Archive for April, 2009

General Growth filing clouds future for stores (Reuters)

Thursday, April 16th, 2009 | Finance News

NEW YORK (Reuters) –
The bankruptcy of the second-largest U.S. mall owner, General Growth Properties Inc, will have little immediate effect on its retail tenants, but could hurt them down the road.

At the very least, the biggest real estate failure in U.S. history casts a cloud over specialty retailers, many of which already face declining sales and limited credit and are trying to stave off their own demises.

"Having a landlord in Chapter 11 has some very foreseeable negative consequences as far as maintaining the property and the landlord living up to its commitments, and that's going to affect the retailer right on the sales floor," said Anthony Sabino, professor of law and business at New York's St. John's University. "And people aren't going to malls as it is."

Following Thursday's bankruptcy filing by General Growth and 158 of its more than 200 U.S. malls, retail tenants are obligated to uphold their leases, though the mall owner now has the ability to reject whichever leases its overseers view as unfavorable.

As consumers cut back on spending, scores of retailers have trimmed staff, closed unprofitable stores and sought to renegotiate their leases for better terms. Sabino said any outstanding renegotiations will likely get caught up in the tangled legal web of bankruptcy court.

That being said, retailers could find themselves with more leverage as they seek to renew or renegotiate their leases, especially in General Growth's secondary and tertiary malls.

"The last thing a company in General Growth's position wants is to have more stores go dark at this point," said Antony Karabus, chief executive of Karabus Management, a retail advisory firm and subsidiary of PricewaterhouseCoopers (PwC) Canada. "It's better to have a tenant at a lower rate than to not have a tenant at all."

A BRIGHT SIDE

For now, it is "business as usual" for Macy's Inc and JC Penney Co Inc, which both operate dozens of department stores in General Growth malls.

"General Growth has been a good mall operator for us," a J.C. Penney spokeswoman said. "As long as the malls continue to be operated properly, we do not foresee any issues."

Of the 111 J.C. Penney stores in General Growth malls, about 90 are in malls affected by the bankruptcy filing.

A Macy's spokesman said the General Growth bankruptcy has "very little effect" on it, since it owns many of its store properties and has long-term leases for many others.

Among General Growth's trade creditors are LVMH Moet Hennessy Louis Vuitton SA's Sephora chain and Borders Group Inc. Bankruptcy experts said that is likely due to costs the retailers took on to build their stores that General Growth did not repay.

Now that General Growth is in bankruptcy, any build-out costs will be paid out of debtor-in-possession financing, so new tenants may be encouraged to move into General Growth malls since they may feel assured of getting reimbursed, said Mark Freiman, an independent contractor with retail consultancy Focus Management Group.

"This may give (General Growth) the ability to do deals they couldn't do before" bankruptcy, Freiman said.

Retail real estate broker Faith Hope Consolo, chairman of Prudential Douglas Elliman's retail leasing and sales division, said she has several deals pending with General Growth that she expects to continue moving toward closing.

"My retailers feel confident that General Growth will survive this, and they're going forward with the deals," Consolo said. "When we entered into negotiations, we already knew they had their issues."

(Reporting by Martinne Geller; Additional reporting by Aarthi Sivaraman, Nicole Maestri, Tom Hals and Phil Wahba, editing by Matthew Lewis)

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New York Times cuts sections to save money (Reuters)

Thursday, April 16th, 2009 | Finance News

NEW YORK (Reuters) –
New York Times Co's flagship newspaper plans to eliminate several weekly sections and cut freelance spending to save millions of dollars in annual costs, according to a memo obtained by Reuters.

The Times's moves, which it also reported through an article on its website on Thursday, is the latest effort to cut costs by the struggling newspaper publisher.

"Taken together, these moves will save millions of dollars -- savings that would otherwise have to come out of payroll," Executive Editor Bill Keller wrote to employees on Thursday.

The paper is cutting pay for nonunionized employees at the Times and other papers and is seeking similar concessions from unionized employees. It also has threatened to close the money-losing Boston Globe should it not find ways to cut millions of dollars in costs.

In a copy of the memo obtained by Reuters, Keller said that he does not know how the Globe's situation will be resolved, but said financial forecasts for the parent company have not changed in the past month.

He would not rule out job cuts. "As I have said on past occasions, there is nothing sacrosanct about the current size of the newsroom, but if the day comes when we decide to undertake a cut in the staff, it should be driven not by the temporary crisis of a recession, but by a careful calculation of our long-term priorities."

A New York Times spokeswoman was not immediately available for comment.

The Times will cut weekly sections covering New York City and nearby locations, including New York's Long Island and Westchester County, along with New Jersey and Connecticut, according to the article on the Times's website.

Instead, the news that would have run in those sections will be used in a separate Sunday section that is scheduled to appear as early as May 24, the memo said.

The Times will eliminate its Escapes section and absorb its content into the Weekend section, and stop running a separately labeled New York report in the first section of the Sunday paper. It also will stop running a regular fashion layout in the Times Magazine, and move its guide to the contents of each day's paper to one page from three.

New York Times, which reports its quarterly financial results next week, is one of many U.S. newspaper publishers that is dealing with a decline in advertising revenue as more readers shift their attention to the web instead of print.

The moves that it took on Thursday come on the same day that Washington Post Co told employees in a memo about changes it will make to the newsroom of its namesake paper that will consolidate some editing and reporting tasks.

It also comes on the same day that USA Today publisher Gannett Co Inc reported a 60 percent drop in first-quarter profit.

The economic crisis has accelerated those ad declines.

In the Times's case, it has been forced to take steps to relieve its debt load, including borrowing money from Mexican billionaire Carlos Slim and selling its stake in its New York headquarters building.

It also is looking for a buyer for its interest in the holding company that owns the Boston Red Sox baseball team.

New York Times shares fell 4 cents, or less than 1 percent, to $5.70 on the New York Stock Exchange.

(Reporting by Robert MacMillan, editing by Gerald E. McCormick)

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FTSE 100 climbs on JPMorgan profits (AFP)

Thursday, April 16th, 2009 | Finance News

LONDON (AFP) –
Stocks in London shot up on Thursday as investors took news of a healthy profit performance at US bank JPMorgan Chase as evidence of more green shoots of recovery.

The benchmark FTSE 100 index closed up 84.58 points -- or 2.13 percent -- to finish at at 4,052.98.

JPMorgan announced a net profit of 1.4 billion pounds in the first quarter of 2009, slightly down from 2008 figures for the same period but better than most market analysts had predicted and enough to fire investor optimism..

In London, insurer Prudential led the day's risers, adding 8.61 percent -- or 31.25 pence -- to finish at 394, followed by banking giant Barclays, which rose 7.72 percent -- or 15.2 pence -- at 212.

Other London financials also turned in a strong performance with Royal Bank of Scotland (RBS) adding 3.25 percent -- or 0.9 pence -- at 28.6 and Lloyds Banking Group 6.66 percent -- or 5.6 pence -- at 89.7.

Food packaging group Bunzl led the fallers, tumbling 9.99 percent -- or 53.75 pence -- to end at 484.25, followed by credit report company Experian, which shed 5.25 percent -- or 24.5 pence -- to end at 442.25.

Vodafone was the most widely traded stock, seeing 167 million shares change hands, followed by RBS, which saw 143 million units switch ownership.

Elsewhere, the pound ended the day down against the US dollar and the euro.

Sterling was worth 1.4918 dollars at 15:58 GMT, down from 1.4998 at Wednesday's close, while it slipped to 1.1306 euros from 1.1340 over the same period.

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