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Ten Stocks to Hold Long-Term - Barron's

I guess GE just confirmed loss of Triple AAA rating because of this...

GE Capital sets $8 bln, FDIC-backed debt sale -IFR
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More Business & Investing News... NEW YORK, March 9 (Reuters) - General Electric's (GE.N) finance unit, General Electric Capital Corp, plans to sell $8 billion in bonds backed by the Federal Deposit Insurance Corp, in a four-part sale, said International Financial Review on Monday.

The sale includes $4 billion in two-year fixed rate notes expected to price at around 8 basis points over mid-swaps and $1 billion in two-year floating rate notes expected to price at around 8 basis points over the three-month London interbank offered rate, said IFR, a Thomson Reuters service.

The sale also includes $1.5 billion of three-year fixed rate notes expected to price at around 20 basis points over mid-swaps and $1.5 billion in three-year floating rate notes expected to price at around 20 basis points over three-month Libor, IFR said.

Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and RBS Greenwich Capital are co-managing the sale. (Reporting by Karen Brettell; Editing by Leslie Adler)


NOW THAT...

What happens in a downgrade? The Fortune article presents a good summary:

On page 53 of GE's 2008 10k recently filed with the SEC, the company says that at the end of last year, if it had a rating of AA-, GE Capital would have been required to provide about $3.5 billion of capital to support a group of entities that are funded by issuing guaranteed investment contracts (GICs). A GIC provides a fixed return on an mount of capital that the GIC issuer invests.

Another entity at GE Capital also issues GICs and then loans the proceeds back to the finance arm. If GE Capital's rating were to hit AA-, GE Capital would have to provide about $4.7 billion to repay the GIC holders.

The total $8.2 billion GE would owe could swallow up the $4.2 billion freed up by the recent dividend cut as well as further weaken the company's cash holdings. In an environment where it's difficult to raise cash, that would put GE at risk of further ratings cuts - and more ratings cuts would cost the company even more money.

GICs can burn GE in another way. Should the liabilities in the GICs exceed their fair market value, GE Capital would have to provide the difference. As long as GE is not forced to sell these contracts, this should not be a problem. But had the company sold the GICs at the end of 2008, according to the annual report, the fair value of their assets were only $9.2 billion and the liabilities totaled $10.7 billion, which would make a loss of about $1.2 billion.

GE's annual report also says that if the rating on GE, or applicable entities, falls six notches to A-, then covenants will be triggered on its swap, forward and options contracts that force the company to pay money to its counterparties to account for the additional risk. The fair value of this risk was about $4 billion at the end of 2008, according to page 52 of the 10k.

A cut to its short-term debt rating would also be a blow to GE. Should GE's short-term debt ratings fall below A+ (or A1 in Moody's parlance), then it would no longer be eligible to participate in the Federal Reserve's Commercial Paper Funding Facility program.

GE currently has $60 billion in commercial paper outstanding, i.e. short-term loans that roll over every month or so. It is essential that these loans roll over - meaning that lenders continue to let GE borrow on a short-term basis - because these loans fund the company's daily operations.

Jim Cramer's Mad Money In-Depth, 1/23/08: Back from the Abyss?

Meredith Whitney fears $70bn carnage on monoliners
By James Quinn, Wall Street Correspondent
Last Updated: 11:55pm GMT 30/01/2008

www.telegraph.co.uk/mo......



The high-profile banking analyst who triggered the resignation of Citigroup chairman Charles "Chuck" Prince is predicting investment banks will need to take further write-downs of $40bn (£20bn) to $70bn as a result of the current crisis in the bond insurance market.

The latest news and analysis on the credit crisis
Whitney raised fears about write-downs last year
Meredith Whitney, whose research note on Citigroup in late October triggered a $369bn sell-off in global equities after she warned of the bank's need to raise fresh capital, warns Citigroup will be one of the banks to be hardest hit by a collapse in the monoline sector, along with Merrill Lynch and UBS.

Ms Whitney, who now works for Oppenheimer following the boutique investment house's recent purchase of CIBC World Markets, warns: "Among the myriad of negatives that surround financial stocks today, we see no issue more critical than the fate of the monoline insurers."

Major monolines - such as MBIA and Ambac - risk losing their triple-A credit ratings as a result of having to pay out on guarantees connected to bonds that contain defaulting sub-prime mortgages.

She estimates that Merrill, Citigroup and UBS hold more than 45pc of the entire market risk associated with the monolines.

However Speaking at a banking conference in New York, Merill's new chairman and chief executive John Thain pointed out that the bank's net exposure to collateralised debt obligations (CDO's) hedged by monolines is around $3.5bn. However, he said that if monolines "disappeared from the face of the earth", which he doesn't expect to happen, Merrill will owe around $6bn.

