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March 17, 2008

 Past Issues

Cover Story

The Great Credit Unwind

Buying insurance against default in the credit default swaps market has become pricier despite the Federal Reserve's moves to shore up liquidity in financial markets. The cost of insuring US commercial bank and brokerage debt fell slightly after the Fed's move last week, but has since risen because of concerns that what has become known as 'The Great Leverage Unwind' still poses risk for many firms on Wall Street.

Carlyle Cap Brings Crisis to New Level

What originally seemed like a good trade -- investing in government guaranteed mortgages -- ended up being an extremely poor choice for hedge fund Carlyle Capital Corp., one that led to its collapse. A combination of factors, mostly lack of liquidity, an enormous amount of leverage -- especially with the current unprecedented market volatility -- and a huge amount of assets, led to the fund's failure.

Out of Gas, Again?

Wall Street and the global credit markets were given a reprieve last week when the Federal Reserve got even more serious about the dire liquidity situation facing financial markets. That reprieve didn't last long.

Aftershock Rocks Credit Markets

If last August's credit problems were a high-powered quake, then the latest problems on Wall Street are its aftershocks. And while aftershocks may be expected, their intensity can be surprising. Such was the case in the early days of March.

A Vicious Cycle

In a recent report on US investment banks, Bernstein Research analyst Brad Hintz pointed out some seemingly bullish stats on the bulge-bracket names. His price targets on the stocks, for instance, suggest the shares, on average, will gain 44% in the next 6-12 months. What's more, the investment banks have typically outperformed the market by an average of 15% in the 12 months after trading as low as they do currently. Time to scoop them up, right? Don't even think about it.

Editorial

A Matter of Trust

What do S&P and Eliot Spitzer have in common? Well, it seems some folks want to stand behind them no matter what.

Global Investing

Microfinance Area Feeling Credit Heat

A $130 loan from a microfinance lender enabled Fatouma Dijbril Issifou to buy vegetables in bulk, and then resell them at a higher price in her hometown in the West African nation of Benin. The subprime mortgage crisis is a world away from entrepreneurs like Issifou but it has hurt some sources of funding for lenders who, for example, relied on the sale of collateralized loan obligations.

Hedge Funds

Engineering A Hedge Fund

What do General Motors Corp.'s Corvettes and defense fighter airplanes have in common? Not much, except that former structural designers for both, Stephen Longo and Andrew Poe Borden, have just launched their own hedge fund, Solytix Capital.

M&A

Small SPACs Feeling Big Pinch

Special purpose acquisition companies (SPACs) were once relegated to the appendices of M&A textbooks. In recent years, however, the tiny niche has grown up, creating billions of dollars worth of deals. The arrival of bulge-bracket banks in underwritings is a potentially ominous sign for boutique firms that, until recently, exerted near-total-control over deals in the space.

Personnel File

Thomas Weisel CFO Jumps To Vector

David Baylor resigned as chief financial officer and chief operating officer of Thomas Weisel Partners Group to join private equity firm Vector Capital. He was replaced as COO by Lionel Conacher, who will retain his other role as president. However, Baylor will remain CFO during a transition period.

Private Equity

Accrue Sports Eyes Early Players

When Paul Levy left Live Audience Business Solutions to join Connecticut private equity firm Main Street Resources four years ago, the move vaulted the then co-chief executive and former UBS investment banker back into the financial deal business. Interestingly enough, though, it was New York-based Live Audience that set the stage for Levy to further his dealmaking career at recently launched Accrue Sports and Entertainment Ventures, a New York firm that occupies a unique niche in the private investment world.

PE Firm Tackles Restaurant Space

TowerBrook Capital Partners has cooked up a new industry investment focus, teaming up with seasoned restaurant executive Anthony Wedo to target the restaurant sector.

Law Firms & PE: A Good Match?

The UK Legal Services Act of 2007 doesn't go into effect until 2011, but at least one private equity firm is already looking to capitalize on opportunities presented by the legislation. Lyceum Capital announced last Monday the additions of three members to its new legal industry advisory board, which aims to identify potential investments in UK-headquartered law firms.

Week on the Street

Citi Backs Muni-Bond Hedge Funds

Citigroup has made a $1 billion equity commitment to six municipal-bond hedge funds with $15 billion in assets, after lenders issued a margin call in response to falling securities values, a spokesman for the bank said.

SocGen Slapped With Class-Action Subprime Suit

New York law firm Cohen Milstein Hausfeld & Toll has filed a class-action lawsuit against Societe Generale, chief executive Daniel Bouton and director Robert Day for allegedly misleading investors regarding activities and exposure in the subprime mortgage markets, and the bank's lack of sufficient controls and failure to act on information it had regarding the irregular trades conducted by trader Jerome Kerviel.

S&P Ups Write-off View

Write-downs of subprime asset-backed securities -- mostly collateralized debt obligations of ABS and residential mortgage bonds -- could hit $285 billion in the global finance arena, according to Standard & Poor's, which says the end of write-downs is 'now in sight' for many financial giants.

The Fed Steps In, Again

For the second time in three trading days, the US central bank last week announced moves aimed at bolstering liquidity in US financial markets.

Lehman Cutting 5% of Staff

Lehman Brothers laid off 1,400 professionals last week, not specific to one area or region, in order to address continued challenging market conditions.

Securities in Registration

Securities In Registration

EQUITY and DEBT Issues in Registration. The following is a list of planned new offerings that have been registered with the SEC in the past two months, but have not yet come to market. Deals that have been withdrawn are excluded. The list is broken out into two sections: equity and debt. Initial public offerings are identified by an (IPO) flag. Outstanding shelf registrations are not listed here, but new shelf registrations are listed weekly in the New Registrations section of this magazine. To add or delete listings, or to request corrections in this section, please contact Sylvia Figel at (973) 353-7120.

Aftermarket Performance

Aftermarket Performance

Best and worst IPO performance for 2008, along with performance of recent stock offerings.

 

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