Deals wrap: AgBank’s IPO causes frenzy
It’s hard to find fault with the second-largest IPO in history, but analysts were only lukewarm about this week’s $19.3 billion IPO debut by Agricultural Bank of China.
Despite the tepid debut, AgBank’s IPO is only overshadowed by Industrial and Commercial Bank of China’s (ICBC) world record $21.9 billion public float in 2006. More interesting than the monetary value attached to its IPO was the fact that AgBank was even able to pull it off in the first place, given the global downturn and a very short three-month completion process. In a Reuters special report, one banker involved in the deal said: “It’s the last of its kind.”
Apparently cats aren’t the only species with nine lives – hedge-fund advisers do too. Bloomberg reported that Neuberger Berman Group LLC, which was part of Lehman Brothers Holdings Inc., has “reassembled a team of executives to invest as much as $1 billion in firms that run hedge funds.”
With this week’s announcement that Kleiner Perkins Caufield & Byers partner Joe Lacob led the group that was buying the NBA’s Golden State Warriors for a record $450 million, PE Hub editor Dan Primack wondered whether Lacob would quit his day job as one of Silicon Valley’s most prominent venture capitalists.
Graphic: How “Repo 105″ worked
A look at “Repo 105,” a series of transactions that Lehman Brothers is alleged to have used to make its balance sheet appear stronger.
- Text: Dan Wilchins, llustration: Silvio DaSilva
My gut feeling is that this looks like good old fraud, or breach of trust if you want, and not ‘smoke and mirrors’. The basic notions of good faith and proper disclosure are missing here.
I can already see Cuomo and his team filing charges.
Should banks or regulators come up with “living wills”?
The idea that financial firms whose collapse could create trigger broad economic problems should come up with their own living wills has been gaining traction lately.
After the confused attempt to bailout or save Lehman Brothers, Bear Stearns and AIG in 2008, some regulators have been suggesting that banks and important financial institutions plan for their own demise.
A senior Canadian finance official said on Wednesday that the Group of Twenty (G20) are thinking about the idea as a way to avoid financial meltdowns.
Even one of the top financial advisors unwinding Lehman Brothers’ has said a living will would have helped.
But is it the banks or the regulators that oversee them who should come up with these living wills? Should they come up with them together? Who would have better incentives to prevent systemic issues?
The issue was discussed on Wednesday at a Practising Law Institute conference in New York by H. Rodgin Cohen, a mergers & acquisitions lawyer at Sullivan & Cromwell in New York, who personally worked on deals like JPMorgan-Bear Stearns, Barclays-Lehman, and Wells Fargo-Wachovia last year. Here is what Cohen told the conference:
“I do think we have it somewhat backwards on all this emphasis on the living wills for these institutions. Actually the living will isn’t the institution’s responsibility. It is truly surprising to me that sitting in a locked desk somewhere there isn’t a living will which the relevant supervisor has for each institution. Clearly that did not exist last year, and hopefully we have it today. “
No.
There,obviously,is a reluctance to look at the real reasons and the remedy,by those concerned,and this casts doubts on the integrity of the G20 as a whole,whose members,it seems, are using the printing press to save a few big players in Derivatives.Subprime lending and Derivatives Trading are the reasons for the present Financial Crisis.While the first one, is a fait accompli,there is still time to BAN the second one,the ONLY solution.
Lehman and its aftermath, by the numbers
With apologies to Harper’s Index, some collected statistics on the collapse of Lehman and the roller-coaster year that followed.
Add your own significant digits in the comments section.
***
Number of siblings who made up the original Lehman Brothers, founded as a dry-goods store in 1844:
Age of Bavarian immigrant Henry Lehman when he founded the business:
Percentage difference between the DNA of former Lehman CEO Dick “The Gorilla” Fuld and an actual gorilla:
The percentage of people that truly understand why this happened. .003%, most likely fewer!