Jim Cramer's Mad Money Lightning Round, 1/9/08: Mary Just Might Make It After All

Jim forget to tell you this from Q3 analysts meeting:

This is from the CFO Kevin Twomey:

Ed Kelly - Credit Suisse

In terms of the Eckerd synergies, were the synergies you achieved this quarter in line with what you had expected?

Kevin Twomey

Very much so, Ed.

Ed Kelly - Credit Suisse

Can you give us a sense as to how much of that $200 million has been achieved so far, year-to-date?

Kevin Twomey

As we talked before, because of some of the ramp up, the fourth quarter is not evenly spreads off the three quarters, but we are very, very close to two-thirds of it.

OK 2/3 of $200M=$133M saving in Bank...Copy that ??

Next...

Ed Kelly - Credit Suisse

Kevin, could you just go over the liquidity situation? Whens your next big maturity? Whats under the revolver? What are you expecting in free cash for this year? Do you still expect it to be positive next year?

Kevin Twomey

The required maturities over the next three years are less than $175 million and the largest component of that is the $150 million note thats due December 15, 2008. Basically as we are going through the integration and ramping up the synergies, fiscal 2008 is going to be what everybody refers to as a negative free cash flow. In other words, operating cash flows will be less than the capital expenditures.

But in fiscal 2009, we still expect operating cash flows to exceed CapEx and in fact have us paydown the revolver. So from a, if you will, strategic perspective, from a commitment in terms of keeping things balanced, nothing haschanged. We are, if you will, very, very flexible; we have a lot of flexibility with regards to revolver and there are no restrictions on it.

So we think we are in very good shape, and as I mentioned, we areat our holiday season third quarter inventory build along with the planogram, retrofitting the Brooks/Eckerds, along with the moving out of the non go-forward inventory and restocking adding an additional burden in building inventory. So, we are kind of where we need to be, but that doesnt mean we dont have opportunities. I think that I would be remiss in my duties as a CFO by saying that we arent always looking for ways to improve the investment of our working capital inthe business.

And last....

John Heinbockel - Goldman Sachs

Finally, you sound pretty comfortable with the revolver availability. At this point you dont seethe need to go out and raise permanent capital to be able execute the CapEx program over the longer term? You are happy with the availability on the revolver?

Kevin Twomey

Very much so, John. I mean, we basically established our revolver and with the mix of revolver and term loan and senior notes with the idea in mind that we needed to have a lot of flexibility and a lot of liquidity to support our business plans over the next several years.

I know its inthe back of everybodys mind because the markets areso goofy right now, but we dont have to access the capital market to execute and support our business plan.

Jim Cramer's Mad Money Lightning Round, 1/9/08: Mary Just Might Make It After All

Hey Jim you didn't say that Rite Aid (RAD) was a takeover target at $3.50 why???


The Capital Research analyst, stated that the title of Jean Coutu Group may rise sharply if Rite Aid (NYSE: RAD), American Chain Drug Stores, owned 31.7% by Jean Coutu Group, was acquired.

As I mentioned Jean Coutu Group holds 31.7% of Rite Aid or approximately 252 million shares, which closed yesterday at Cap $ 2.2 Americas. The real value of the investment is approximately 560 million Americans.

What nobody said it and the problem is the following is that the same shares of Rite Aid worth $ 6.38 to June 29, 2007.

In other words, in six months, the placement du Groupe Jean Coutu melted like snow in the sun. The course is worth 3.5 billion American (3731 billion Canadian), the investment has grown to 560 million US-dollar (565.54 million).

What was the actions of the Jean Coutu Group 6 months ago? At the same time placing Rite Aid worth 3,731 billion Canadian, or at June 29, 2007, shares of Jean Coutu Group worth $ 15.50.

So in closing price yesterday, while the placement du Groupe Jean Coutu in Rite Aid founded nearly 85% (in Canadian currency), the shares of Jean Coutu Group lost almost 28%.

Some analysts believe the US drugstore chain Rite Aid could be acquired by a competitor. Assuming that possibility and the purchaser would pay approximately $ 3.50 reflecting a fairly reasonable premium of nearly 45% over the closing price yesterday of $ 2.22.

If this situation took place, the Jean Coutu Group therefore receive 789 million Americans for all its shares of Rite Aid.

Is Walgreen Co. Reasonably Valued?

I guess the market is kind of myope on the Aging population.... and Rite Aid could be a takeover target for CVS or Wallgreen...why...it's really hard to built from 7000 to 13000 stores without pharmacists and US is short of great pharmacists and Rite Aid (RAD) has over 5000 great pharmacists


Analysts certainly see improvement at Rite Aid. Thomson Financial lists consensus earnings per share at a loss of 12 cents this year, rising to a profit of 31 cents by 2010.

According to the U.S. Centers for Medicare and Medicaid, prescription drug spending is expected to grow to $300-billion by 2010 and then to $450-billion by 2015. That's a big wave with lots of room for competition.

Copy that Houston???