The Banking and Strategy Initiative

Chillin' out till it needs to be funded

This week's investment banking buzz and inspiration | Advantage Dealbook

As BofA and Buffet now detail their investments / deals for the press, there seems to be a temporary revival in investment fortunes, even as Europe keeps a death reaper’s stranglehold on the markets. Italy yields are down, trading between 6 to 6.5% and its 5 yr bond auction covered 1.47 times by banks showing sufficient demand at a “low” 6.3%

Also germaine to the flat debt schedule for Italy across 2011, 2012 and 2013, the only nervousness arises around a fat

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EUR60 bln in February and April 2012 and the overall 2012 bump of EUR 220 bln that

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Italy needs to repay, the rest evenly split across multiple years most beyond 2015 from its total repayable EUR 1.6 bln

Unfortunately more deal volume still centers around those selling off their Italy debt holdings and buying CDS protection. Banks are also withdrawing from new lending especially in East Europe

Unicredito: As discussed in the series “Deal momentum in China” the IPO market has mostly moved on to the secondary trades where GS and BofA sold their stakes in China banks. However, Groupon IPO was successful at the reworked terms and consequently Italian large sovereign holder and active trader Unicredito is going ahead with a rights offer to gather the required EUR 7.4 bln requested by EBA for its requirement to get to 9% Tier I iin the next 6 months. The Bank had reported an equal amount in losses

Coke: Despite challenges to HSBC in Brazil , many businesses are convinced by continuing double digit growth in the BRIC and other

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Emerging markets, Coke signing off on a new $ 2 bln in infrastructure and market development investments in India. Ad spending is also back in Asia with a bang and Coke will no doubt extraxct mileage from its creative team sto churn the next 15 $1 bln brands from the subcontinent and China

AIA/AIG: AIG is still looking for buyers for its AIA stake sale as valuation changes much like ICBC’s fall in Q3 is causing heartaches for AIG. Goldman Sachs sold its ICBC stake last week

Citi/EMI: Citi is making a $5 bln on its stuck investments in EMI. The lender will find the music publishing  unit for Sony for its 1.3 mln copyrights for $2.2 bln in a deal just 8 hours back this morning. The recorded music apparently got hit in valuation from the piracy and the run of losses by the company but netted $1.9 bln in the sale to Universal. Cit could have apparently lasted in the negotiations for the publishing business for a higher price to a group of 6 investors led by Sony

EMI was the no2 publisher behind Universal and Sony’s struggle to find the right market size for its publishing business may just pay off

The no.  1album this year by Adele sold 4 mln copies despite teh digital brouhaha ( which would account for an expansion of the market for original music and albums seemingly are being counted for every 10 digital tracks sold in the new channels incl streaming/downloads Michael Jackson’s estate and Abu dhabi joined Sony in the bid in which Sony itself pays only $325 mln

IBM secret: Extended purchases in IBM by Buffetwere kept secret with a sign off from the US SEC as he was actively

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purchasing during prior reporting periods in April and August. Some would say the IBM chart has tell tale signs there were chunky purchases at regular intervals since August

Moodys’ is unlikely to earn many friends in India after its downgrade of the banking sector in India was upped bby S&P in a counter upgrade from 6 to 5 in the Industry Financial Strength rating for India as the government has already put in $5 bln in the last two years in bank capital and the sector remains a notch above without needing to deleverage and maintaining good margins on its lending

Supercommittee blues: The supercommittee with a deadline of Nov 23 is vacillating and unlikely to find an agreement.

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The 3 democrats on the supercom presented a $3 bln revenue heavy proposal while the GOP trio has presented a $2.2 spending cut proposal. in case no agreement is reached the COngress gets nothing to vote on and automatic spending cuts of $1.2 bln ensure 2 out of 3 rating agencies don’ tpull the rug on the US government again before elections in 2012

Yahoo!: Erstwhile Texas Pacific, TPG capital became one of the first to sign a non disclosure and move in for due diligence to bid for Yahoo! last week

Best Buy drew a finite line around its Europe business closing 1000 box stores in the UK but bought out its North American Best buy mobiles business for $1.3 billion

Barclays Capital: HP’s $12 bln purchase of Autonomy, which led to changed hands at the company’s leadership and


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Kinder Morgan’s $21 bln deal for El Paso were the biggest deals o f the year.  Even as T Mobile $31 bln deal stares at disapproval from multiple regulators / US federal court, the NYSE purchase by Deutsche Borse got an unlikely nod as The first two deals depended on single bank unsyndicated loans by their advisor Barclays Capital for nearly $20 bln to the two buyers Shareholderds have already sued Barclays Capital over its advisory role in selling/auctioning DelMonte’s $5 bln deal for its vested interests paying $45 bln to DelMonte shareholders last month

European Banks: More accounting changes for European banks are in the offing as newer regulations preventing banks from using DVA adjustments for their own outstanding credit were approved but postponed from 2013 to 2015 whence banks may not use the mark to market facility to increase earnings volatility. Banks may have to stop earlier as Barclays CFO wrote to regulators to directly make necessary changes in IAS39 limiting profits from such hedging  in COB statements


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