Real estate players are tangled up in Lehman
Before it declared bankruptcy, Lehman was one of the biggest investors of debt and equity in U.S. commercial real estate estate. But having Lehman as a partner these days is a little like climbing a staircase in an M.C. Escher drawing — you’re bound to end up where you started. Take ProLogis for example. The world’s largest owner and developer of warehouse and distribution centers set up a property fund in which Lehman in an equity investor as well as the lender. Before Lehman Brothers Holdings Inc filed for Chapter 11 bankruptcy in September, the two planned to pay off the $166 million loan on the portfolio. “Subsequent to them going into bankruptcy they were impossible to get hold of. We finally did, and they said they were still in the game for paying this off.” Lehman said it just needed to get the correct approvals. “About a week later, we got a call from State Street Bank bank who said, ‘We are the lender on the Lehman portfolio. We now own the loan,’ Chief Financial Officer William Sullivan told investors in New York. The subsequent chat went well, but there was one problem. “The fact of the matter is is that we don’t know that they own the loan today,” Sullivan said. “They had told us they own the loan. They have not provided us with documentation that they own the loan, and Lehman thinks they own the loan but are not sure.” The three are trying to work out an extension while they straighten out the loan’s ownership. Meanwhile, the loan was due Nov. 11. “We think we’ll wrap this up in the next week,” Sullivan said. “But from our prospective, this loan should be considered extended at this point. If that doesn’t turn out to be the case, in the grand scheme of things, it goes into default, and I’m certain that Lehman and State street will have a merry old time discussing it.” There likely will be a lot of talk. Mark Edelstein, partner in the firm of Morrison Foerster told a room full of lawyers that extensive negotiations on Lehman deals are par for the course these days. Sounds like a lot billable hours.
Away from the volatite stock price, real porperty grows very rapidly but without stability, forming foam ecomony.
Sales and subpoenas for Lehman
An auction of Lehman‘s Neuberger Berman unit and other investment management bits and pieces moved closer yesterday with bid procedures getting clearance from a New York judge. Private equity groups Bain Capital and Hellman & Friedman agreed last month to purchase Lehman’s prized asset management unit for $2.15 billion, and they will be the lead bidders at an auction for the unit in December. In a status update prior to the judge’s ruling, Lehman’s lead attorney, Harvey Miller, said prosecutors had opened three grand jury investigations into the investment bank’s demise. The New York Post reported that disgraced CEO Dick Fuld is among 12 Lehman executives being subpoenaed. Fuld, questioned by a U.S. congressional panel earlier this month, denied deceiving shareholders. Politicians and the public are calling for heads to roll on Wall Street. Looking into Lehman are federal prosecutors as well as at least one state attorney general. And the FBI is in the early stages of examining mortgage finance companies Fannie Mae and Freddie Mac and insurer American International Group, which were bailed out by the government after getting caught in the credit crunch. Did anyone actually understand the rocket science behind the engineering of the credit default swaps and other complex financial tools that blew up behind the scenes? If not, then it might be a hard sell to convince anyone that investors were intentionally misled.
In the brave new financial world that emerges from the chaos of the ’08 crash, will Wall Street executives be expected to understand everything their firms are doing? Sounds reasonable, if unlikely.
Deals of the day:
* The credit crisis has forced Dutch builder Royal BAM Groep to put on hold its plan to sell its 21.5 percent stake in Dutch dredger Van Oord, BAM said.
* Japanese trading house Itochu Corp and six Asian steelmakers have agreed to jointly buy a minority stake in Namisa, an iron ore mine owned by Brazilian steelmaker CSN, sources familiar with the deal told Reuters.
* San Miguel may bring in foreign partners in a bid for a 40 percent stake the Philippines is selling in oil refiner Petron Corp, the president of Southeast Asia’s largest food and beverage firm said.
* India’s Tata Sons has been in talks to buy a stake in AIA, a major Asian unit of American International Group, according to sources close to the matter, as the U.S. insurance giant seeks to sell assets after nearly collapsing last month.
Did anyone actually understand the rocket science behind the engineering of the credit default swaps and other complex financial tools that blew up behind the scenes? If not, then it might be a hard sell to convince anyone that investors were intentionally misled.
Answer: YES, anyone with 5th grade math should have.
Those CEO’s knew, the only thing they didn’t know is the time period. None of this could have happened without the collusion of the RATING AGENCIES. I’d say those agencies are more guilty in assigning a AA+ & A+ rating to junk.
The rating agencies were derelict in their duty, and they should suffer the consequences rather than the investor who counted on them in the decision to buy.
Sympathy for the devil’s banker
After a couple weeks of just trying to keep up with developments in the financial crisis, reporters and bloggers are taking halting steps toward describing the mythos of the investment banker.
It’s been a while since Tom Wolfe and Bret Easton Ellis popularized the bespoke-suited arrogance commonly associated with the financial world’s anointed — the easy millions, the casual disdain for the rubes and the marks in the lower classes and the single-minded pursuit of money. Depicting the carnivore in his or her habitat is beginning to come back into vogue as taxpayers who may soon be on the hook to bail out their social betters in the investment banking world wonder why they’re getting stuck with a bill they didn’t incur.
