Under The Radar News - Wednesday

Includes: BCS, BRK.A, C, CS, DB, DIA, F, JPM, MS, NYT, QQQ, SPY, T, TM
by: SA Eli Hoffmann
  • Ford forges ahead. Ford (NYSE:F) appears to be staging a surprise turnaround. Quality ratings on its vehicles are approaching those of Toyota Motor (NYSE:TM), which shaved $1B off Ford's warranty costs in 2007. CEO Alan Mulally wants to further cut costs by selling Volvo and shuttering the ailing Mercury brand. Ford reports Thursday.
  • Architecture lull signals even weaker construction. The Architecture Billings Index, considered a forward-looking indicator of nonresidential construction, fell by 2 to 39.7, its lowest since the index was launched in 1995. A reading below 50 indicates contraction 9-12 months off. "Activity at architecture firms is coming to a screeching halt," it said. Developers are holding back on pipeline projects until they feel more secure about their economic futures.
  • Dabbling in their own debt. Private-equity firms are using the credit crunch to repurchase their own debt at discounts of as much as $0.80 on the dollar. Banks such as Barclays (NYSE:BCS), Credit Suisse(NYSE:CS), Deutsche Bank (NYSE:DB) and JPMorgan (NYSE:JPM) are concerned borrowers will use their excess cash to buyback debt on the cheap rather than repaying it through formal channels as required by most standard leveraged debt covenants.
  • Regulator fears rash of bank failures. UK Bank regulator John Dugan says he fears a wave of U.S. bank failures as a recessionary economy puts additional pressure on poorly underwritten debt. He's especially concerned about commercial real-estate. More than 33% of regional banks have made commercial property loans worth over 300% their capital; in 1987, when hundreds of banks failed, they had lent an average of only 175% their capital. Only three U.S. banks failed in 2007. Dugan also says rising losses on non-subprime deteriorating credit such as home-equity loans and credit cards will likely force banks to raise yet more capital.
  • Brown backtracks on biofuel support. UK PM Gordon Brown says he may push for a halt in proportional increases slated for biofuel use, fearing biofuels are contributing to skyrocketing food prices. His remarks are likely to bolster perceptions of weakening governmental support.
  • Citigroup antsy. Citigroup (NYSE:C) is in talks to sell Nikko Antfactory, its Japanese private-equity unit, in an effort to bolster its balance sheet and comply with U.S. banking laws. Antfactory manages about $1.3B of investments. Its name presumably stems from its attraction to small investments. Meanwhile Morgan Stanley (NYSE:MS) is opening a private-equity unit in India.
  • Buffett focusing on Europe. Berkshire Hathaway (NYSE:BRK.A) Chairman Warren Buffett is traveling to Europe in May to meet with strategic business owners. Sources say Buffett will make a major Europe acquisition "sooner or later."
  • Puzzling answer. NY Times (NYSE:NYT) publisher Arthur Sulzberger Jr., in response to why the Times doesn't run a Sudoku puzzle: "I know it’s something we’ve looked at but I cannot answer the question as to why we haven’t done it yet. Our [crossword] puzzle is one of the great puzzles of the world and it continues to be a huge draw for us. But I will certainly make your thoughts known to the puzzle people."
  • Hedge funds snap up bankers. For the second time in two months, hedge fund Citadel Investment Group wooed a JPMorgan (JPM) investment banker. Hedge funds tend to offer more generous compensation than investment banks; their pull may now be stronger since hedge funds are seen as stronger than many large banks squeezed by the credit crunch.
  • AT&T looks at Malaysian celco. AT&T (NYSE:T) is in preliminary talks with Malaysia's Maxis Communications to acquire its 74% stake in Indian cellular phone company Aircel.