Wall Street Breakfast: Must-Know News

• Saved just before CIT hit the fan. Saved at the last moment, CIT Group (CIT) reportedly agreed on a deal late last night for $3B in rescue financing from a group of bondholders. The financing, which will be backed by unsecuritized assets worth over $10B, carries a high interest rate and doesn't solve CIT's long-term financing problems, but it does buy the lender some time and minimizes bondholders' losses. An announcement is expected this morning before markets open. Shares +97% premarket (7:00 ET).
• Schwab faces civil fraud charges. New York Attorney General Andrew Cuomo plans to sue Charles Schwab (SCHW) for civil fraud connected to the marketing and sale of auction rate securities to clients. According to the official notice sent to Schwab on Friday, Schwab's brokers didn't really understand what they were selling and then failed to tell clients when the market was collapsing. Cuomo said he's open to a settlement but Schwab must agree to buy back securities from investors still stuck with them. Schwab denies the allegations.
• Human Genome scores with lupus drug. Human Genome Sciences (HGSI) announced its experimental lupus drug showed success in late-stage clinical trials. The drug, which many analysts had written off, could be a potential blockbuster if it gets FDA approval, with profit split between Human Genome and its partner GlaxoSmithKline (GSK). Premarket: HGSI +183%, GSK +4% (7:00 ET).
• SAP courts SAF. Business-software giant SAP (SAP) proposed to acquire SAF Simulation, Analysis & Forecasting AG for €11.50 ($16.29) per share. The offer is a 9.5% premium over SAF's closing price on Friday, and two major SAF holders with a total 38% of shares have already agreed to vote for the deal.
• Sinopec, Cnooc buy Angolan oil stake. China Petroleum & Chemical Corp. (SNP), also known as Sinopec, and Cnooc (CEO) agreed to buy a $1.3B stake in an offshore Angolan oil block. China's second- and- third-largest oil producers are buying their 20% stake from Marathon Oil (MRO) and are putting a renewed focus on buying assets in Africa and Central Asia to avoid the political opposition faced by planned acquisitions in the U.S. and Australia.
• Magna's ultimatum. Final bids for General Motors' Opel unit are due today by the close of business in Europe. According to a Russian media report, Magna International (MGA) will make a new offer before the deadline that includes a demand for the right to Opel's intellectual property. Magna reportedly wants to sell Opel cars under its own brand, make any changes it wants to Opel designs and use Opel technology for new models.
• KKR inches closer to listing. Private equity firm Kohlberg Kravis Roberts received unanimous approval from the board of its Euronex-listed fund to combine businesses. The merger with KKR Private Equity Investors brings it one step closer to a New York Stock Exchange listing. KKR also updated its profit outlook, and expects Q2 earnings to be $345M-370M.
• Commercial loans failing rapidly. U.S. banks are charging off failed commercial mortgages at the fastest rate in 20 years. If the pace continues, commercial loan losses could reach $30B by the end of 2009, with regional banks likely to be especially hard hit.
• Friday's failures. Regulators closed four more banks on Friday, bringing this year's total failures to 57 so far and putting the country on track for close to 100 bank failures by the end of the year. The four failures will cost the FDIC nearly $1.1B. (See FDIC statements I, II, III, IV)

Earnings: Monday Before Open

• Eaton (ETN): Q2 EPS of $0.23 beats by $0.06. Revenue of $2.9B (-32.2%) vs. $3B. Shares (PR)
• Halliburton (HAL): Q2 EPS of $0.30 beats by $0.03. Revenue of $3.5B (-22.1%) vs. $3.4B. (PR)
• Hasbro (HAS): Q2 EPS of $0.26 beats by $0.03. Revenue of $792M (+1%) vs. $797M. (PR)
• Johnson Controls (JCI): FQ3 EPS of $0.25 beats by $0.06. Revenue of $7B (-29.3%) vs. $7.4B. (PR)
• Weatherford International (WFT): Q2 EPS of $0.10 misses by $0.06. Revenue of $2B (-10.5%) in-line. (PR)

Today's Markets

European markets and U.S. futures are following Asia up.

