of the solution. Attorney General Terry Goddard, is not willing to enforce our laws and is instead playing the role as Obama-defender-in-chief. I got into this race because I did not want to see Goddard become Governor. This is still my goal, and is the reason I have made this decision to suspend my campaign.

Governor Brewer is going to need all our help to shoulder the burden of defending Arizona from the federal government. It is our duty to stand together as Arizona residents against an intrusive federal bureaucracy.

While my service to this state as an elected official will come to an end in December, I will continue to serve in other ways. After taking some much needed time off, I will be focusing my efforts on the charitable foundation we established, MartinCharities.org to continue my late wife Kerry’s spirit of service to the community in water safety and financial literacy.

Thank-you and God Bless the great State of Arizona.

Dean Martin

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A sharp drop in demand for temporary nurses sent Medical Staffing Network Holdings to bankruptcy court late Friday, when the Boca Raton-based company filed for Chapter 11 reorganization.

The company is the largest provider of per diem health care staffing in the U.S. and among the largest providers of traveling nurses, but many hospitals have scaled back on temporary staff to cut costs. It has 101 branch locations, 915 corporate employees and about 19,000 field employees nationwide.

Medical Staffing (Pink Sheets: MSNW) immediately signed a deal to sell its assets to MSN AcquisitionCo, a company formed by its first lien lenders. The $84.1 million proposed purchase price is the equivalent of the money Medical Staffing owes those creditors. The deal would essentially wipe out the company’s existing shareholders.

However, third parties can submit competing bids by contacting Leon Szlezinger at Jefferies & Co. in New York City. The company hopes to complete its sale by Aug. 31.

As that deal seeks court approval, the company will continue operating and its employees are expected to continue receiving full pay and benefits. The first lien lenders, led by General Electric Capital Corp., provided the company with $15 million of debtor-in-possessing financing to support cash flow needs during the transition.

The bankruptcy filing listed assets of $10 million to $50 million, and liabilities of $100 million to $500 million payday loan. The filing has a list of creditors 493 pages long.

“We believe that the filing of our Chapter 11 petition and the signing of the asset purchase agreement move us one step closer to emerging from the restructuring process with a capital structure that will allow us to successfully operate our business in the future,” Medical Staffing Chairman and CEO Robert Adamson said in a news release.

Although Adamson and other company executives have large stakes in Medical Staffing’s stock, the bankruptcy filing lists Warburg Pincus Private Equity VIII as the largest stockholder, with a 45.4 percent equity stake.

In addition to GECC, the first lien holders set to acquire Medical Staffing include SunTrust Bank, Bank of America, Hewlett-Packard Financial Services Co. and a host of investment funds organized by Dallas-based Highland Capital Management.

Miami law firm Berger Singerman has been retained to represent Medical Staffing in bankruptcy court.

Medical Staffing shares closed Friday at 0.4 cents. The 52-week high was 72 cents on Nov. 16.

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LONDON — Emerson offered to buy Chloride Group Plc for $1.5 billion (997 million pounds) in an effort to derail ABB Ltd.’s planned takeover of Britain’s biggest maker of gear to protect against power outages.

Chloride shareholders would receive $5.59 (375 pence) a share, Ferguson-based Emerson said in a statement early Tuesday morning. That’s 15 percent higher than ABB’s bid, announced June 8 and accepted by London-based Chloride.

Emerson took its offer directly to shareholders after Chloride’s management spurned its approaches.

"The issue that makes them pay up is the fact that there was a threat of losing market share globally from ABB buying Chloride," Ian Robertson, an analyst with Seymour Pierce Ltd., said in a telephone interview. "ABB suddenly joins, from having not been a player in secure power."
Chloride, Britain’s largest maker of backup power equipment, said in a regulatory filing that Emerson’s proposal is "superior" to ABB’s offer. A range of options must be considered before there’s another announcement, Zurich-based ABB said in a statement.

"The people who will pay the most are Emerson," Robertson said. "For Emerson, it’s not just what they gain from Chloride, it’s what do they also make sure of by closing the door on ABB."

Should Emerson win Chloride, it will become the largest supplier of critical power systems in Europe, Robertson said. He added that it’s now the fourth-largest.

Emerson Chairman David Farr said in April that acquiring Chloride would help the company compete with Schneider Electric SA and Eaton Corp cash advance now. in the market for uninterruptible power-supply gear. Emerson bought Avocent Corp., a maker of information-technology management products for data centers, for $1.2 billion last year.

Chloride, which provides power equipment to clients including the London Underground, Ikea and Barclays Plc according to its website, rebuffed Emerson’s initial offer in 2008, as well as a bid in April.

"Emerson is already strong in this area," Vontobel analyst Panagiotis Spiliopoulos said in a telephone interview. "They would clearly strengthen their position. For ABB it’s probably more important to get it than for Emerson."

ABB won’t be constrained by ability to pay for Chloride, Spiliopoulos said. The question is whether the Swiss company can justify the strategic move into a new area, he said.

Nigel Coe, an analyst with Deutsche Bank AG in New York, said he was "surprised" by the amount of Emerson’s offer. The company is counting on cost savings of $40 million (33 million pounds), or 10 percent of Chloride’s sales, compared with typical savings of 6 percent to 8 percent of sales for an acquisition, Coe said in a report Tuesday.

"It is clear that Chloride is viewed as a critical acquisition by Emerson, but shareholders may not like the price," he said.

Emerson fell $1.56, or 3.5 percent, to $43.29 at 4 p.m. in New York Stock Exchange composite trading. The stock has increased 1.6 percent this year.

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The former Jean LaFitte Hotel in Galveston has been acquired for redevelopment into a mixed-income apartment complex.

