Archive for November, 2009

Beal Bank makes play for Trump casinos (Reuters)

Wednesday, November 25th, 2009 | Finance News

NEW YORK (Reuters) –
Beal Bank has made a restructuring proposal for bankrupt Trump Entertainment Resorts' (TRMPQ.PK) Atlantic City casinos that would give it a 65 percent stake in the casinos company, the bank's attorney said on Wednesday.

Dallas-based Beal Bank introduced its plan about a week after Donald Trump abandoned his campaign to get back the properties bearing his name.

Beal Bank, which is owed around $486 million, offered a New Jersey bankruptcy judge and Trump Entertainment to convert $386 million of loans it made to the casinos into equity of the company, and receive a $100 million cash payment, attorney Thomas Lauria said.

Under Beal Bank's proposal, other creditors of Trump Entertainment would receive a 35 percent stake in the company, Lauria said.

Trump Entertainment was not available for comment.


Stocks push higher after drop in jobless claims (AP)

Wednesday, November 25th, 2009 | Finance News

NEW YORK – A drop in unemployment claims and a rise in home sales pulled the stock market higher in light trading ahead of Thanksgiving.

Modest gains Wednesday left the Dow Jones industrial average and the Standard & Poor's 500 index at 13-month highs.

The economic news, as well as a drop in the dollar, stoked investors' appetite for higher-returning but riskier investments like stocks. For months, investors have been weighing their desire for bigger returns with fears that the stock market will falter if the economy looks like it won't maintain a recovery.

Investors drew confidence from a handful of promising economic reports. The government said new claims for unemployment insurance fell by 35,000 last week to 466,000. That's the fewest since September last year, and better than the 500,000 that economists had expected.

The drop in claims suggests the job market is healing, but concern remains that the improvement will be temporary. The jobless rate hit 10.2 percent in October and many analysts believe it will keep rising before starting to improve next summer.

In other economic reports, new home sales rose 6.2 percent to an annual rate of 430,000. That's above what economists surveyed by Thomson Reuters had expected.

The government also said consumer spending rose a brisk 0.7 percent last month, after falling in September. It was the best showing since August, when the government's now-defunct Cash for Clunkers programs enticed people to buy cars. The report was a welcome sign as the holiday shopping season goes into full swing.

Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, N.J., said investors are still worried about the sustainability of a recovery but are afraid of missing more of the market's eight-month rally.

"People may not believe in this market but they're reluctantly being pulled into it with each of these reports," he said.

The Dow Jones industrial average rose 30.69, or 0.3 percent, to 10,464.40, its second gain in three days and its best finish since October 2008.

The broader Standard & Poor's 500 index rose 4.98, or 0.5 percent, to 1,110.63, and the Nasdaq composite index rose 6.87, or 0.3 percent, to 2,176.05.

U.S. markets are closed for Thanksgiving and finishing early on Friday.

Major stock indicators are up more than 6 percent for November after a slowdown in October on worries that the market's advance had been too rapid. The quiet trading Wednesday followed a 133-point jump in the Dow on Monday as the dollar weakened. Tuesday brought a modest drop. Analysts say the market's gyrations signal that investors are lacking conviction about what's happening with the economy.

Haag Sherman, chief investment officer at Salient Partners in Houston, said light trading around Thanksgiving doesn't necessarily mean that investors have concluded that an recovery has taken hold. "The market's reaction has been in kind of a muted," he said.

The dollar fell against most other major currencies, while gold rose for the ninth straight day, advancing $21.20 to settle at $1,188.60 an ounce on the New York Mercantile Exchange. It touched a record $1,191.80 during trading.

When the dollar falls commodities become more affordable to buyers outside the U.S.

The drop in the dollar fanned the price of oil. Crude rose $1.94 to settle at $77.96 per barrel on the Nymex.

Bond prices were mixed. The benchmark 10-year Treasury note rose, pushing its yield down to 3.28 percent from 3.31 percent late Tuesday. The yield on the three-month T-bill was flat at 0.03 percent.

The Chicago Board Options Exchange's Volatility Index, known as the market's fear index, fell during trading to 20.05, its lowest level since August 2008. That's a signal that investors aren't as worried about big swings in the market.

Beyond the increase in consumer spending, earnings from Tiffany & Co. boosted confidence about how much consumers might spend for the holidays. The jeweler's third-quarter profit topped expectations and the company raised its full-year profit forecast. Tiffany rose $2.06, or 4.9 percent, to $43.89.

