Lehman Brothers will pay out an additional $17.9B to creditors, its fifth distribution since a judge approved the failed investment bank's liquidation plan in December 2011, and bringing the total doled out so far to more than $80B - $15B higher than its initial estimate of how much would be paid to creditors. While much of this most recent distribution involves money Lehman entities owe to one another, the outlook for creditors keeps improving. Those holding bonds issued by the Lehman parent company are now expected to get 26.9 cents on the dollar vs. an earlier estimate of 21.1 cents. For hedge funds who have spent years buying Lehman debt at big discounts, an increase of just a few cents means millions in profits.
The Chicago Fed's Charles Evans doesn't expect the first rate hike until the 2nd half of 2015 - somewhat later than Yellen's "six-month" (from QE's end) remark which suggested a boost as soon as April 2015. Speaking to reporters after his speech, Evans suggested holding off on hikes until 2016 could be appropriate given the state of the economy. Nevertheless, Evans sees a Fed Funds rate of 1.25% by the end of 2016 - the low end of FOMC guesses, but 25 basis points higher than his forecast three months ago. As for hiking rates to cool "financial exuberance" - an idea seeming to gain a little traction with some Fed members in recent days - Evans says "monetary policy is not the best tool to mitigate this risk."
Wal-Mart has sued Visa for $5B, accusing Visa (NYSE:V) of violating antitrust laws by setting excessive swipe fees. The suit comes one week after an appeals court upheld a $0.21 cap on debit card swipe fees in spite of retailer opposition. Big-box retailers like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) also opposed a late-2013 $5.7B class-action settlement over swipe fees, arguing the deal gave too much leeway to card companies.
Amazon's free TV/music service "could arrive in the coming months," according to the WSJ. It will feature the company's original programming and might also include licensed content. Notably, an Amazon Prime subscription will not be required. Amazon (NASDAQ:AMZN) reportedly also plans to offer free, ad-supported music videos (a la YouTube) on its site. This report came ahead of an April 2 event which is expected to feature the launch of a streaming/gaming set-top box. Netflix (NASDAQ:NFLX) - which now gets over 80% of its traffic from connected and mobile devices - fell 1.2% in after-hours trade after a 2.2% decline in the regular session.
The Fed's rejection of its capital plan was a shock to the top brass at Citigroup (NYSE:C). On business in Korea, CEO Michael Corbat quickly jetted back home for a board meeting after listening in on a conference call at which the Fed informed the bank's senior management of the rejection. Following that, he then took a meeting with FRBNY President Bill Dudley. "It's too early ... why are you returning capital when you need it," was the message the Fed was trying to get across, according to a source, who adds the central bank appears to want Citi to continue shedding noncore operations. Will heads roll? "Since becoming CEO, I have spoken with many of you about the need to hold ourselves accountable for what takes place at our firm," said Corbat in a staff memo yesterday. "I am accountable for getting this right.”
Spotify is eyeing a fall IPO, reported Quartz, which said informal talks with banks have begun and formal meetings could begin next month. The news followed a Bloomberg report of Spotify working with Goldman on landing a credit facility - the type of move often seen as a precursor to an IPO. Last year, Spotify raised funding at a reported $4B valuation. Apple has been reported to be holding "exploratory talks" with music labels about offering a rival service. Much like Pandora (NYSE:P) in the Web radio space, Spotify has been able to hold a number of rival subscription services at bay.
Alcoa had a big day after a U.K. court ruling threw LME warehouse reform plans on ice. The High Court in London ruled in favor of Russian aluminum producer Rusal, which feared prices of its products would suffer from the LME's efforts, and that the consultation process had been unfair. LME reforms designed to make owners of warehouses in the exchange's global network deliver metal more quickly to consumers had been due to take effect on April 1. Alcoa (NYSE:AA) gained 6.2% on the session.
Baxter International announced plans to split into two companies - with one focused on biopharmaceuticals and the other on medical products. The biopharma operation - developing treatments for hemophilia and other bleeding disorders, immune deficiencies, burns and shock - generated revenue of $6B in 2013. Baxter (NYSE:BAX) expects to make a tax-free distribution of shares in the business by mid-2015. Initially soaring by a double-digit percentage on the news, the stock closed the session higher by 3.9%.
Office iPad apps are now available after their launch at a San Francisco event yesterday. The iPad's screen real estate has allowed the apps to sport UIs similar to those of PC Office apps. At the same time, Microsoft (NASDAQ:MSFT) promises it has put a lot of effort into optimizing for touch. New CEO Satya Nadella put some effort into reassuring his Bay Area audience Microsoft now has mobile/cloud religion. He also declared his company is pursuing a vision of "ubiquitous computing and ambient intelligence."
Fast-food chicken chain El Pollo Loco is planning an IPO, reported the WSJ, though details such as timing and valuation aren't yet known. Specializing in flame-grilled chicken and Mexican entrees, El Pollo Loco - whose name means "the crazy chicken" in Spanish, and which traces its roots to a chicken stand in Guasave, Mexico in 1975 - operates about 400 company-owned and franchised restaurants in the southwest. It generated roughly $307M in revenue last year, and is majority owned by P-E firm Trimaran Capital Partners.
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In Asia, Japan +0.7% to 14696. Hong Kong +1.1% to 22066. Shanghai -0.2% to 2042. India +0.2% to 22266.
In Europe, at midday, London +0.6%. Paris +0.6%. Frankfurt +1%.
Futures at 6:20: Dow +0.3%. S&P +0.4%. Nasdaq +0.5%. Crude +0.5% at $101.83. Gold +0.1% to $1296.
Ten-year Treasury Yield up 2 basis points at 2.72%.
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