Itex Partners, the real estate investment arm of Port Arthur-based Itex Group LLC, has acquired the historic building at 2101 Church St. that has stood vacant for a long time in downtown Galveston.

State and federal disaster recovery funds will be used to renovate the 1927 building, with half of the units earmarked for low and moderate income housing no teletrack payday loans.

Cathay Bank sold the property to Itex for an undisclosed amount.

Derek Hargrove and Christopher Dray of Moody Rambin Investment Services represented the seller.

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The former downtown-area Wonder Bread plant being developed into an artists’ haven is getting $597,000 in historic preservation funding from the state.

Gov. Ted Strickland’s office on Friday announced $28.3 million in Ohio Historic Preservation Tax Credit awards to 13 projects, one of which is the Wonder Bread building. The latest announcement is the fourth and final preservation award under the state’s $1.57 billion job creation stimulus package, which set aside $120 million for such credits.

The plant, which Wonder Bread owner Interstate Bakeries Corp. shut down last year after to deciding to shift operations out of state, is under development as a mix of arts-oriented retail, exhibition, office and rehearsal space. Arts entrepreneur Adam Brouillette formed Wonderland Columbus to serve as the master tenant that will go about filling the 64,600-square-foot building.

The state said the project in applying for the tax credit pledged to preserve the industrial heritage of the building along with the Wonder Bread sign that has become a visual landmark in Italian Village. The tax credits fund up to a quarter of qualified rehabilitation spending.

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A heated battle between two of the nation’s largest drug chains came to an end Friday after a compromise under which Walgreens will continue participate in CVS Caremark’s pharmacy benefit management network.

The drugstores did not disclose financial terms of the new contract. Shares Walgreens (WAG, Fortune 500) were up about 8% in pre-market trading, and CVS’ (CVS, Fortune 500) stock was 5% higher.

"The agreement makes good business sense, provides the framework we need to operate our business going forward, and assures choice and convenience for the many consumers who look to us for quality pharmacy care," said Walgreens executive vice president of pharmacy Kermit Crawford in a statement.

CVS’s president Per Lofberg added that his company is also "pleased" to have reached a solution.

Earlier this month, Walgreens said it was no longer willing to participate in a new or renewed benefits plan from its rival’s drug benefits unit, citing a list of criticisms including unpredictable drug reimbursement rates.

Another complaint was related to CVS Caremark’s Maintenance Choice plan, which requires patients with chronic conditions to fill prescriptions at CVS or through Caremark mail services, instead of at Walgreens or other pharmacies.

Drug benefits provider Caremark merged with retail pharmacy CVS in 2007, and CVS CEO Tom Ryan promised at the time that the Caremark business would not favor one pharmacy over another. But Walgreens’ gripe about Caremark’s preferential treatment of CVS stores was echoed by other drugstores.

In response to the Walgreens announcement, CVS dropped the rival from its pharmacy benefits plan last week.  

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Luby’s Inc. has agreed to buy substantially all the assets of bankrupt Fuddruckers Inc. for $61 million in cash.

Houston-based Luby’s (NYSE: LUB) will also assume Fuddruckers’ obligations, real estate leases and contract and will pay an additional $2.45 million in cash if it does not assume certain specified contracts. Luby’s will also buy Fuddruckers’ Magic Brands LLC.

Austin-based Fuddruckers filed for Chapter 11 bankruptcy protection on April 21. Luby’s participated in an auction and won the right to buy substantially all of Fuddruckers’ assets on June 17. The sale to Luby’s remains subject to the U.S. Bankruptcy Court for the District of Delaware. The Bankruptcy Court has scheduled a final hearing on the sale of assets on June 22. If approved by the court, the transaction should close on or about July 9.

Luby’s has 96 restaurants that serve home-style food. Luby’s has 10 restaurants in San Antonio.

Fuddruckers currently operates 60 Fuddruckers restaurants and three Koo-Koo-Roo locations. Franchisees currently operate another 138 Fuddruckers locations, which are not included in the purchase. Fuddruckers has four corporate owned restaurants in San Antonio.

Both restaurant concepts were founded in San Antonio but their corporate headquarters have long since moved elsewhere in Texas. Luby's was founded in San Antonio in 1947. Fuddruckers was founded in San Antonio in 1980.

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NewPage Corp.’s top two executives have resigned, along with a third executive.

The Miami Township-based paper manufacturer announced Tuesday that President and Chief Executive Officer E. Thomas Curley and Chairman Mark Suwyn have left NewPage. Michael Edicola, vice president human resources, also resigned.

Robert Nardelli, CEO of Cerberus Operating and Advisory Co., an affiliate of the controlling stockholder of NewPage, will fill the role of non-executive chairman of NewPage and its affiliates, according to a statement.

NewPage’s board has formed an executive search committee to find a new CEO. The committee will consider both internal and external candidates for the position. The company will broadcast an investor and analyst conference to discuss the leadership changes Tuesday at 11 a.m.

In a filing with the U.S. Securities and Exchange Commission, NewPage said it will give Curley $1 low fee payday loans.1 million in severance pay - equal to twice his base pay, as part of his contract - as well as a $165,000 prorated performance bonus.

Suwyn will receive a $2 million severance payout. Edicola will get $650,000 for severance and a $243,000 prorated performance bonus.

The resignations were effective June 11.

The company reported its profit dropped 62 percent in the first quarter of 2010, despite an increase in sales. The company had planned an IPO, but withdrew that in May.

NewPage is the largest coated paper manufacturer in North America. It owns paper mills in Kentucky, Maine, Maryland, Michigan, Minnesota, Wisconsin and Nova Scotia, Canada with annual capacity to produce 4.4 million tons of paper. The company has about 7,500 employees, including 400 in the Dayton area.

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