The reports came ahead of the unofficial start of the holiday shopping season on Friday. Investors will be looking for any signals in the coming weeks from retailers about consumer spending, the primary driver of the economy.

Two stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 3.1 billion, the lowest level of 2009. Volume was 3.8 billion Tuesday.

Overseas, Japan's Nikkei stock average rose 0.4 percent. Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 0.6 percent, and France's CAC-40 rose 0.7 percent.


Augstums reported from Charlotte, N.C.


Dubai seeks debt delay, some units cut to junk (Reuters)

Wednesday, November 25th, 2009 | Finance News

DUBAI/NEW YORK (Reuters) –
Dubai said on Wednesday two of its flagship firms planned to delay repayment on billions of dollars of debt as a first step toward restructuring Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.

The sudden move by the Gulf government led Standard & Poor's and Moody's Investors Service to deeply downgrade several government-related entities. Moody's slashed some units to junk status and S&P said the restructuring could be considered a default.

The government's announcement, which said consultants Deloitte had been appointed to help with the restructuring, sent the cost of insuring Dubai's debt against default soaring and bond prices tumbling.

State-run Dubai World has $59 billion of liabilities, its subsidiary Nakheel said in August, a large proportion of Dubai's total debt of $80 billion.

Analysts expect financial support from deep-pocketed Abu Dhabi, a neighboring member of the United Arab Emirates, to keep Dubai afloat. But Dubai will likely have to abandon a flamboyant economic model that focused on heavy real estate investment and inflows of foreign capital.

"It's shocking because for the past few months the news coming out has given investors comfort that Dubai would most probably be able to meet its debt obligations, and most analysts were of the view that Nakheel's commitments would be met," said Shakeel Sarwar, head of asset management at SICO Investment Bank.


The government said in a statement: "Dubai World intends to ask all providers of financing to Dubai World and Nakheel to 'standstill' and extend maturities until at least 30 May 2010."

Moody's cut ratings on some government-related entities to junk status, while S&P cut ratings on some entities to one level above junk.

S&P said the restructuring "may be considered a default under our default criteria, and represents the failure of the Dubai government (not rated) to provide timely financial support to a core government-related entity."

Nakheel, developer of iconic palm-shaped residential islands owned by Dubai World, has a $3.5 billion Islamic bond maturing on December 14 and debt worth 3.6 billion dirhams ($980 million) due on May 13, 2010. Limitless, another Dubai World developer, has a $1.2 billion bond maturing next March 31.

The announcement appeared to be timed to minimize its impact on markets; it came after the stock market shut and just before the eve of the long Eid al-Ad holiday, which will close many firms and government offices in Dubai and the Gulf until December 6.

But the cost of insuring Dubai government debt against default with five-year credit default swaps soared, jumping over 100 basis points to 420.6 from a close of 318 a day earlier, according to CMA DataVision. Nakheel's Islamic bond prices fell more than 20 points to 87.

"The market had expected a timely repayment of the $3.5 billion sukuk and spreads had narrowed. This will destroy a lot of confidence," said Eckhart Woertz, economics program manager at Gulf Research Center.

Dubai's economy was hit hard as the global credit crunch over the past year ended a six-year boom in the region and sent the emirate's once-flourishing property sector into decline.

Dubai's announcement Wednesday shook the confidence of investors in government debt elsewhere in the region; credit default swaps for Abu Dhabi, Saudi Arabia and Qatar also rose, by more modest amounts.

Investor confidence in Saudi Arabia has been hit this year by up to $22 billion of debt restructurings at the country's Saad and Algosaibi groups.


In another move Wednesday which the government said was not connected to the Dubai World restructuring, Dubai raised a further $5 billion as part of a $20 billion bond program launched this year. The $5 billion was half of what it had previously said it would raise.

The $5 billion tranche, with a maturity of five years and paying 4 percent interest, was placed with two Abu Dhabi-controlled banks, National Bank of Abu Dhabi and Al Hilal Bank, officials said.

Dubai has said previously that proceeds from its bond scheme will underpin companies such as Nakheel, as part of its drive to build tourism as an alternative to dwindling oil reserves.

(Reporting by Rachna Uppal, Andrew Hammond, Matt Smith, Nicolas Parasie, Enjy Kiwan, Carolyn Cohn; Additional reporting by Ciara Linnane, Caryn Trokie, John Parry and Walden Siew in New York; Writing by Thomas Atkins; Editing by Andy Bruce, Andrew Torchia and Kenneth Barry)