Wall Street Breakfast: Must-Know News

• GM told to prep for possible bankruptcy. The Treasury has reportedly directed General Motors (GM) to lay the groundwork for a possible bankruptcy filing by June 1. Sources say the goal is to prepare for a fast, 'surgical' bankruptcy so that GM's image and sales don't suffer permanent damage. Under one scenario, the company would split into good and bad parts, with the 'good GM' in and out of bankruptcy protection in as little as two weeks, using $5-7B in federal financing. Any plans for a brief bankruptcy will likely face legal challenges from GM bondholders concerned about being forced to accept hefty losses. GM continues to insist publicly that it can find a way to reorganize outside of court. Separately, GM is being sued in Canada by unsecured bondholders over payments pulled from a Canadian subsidiary.
• Credit Suisse cracks down on offshore accounts. According to media reports, Credit Suisse (CS) has started to shut down the offshore accounts of U.S. clients who haven't declared their money to U.S. authorities. The bank has 2,500-5000 U.S. clients with undeclared offshore accounts worth about 3B Swiss francs, said the Sonntagszeitung newspaper, and is giving clients the option of moving their accounts to a subsidiary which would report to U.S. tax authorities or writing them a check. Though the 'zero tolerance' policy is for individual cases at the moment, the bank is considering a more general withdrawal from the U.S. offshore business.
• Bailed-out banks probed over increased fees. Banks that received bailout funds are under scrutiny from the Congressional Oversight Panel for their lending practices, following a slew of complaints about increased rates and fees. Many TARP recipients, including Bank of America (BAC) and Citigroup (C), have recently started charging more on credit card balances and for a wide range of transactions, and have encouraged loans that some criticize as predatory. Panel chairwoman Elizabeth Warren said it's unfair that "the people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending."
• eBay takes stake in rival. eBay (EBAY) has agreed to buy a controlling stake in South Korean rival Gmarket (GMKT) for $413M, according to news service eDaily, and will sign a final contract on Wednesday. eBay will buy its 34.2% stake from Gmarket's current top shareholder Interpark and the Korean firm's chairman, and has conditional approval from South Korea's antitrust watchdog. The $24/share purchase marks a 32.5% premium on Gmarket's stock. Intermarket says it does not yet have an official contract from eBay on its Gmarket stake sale, and a Gmarket spokesman declined to comment.
• Express Scripts reaches WellPoint deal. Express Scripts (ESRX) will buy WellPoint's (WLP) in-house pharmacy-benefit management business for $4.68B. The cash-stock deal will boost Express Scripts' prescription volumes by roughly 50%, helping it compete against larger rivals like CVS Caremark (CVS) and Medco Health Solutions (MHS). The deal includes a ten-year contract for Express Scripts to provide pharmacy-benefit management services to WellPoint.
• HSBC mulls selling headquarters. HSBC (HBC) may sell three of its signature office buildings to raise cash as it tries to avoid accepting money from the U.K. government. An HSBC spokeswoman confirmed the bank is gauging interest in the sale of its world headquarters in London, its Fifth Avenue skyscraper in New York City and its Paris offices on the Champs Elysees. Media reports put the combined asking price for the three properties at £2.7B ($3.96B). HSBC would probably lease the offices back from any buyer.
• More cuts expected at UBS. UBS (UBS) is expected to announce more job cuts soon, with staff in Switzerland and departments like marketing likely to be among the hardest hit. Several sources say managers have already started telling their departments about the cuts, with some managers forced to cut as much as a third of their team. UBS has already announced plans to cut more than 10% of its workforce.
• Goldman readies fund launch. Sources say Goldman Sachs (GS) is in the process of wrapping up $5.5B in investor commitments for a new fund to buy private-equity investments at a discount on the secondary market. The new GS Vintage Fund V would be the largest secondary fund ever raised.
• GE invests in car batteries. Car-battery maker A123 Systems is expected to announce today that it has raised $69M in its most recent capital campaign, while primary backer General Electric (GE) will get a seat on the company's board in exchange for its investment. GE's provision of $15M in the latest financing round brings the company's total investment in A123 to $70M, representing an ownership stake of more than 10%. The funding news follows an announcement that A123 was selected by Chrysler to develop batteries for its prospective line of electric cars.
• Satyam names top bidder. Tech Mahindra was named as the highest bidder for a controlling stake in Satyam (SAY). The Company Law Board, a semi judicial authority, is likely to grant deal approval this week. A unit of Tech Mahindra will pay 17.56B rupees ($352.6M) for a 31% stake in scandal-shaken Satyam and, if the deal is approved, will have to make an open offer for another 20% of Satyam within four days of CLB approval. The purchase will help Tech Mahindra become a bigger player in the software services business.
• Toyota may face second annual loss. Toyota (TM) shares lost ground after a media report that the carmaker may post an operating loss for the second year in a row. According to the Nikkei newspaper, Toyota could report a loss of over ¥500B ($5B) for FY 2009, while economists estimated the loss will likely be closer to ¥425B. Shares -5.2% premarket (7:00 ET).
• More bank failures. North Carolina's Cape Fear Bank and Colorado's New Frontier Bank were both closed by regulators, bringing this year's total number of bank failures to 23 so far. Carolina-based First Federal agreed to assume all of Cape Fear's deposits and its 8 branches will re-open today under the First Federal banner. The estimated cost to the FDIC is $131M. In New Frontier's case, the FDIC has asked San Francisco's Bank of the West to operate a new bank called Deposit Insurance National Bank of Greeley for the next 30 days while New Frontier is wound down.