• In Asia, Hang Seng +3.7% to 19,502. Shanghai +2.4% to 3,267. BSE +3% to 15,191. Nikkei closed.
• In Europe at midday, London +1.65%. Paris +1.7%. Frankfurt +1.6%.
• Futures: Dow +0.7%. S&P +0.8%. Nasdaq +0.6%. Crude +1.9% to $64.77. Gold +1.6% to $952.30.

Monday's Economic Calendar

• 10:00 Leading Indicators
  1:30 PM Fed's Lockhart speaks on economic outlook
• Notable earnings before Monday's open: ETN, HAL, HAS, JCI, MTB, WFT
• Notable earnings after Monday's close: BSX, CNI, LM, MDRX, PKG, SY, TXN, WERN, ZION

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

"planned acquisitions in the U.S. and Australia."

There is a plan. They just need us to quit kicking and screaming every time they implement it. I am sure if we default on our bonds they will have first choice at the great American yard sell.

I would personally hope they refuse to buy one more bonds in hopes that the money spigot gets turned off to congress.

Of course they might just print what they want then.

Jul 20 08:01 AM

[David White:]

"The world's biggest miners and steelmakers are on the brink of forging a new system for setting iron-ore prices that is expected to increase the volatility of steel prices but perhaps make the process more transparent, according to a published report Monday.

The new system would set iron-ore contract prices on a quarterly basis -- rather than annually as it is now, the Wall Street Journal reported on its Web site.

The agreement could be in place as early as year's end, the report said, citing unidentified miners and steelmakers involved in crafting the deal. "

This is important to Dry Bulk Shippers as well as both the miners and steelmakers. As recently as the end of last year, shipping dried up at least partially because the steelmakers did not want to pay the estimated 40% more for the year old prices on iron ore. Negotiating these prices quarterly may smooth out some of these huge swings in business for all of the participants.

Jul 20 08:22 AM

[Roger Knights:]

"bringing this year's total failures to 57 so far and putting the country on track for close to 100 bank failures by the end of the year."

Actually, we're on pace for 150 failures this year. Failures per week were 2 in the first half of the year, and look to average 4 in the second half. Bair was quoted somewhere as expecting 150 failures this year.

Jul 20 08:39 AM

[a. palmer jr.:]

I'd hate to have money in the 150th bank that failed this year. Last I heard the FDIC was about tapped out already. Hmmm

Jul 20 08:50 AM

[notsosmart:]

you can plant green shoots on these bank sites.this whole system is shot.

Jul 20 09:24 AM

[predictorma...:]

Maybe Cumo is starting a trend. A few years ago state governments were all about luring companies to their state with generous tax incentives.

Now their AGs will accuse those same companies of some sort of violations in order to recoup that money and fill state coffers.

Jul 20 09:26 AM

[TeresaE:]

"Commercial loans failing rapidly. U.S. banks are charging off failed commercial mortgages at the fastest rate in 20 years. If the pace continues, commercial loan losses could reach $30B by the end of 2009, with regional banks likely to be especially hard hit."

When the banks are calling the loans from PAYING commercial customers, I wonder WHY the charge offs are skyrocketing?

The charge offs are coming because there are no banks to lend the money that the other banks are demanding.

The banks are bankrupting our customers, and then blaming it on the same customers.

DC knows and does not care to save us in the small business community.

Lucky thing the jobs and tax revenues we used to provide are no longer needed in this new global, jobless recovery. [/sarcasm]

Jul 20 09:27 AM

[AndrewBaker:]

Now, how did I know early last week that CIT would do a deal and not have to declare bankruptcy?! Maybe the same people who wrote Dallas and Dynasty are orchestrating the recovery our wonderful government is putting in place.

Tune in to see if CIT goes bankrupt ... thrill to the wheelings and dealings trying to save them ... gasp in awe as salvation comes at the 11th. hour ... wonder at the mighty Obaaaa-ma, great lord of all of America, as his magic once again provides proof that green shoots can grow in even the driest desert and forsaken land where only money grows on trees.

