Special report on Corporate Finance from FT

The Financial Times is featuring a special report on Corporate Finance today. Contents include:

Banks face big test to keep clients
Private equity: An impressive miracle of capitalism
On the move: Banks beef up senior ranks
Hybrid securities: Market gathers steam
Energy: Banks still have a role to play
Interview: Cristobal Conde of SunGard
SunGard: The long road to a successful deal
Treasury: Living in a time of great challenge
EU directive: Useful progress but goal is unfulfilled
Viewpoint: Private equity is attractive – for now

Link to the full report HERE

Tribune Co. plans to buy back outstanding shares--Fitch lowers ratings

Tribune Co., in a move that will boost its stock price but saddle the company with a punishing debt load, today disclosed a plan to buy back a quarter of its outstanding shares at a cost of at least $2 billion...On its face, the move appears to be a bid to return cash and calm restless shareholders, and to provide a vehicle for those who want exit the stock. Tribune may also, however, be angling to render itself less attractive to any potential suitor: its whopping post-buyback debt of nearly $6 billion will make it hard for leveraged-buyout companies to borrow against Tribune's assets. Under the plan Tribune unveiled today, the company will sell off an undisclosed grab-bag of "noncore" assets, which officials explicitly said won't include the Chicago Cubs baseball team, to raise an estimated "at least" $500 million.

Read the article on the Chicago Tribune's website HERE or through the Proquest database HERE Read a related article about the Tribune Co's stock woes from Crain's Chicago Business HERE

In related news, the Tribune Co. recently settled an SEC probe. Read the Chicago Tribune coverage HERE

Who will replace Snow? Markets react.

In the last hour: In Rose Garden ceremony, Bush nominated Goldman Sachs chief executive officer Henry M. Paulson Jr. to replace Snow as Treasury Secretary. Goldman Sachs has sent a number of its top executives to high positions in Washington, including current White House Chief of Staff Joshua Bolten, former Treasury Secretary Robert Rubin and former Senator Jon Corzine.
The Senate Finance Committee is expected to act swiftly on the nomination. Read the AP wire report HERE.

Earlier this morning: The US dollar fell sharply in European morning trade today after speculation that Bush was considering Texas oil man Don Evans (who favors a weaker dollar) as Treasury Secretary. The two spent the Memorial Day holiday together. Read the Financial Times article online HERE.

Buy those dollars back! On news that Paulsen was nominated and not Evans, the dollar gained some of its earlier losses. Read a CNN blurb HERE.

Foreclosure investors: Sharks or 'White Knights?'

From the front page of today's WSJ: The slowdown in housing sales, after five years of frantic buying, has ended the party for many real estate investors. But the cooler market is welcome news for a subset of investors -- those who target homeowners facing foreclosure...More people are falling behind on their mortgages, according to the Mortgage Bankers Association. The percentage of loans on which payments are at least 30 days overdue rose to 4.7% in the fourth quarter of 2005 from 4.4% a year earlier. With interest rates rising, it's harder for homeowners to refinance or sell quickly.

Read the whole article HERE

"Keeping up" presentation available online

Didn't get a chance to attend last Friday's Commerce brown bag lunch session on Using the Internet to Keep Up (and Go Beyond!)? No problem! You can link to the slides from the presentation as well as other Commerce-related resources on RSS here: http://condor.depaul.edu/~cross5/keepingup.html Questions? Comments? Click on the comment link on this post and send a message!

Rich get richer through hedge funds

From today's NYT: Talk about minting money. In 2001 and 2002, hedge fund managers had to make $30 million to gain entry to a survey of the best paid in hedge funds that is closely followed by people in the business. In 2004, the threshold had soared to $100 million. Last year, managers had to take home -- yes, take home -- $130 million to make it into the ranks of the top 25. And there was a tie for 25th place, so there were actually 26 hedge fund managers who made $130 million or more. Just when it seems as if things cannot get any better for the titans of investing, they get better -- a lot better...Read the article on the NYT web site HERE or read the article through LexisNexis HERE (search on hedge funds).

Snow will step down from Treasury next month

From today's WSJ: Treasury Secretary John Snow plans to announce his departure from the Bush administration by mid-June, according to people familiar with the matter. After months of criticism and speculation about his future, Mr. Snow has told the White House he wants to leave, a senior administration official said. He has withheld any announcement until President Bush settles on a successor, a process that is nearly concluded. Read the whole article HERE

Geoffrey Hirt named "Spirit of DePaul" honoree

Congratulations are in order for Finance faculty member Geoffrey Hirt who has just been named an honoree of the prestigious "Spirit of DePaul" award for 2006-2007. According to DePaul's Office of Mission and Values, the Spirit of DePaul Award was instituted during DePaul's Centennial celebration to highlight institutional Vincentian Values and their relation to the achievement of DePaul's mission. The award also seeks to personally honor and recognize diverse members of the DePaul Community for their leadership and service in the spirit of Saint Vincent de Paul.

