- 'Bad bank' funding starts to take shape. The White House is said to be considering creating multiple investment funds to buy some of the bad loans and distressed assets at the core of the financial crisis. Obama's administration already announced last month that it plans to create private-public partnerships to buy these assets, but has yet to finalize the structure of the financing partnership. Sources say one leading idea is to create a series of separate funds to be run by private investment managers who would have to put up a certain amount of capital and would decide which assets to buy and at what price. Additional capital would be supplied by the government, which would share in any profits or losses. The government would also try to encourage other private investors to participate, possibly by offering non-recourse loans.
- Toyota may seek help from Japan. Sources say Toyota (TM) plans to ask the Japanese government for loan assistance as the company faces its first loss in 59 years and private investors demand as much as 50% more in interest for the company's debt. Public broadcaster NHK reported that Toyota's financial unit may ask for up to ¥200B ($2B) in loans; a Toyota spokesman confirmed the unit is in talks with state-owned Japan Bank for International Cooperation but didn't confirm the amount of the loan request or the timing. The company is expecting a ¥350B net loss after vehicle sales in the U.S., Toyota's most profitable market, fell off a cliff, dropping 31% last quarter.
- Chrysler hits dead end in bank talks. Talks have stalled between Chrysler and its banks because the banks are unwilling to discuss swapping loans for equity they feel is uncertain. The banks, including Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS) and JPMorgan (JPM), are first in line to be repaid in the event of a bankruptcy, and would lose that standing if they exchange debt for equity. The only other creditors Chrysler could approach to take more equity instead of debt would be the U.S. government and the United Auto Workers union, which has already agreed in principle to reduce its obligation by 50%. Chrysler needs to secure lender concessions by March 31 and reduce its debt by as much as $5B to remain viable.
- Senate moves to restrict tax havens. The Senate introduced legislation yesterday to "restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation." The Stop Tax Haven Abuse Act, as it's called, is meant to increase transparency and accountability in the wake of the Stanford Financial Group fraud and the ongoing legal battle between U.S. authorities and UBS (UBS) over tax evasion. The bill came as UBS CFO Mark Branson prepares to testify before Congress on Wednesday.
- Citi gives jobless homeowners a break. Citigroup (C) plans to announce a new program today aimed at addressing the problem of unemployed homeowners. Under the program, Citigroup will temporarily lower mortgage payments to an average of $500/month for certain borrowers who recently lost their jobs and are at least 60 days behind on mortgage payments. The lowered payments will last for three months, during which time Citigroup will waive any interest or penalties. Sanjiv Das, head of CitiMortgage, said he expects "there will be thousands of people we can help" and called rising unemployment "the single biggest issue facing mortgage servicers."
- Freddie needs new chief. David Moffett has resigned as the CEO of Freddie Mac (FRE), effective March 13, leaving the board of directors and the Federal Housing Finance Agency to find a replacement. Moffett, who is leaving the job just six months after being named to the post, indicated he wants to return to the financial services industry. However, the decision to resign was at least partly due to Moffett's frustration at having to consult regulators on all major decisions and follow public-policy mandates he felt weren't necessarily in the best interest of the company.
- OECD darkens forecasts. Klaus Schmidt-Hebbel, chief economist at the OECD, thinks the global economic downturn will be considerably worse than the IMF forecast last month of 0.5% global growth in 2009 and a 2% slide among advanced economies. Schmidt-Hebbel is preparing new forecasts to be published at the end of March, but says there's no doubt the recession will deepen, and thinks "this quarter will be the worst quarter of all."
- Quotables. "In hindsight, it was a tactical mistake because it put us in the same category as Citigroup (C)." -Bank of America (BAC) CEO Kenneth Lewis, on his decision to ask for more government money to help absorb Merrill's losses.
- Aussies hold rates steady. Australia's central bank left its benchmark interest rate unchanged at 3.25%, the first time in seven months that it has held the rate steady. The bank says government spending and the lowest borrowing costs in four decades are supporting the economy.
