Feb. 23 (Bloomberg) -- Donald Trump opened his court battle today with billionaire Carl Icahn over three bankrupt casinos that bear Trump’s name.
In their opening statements, attorneys for Icahn and Trump disagreed about whether bankruptcy law allows the three casinos to keep using the Trump brand name.
“Icahn can’t get the benefits” of the Trump name, attorney David Friedman told U.S. Bankruptcy Judge Judith Wizmur today.
The court hearing in U.S. Bankruptcy Court in Camden, New Jersey is scheduled to last at least four days as lawyers pitch competing plans for reorganizing Trump Entertainment Resorts Inc.
Wizmur will hear from gambling consultants, economists and financial advisers for each side. Trump has changed positions and allies since the company filed bankruptcy on Feb. 17, 2009.
Trump abandoned his partnership with Trump Entertainment’s banker in favor of an alliance with his former adversaries in the case, noteholders who say that Trump personally guaranteed to repay at least $290 million of the $1.25 billion they are owed.
Icahn is working with the banker jilted by Trump, Andy Beal, a Dallas businessman who has been a high-stakes poker player. Trump Entertainment owed Beal Bank more than $480 million, debt that had a higher payment priority than the notes. Icahn bought the right to collect that bank debt for about 92 cents on the dollar, Friedman said in court today.
The case is In re TCI 2 Holdings LLC, 09-13654, U.S. Bankruptcy Court, District of New Jersey (Camden).
Wednesday, February 24, 2010
Jobs Bill May Get U.S. Senate Vote Today After Clearing Hurdle
Feb. 23 (Bloomberg) -- The U.S. Senate may take a final vote today on a $15 billion jobs bill after a handful of Republicans, including Scott Brown of Massachusetts, broke with party leaders to help advance the Democratic measure.
Yesterday’s vote allowing the measure to proceed was 62-30, with 60 needed to overcome Republican stalling tactics. Most Republicans opposed the bill after Senate Majority Leader Harry Reid scaled back an $85 billion jobs-related measure crafted by a group of Democrats and Republicans.
Reid said today the Senate may approve the bill by the end of the day. He said he wants the Senate to consider a 30-day extension of unemployment benefits, including so-called Cobra subsidies to help the jobless buy health insurance. Those would otherwise expire at the end of this month.
Lawmakers also may consider longer-term extensions of those benefits and a group of miscellaneous tax cuts, as well as higher aid to states struggling to pay for Medicaid, Reid said.
Brown, in just his third vote since being seated earlier this month, said that while the bill was “not perfect” he “came to Washington to be an independent voice, to put politics aside and to do everything in my power to create jobs for Massachusetts families.”
Also siding with Democrats were Republican Senators Susan Collins and Olympia Snowe of Maine, Christopher Bond of Missouri and George Voinovich of Ohio. Senator Ben Nelson of Nebraska was the sole Democrat to vote against advancing the bill.
Democrats, who lost their 60-vote supermajority with Brown’s surprise win in a special election last month, needed support from at least two Republicans in yesterday’s vote because New Jersey Democrat Frank Lautenberg is being treated for stomach cancer.
Obama ‘Grateful’
President Barack Obama issued a statement saying he was “grateful to the Democratic and Republican senators who voted to support” the bill’s provisions.
“The American people want to see Washington put aside partisan differences and make progress on jobs” and with yesterday’s vote “the Senate took one important step forward in doing that,” Obama said.
House Speaker Nancy Pelosi, a California Democrat, said lawmakers there may pass the Senate plan without any changes.
The measure’s centerpiece is a $13 billion plan to fight joblessness by offering companies a one-year holiday from paying a 6.2 percent Social Security payroll tax for each worker they hire who has been jobless for at least 60 days. The plan would save or create as many as 234,000 jobs, according to the nonpartisan Congressional Budget Office.
Subsidies for Bonds
The plan would spend $2 billion to aid state governments by expanding subsidies for bonds used to finance construction projects, give small businesses more power to write off expenses and transfer $19.5 billion in tax revenue into the government’s highway trust fund.
Republican leaders had demanded a chance to restore provisions Reid dropped earlier this month, including a package of business-related tax cuts. Some of those provisions were among those Reid said today he wants the Senate to vote on later.
The provisions eliminated by Reid included an extension in unemployment benefits, a package of individual and business tax cuts worth $31 billion, and provisions preventing looming cuts in Medicare reimbursements to doctors.
The House approved a jobs bill in December costing more than $150 billion. It would spend $53 billion to extend unemployment benefits, $24 billion to help states to pay their Medicaid bills, $48 billion for infrastructure and $26 billion to shore up funding for public service jobs.