Congratulations, Geoff!

Former Senator and Treasury Secretary Lloyd Bentsen dies

Bentsen, who famously put down vice presidential rival Dan Quayle in a 1988 debate by telling him ''you're no Jack Kennedy,'' died Tuesday. He was 85. Read the New York Times obituary through LexisNexis HERE (search on Bentsen) or link to the New York Times' website HERE

Book Review: Women, Business, and Finance in Nineteenth-Century Europe: Rethinking Separate Spheres

Read a review of Women, Business, and Finance in Nineteenth-Century Europe: Rethinking Separate Spheres from Harvard Business School's Working Knowledge newsletter HERE

Check out the book from DePaul's Loop Library! Link to the record HERE

NYSE to Unveil Proposed Tie-Up With Euronext

From the front page of today's WSJ: The battle to consolidate the world's stock exchanges intensified, as the New York Stock Exchange put the finishing touches on a $10.1 billion proposal to link up with one of Europe's biggest stock-market operators, even as Germany's main market operator scrambled to prevent such a deal. Euronext operates the Paris, Amsterdam, Brussels and Lisbon stock markets, as well as the London-based Euronext.liffe, which trades futures and options. It dismissed Deutsche Boerse's most recent proposal, made last week, saying it offered nothing new. Euronext executives are expected to back an alliance with NYSE Group Inc., the NYSE's owner, according to a person familiar with the matter. Euronext's board meets today to consider both proposals. Read the whole article HERE

Markets dip in response to April inflation data

From the front page of today's WSJ: An April rise in consumer prices sent shock waves through financial markets, pushing the Dow Jones Industrial Average down 214.28 points, as worries grew that the Federal Reserve could face a tough battle with inflation in coming months.

The nation's average retail prices of goods and services climbed a seasonally adjusted 0.6% in April, up from 0.4% in March, and rising at a 3.5% annual rate, the Labor Department reported. The monthly increase was led by a 3.9% jump in energy prices. Economists, however, paid more attention to a steeper-than-expected gain in the prices of services, such as rent. Rising services prices helped push up "core" consumer prices -- a widely watched measure that excludes food and energy -- by 0.3%. That was the second consecutive monthly reading to exceed consensus forecasts. Core prices in April were up 2.3% from a year earlier -- near the top end of the Fed's comfort zone -- exceeding March's year-to-year increase of 2.1%.

Read the whole article HERE

Enron Aside, Special Purpose Vehicles (SPVs) Are Legal, Innovative and Widely Used

From this week's Knowledge @ Wharton newsletter: With this spring's criminal trial of former Enron executives Ken Lay and Jeffrey Skilling, the public was again seeing accounts of Raptors, Chewco and Osprey -- some of the shadowy "special purpose vehicles" the energy company used for improper purposes such as concealing its mushrooming debt. But while much of Enron's SPV use was illegal, most SPVs are proper and they can serve a variety of functions. Many are separate business-financing operations whose transactions do not appear on the parent company's books. They can be used to create easily traded asset-backed securities that allow their "sponsor" companies to convert cash flows expected over many years into immediate lump-sum payments, says Gary B. Gorton, professor of banking and finance at Wharton. Read the whole article HERE

Chinese yuan breaks "psychological barrier"

From today's WSJ: Before the start of trading in Shanghai yesterday, the Chinese central bank lowered its daily trading benchmark for the yuan to the point where one U.S. dollar fetched fewer than eight yuan, a psychologically important level that it had maintained as a barrier for weeks. Traders and economists said that by breaching that level, the bank sent a signal that it will allow the yuan to advance at a faster pace...Washington has been pressing China and its neighbors to allow stronger currencies to help cut their huge trade surpluses with the U.S. by making their exports more expensive in dollar terms. Economists say Beijing's move might add momentum to currency appreciation around Asia that could help to unwind global economic imbalances. Read the whole article HERE

Latest Trends in Microfinance--Greed drives success?

