Archive for August, 2008

Highland Capital seeks to block Delphi loan (Reuters)

Thursday, August 21st, 2008 | Finance News

(Reuters) -
Highland Capital Management LP is trying to
prevent Delphi Corp (DPHIQ.PK) from borrowing an additional
$300 million from former parent General Motors Corp (GM.N),
court documents showed.

In court papers filed with the U.S. Bankruptcy Court in
Manhattan on Wednesday, Highland Capital said Delphi's North
American operations "continue to lose staggering sums of money,
and drag down the rest of the business."

Highland Capital, a Delphi bondholder, said recoveries for
unsecured creditors in the bankruptcy case were certain to be
eroded by the financing.

"The Debtors' continued willingness to operate a
money-losing business that burns cash for the benefit of GM is
beyond comprehension," Highland said in the court papers.

Delphi and Highland Capital could not be immediately
reached for comment.

Steven Cohen's CR Intrinsic Investors LLC joined Highland
in the objection, according to the court documents.

Earlier this month, Delphi said General Motors had agreed
to increase its loan to Delphi by $300 million for a total of
$950 million to shore up the supplier's liquidity.

Delphi, which filed for bankruptcy protection in October
2005, has cut thousands of jobs and divested several business
units in its reorganization.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by
Anshuman Daga)

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Buffett, others say high U.S. debt levels pose risks (Reuters)

Thursday, August 21st, 2008 | Finance News

NEW YORK (Reuters) -
Warren Buffett, the billionaire
co-founder of a top private equity firm and a prominent voice
for U.S. fiscal responsibility, called on the United States and
its elected officials to combat the nation's fast-growing,
multi-trillion dollar debt load.

Buffett, Blackstone Group LP (BX.N) co-founder Peter
Peterson
, and former Comptroller General David Walker were part
of a panel that spoke Thursday night in Omaha, Nebraska
following the national premiere of the documentary "I.O.U.S.A."
The talk was simulcast in more than 350 movie theatres.

The film argues the country might face economic disaster if
it can't find a way to pay some $53 trillion it has committed
to spend -- and doesn't have now -- as the population ages, and
Medicare and Social Security costs soar.

It also argues, and panelists agreed, that the United
States has become too dependent on foreign investors to buy its
goods and its publicly-issued debt. There was also agreement
that many politicians fear making tough policy choices that
have ramifications far beyond the current election cycle.

"Our politics have become so embedded and so partisan, with
so many special interests, that they require a massive effort
from the public telling them, 'we want something done',"
Peterson said.

Buffett, who runs Omaha-based Berkshire Hathaway Inc
(BRKa.N) (BRKb.N) and turns 78 on Aug 30, was more sanguine
than other panelists, though he said he doesn't want debt to
grow as a percentage of gross domestic product.

"The prospects of being born in the United States are still
better than being born anyplace else in the world," Buffett
said.

Buffett, the world's richest person according to Forbes
magazine, added: "It has not paid to sell America short since
1776, and the time to start is not in 2008."

He added that even if there are more debts to cover, the
United States will have greater resources to pay them. "The pie
gets larger over time," he said.

Another panelist was Bill Novelli, chief executive of the
AARP advocacy group for people 50 and older, who called for
bringing health care inflation under control. A fifth was
William Niskanen, chairman of the libertarian Cato Institute,
who said the nation's retirement age should rise to 70.

CREDIBLE PLAN SOUGHT

Roughly four-fifths of the $53 trillion figure is related
to projected shortfalls in Medicare and Social Security.

Most of the rest is what is commonly called the "national
debt," which in July totaled nearly $9.6 trillion, according to
the U.S. Treasury Department's Bureau of Public Debt.

Walker as comptroller general ran Congress' Government
Accountability Office
from 1998 until this March. He said
aggressive action is needed by whoever becomes the next
president, likely either John McCain or Barack Obama.

Now running the Peter G. Peterson Foundation, Walker called
for the creation of a "capable, credible and bipartisan"
commission to make recommendations to ensure tough budget
controls, comprehensive Social Security reforms that will last
indefinitely, and "round one" of health care and tax reform.

"What we have to do is to recognize and reward elected
officials -- Democrats, Republicans, independents, whatever --
who tell the truth and who stand up and try to help make tough
choices sooner rather than later to make sure that America's
future is better than its past, and reject the B.S. and the
nothing types of solutions and platitudes that we hear from so
many politicians today," he said.