Today's Markets

Asia markets were mostly higher Monday, while U.S. futures trended lower. Europe is closed for Easter Monday.

• Asia: Nikkei -0.44% to 8,924. Shanghai +2.84% to 2,514. BSE +1.51% to 10,967. Hang Seng closed.
• Futures: Dow -0.85% to 7956. S&P -0.8% to 846. Nasdaq -0.4%. Crude -2.5% to $50.95. Gold +0.6% to $888. 30-year Tsy +0.21%.

Monday's Economic Calendar

• 10:00 Moody's Survey of Business Confidence
• Notable earnings on Monday: none.

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[pattisw:]

If Gm goes bankrupt it will throw thousands more on the unemployment roles and a few hundred thousand retirees into poverty.
The guaranteed government pension is a substantial cut in the pension now received.Ours would be cut in half.We would not be able to stay in our home or keep up our vehicle payment(repo time).We are a tiny sample,there will be more home foreclosures,repossesi... card default,food stamps needed and $13.5 billion needed by the government pension plan.It is underfunded and will need government aid,so the taxpayers will be paying anyways.
Many retirees are too old to get a job and those that are not...well where would you get a job in a state like Michigan where I live? Wouldn't it be cheaper and better in the long run to LOAN GM the money and get it paid back someday than to spend billions that will never be repaid?
Obama will never be elected to a 2nd term if he stabs the union in the back and allows the retirees to be thrown away(think AARP,UAW support).

Apr 13 08:24 AM

[epeon:]

Sorry to say this, but Obama is forcing GM into bankruptcy. He fired the chief opponent (Waggoner) and he has removed the two chief obstacles (by government guaranteeing warranties and debtor in possession financing). The new boy has gotten the message: "you want your job, go to bankruptcy."

I think what Obama wants is for the bankruptcy judge to make the politically difficult cuts. He can say his hands are clean to the unions. Of course, this is bullshit, but the rank and file is sold that sort of nonsense all the time. The political danger is that they may realize that he is playing them for doops.

The economic danger is that they think they can get through bankruptcy quick. I am betting with all the legal wrangling, they will be in bankruptcy about as long as Delphi (i.e. years).