Yesterday’s vote allowing the measure to proceed was 62-30, with 60 needed to overcome Republican stalling tactics. Most Republicans opposed the bill after Senate Majority Leader Harry Reid scaled back an $85 billion jobs-related measure crafted by a group of Democrats and Republicans.
Reid said today the Senate may approve the bill by the end of the day. He said he wants the Senate to consider a 30-day extension of unemployment benefits, including so-called Cobra subsidies to help the jobless buy health insurance. Those would otherwise expire at the end of this month.
Lawmakers also may consider longer-term extensions of those benefits and a group of miscellaneous tax cuts, as well as higher aid to states struggling to pay for Medicaid, Reid said.
Brown, in just his third vote since being seated earlier this month, said that while the bill was “not perfect” he “came to Washington to be an independent voice, to put politics aside and to do everything in my power to create jobs for Massachusetts families.”
Also siding with Democrats were Republican Senators Susan Collins and Olympia Snowe of Maine, Christopher Bond of Missouri and George Voinovich of Ohio. Senator Ben Nelson of Nebraska was the sole Democrat to vote against advancing the bill.
Democrats, who lost their 60-vote supermajority with Brown’s surprise win in a special election last month, needed support from at least two Republicans in yesterday’s vote because New Jersey Democrat Frank Lautenberg is being treated for stomach cancer.
Obama ‘Grateful’
President Barack Obama issued a statement saying he was “grateful to the Democratic and Republican senators who voted to support” the bill’s provisions.
“The American people want to see Washington put aside partisan differences and make progress on jobs” and with yesterday’s vote “the Senate took one important step forward in doing that,” Obama said.
House Speaker Nancy Pelosi, a California Democrat, said lawmakers there may pass the Senate plan without any changes.
The measure’s centerpiece is a $13 billion plan to fight joblessness by offering companies a one-year holiday from paying a 6.2 percent Social Security payroll tax for each worker they hire who has been jobless for at least 60 days. The plan would save or create as many as 234,000 jobs, according to the nonpartisan Congressional Budget Office.
Subsidies for Bonds
The plan would spend $2 billion to aid state governments by expanding subsidies for bonds used to finance construction projects, give small businesses more power to write off expenses and transfer $19.5 billion in tax revenue into the government’s highway trust fund.
Republican leaders had demanded a chance to restore provisions Reid dropped earlier this month, including a package of business-related tax cuts. Some of those provisions were among those Reid said today he wants the Senate to vote on later.
The provisions eliminated by Reid included an extension in unemployment benefits, a package of individual and business tax cuts worth $31 billion, and provisions preventing looming cuts in Medicare reimbursements to doctors.
The House approved a jobs bill in December costing more than $150 billion. It would spend $53 billion to extend unemployment benefits, $24 billion to help states to pay their Medicaid bills, $48 billion for infrastructure and $26 billion to shore up funding for public service jobs.
Friday, February 19, 2010
Goldman Sachs, Greece Didn’t Disclose Swap Contract
Feb. 17 (Bloomberg) -- Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.
No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.
Failing to disclose the swap may have allowed Goldman, a co-lead manager on many of the sales, other underwriters and Greece to get a better price for the securities, said Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP, a London-based broker and fund manager.
“The price of bonds should reflect the reality of Greece’s finances,” Blain said. “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”
Michael DuVally, a spokesman at Goldman Sachs in New York, declined to comment.
Legal ‘At the Time’
Goldman Sachs, Wall Street’s most profitable securities firm, is being criticized by European politicians including Germany’s ruling Christian Democrats, who have questioned whether the firm helped Greece hide its deficit to comply with the currency’s membership criteria. Greece is also being faulted by fellow euro-region countries for failing to disclose the swaps to EU regulators.
German Chancellor Angela Merkel said today it’s a “scandal” if banks are found to have helped Greece conceal its budget deficit. The country “falsified statistics for years,” she said in her speech to a party rally.
The swaps used by Greece to manage debt were “at the time legal,” Greek Finance Minister George Papaconstantinou said on Feb. 15. The government doesn’t use the swaps now, he said.
Eurostat, the EU’s statistics office, this week ordered Greece to hand over information on the swaps transactions by the end of this week in an investigation that may extend to other EU countries.
Goldman Sachs earned about $24 million underwriting Greek government bonds since 2002, data compiled by Bloomberg show. Goldman Sachs underwrote 10 bond sales. Prospectuses for six of them, obtained by Bloomberg, contain no mention of the swaps. The other four couldn’t be obtained.
