Archive for May, 2009

U.S. retail lull means prep time for international expansion (Reuters)

Friday, May 29th, 2009 | Finance News

LAS VEGAS (Reuters) –
U.S. retail giants in home furnishings, food and clothing are expected to push into emerging markets such as Mexico, Brazil and China, once the U.S. economy and cash flows improve, executives said.

"There are a lot of retailers who are in defensive mode right now, but a lot of retailers still have ambition to go abroad," said Anthony Buono, executive managing director of CB Richard Ellis (CBG.N), the world's largest commercial real estate services company.

Global retailers are eyeing new markets, Buono said at the International Council of Shopping Centers' RECon retail real estate show in Las Vegas last week.

Growth in Latin America, the Middle East and Asia as well as the prospect of a shrinking domestic economy is causing U.S. corporations to look abroad.

U.S. brands already expanding globally include Collective Brands Inc (PSS.N), owner of PayLess, which has its highest-performing stores in Colombia and Dunkin' Brands, which is operating Dunkin' Donuts shops in 31 countries from Bulgaria to Qatar.

Wal-Mart Stores Inc (WMT.N) is due to open its first cash-and-carry store in India on Saturday.

AutoZone Inc (AZO.N), Gap Inc (GPS.N) and Brinker International (EAT.N), the owner of restaurant chain Chili's, are expanding in Mexico.

Frozen yogurt maker PinkBerry, which has inspired cult-like status in its home market of Los Angeles, is opening a store in Kuwait City this summer, with another in Dubai to follow.

DIVERSITY

Joe Albright, Wal-Mart's vice president of international real estate, said diverse formats designed to appeal to many had made Wal-Mart's international unit a $100 billion business.

For many retailers, franchises and joint ventures offer common ways to expand because they minimize risk.

"It gives us an outlet to sell our product in, but we're doing it with a third party, who puts up the capital to open the store," said Levi Strauss spokesman Jeff Beckman. He added Levi's is now seeking "opportunistic" deals afforded by the economic downturn.

Brinker, operator of Chili's, plans to open up to 18 eateries in Mexico this year, adding to its portfolio of nearly 200. AutoZone is looking to add to its 160 stores in Mexico.

"We're here to do deals," AutoZone director of real estate Terry McKee said while at the convention.

The top brands sought by tourists, according to a study by mall developer Taubman Centers (TCO.N) and Shop America Alliance are: Nike (NKE.N), Levi Strauss, Gap, Polo (RL.N) and Abercrombie & Fitch (ANF.N). All of them are planning overseas expansions.

Abercrombie says international stores will eventually make up half of total sales from the approximately 8 percent today.

VF Corp (VFC.N), owner North Face and Vans, plans to open 70 stores this year, pared back from its previous rate of 100, with most on a proportional basis in Europe and Asia.

Besides full-price stores, retail outlets are another venue for global growth. U.S. brands are keenly interested in outlet stores in Russia, especially in Moscow, said Neil Thompson, chief executive of outlet developer Fashion House Development. His company is opening 16 outlet centers in Russia.

"I get two (calls) a week," from U.S. companies interested in opening stores first in Russia, Thompson said.

(Additional reporting by Ilaina Jonas, editing by Leslie Gevirtz)

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GM bondholders urged to accept new debt deal (Reuters)

Friday, May 29th, 2009 | Finance News

DETROIT (Reuters) –
Advisers to General Motors Corp (GM.N) bondholders representing $27 billion in the automaker's debt urged investors on Friday to support a debt swap negotiated over the past week with the Obama administration.

Bondholders have until Saturday to register their support for the terms of a deal that would give them up to 25 percent of a reorganized GM. That offer is contingent on the U.S. Treasury determining that enough investors have signed on in support.

Investors representing at least 35 percent of GM's bonds are expected to support the sweetened offer from the U.S. Treasury, which will be the automaker's largest shareholder and creditor.

In a conference call open to GM bondholders, advisers to an ad hoc committee representing institutional investors urged other bondholders to offer their support for the deal.

GM's bondholders have been advised by law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP and financial adviser Houlihan Lokey Howard & Zukin Capital Inc.

Andrew Rosenberg, the legal adviser to the GM bondholder committee, said investors should understand the automaker's intent to file for bankruptcy on Sunday or Monday.