On Apr 13 08:24 AM pattisw wrote:

> If Gm goes bankrupt it will throw thousands more on the unemployment
> roles and a few hundred thousand retirees into poverty.
> The guaranteed government pension is a substantial cut in the pension
> now received.Ours would be cut in half.We would not be able to stay
> in our home or keep up our vehicle payment(repo time).We are a tiny
> sample,there will be more home foreclosures,repossesi... card default,food
> stamps needed and $13.5 billion needed by the government pension
> plan.It is underfunded and will need government aid,so the taxpayers
> will be paying anyways.
> Many retirees are too old to get a job and those that are not...well
> where would you get a job in a state like Michigan where I live?
> Wouldn't it be cheaper and better in the long run to LOAN GM the
> money and get it paid back someday than to spend billions that will
> never be repaid?
> Obama will never be elected to a 2nd term if he stabs the union in
> the back and allows the retirees to be thrown away(think AARP,UAW
> support).

Apr 13 08:32 AM

[Robert DiAl...:]

We are looking at some nervous times right now. I do not hold any GS at this time but, I have made money trading the stock. Let's be careful as we enter earnings season and watch the news on GM. I am just not sure what is coming from General Motors as they struggle with the Bondholders and the Union.

Apr 13 08:33 AM

[Allan Frain:]

Credit Suisse' dramatic cooperation with US taxing authorities comes too soon after its AIG money to strike me as a coincidence.

Apr 13 08:33 AM

[robinjoe:]

To place your future hope in a company that doesn't make money is insanity. I don't ever plan to see a dime from social security because the US gov't is insolvent, so why does anyone stake their future on GM which is more insolvent? My plan in enjoy life now. Have little to zero debt and plan to work forever. At the moment I've been doing what 60 Minutes pointed out last night, stockpiling guns and ammo as this is going to get ugly! Even more so that Leslie Stahl in bright lights.

Apr 13 08:40 AM

[robinjoe:]

GM has about as many foreign entanglements as AIG. Why does anyone think a bankruptcy can be handled quickly. I mean Obama is a lawyer, so he should at least understand that. I know if I was a bond holder in GM, I'd want acess to Opel money if that it what it took to get paid back.

Apr 13 08:44 AM

[BlueOkie:]

Anyone who decides to retiree who is not totally debt free with some savings, needs to revisit their decision. If you had to borrow money while you were working then borrowing money while in retirement will be difficult. The UAW did such a great job for its members, it priced itself out of the market. Jobs went to non-union shops and overseas. I'd rather see GM go bankrupt then turn into Goverment Motors. The exec's are just as to blame as anyone else or even more so.

On Apr 13 08:24 AM pattisw wrote:

> If Gm goes bankrupt it will throw thousands more on the unemployment
> roles and a few hundred thousand retirees into poverty.
> The guaranteed government pension is a substantial cut in the pension
> now received.Ours would be cut in half.We would not be able to stay
> in our home or keep up our vehicle payment(repo time).We are a tiny
> sample,there will be more home foreclosures,repossesi... card default,food
> stamps needed and $13.5 billion needed by the government pension
> plan.It is underfunded and will need government aid,so the taxpayers
> will be paying anyways.
> Many retirees are too old to get a job and those that are not...well
> where would you get a job in a state like Michigan where I live?
> Wouldn't it be cheaper and better in the long run to LOAN GM the
> money and get it paid back someday than to spend billions that will
> never be repaid?
> Obama will never be elected to a 2nd term if he stabs the union in
> the back and allows the retirees to be thrown away(think AARP,UAW
> support).

Apr 13 08:46 AM

[notsosmart:]

a yes-capitalism was killed by wall st.its like a cancer that destroys its host.we are screwed no matter what the "ism".

Apr 13 09:46 AM

[jr007:]

The exec's and the unions both benefited from the GM company. They have effectively mismanaged, bled and ruined the company. Now the stock and bond holders are going to lose along with them. Greed is like a cancer, it kills the body. Unfortunately GM is not the only usiness infected.

Apr 13 10:09 AM

[bobbobwhite:]

The USA steel and forestry industries underwent giant changes in their businesses in the 70's and 80's, including bankruptcies, and they came out smaller and different industries in America but still here and functioning well as global industries.

If GM actually wants to run a globally competitive business and can become one and not just stay a rich boy club that markets inferior products like it does today, then it will survive. Otherwise, who cares?

Apr 13 10:41 AM

[Joseph Sherman:]

HSBC mulls selling headquarters - in the broader sense, what is the purpose of flagship headquarters?

