What’s the Story?

by CC August 6, 2012 9:25 am • Commentary


Investors are starting the week in a generally positive frame of mind after better than expected US jobs data buoyed global economy hopes and after tensions eased in the eurozone debt markets.

In Europe the FTSE Eurofirst 300 is up 0.3 per cent, adding to Friday’s 2.5 per cent surge. The Asia-Pacific region is playing a bit of catch-up and is therefore much stronger, gaining 1.7 per cent, while S&P 500 futures point to Wall Street advancing 0.3 per cent later in the day.

Away from stocks the action is more circumspect, a sign that the recent revival of optimism is not too effusive. Copper is down 0.4 per cent to $3.35 a pound and Brent crude is off 81 cents to $108.13 a barrel.

The dollar index is up 0.2 per cent, yet the gold price, which tends to display an inverse correlation to the buck, is up $4 to $1,607 a troy ounce. US Treasury benchmark yields are down 1 basis point to 1.55 per cent.

The FTSE All-World equity index is up 0.5 per cent to its best level since early May. Bourses have endured a volatile three months as worries about the prospects for the global economy and fears of more eurozone debt contagion have battled with fluctuating hopes for supportive central bank action and the odd good piece of macroeconomic data.


A group of investors will rescue embattled market maker Knight Capital Group Inc in a $400 million deal that keeps the company in business, Knight said on Monday, but comes at a huge cost to investors.

The New York Stock Exchange said it will temporarily transfer Knight’s market-making responsibilities on more than 500 stocks – and related Knight employees – to Chicago-based Getco, until the recapitalization is complete. The exchange said both companies cooperated with the transfer.

The rescuing companies will buy convertible preferred stock with a 2 percent dividend to save Knight, which was brought to its knees last week by a software glitch that caused errant trading in dozens of stocks. The deal is expected to close later Monday morning.

The preferred shares are convertible into about 267 million shares of common stock, Knight said in a U.S. Securities and Exchange Commission filing, implying the investors would get a stake of a little more than 70 percent in the company.

The filing did not name the investors.


Best Buy founder Richard Schulze wants the company back.

Three months after resigning his chairmanship following a board investigation that found he was aware of an alleged relationship between the company’s former CEO’s and an employee, Schulze has made a move to buy Best Buy for $24 to $26 a share.

The buyout offer has been largely expected since he stepped down and was said to be “exploring all options” on what to do with his ownership stake.

Schulze, who owns 20.1%, says he will use aid from private-equity, $1 billion in his own equity and some amount of debt financing for the deal. He has no agreements in place at this point but says his advisers from Credit Suisse are confident that agreements will be signed. And he adds he has the support and interest of two other former executive, Brad Anderson and Allen Lenzmeier.


ASML Holding ASML +4.05%  has added Taiwan Semiconductor Manufacturing Co. TSM +2.24%  as a second equity partner, joining Intel Corp. INTC +2.12%  in the “co-investment program” for customers that Netherlands-based ASML announced last month. Taiwan Semiconductor agreed to take a 5% equity interest in ASML in a deal valued at slightly more than $1 billion. Moreover, the company committed to invest some $335 million in research and development of next-generation technologies over the next five years, according to ASML, which is seeking to accelerate development of extreme ultraviolet lithography technology as well as 450-millimeter silicon wafer technology. Intel recently agreed to buy a 15% stake in ASML, leaving a 5% minority stake still available to customers in accordance with terms of the co-investment program. ASML said Sunday it remains in discussions with other unidentified customers.

AIG AIG +1.62%  said the Treasury Department priced a further public offering of nearly 164 million shares of AIG common stock held by the federal government. The shares priced at $30.50 each; AIG’s shares closed the Friday session in New York at $31.34. The offering is part of the Treasury’s continuing program to wind down its holding in New York-based AIG under the Troubled Asset Relief Program implemented following the 2008 financial crisis. It will lower the Treasury’s investment in AIG to $25 billion, in the form of nearly 896 million common shares, and reduce its percentage ownership in AIG common to 55% from about 61%. Aggregate proceeds to the Treasury are expected to be about $5 billion. As part of this latest offering, AIG agreed to buy about 60% of the stock up for sale at the $30.50-a-share price. The Treasury granted underwriters a 30-day option to buy some 24.6 million additional AIG common shares if investor demand warrants.

Also late Friday, Boeing BA +1.14%  said Xiamen Airlines, the Chinese carrier that currently operates an all-Boeing fleet, agreed to buy 40 737-800s, a deal valued at $3.5 billion at list prices. Chicago-based Boeing called Xiamen “one of the fastest growing airlines in the world,” with plans to expand on more international routes in line with greater travel demand in the Asia-Pacific region. Xiamen intends to operate a fleet of 200 aircraft by the end of 2020, up from its present fleet of six 757s and 77 737s, according to Boeing.

Staking a claim to the Maryland gambling market, Lakes Entertainment Inc. LACO +2.27%  said a subsidiary closed on the purchase of Rocky Gap Lodge & Golf Resort near Cumberland, Md., at a price of about $6.8 million. Previously, a video lottery license for Rocky Gap was awarded by Maryland regulators, who recently approved plans to convert convention and meeting space into a gaming facility with at least 500 VLTs. The total cost of the Rocky Gap acquisition and development project is expected to be between $25 million and $30 million, according to Minneapolis-based Lakes Entertainment. “We have the cash to finance the current development plans and we intend to start construction in November of this year, with an anticipated opening date for gaming in the second quarter of 2013,” said Chairman and Chief Executive Lyle Berman in a statement.

Jabil Circuit Inc. JBL +4.11%  said it realized net proceeds of about $493.3 million as a result of completing an offering of 4.7% senior unsecured notes. The $500 million offering of the 10-year notes priced a week ago at 99.992% of par. Net proceeds will be used to, among other things, repay outstanding borrowings under Jabil’s revolving senior credit facility, the St. Petersburg, Fla.-based company said.

StanCorp Financial Group Inc. SFG +3.03% , in the process of refinancing debt, priced a public offering of $250 million of senior notes. Net proceeds will be used to repay $250 million of 6.875% senior notes coming due Oct. 1, the Portland, Ore.-based company said. The 10-year notes up for sale will pay interest at 5% annual rate, with interest to be paid twice a year beginning Feb. 15, 2013, according to StanCorp Financial.

Along with reporting second-quarter results, National Health Investors Inc. NHI +1.42% announced a 3% increase in its quarterly dividend on common stock, to 67 cents a share. It’s payable Nov. 9 to stockholders of record as of Sept. 28, the Murfreesboro, Tenn.-based real estate investment trust said.