Wall Street Breakfast: Must-Know News

General Motors to seek bankruptcy protection. The automaker (GM) plans to file on Monday and will sell most of its assets to a new company, 72.5% owned by the U.S. government. Agreement from a key group of bondholders for a 10% stake, with warrants to buy an additional 15%, in exchange for their $27 billion in bonds paved the way. The U.S. Treasury is requiring enough debt holders – seen at 50% - to accept the terms by 5 p.m. ET Saturday. “If bondholders agree to this up front, this would essentially be a prepackaged bankruptcy,” bond analyst Shelly Lombard says. The UAW’s health care trust stands to receive up to 20 percent of the new company, including warrants. GM’s unsecured creditors will likely battle one another and dealers over claims. Current shareholders, who earlier stood to get a 1 percent stake, are left with nothing.
The cost: A GM regulatory filing says the government is to provide bankruptcy financing of about $50 billion. The restructuring will cost taxpayers billions of dollars more than expected.
Fiat puts brakes on speedy Opel rescue. German efforts to spin off GM’s Opel business stall as Fiat balks at a request to put up emergency funding. Italy’s Fiat had been seeking to put up assets debt-free in exchange for a merger with Opel. The automaker hasn’t abandoned its bid. Canadian auto supplier Magna, a second potential buyer, agreed to put up an extra €300m on Thursday. In all, GM Europe needs €3 billion in loan guarantees.
Merck’s Singulair patent re-examined. Drugmaker Merck & Co (MRK) says the U.S. Patent Office is reexamining the patent on its biggest product, $4.5 billion-a-year asthma treatment Singulair. The PTO reorder the review after a request by a new online community called Article One Partners, which recruits scientists to look for evidence patents have been improperly issued.
R.H. Donnelley to file for bankruptcy. The yellow pages and commercial search provider (RHDC) is seeking to reorganize under Chapter 11. The company said it has reached an agreement in principle with key creditors on the terms that would reduce debt by around $6.4 billion
Ray of hope for Delphi Corp. creditors. The Obama administration’s auto task force is pushing for a sale of at least some Delphi assets to a third-party buyer, possibly another parts supplier or an investment firm. A deal could surface as soon as this weekend. As a result, Delphi may finally emerge from Chapter 11 and avoid a wholesale liquidation that would leave its creditors with little or nothing.
No detailed outlook from Dell.The No. 2 PC maker (DELL) narrowly beat expectations with a 63% drop in quarterly profit as revenue declined 23%. "We don't believe there's enough momentum to call a bottom yet," said Chief Financial Officer Brian Gladden. He added there was "no real improvement" in business conditions in May. Dell foresees a rise in PC sales next year on corporate updates. Shares rose 1.5 percent to $11.65 on the overnight.
Inflation or deflation? Krugman sides on deflation.. Rising Treasury yields don’t scare influential NY Times columnist Paul Krugman. Deflation is the “clear and present danger” to the U.S. economy, he says and snuffs talk the Federal Reserve is printing money. “It’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts.”
Banks to push back on derivative rules. Banks and money managers plan next week to fend off some rules proposed by the Obama administration to reform trading practices in over-the-counter derivatives. Bankers are seeking to defend billions in fees from trading in the market. Many are opposed to mandatory exchange-trading and real-time price reporting of trades.
Ackerman fails to hit Target board. Shareholders tossed hedge fund manager William Ackman's proposal to install new directors at Target (TGT). Shareholders elected four incumbents "by a comfortable margin" over Ackman's five picks, which included himself. The vote wasn’t surprising; outside activists rarely prevail. Ackman's Pershing Square Capital Management owns a 7.8% stake in Target stock and options. Ackman had said he would retain his personal Target stake, now worth more than $55 million, for at least five years if he was elected. It was unclear whether he will retain that stake.
Biogen next. Carl Icahn's fight for seats on the board of Biogen Idec (BIIB) comes to a vote Wednesday. He owns 5.6% of the biotech group. Proxy advisory service RiskMetrics Group is backing two of Icahn's nominees.
Surprise rise in UK housing prices. A break in the unrelentingly gloomy data as the average home price rose a surprising 1.2% in May to £154,016. It’s the second time in the past 12 months for a monthly rise; house prices are 11.3% lower than they were a year ago. Economists are unwilling to call a turn in the market but say the rise provides some evidence the sustained declines are at least easing.
'Hulu's doing OK.' Jeff Zucker, CEO of NBC Universal (GE), says the online video site should turn cash-flow postive "soon". As for the ad market, he says, "we have bottomed out, and there is some light at the end of the tunnel, and I think this upfront will be stronger than people expected.”
Thumbs up on Bing, Wave but balance of power unchanged. Positive reviews emerge for Microsoft's (MSFT) Bing search engine and Wave, an email service unveiled Thursday by rival Google (GOOG). Yet few tech commentators were prepared to declare either product will score decisively in the showdown between the world’s biggest software and internet companies.

Earnings: Friday Before Open

Quality Systems (QSII) Q4 EPS 40c misses by 7 cents. Q4 revenue $65.8M vs. consensus of $68M. [PR]
OmniVision (OVTI) Q4 EPS of (30c) beats by 3 cents. Q4 revenue of $89.1M vs. consensus $68.24M. [PR]
Tiffany (TIF) Q1 EPS 20c in-line. Q1 revenue $523.1M vs. consensus of $533.03M. [PR]

Earnings: Thursday After Close

Dell (DELL) Q1 EPS 24c beats by 1 cent. Q1 revenue $12.3B misses consensus by $330M. [PR]
Novell (NOVL) Q2 EPS of 5 cents misses by 1 cent. Q2 revenue $216M vs. consensus of $218M. [PR]
Marvell Tech (MRVL) reports Q1 EPS of 5c, in line with estimates. Q1 revenue of $521.4M beats by $4M. [PR]

Today's Markets

Rising oil prices, Treasury yields lift European oil majors, insurers

Asian markets closed. Nikkei up 0.75% to 9522.50, Hang Seng up 1.6% at 18,171, S&P/ASSK up 1.6% at 3818.1. BSE up 2.3% to 14625.25 on positive Q1 GDP report for India.
In Europe at midday, London up 1.1%, Paris up 1.2%, Frankfurt up 1.1%
U.S. futures: Dow up 0.5%, S&P up 0.6%, Nasdaq up 0.60%. Crude up 1.4% to $65.98. Gold up 1.2% at $974.60. 30-year Treasury yield at 4.49%. Dollar down across major currencies.