‘Fear the Worst’
Freshfields was the legal adviser to the managers of the six bond sales. Spokesman Christian Marroni didn’t have an immediate comment.
The yield on Greek 10-year government bonds jumped to as much as 7.2 percent on Jan. 28 amid the worst crisis in the euro’s 11-year history. The premium, or spread, investors demand to hold Greek 10-year notes instead of German bunds, Europe’s benchmark government securities, widened yesterday by 18 basis points to 323 basis points.
The spread reached 396 basis points last month, the most since the year before the euro’s debut in 1999, compared with an average of 57 basis points in the past decade. A basis point is 0.01 percentage point.
“When people start to fear that the numbers aren’t accurate, they fear the worst,” said Simon Johnson, a former International Monetary Fund chief economist who is now a professor at the Massachusetts Institute of Technology’s Sloan School of Management in Cambridge, Massachusetts.
No ‘Smoking Gun’
Goldman could face legal liability “if it could be established that they were knowingly hiding risk, and therefore knew or had reason to know that the bond disclosure documents were misleading,” said Thomas Hazen, a law professor at the University of North Carolina at Chapel Hill. “But that would be a tough hill to climb, in terms of burden of proof. There’d have to be some sort of smoking-gun memo.”
The swap enabled Greece to improve its budget and deficit and meet a target needed to remain within the region’s single currency. Knowledge of their existence may have changed investors’ perception of the risk associated with Greece, and the price they may have been willing to pay for the country’s securities.
“From what we know, this is an egregious example of a conflict of interest” for Goldman Sachs, MIT’s Johnson said. “Even if the deal had been authorized, it doesn’t let them off the hook.”
‘Long-Term Damage’
A Greek government inquiry this month identified a series of swaps agreements with securities firms that allowed the country to hide its mounting deficit. Greece used the swaps to defer interest payments, causing “long-term damage” to the Greek state, according to the Feb. 1 document, commissioned by the Finance Ministry.
European Union officials said this week they only recently became aware of the transaction with Goldman. The swaps don’t necessarily break EU rules, European Commission spokesman Amadeu Altafaj told reporters in Brussels on Feb. 15.
The transaction with Goldman consisted of a cross-currency swap of about $10 billion of debt issued by Greece in dollars and yen, according to Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time.
That was swapped into euros using a historical exchange rate, a mechanism that implied a reduction in debt and generated about $1 billion in an up-front payment from Goldman to Greece, Sardelis said. He declined to give specifics on how the swap affected the country’s deficit or debt.
‘Wider Collusion’
European politicians such as Luxembourg Treasury Minister Jean-Claude Juncker this week criticized Goldman Sachs for arranging the Greek swap and are pressing the firm and Greece for more disclosure. Merkel’s Christian Democrats aim to push for new rules that will force euro-region nations and banks to disclose bond swaps that have an impact on public finances, financial affairs spokesman Michael Meister said.
“Investment banks are guilty of being part of a wider collusion that fudged the numbers to make the euro look like a working currency union,” said Matrix’s Blain. “The bottom line is foreign exchange and bond investors bought something sellers knew not to be the case.”
No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.
Failing to disclose the swap may have allowed Goldman, a co-lead manager on many of the sales, other underwriters and Greece to get a better price for the securities, said Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP, a London-based broker and fund manager.
“The price of bonds should reflect the reality of Greece’s finances,” Blain said. “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”
Michael DuVally, a spokesman at Goldman Sachs in New York, declined to comment.
Legal ‘At the Time’
Goldman Sachs, Wall Street’s most profitable securities firm, is being criticized by European politicians including Germany’s ruling Christian Democrats, who have questioned whether the firm helped Greece hide its deficit to comply with the currency’s membership criteria. Greece is also being faulted by fellow euro-region countries for failing to disclose the swaps to EU regulators.
German Chancellor Angela Merkel said today it’s a “scandal” if banks are found to have helped Greece conceal its budget deficit. The country “falsified statistics for years,” she said in her speech to a party rally.
The swaps used by Greece to manage debt were “at the time legal,” Greek Finance Minister George Papaconstantinou said on Feb. 15. The government doesn’t use the swaps now, he said.
Eurostat, the EU’s statistics office, this week ordered Greece to hand over information on the swaps transactions by the end of this week in an investigation that may extend to other EU countries.
Goldman Sachs earned about $24 million underwriting Greek government bonds since 2002, data compiled by Bloomberg show. Goldman Sachs underwrote 10 bond sales. Prospectuses for six of them, obtained by Bloomberg, contain no mention of the swaps. The other four couldn’t be obtained.