Jul 20 11:08 AM

[David White:]

GS raised its target for the S&P 500 to 1060 by the end of this year from 940. GS did couch their prediction by mentioning the possibility of a double dip recession. However, this type of news tends to lift the markets, just as the $85/barrel year end oil price prediction did for oil prices not long ago.

We still need a leader to move up though. Some are suggesting that leader may be tech. It might be smart to watch the tech results closely this week and next. If they aren't good, GS's prediction for the possibility of a double dip recession may be closer than the 1060 target. TXN may be a key stock. It reports this afternoon after the market closes.

Jul 20 11:35 AM

[Buckoux:]

One must remember that to "DC", small business is an academic theory that the honcho's in charge know little or nothing about. Does anyone really think that Geitner, Summers, Bernanke, or Obama have any realistic grasp of small business in the US? Oh, sure, they may have waited tables, or worked a donut counter while in college, but you can bet your Self Employment Tax that those named above don't even know that small business first starts out with the permit process at city hall. It's all downhill from there.


On Jul 20 09:27 AM TeresaE wrote:
> "DC knows and does not care to save us in the small business community."

Jul 20 01:36 PM

[el dante:]

hey hasbro...you guys should check out magic wheels!!!!

Jul 20 03:57 PM

[Bill Goode:]

Re: "Saved just before CIT hit the fan"

This allows companies like Wal-Mart & Bed, Bath & Beyond to get out of CIT, unless they are locked in. A year should give such companies time to find another lender for their merchandise. When / If they do, CIT will hit the fan with a vengeance !!! If I were running any of these merchandisers, I would certainly be looking hard for another lender. With a $3B loan CIT may now have enough funds to see it through this year, but next year they will owe $8B. Will some one loan that to them as well?

Jul 22 04:24 PM

[Investigato...:]

Be very careful of this scamming company....the Arcade Currency Palace in Florida...just go to keycurrency.com and click on the bad grade link and see the evidence of the scam...

Aug 01 08:43 AM

[Investigato...:]

Warning!!!! Go to keycurrency.com and click on the bad grade link.......Arcade Currency palace owner Ahmet Sandikci is a CROOK and SCAM artist. He is being sued for defrauding a USA company for jewels and artwork.

COURT RECORDS:

Uniform Case Pinellas Case Section Case Type Type
522008CA004611XXCICI 08004611CI 019 CONTRACT CI
Style: JEREMIAHS INTERNATIONAL TRADING COMPANY INC
vs. SANDIKCI AHMET
Jury Trial STIP NOTH Reason Type Disp.
Y
Filling Date Appeal Date Judg. Date Reop Date Docket Date
03/28/08
Case/Cat
C&I BREACH OF CNTRCT



10 Docket Entries, 07/06/09 to 09/09/08
Pages Date P/D Docket Entry Ver
07/06/09 PLAINTIFF NOTICE FINAL DISPOSITION OF REFERRAL -IMPASSE F
06/05/09 PLAINTIFF NOTICE OF MEDIATION CONFERENCE 062909 1:30 F
05/04/09 PLAINTIFF MOTION SET TRIAL F
05/04/09 PLAINTIFF NOTICE CAUSE IS AT ISSUE READY FOR TRIAL AND F
01/14/09 PLAINTIFF NOTICE OF SERVICE ANSWERS/OBJECTIONS TO 2ND INTERROGATORIES F
12/15/08 DEFENDANT NOTICE OF SERVICE OF: SECOND REQUEST FOR PRODUCTION F
12/15/08 DEFENDANT NOTICE OF SERVICE OF: SECOND INTERROGATORIES F
12/04/08 DEFENDANT NOTICE OF SERVICE OF: RESPONSES TO 2ND SET INTERROGATORIES F
11/05/08 PLAINTIFF NOTICE OF TAKING DEPOSITION F
09/09/08 PLAINTIFF NOTICE OF SERVICE OF: SECOND INTERROGATORIES F

Aug 01 08:48 AM

[Investigato...:]

Be very careful of this business the Arcade Currency Palace...scams???? Big Time!!

Aug 01 09:17 AM