- Personal income increases. Personal Income increased 0.4% ($44.8B) (vs. -0.2% consensus); disposable personal income rose 1.7% ($183B). Personal spending (PCE) increased 0.6% ($56.4B) vs. +0.4% consensus. Core PCE +0.1% in-line. Personal savings in January - 5% of disposable income - was the highest since March 1995.
- More mfg contraction. The ISM Manufacturing Index came in at 35.8 in February vs. 33.8 consensus, its 13th consecutive month of contraction. None of the 18 manufacturing industries reported growth. Primary Metals and Wood Products led the laggards.
- Construction spending falls. U.S. construction spending -3.3% in January, far worse than the -1.5% expected, and -9.1% Y/Y. Residential private construction -2.9%; non-residential -4.3%.
Earnings: Tuesday Before Open
- AutoZone (AZO): FQ2 EPS of $2.03 beats by $0.18. Revenue of $1.45B (+8.1%) vs. $1.38B. (PR)
- Delta Petroleum (DPTR): Q4 EPS of $0.08 beats by $0.24. Revenue of $53.5M (+5.1%) vs. $48.7M. (PR)
- Tech Data (TECD): Q4 EPS of $1.17 beats by $0.42. Revenue of $5.71B vs. $6B. Sees Q1 revenue down by as much as 20%. (PR)
- Trina Solar (TSL): Q4 EPS of -$0.03 beats by $0.01. Revenue of $216M (+113.3%) vs. $201M. Financial climate makes guidance difficult. (PR)
Earnings: Monday After Close
- Eagle Bulk Shipping (EGLE): Q4 EPS of $0.32 in-line. Revenue of $62.4M (+64.6%) vs. $58.1M. Shares +14.3% AH. (PR)
- First Industrial Realty Trust (FR): Q4 FFO of $0.52 vs. consensus of -$0.17. Revenue of $145.4M (+44.3%) vs. $83.8M. Sees 2009 FFO of $1.34-1.44 vs. $1.20. Shares +2.9% AH. (PR)
- Hospitality Properties Trust (HPT): Q4 FFO of $0.94 misses by $0.01. Revenue of $24.3M vs. $282M. (PR)
- Live Nation (LYV): Q4 EPS of -$4.33, including $270M in goodwill impairment, vs. consensus of -$0.22. Revenue of $916M vs. $1B. Shares +0.95% AH. (PR)
- MBIA (MBI): Q4 EPS of -$5.30 misses by $4.54. Shares 7.2% AH. (PR)
- McDermott International (MDR): Q4 EPS of $0.19 misses by $0.04. Revenue of $1.66B (+9.1%) vs. $1.62B. Backlog remains near record levels. Shares -4.6% AH. (PR)
- TiVo (TIVO): Q4 EPS of -$0.04 beats by $0.06. Revenue of $59.2M (+16.5%) vs. $54.7M. Sees Q1 in-line. Shares +9.4% AH. (PR)
- Asia markets opened lower after Monday's U.S. selloff, but rallied to finish the day with milder losses. Nikkei -0.69% to 7,230. Hang Seng -2.3% to 12,034. Shanghai -1.05% to 2,071. BSE -2.09% at 8,427.
- In Europe, stocks posted higher but quickly turned shaky. At midday, London -1.7%. Paris +0.05%. Frankfurt -0.4%.
- U.S. futures surged higher in the overnight session, but lost steam after Europe's gains didn't stick. Dow +0.2% to 6804. S&P +0.1% at 706.50. Nasdaq +0.25%. Crude +1.5% to $40.75. Gold -1.7% at $924.
Tuesday's Economic Calendar
- Motor Vehicle Sales
7:45 ICSC Retail Store Sales
8:00 Fed's Lockhart speaks about the U.S. economy
9:00 Bank of Canada Announcement
10:00 Pending Home Sales
5:00 PM ABC Consumer Confidence Index
- Notable earnings before Tuesday's open: AZO, CHS, DPTR
- Notable earnings after Tuesday's close: ADCT, PAY, URS
Seeking Alpha editor Eli Hoffmann contributed to this post.
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