‘Fear the Worst’
Freshfields was the legal adviser to the managers of the six bond sales. Spokesman Christian Marroni didn’t have an immediate comment.
The yield on Greek 10-year government bonds jumped to as much as 7.2 percent on Jan. 28 amid the worst crisis in the euro’s 11-year history. The premium, or spread, investors demand to hold Greek 10-year notes instead of German bunds, Europe’s benchmark government securities, widened yesterday by 18 basis points to 323 basis points.
The spread reached 396 basis points last month, the most since the year before the euro’s debut in 1999, compared with an average of 57 basis points in the past decade. A basis point is 0.01 percentage point.
“When people start to fear that the numbers aren’t accurate, they fear the worst,” said Simon Johnson, a former International Monetary Fund chief economist who is now a professor at the Massachusetts Institute of Technology’s Sloan School of Management in Cambridge, Massachusetts.
No ‘Smoking Gun’
Goldman could face legal liability “if it could be established that they were knowingly hiding risk, and therefore knew or had reason to know that the bond disclosure documents were misleading,” said Thomas Hazen, a law professor at the University of North Carolina at Chapel Hill. “But that would be a tough hill to climb, in terms of burden of proof. There’d have to be some sort of smoking-gun memo.”
The swap enabled Greece to improve its budget and deficit and meet a target needed to remain within the region’s single currency. Knowledge of their existence may have changed investors’ perception of the risk associated with Greece, and the price they may have been willing to pay for the country’s securities.
“From what we know, this is an egregious example of a conflict of interest” for Goldman Sachs, MIT’s Johnson said. “Even if the deal had been authorized, it doesn’t let them off the hook.”
‘Long-Term Damage’
A Greek government inquiry this month identified a series of swaps agreements with securities firms that allowed the country to hide its mounting deficit. Greece used the swaps to defer interest payments, causing “long-term damage” to the Greek state, according to the Feb. 1 document, commissioned by the Finance Ministry.
European Union officials said this week they only recently became aware of the transaction with Goldman. The swaps don’t necessarily break EU rules, European Commission spokesman Amadeu Altafaj told reporters in Brussels on Feb. 15.
The transaction with Goldman consisted of a cross-currency swap of about $10 billion of debt issued by Greece in dollars and yen, according to Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time.
That was swapped into euros using a historical exchange rate, a mechanism that implied a reduction in debt and generated about $1 billion in an up-front payment from Goldman to Greece, Sardelis said. He declined to give specifics on how the swap affected the country’s deficit or debt.
‘Wider Collusion’
European politicians such as Luxembourg Treasury Minister Jean-Claude Juncker this week criticized Goldman Sachs for arranging the Greek swap and are pressing the firm and Greece for more disclosure. Merkel’s Christian Democrats aim to push for new rules that will force euro-region nations and banks to disclose bond swaps that have an impact on public finances, financial affairs spokesman Michael Meister said.
“Investment banks are guilty of being part of a wider collusion that fudged the numbers to make the euro look like a working currency union,” said Matrix’s Blain. “The bottom line is foreign exchange and bond investors bought something sellers knew not to be the case.”
Monday, February 15, 2010
U.S. Stocks Post Second Week of Gains in the Year
Published: Friday, 12 Feb 2010 | 6:18 PM ET Text Size By: Gina Francolla, Marc Briganti, Giovanny Moreano
U.S. stocks snapped four weeks of consecutive losses, led to the upside by the NASDAQ Composite, posting a gain of 1.98%. This week, the Dow Jones Industrial Average closed below the 10,000-mark, its lowest level since November 4, 2009. However, all three major equity indices recovered some of the earlier losses in the week, posting their second week of gains in 2010.
What follows is a summary of this week's statistics on the markets.
Equity Metrics
20 of the Dow 30 components finished up for the week, while 9 companies closed down, and Exxon (XOM) finished flat
332 out of the 500 (~66%) S&P components finished up for the week, ~33% increased, and 1% was unchanged
76 of the NASDAQ 100 components rose for the week
Since the Peak This Year
The Dow is off by -626.29 points, or -5.8% from its highest close of the year (a 15-month high) reached on 1/19 of 10,725.43
The S&P is off by -74.7 points, or -6.5% from its highest close of the year (a 15-month high) reached on 1/19 of 1150.23
The NASDAQ is off by -136.87 points, or -5.9% from its highest close of the year (a 16-month high) reached on 1/19 of 2320.4
Since the March Lows
Since the March lows, the NASDAQ is leading the way with a gain of 72.12%, followed by the S&P and Dow 58.97%, up % and 54.25%, respectively
S&P 500
Sector Impact: 8 out of 10 sectors closed the week in positive territory, led to the upside by basic material stocks. Utility stocks fell the most this week, down 0.87%.