Peterson added that the United States should consider the
"provocative" notion of mandatory savings for individuals, as
have some other countries, saying the nation had become "so
consumption-obsessed and so borrowing-obsessed."

The 82-year-old Peterson is also a former chief executive
of Lehman Brothers (LEH.N) and former U.S. secretary of
commerce
under President Richard Nixon.

(Editing by Kim Coghill)

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Gap profit beats Street, PacSun disappoints (Reuters)

Thursday, August 21st, 2008 | Finance News

SAN FRANCISCO (Reuters) -
Gap Inc (GPS.N) reported a 50
percent jump in quarterly net income on Thursday, beating Wall
Street estimates
, as cost-cutting, lower inventories and other
moves that boosted profit offset declining sales at its family
of clothing stores.

Same-store sales, a key measure of retail health, fell 10
percent at Gap and also were down at apparel retailers Wet Seal
Inc
(WTSLA.O), Bebe Stores Inc (BEBE.O) and Pacific Sunwear of
California Inc
(PSUN.O), as summer shoppers, stunned by higher
grocery and gas prices, reeled in spending.

Like many other retailers, apparel chains have struggled to
attract shoppers in a sputtering U.S. economy.

Teen retailer Aeropostale Inc (ARO.N), however, bucked the
trend as popular and low-priced back-to-school offerings
sparked a same-store sales increase of 11 percent.

Shares of Gap Inc, which owns the Gap, Old Navy and Banana
Republic chains, rose 4 percent in after-hours trading as
investors cheered improved profit margins. The stock has been
hard-hit this year, down more than 10 percent as of Thursday's
close.

"Retailers awhile ago recognized how tough it was out
there, and how tough it's going to be, and went into defense
mode," said Stifel Nicolaus analyst Richard Jaffe, citing a
list of aggressive spending measures Gap has taken including
cutting store growth. "Every lever you can pull to reduce your
exposure and protect your profits, you must do."

Gap, one of the largest apparel retailers in the world with
over 3,000 stores, has been trimming costs, reducing inventory
and streamlining operations to shore up its business. It has
suffered through years of sliding sales due to strong
competition and its own fashion miscalculations.

The company said second-quarter net income rose to $229
million, or 32 cents per share, from $152 million, or 19 cents
per share, a year ago. Analysts had forecast a profit of 31
cents per share, according to Reuters Estimates.

Sales fell 5 percent to $3.5 billion in the quarter,
roughly in line with the nearly $3.51 billion expected by Wall
Street
.

Same-store sales fell 6 percent at both Gap and Banana
Republic stores
, 16 percent at Old Navy and 6 percent at
international stores.

"It's unacceptable we have been on this trajectory for a
number of years," Gap Chief Executive Glenn Murphy said on a
conference call with analysts, adding that the retailer will be
more aggressive in spurring traffic when it better aligns
marketing, brand positioning, and product in its stores.

Murphy gave a dour view for the remainder of the year,
however.

"We don't see any reason for any optimism in the back half
of the year," he said, adding that the company was
conservatively managing its business.

Gross profit margins increased in the quarter and the
company said fiscal 2008 operating profit margins would now be
higher than earlier estimates.

Inventory levels per square foot fell 17 percent in the
quarter and operating expenses fell 7 percent, Gap said.

AEROPOSTALE BUCKS TREND

Elsewhere, Pacific Sunwear, which has struggled in recent
years to recapture its former success with teens looking for
surf-inspired looks, said net income from continuing operations
fell 60 percent, in line with the expectations of analysts.

But the retailer's shares dropped nearly 23 percent after
its earnings forecast for the balance of the year fell short of
estimates.

Pacific Sunwear forecast third-quarter earnings from
continuing operations of nil to 5 cents per share, well below
analysts' call for earnings of 23 cents per share.

Aeropostale's second-quarter net profit rose almost 44
percent to match Wall Street's estimate after its
back-to-school merchandise was "positively received" and
same-store sales increased 11 percent.

The company, popular for its relatively low prices, also
said it was well positioned for the second half of 2008.

Gap shares rose to $19.70 in after-hours trading from their
close of $19.01 on the New York Stock Exchange.

Aeropostale shares fell to $33 in after-hours trading after
finishing at $34 on the New York Stock Exchange, while Pacific
Sunwear shares
fell to $6.00 from their Nasdaq close of $7.78.

(Additional reporting by Lisa Baertlein; editing by Carol
Bishopric)

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