Apr 13 11:35 AM

[lyonsban:]

GM doesn't make inferior products, it makes products that cost too much to compete. There's a difference. The former implies the company can shrink itself to profitability, the latter acknowledges there is a inherent structural cost that will hurt the company no matter how big or small it gets. Unpalatable as it may be, especially given how unpalatable it is, bankruptcy may be the only option.

Of course management wants to fight bankruptcy. For the last 50 years every time the workers "fought" for some benefit, management with a nudge and a wink increased it's own benefits, payroll and pay rates.

Apr 13 11:39 AM

[grh1212:]

This isn't about money. The Precious is driving GM toward declaring bankruptcy in order to destroy or at least tame the UAW. That's why he forced Wagonner out. The idea is to curry favor with the Repugs (fat chance) by eliminating the last industrial union with the potential for fresh thinking. Hey gang, I know, let's elect a community organizer.


On Apr 13 08:44 AM robinjoe wrote:

> GM has about as many foreign entanglements as AIG. Why does anyone
> think a bankruptcy can be handled quickly. I mean Obama is a lawyer,
> so he should at least understand that. I know if I was a bond holder
> in GM, I'd want acess to Opel money if that it what it took to get
> paid back.

Apr 13 03:36 PM

[Repsonsible...:]

Were did Your IRA and Retirement MONEY probably Go ? Right to Goldman Sac s via Goverment Bailout of $180 Billion bailout AIG that money was transfered to GOLDMAN SACs to Pay off there worhtless CDS s So GoldMan didnt lose a Dime , course everybody else did !! Dillan Radigan fromly of CNBC tried to Break the story two weeks ago he was FIRED the Next day ! There Should be a Federal Investgation Of Goldman but there wont be . Too Many powerful politcal players to stop it !!

Apr 13 05:41 PM

[expat in China:]

GM makes small effiecent cars so that it can not be taxed on the gas guzzlers (cafe), the problem is that GM sticks 100 dollars in the trunk of every loosing small car it makes. The unions killed their host and they should sell their assetrs to support their members, they have money and golf courses and realestate.

GM China is not GM America, so any government money given to GM will go to developing products and building joint ventures in other nations. The competative ability to produce a cost effective car part or assemble a vehicle has been long gone due to the unions unrealistic wage and benefits packages for unskilled labour.

The high capaital equipment cost for an automated facility to reduce labour has made the automotive industry bankrupt with facilities and equipment that have no payback for a model that sells slow.

The bankruptcy is imenent and the sunami effect is huge.

Obama is a 1 term joke who was out manuvered by his own financial team, it too late for him and America.

The econimic war is at the execution phase and the printing presses will fail from over usage and lack of spare parts (made off shore).

Apr 13 06:29 PM

[woodsey:]

The first two comments are pretty much on the mark.But it is shouting into the wind. Obama does not hear. I am a GM retiree, and I helped put Obama where he is, but he is a one term president. He has noticed that the mob hates American auto companies, American auto workers, and American auto unions. It doesn't matter that the unions made it possible for every Tom, Dick, and Harry, and his wife, and his daughter to have a car sitting out there in the driveway. Obama thinks he must play to the mob. After we retire him, I hope that he will visit the graves of the martyrs to the eight hour day in Illinois. He is young; he'll learn, but he shall never again hold high office.

Apr 13 11:27 PM

[woodsey:]

About the photo: I was the eldest and tallest of three little kids in sailor suits made by our mother. I took this out of our portrait. I must have been five or six; now I'm 85.

Apr 13 11:34 PM

[tonym:]

<<unions killed their host >>

the end.

Apr 14 07:59 AM

[Wisdom vs. ...:]

GM's inevitable restructuring/bankruptcy has already been priced into the market and the economy; it will have no effect whatsoever

Apr 14 05:10 PM

[Freya:]

Governmental Control= 500 plus micro managers.

Amtrak and the US Postal service, The Gov. at its best.

The Public gets into Bull Markets at the Top.

Keep on trucking.

Apr 13 03:07 PM