Materials were helped by Cliff Natural Resources (CLF), up 10%
Utilities were hurt this week by FirstEnergy (FE), down 6%
Year-to-date, 10 out of 10 sectors continue to trade in the red, led by Telecom, down 10%.
Commodity Impact: Crude oil for March delivery snapped a four-week losing streak, closing at $74.13 per barrel on Friday, up $2.94, or 4.13% for the week.
Copper recovered some of last week's losses, gaining 7.9% this week, while milk futures dropped the most, -2.3% for the week.
Use of Temps May No Longer Signal Permanent Hiring
Published: Monday, 15 Feb 2010 | 12:42 PM ET Text Size By: AP
It's not the signal it used to be. When employers hire temporary staff after a recession, it's long been seen as a sign they'll soon hire permanent workers.
Not these days.
Companies have hired more temps for four straight months. Yet they remain reluctant to make permanent hires because of doubts about the recovery's durability.
Even companies that are boosting production seem inclined to get by with their existing workers, plus temporary staff if necessary.
"I think temporary hiring is less useful a signal than it used to be," says John Silvia, chief economist at Wells Fargo. "Companies aren't testing the waters by turning to temporary firms. They just want part-time workers."
The reasons vary. But economists and business people say the main obstacle is that employers lack confidence that the economic rebound has staying power. Many fear their sales and the overall economy will remain weak or even falter as consumers spend cautiously.
Companies also worry about higher costs related to taxes or health care measures being weighed by Congress and statehouses. That's what Chris DeCapua, owner of employment firm Dawson Careers in Columbus, Ohio, is hearing from clients.
DeCapua says corporate demand for temporary workers has surged. That's especially true for manufacturing-related jobs involving driving forklifts, assembling products, packing merchandise and loading it on trucks.
Yet that demand hasn't spilled over into a demand for permanent workers. And DeCapua doesn't see it turning around anytime soon.
"There is so much uncertainty, and when there is uncertainty people and companies hold onto their checkbooks," DeCapua says.
Companies "don't want to hire permanent workers and then have to turn around and get rid of them six months later," he says.
DoubleStar, a human resources firm based in West Chester, Penn., hired two temp workers recently to join its 60-person staff. CEO Harry Griendling says in normal times he would have hired two permanent employees.
But Griendling has doubts about the strength of the recovery. He's not ready to absorb the risk and cost of adding permanent workers.
"When I look ahead for the next three to four months, all I see is murkiness," Griendling says.
For years, economists have viewed the hiring of temp workers as a bridge between no hiring and healthy job creation. It meant that employers would soon expand their permanent payrolls to keep up with rising customer demand.
After the 1990-1991 recession, for instance, gains in temporary hiring starting in August 1991 led almost immediately to stepped-up permanent hiring. And after the 2001 recession, temporary hiring rose for three straight months in the summer of 2003. By September, employers were adding full-time jobs each month.
Now, because the recovery seems more tepid and fragile than previous rebounds, temporary hiring may have lost its predictive power, economists say.
"I think a lot of it is manufacturing," says Mark Zandi, chief economist at Moody's Economy.com. "It may be that manufacturers are relying more on temps than in the past because they are more unsure about the ongoing demand for what they produce."
Employers added 52,000 temp jobs in January — the fourth consecutive month of gains. Over that same time, total U.S. jobs shrank by 106,000. Employers have managed to squeeze more work out of their existing staffs.
For the unemployed, temporary jobs provide a paycheck at a time when the unemployment rate remains near double digits. Still, these jobs generally offer few or no benefits.
Some of the jobless see temporary work as providing a foothold at a desirable employer. Yet it seems far from certain these days that a temp job will lead to full-time work.
Allen Moore, 26, said a temporary job was all he could find last fall after more than six months of unemployment. Jobs disappeared last year around his hometown of Peoria, Ill., after manufacturer Caterpillar [CAT 56.20 0.05 (+0.09%) ] cut thousands of positions.
Moore landed a temporary job in September through a staffing agency. He preferred a permanent position. But he found none. He earns $9 an hour making pallets and boxes for FCA Manufacturing in nearby Princeville.
He said he took the job with the hope that he'd be hired as a permanent employee within about three months. The three months have come and gone.
Moore figures the company is waiting for orders to increase before it expands its long-term payroll. "They think it's going to pick up," he says. "I hope it does."
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