Wall Street Breakfast: Must-Know News

• UBS to raise another $15.1B. UBS (UBS) said it expects a Q1 loss of $12.1B amid writedowns of $19B, and that it is looking for another $15.1B in new capital to bolster its books. UBS has already taken on $19.1B in capital. Chairman Marcel Ospel will not seek election at the upcoming shareholder meeting. UBS said it has substantially reduced its real-estate positions through the writedowns, and significant disposals. It plans to create a new unit to hold some of its most illiquid U.S. real estate assets. "This capital increase and the creation of a vehicle to separate problem assets from the remainder of our businesses will allow us to return to sustainable value creation over time," CEO Marcel Rohner said. Shares rose more than 8% in Zurich.
• Deutsche Bank sees $3.9B in writedowns. Deutsche Bank (DB) joined its Swiss counterpart UBS (UBS) in announcing fresh mortgage-related writedowns of $3.9B Tuesday, related to leveraged loans and loan commitments, commercial real estate, and residential mortgage-backed securities. Deutsche Bank had warned last week of additional writedowns. "Conditions have become significantly more challenging during the last few weeks," it said. It did not take a writedown in Q4.
• Lehman looks for $3B vote of confidence. Lehman Brothers (LEH) wants to raise at least $3B by selling shares, a move it hopes will be seen as an endorsement of its balance sheet. CFO Eric Callan says the move is symbolic: "We still maintain that we don't need capital, but we've realized that perception is the dominant issue in today's markets." Shares have plunged 42% this year on unsubstantiated rumors Lehman is on the verge of a liquidity crisis. Citi analyst Prashant Bhatia recently upgraded Lehman to Buy from Neutral, saying, "Reality will trump fear. Lehman has ample liquidity to run its business."
• Citi, Merrill to writedown a combined $14B in Q1 - analyst. Goldman analyst William Tanona thinks Merill (MER) and Citigroup (C) will need to raise more capital in coming months due to expected writedowns of $2B and $12B on CDO-linked assets respectively. Tanona now thinks Citi will lose $1.55/share in Q1 (previous: -$1), and Merrill will lose $2.45/share (previous: +$0.45).
• Citi puts plans in writing. Citi unveiled its planned organizational changes on its website yesterday, including a note it is "actively seeking new directors" and is placing a "particular emphasis on expertise in finance and investments." That's what the WSJ says, although what now appears on its site in no way resembles the above. (Did Citi pull a switcheroo?) Sources say many feel Chairman Robert Rubin is largely to blame for Citi's unhealthy appetite for risk, but that he is unlikely to step down. The board is supportive of CEO Pandit, although there is apparently friction over some executives he'd like to promote.
• Microsoft staying put. Sources close to Microsoft (MSFT) say it has no plan to raise its offer for Yahoo (YHOO) -- for real. Microsoft believes Yahoo's recent roadshow failed to impress investors, and doesn't see anything that would justify a higher price. The original offer was worth about $45B ($31/share); it is now worth about $42B ($29/share) due to a drop in MSFT's share price. The talk is that Yahoo would accept about $40/share, while there has been speculation Microsoft would be willing to bid in the mid-$30s.
• Paulson plan picked apart. Treasury Secretary Henry Paulson called for sweeping Wall Street reforms in his "blueprint," many of which were summarily dismissed by bankers, exchanges, and government officials. Paulson advocates giving the Fed more power, uniting the SEC and CFTC, and improving mortgage-lending regulation. State AGs said his idea of creating a federal insurance charter to oversee big insurers would render them powerless. "It reads like amateur hour, and it's because none of those guys ever worked in a regulated, chartered bank," a spokesman for small banks said. Paulson says he expected criticism.
• Landing gear alert. The FAA issued a safety alert on landing gear made by AAR Corp. (AIR) used on hundreds of Boeing (BA) aircraft. Critics will likely cite the new alert as further proof the FAA's regulation of airplane maintenance is lagging.
• Strike could impact Chevy Malibu. The UAW strike at American Axle & Manufacturing (AXL) could cause closures at GM (GM) plants that make the Pontiac G6 and the popular new Chevy Malibu by the middle of April, sources say. GM has already closed or cut back at 30 factories. American Axle received so many responses to its weekend ad looking for new hires at its Detroit plant that it stopped receiving applications Monday. Axle is being coy as to whether the ads are soliciting strikebreakers, or looking to replace people leaving the company through buyout and retirement programs after a deal is reached.
• IBM barred from federal contracts. on IBM The U.S. Environmental Protection Agency temporarily suspended IBM (IBM) from bidding on federal contracts while it probes concerns regarding a March 2006 EPA procurement. IBM, which earns about 1% of its $98.8B in revenue from government contracts, said it will appeal the suspension and its scope. The suspension could last for up to one year.
• Wiring with wireless. Radio Shack (RSH) and Western Union (WU) are rolling out a service that will let you wire money with a cellphone. The service, which will operate throughout the U.S., Latin America and the Caribbean, targets people with no bank accounts (read: juicy fees).
• Merck, Schering under Congressional microscope. Sen. Charles Grassley pressed Merck (MRK) and Schering-Plough (SGP) for answers that may help explain why they waited more than a year to disclose a study that seriously questions the efficacy of a joint cholesterol drug, Vytorin, which costs about three times as much as a generic version of Merck's Zocor. "This can become brutal," especially during an election year, analyst Steve Brozak said. Merck fell 14.7% Monday, while SGP was down a full 26%.

Today's Markets

• Markets were unsure which way to go in Asia Tuesday. Shanghai dived 4.1% to 3,329. Nikkei rose 1.04% to 12,656. Hang Seng was up 1.26% to 23,137. BSE Sensex was flat (-0.11%) to 15,627.
• In Europe, markets at midday seemed encouraged that the end of the credit crisis may be approaching after expected writedowns from UBS and Deutsche Bank. FTSE +0.78% to 5,747. CAC +1.29% to 4,768. DAX +1.54% to 6,636.
• U.S. index futures are up at 7:10 AM. Dow +0.55% to 12,326. S&P +0.64% to 1,332.25. Nasdaq +0.87% to 1,806.

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Comments

[notsosmart]

there will be little or no change on wall st. it will be the same crowd running the show for their own benefit. after the election all this change talkwill be history.

[Tom B]

"Sources close to Microsoft (MSFT) say it has no plan to raise its offer for Yahoo (YHOO) -- for real. "

This sounds to me like a gentle way to "walk away". I would be surprised if Yahoo should accept a deal which was shown to be unaccceptable and hasn't gotten any better. It's actually gotten worse.

[coopster]

Regarding the FedReserve making regulatory changes; I don't like a PRIVATE entity running things. The Fed is neither a public entity nor is it a "federal" (read that National these days!) agency. I guess Alexander Hamilton won the constitution debate, after all.