"GM, assuming its board approves, will file for bankruptcy Sunday, Monday of next week," he said.

GM bondholders had been in intermittent talks with members of the U.S. Treasury's autos task force overseeing GM's restructuring since early in the year.

Earlier this week, bondholders rejected a proposal that would have given them a 10 percent stake in the reorganized GM, and a tender offer for new stock in the company was withdrawn.

In a sweetened deal, the U.S. Treasury and GM offered bondholders warrants for another 15 percent stake under a proposed deal that could be rescinded if too few bondholders sign on to support it.

Rosenberg said the new deal terms had been negotiated in "the last week."

Eric Siegert, who has been the financial adviser to the bondholder committee, said the new deal represented a total government investment in GM of nearly $60 billion.

For the government to be repaid in full, GM would have to have an enterprise value of $69 billion based on its expected 72.5 percent stake in the company, Siegert said.

By the time GM reached that market value, bondholders would have recovered $14 billion from their new equity, he said.

"That's a very, very unusual result that you have a junior creditor ... where a company is in bankruptcy (and) where they receive that much value before a senior creditor is paid in full," Siegert said.

He added: "The federal government will not be paid in full on its equity investment until the value of General Motors reaches $69 billion."

Bondholder advisers said they would not disclose the names of investors who supported the U.S. government's plan for GM, which would include a quick sale of its best assets to a new company funded by the U.S. Treasury.

(Reporting by Kevin Krolicki, David Bailey, Soyoung Kim, Poornima Gupta and Walden Siew, editing by Matthew Lewis)

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MetLife CEO says insurers need voice in Washington (Reuters)

Friday, May 29th, 2009 | Finance News

NEW YORK (Reuters) –
MetLife Inc (MET.N) Chief Executive Robert Henrikson on Friday said the economic crisis has made it imperative that the life insurance industry be given a voice in Washington.

The CEO of the largest U.S. life insurer, speaking at the Sanford Strategic Decisions Conference, raised the issue amid a growing debate over whether the current state-by-state system of U.S. insurance regulation needs to be paired with or replaced by a federal regulator.

For life insurers, this has become a particularly pressing issue. Up to a dozen carriers scrambled to buy banks or savings and loan institutions last year in order to become eligible for government aid, much needed as capital was eroded by investment losses.

New York-based MetLife did not seek federal funding and was already federally regulated because of its ownership of MetLife Bank.

Henrikson said a more uniform system for regulating insurers was needed, including some form of insurance office in the U.S. capital.

"You have to have somebody to blackberry," he said. "The life insurance industry has no one ... We did not realize how important that would be when stuff hit the fan."

The U.S. Treasury recently said it would make aid available to select life insurers. Some companies, including Hartford Financial Services Group Inc (HIG.N), are expected to accept the assistance, while others have rejected it.

Life insurers argued that, like banks, they should be extended help, partly because of the trillions of dollars they plow into U.S. corporate and government bonds.

Some believe the spotlight put on insurer American International Group Inc (AIG.N), recipient of up to $180 billion in bailout funds, will increase support for a federal regulatory option.

A bill has been introduced in the U.S. House of Representatives by Reps. Melissa Bean, a Democrat, and Ed Royce, a Republican, that would give insurers the option of federal or state regulation.

A regulatory blueprint drawn up under former U.S. Treasury Secretary Henry Paulson last year called for a federal Office of Insurance Information, another option.

Similar initiatives have failed to pass Congress in the past, in part due to opposition from states and consumer groups who fear higher rates and weakened consumer protection. Some insurers, including many mutual companies, are also opposed.

But MetLife and others are pushing for change. The American Council of Life Insurers, an influential trade group, has called for development of a "strong, streamlined insurance regulatory system."

The trade group represents companies including AIG, Hartford Financial, Assurant Inc (AIZ.N) and Lincoln National Corp (LNC.N).

The American Insurance Association, a group of 350 property-casualty insurers, including Travelers Cos Inc (TRV.N) and Chubb Corp (CB.N) and Ace Ltd (ACE.N), has endorsed creation of a federal insurance regulator.

(Reporting by Lilla Zuill; editing by John Wallace)

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