New York magazine ran a story called, “The Rage of the Previously Rich: A Lehman trader copes with the sudden onset of income shrinkage,” featuring this choice nugget:
The collapse of the world’s most powerful wealth-creating engine required everyone to take stock of their financials. One Lehman executive in Rye Brook, fretting about paying off a Hamptons summer house and a ski chalet in Vermont, panicked on Monday morning and laid off her nanny, who had been with the Westchester family for nine years. “The nanny called me crying,” says Marla Sanders, who runs Advance Nannies and staffs Lehman homes. “One of the children she had brought home from the hospital.” Sanders knows more cuts for her clients are on the way. “They’re going to have to sell homes. The question is, will the homes sell? They’re cutting some of the children’s activities out, dance class, acting class. Are they going to have flowers delivered every day to their homes? I don’t think so!”
On Wednesday, ivygateblog featured comments from the pseudonymous “George”:
One of my friends at Bank of America texted me, ‘Hey, we might be buying you guys.’
I was in denial. You see, Merrill has a much better repuation than a commercial bank like Bank of America. I was shocked I would be joining a lower-tier commercial bank. There’s a feeling, ‘I didn’t go through this whole interview process to work at a commercial bank.’
More from George:
Before the Bell: Buffett’s ball
There’s nothing like a belle to bring a festive mood to an otherwise gloomy ball, and today that honor belongs to Goldman Sachs, which has drawn attention – and money – from none other than Warren Buffett.
Stock futures are pointing up on news of the uber-investor’s plan to purchase a $5 billion stake in the bank. And Japanese media say that Sumitomo Mitsui Financial Group is also looking to buy in.
But the fate of the Wall Street bailout plan remains the $700 billion question. Congress is continuing discussions today, with Fed chief Ben Bernanke testifying before the House Financial Services Committee.
At the same time, CNN is reporting that the FBI is investigating potential mortgage fraud at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group – the very companies at the heart of this financial services meltdown.
Oil prices are up ahead of weekly data expected to show the fifth consecutive decline in U.S. crude inventories.
The dollar is down against an index of major currencies. Longer-term U.S. Treasuries are higher.
Mr. Buffet is following his own mantra stringently buy low sell high. Now that the toxic assets will off the Goldman’s book, it’s definitely a good buy!!
http://vikramsjourney.blogspot.com/
Some Lehman employees bag their belongings
Staffers at the once No. 4 U.S. investment bank headed into its midtown Manhattan headquarters on Monday morning, armed with bags and suitcases of all sizes.
Their emotions ran the gamut.
One man caught his co-worker’s eye and threw his hands up in the air in dismay before hurrying into Lehman’s global headquarters, a few minutes’ walk from Times Square.
“It is madness,” one man said on the phone, as he walked by dozens of reporters lined up on the sidewalk in front of the building.
Another just stood by the corner of the street and gazed up at the building silently for a few seconds before walking in.
Some bought their morning coffee and stood in groups, smoking and talking in the corner near the entrance to the subway station.
Even the coffee cart guys seemed unusually somber, talking very little and shaking hands with their customers.
Who’s next and how?
Lehman‘s most valuable assets, primarily Neuberger Berman, are still on the block, but becoming less valuable by the hour with the bank having filed for bankruptcy protection. And with Merrill Lynch now heading for the relative safety of Bank of America‘s $50 billion embrace, it’s time ask “Who is next and how?” Most attention is squarely focused on insurer AIG and investment bank Morgan Stanley.
AIG’s shares lost a third of their value in pre-market Monday action. Warren Buffett would be a natural candidate for AIG assets, given it’s a business he knows (and part of being a successful oracle is knowing your businesses).
On Sunday AIG is reported by the New York Times to have approached the Fed seeking $40 billion in short-term financing. An investor call is expected later today. The Fed might be more willing to play a role in getting AIG sorted out as well, if it sensed a systemic risk to another strut of the financial markets.
AIG execs reportedly met top New York state officials including Governor David Paterson and insurance and banking regulators over the weekend, seeking permission to liquidate assets, such as Manhattan real estate, to raise cash.
Morgan Stanley could be a much tougher sell, if it comes to that. The market for investment banks is not too healthy, to say the least.
Other deals of the day:
* Longs Drug Stores said it will weigh a $75 per share takeover bid by Walgreen, but the drug store chain said for now it still recommends that shareholders accept an earlier tender offer by rival CVS Caremark.
Hi..I’m from India. Actually, I read the above comment from Stephen Dsilva about the consequences in the Indian market. I think I should let you know that the most important thing we respect in India is not stock-markets. It is treated only as a luxury and not a part of living of the common man as it is done in the western countries. The main reason being, we have a history that is literally unrivalled and we have withstood great changes – this stock changes is one of the negligible changes. In that sense, being a common man, I know I may not be able to watch TV, have an air-conditioner, ride a luxury car and so on if the stocks go away, but life here goes on blissfully. Effectively, this country has existed before western stock markets were born and would live after they go away – common man isn’t too dependent on these changes and they aren’t taken too seriously by the common man here like they are in the west.
