Under The Radar News - Wednesday

Heady investment. If Goldman Sachs (GS) follows through with its commitment to purchase another $200.7M in preferred shares of hard-hit First Marblehead (FMD), which are convertible to common shares at $15, it will lose another $136M on paper, increasing total paper losses to $170M for its 16.7% stake. First Marblehead shares were pounded after its student-loan portfolio insurer filed for bankruptcy. Goldman's private-equity arm, GS Capital Partners, made the commitment in December, also extending FMD a $1B credit line.

Circuit City sale rumors intensify. There are rumors Circuit City (CC) has hired Goldman (GS) as an advisor to pursue a potential sale of the company. Circuit City is reeling after laying off 3,400 workers, and is facing overwhelming competition from Best Buy (BBY), Costco (COST) and Wal-Mart (WMT). Activist 6.5% shareholder Mark Wattles has called the company's comeback plan "disastrous."

Activist hedge fund Chapman Capital may be in trouble. Recent filings show its stake in 13 U.S.-traded companies including Nortel (NT) and Building Materials Holding (BLG) is down to just $54M, from $217.5M last quarter and $325M a year ago. Fund watchers say it's unlikely Chapman is moving to cash, or investing in non-domestic stocks.

Apollo Management filed for an IPO of $418M. Apollo is also one of the private-equity firms involved in a rumored purchase of $12B of Citigroup (C) leveraged debt. Apollo bought Linens N' Things, one of the few private-equity retail buyouts that hasn't panned out. Quite a diversified company.

Defense down under. Australian Prime Minister Kevin Rudd warned the Chinese government he will "defend the Australian national interest," referring to speculation that China was planning to take a more-than-9% stake in BHP Billiton (BHP).

Infineon to provide iPhone 2.0 with 3G. Hidden in the latest test firmware for Apple's (AAPL) iPhone is a note that a new chipset will power 3G cellular internet access in iPhone 2.0. The chipset, SGOLD3H, is made by Infineon (IFX).

Ross: I'll be there to buy failing banks. Distressed-asset investor Wilbur Ross says he expects his next venture will be in banks on the brink of failure. "I believe the next phase of the cycle will be the failure of depositary institutions," Ross said. He would also like to add to his subprime mortgage servicing assets; last month he bought H&R Block's (HRB) subprime mortgage serving unit for $1.1B.

$6-6.5B writedown in store at Merrill. Senior executives say Merrill Lynch (MER) will write down $6-6.5B on April 17 on commercial real-estate debt among other assets. Merrill has told its traders to unload risky assets to clamp down on its balance sheet and improve its credit rating. CEO John Thain said numerous times over the past week the firm would not need to raise more capital.

World Bank: Giant grocery bills will persist. Sky-high global food prices are here to stay through 2015, the World Bank says, although they may come down somewhat starting in 2010. Reductions on tariffs and taxes could provide cash-strapped consumers with some relief, it said.

BP's $20B Russia stake could flow red. Rumors of Russian-owned Gazprom (OGZPY.PK) looking to buy its way into 51% BP (BP) owned TNK-BP may put BP's estimated $20B stake in the venture in peril. Gazprom's goal could be to muscle BP out of the country.

Comments

[GregY:]

Thank you. Always enjoyable and informative. I am addicted to your column.

2008 Apr 10 12:02 PM