From the front page of today's WSJ: SHIVNOOR, India -- Vikram Akula runs a company that doles out loans of $100 or less to desperately poor villagers so they can buy a water buffalo or a bicycle. But he's hardly a typical do-gooder. Mr. Akula, the 37-year-old founder of SKS Microfinance Pvt. Ltd., is at the forefront of the latest trend in "microlending," or making tiny loans that help entrepreneurs lift themselves up from the lowest rungs of poverty. Long the province of charitable institutions, microlending is starting to attract the attention of big business. Intrigued by India's red-hot economy and potential market of more than a billion consumers, financial giants such as Citigroup Inc., ABN Amro Holding NV and HSBC Holdings PLC have already provided millions of dollars for SKS to lend out. SKS, in turn, says it has notched up healthy profits for the past three years.

"This can work driven only by greed," says Mr. Akula..."that's the magic of it."

Read the whole article HERE

Open invitation to Chicago Fed Real Estate Markets conference

The Federal Reserve Bank of Chicago's 42nd Annual Conference on Bank Structure & Competition is happening next week from May 17th-19th. The theme of this year's conference is "Innovations in Real Estate Markets: Risks, Rewards, and the Role of Regulation." Over the past decade, the U.S. real estate sector has been an important engine for macroeconomic growth with innovations in home mortgage finance playing a central role. As the real estate markets have evolved, a number of public policy issues have arisen that require serious consideration.

Find out more, including how to register and agenda information, at the Chicago Fed's web site HERE

Microfinance in China: Growth and Struggle

Microfinance in China is poised for a significant expansion as the government, Non-governmental Organizations (NGOs) and commercial banks begin to explore ways to provide the country's most impoverished people with greater access to credit. Read the whole article from the Knowledge @ Wharton newsletter HERE

Feds raise rates (again). Banks follow suit. Yet markets continue to defy gloomy predictions.

As expected, the Fed raised interest rates a quarter point to 5% but hinted at a willingness to consider pausing in its two-year rate-raising campaign. This is the 16th consecutive quarter-percentage-point raise since June 2004. In response, U.S. commercial banks raised their prime rate, a benchmark for many business and consumer loans, to 8% from 7.75%.

Read the whole article from the front page of today's WSJ HERE

Read a related article on the seemingly incongruous Bull Market, also from today's WSJ front page, HERE

As Dollar Weakens, More Investors Snap Up Debt in Local Currencies

More money managers are embracing a potentially risky approach to investing in developing countries: They're snapping up debt that pays back interest and principal in currencies like Mexican pesos, Turkish lira or Brazilian reals. For years, they did just the opposite, buying bonds like these only when they were issued in dollars or other major currencies. The fear was that the local currency could tumble, eroding their returns.

Now, however, as the dollar weakens -- it's fallen 4.47% this year, according to the U.S. Dollar Index -- the tables are starting to turn...Read the whole article HERE

The Merc Unveils Joint Venture With Reuters

From today's WSJ: Chicago Mercantile Exchange Holdings Inc. unveiled plans for a joint venture with Reuters Group PLC to trade additional currency products, part of a push to beef up its presence in the fastest-growing areas of the derivatives industry. Unlike other exchange operators, such as NYSE Group Inc. and Nasdaq Stock Market Inc., which are both looking to expand business through mergers with other exchanges, the Chicago Mercantile Exchange Holdings and other futures exchanges believe they can pick up business by expanding into the more loosely regulated and fragmented areas of the derivatives arena. The Merc and Reuters, the British media and financial company, will invest as much as $45 million apiece in the company, to be called FXMarketSpace.

The venture, expected to launch early next year, will allow customers to trade an array of currencies and eventually "forwards," swaps and other instruments that investors currently buy and sell in privately negotiated deals.

Read the whole article HERE

Berkshire Buzz: Buffett's Buying

From today's WSJ: Investors and Wall Street denizens are buzzing over speculation that the 75-year-old investment guru's holding company, Berkshire Hathaway Inc., will announce a major new acquisition at its annual meeting in Omaha, Neb. this weekend. Energy Sector? Reinsurance? Buffet looks ready to spend some big money. The only question is what he'll buy.

Read the whole article HERE

When the Fed Chairman Speaks, Everyone Freaks

Check out this podcast from Knowledge @ Wharton: Jeremy Siegel, a professor of finance at Wharton and author of the book, The Future for Investors, spoke with Knowledge@Wharton's Mukul Pandya and Robbie Shell about interest rates, oil prices, the commodities markets, Bernanke's learning curve and President Bush's approval ratings, among other topics.

As CBS News put it, "When the Fed Chairman Speaks, Everyone Freaks." What that hyperbolic headline refers to is the sell-off in stocks and rise in bond yields this week after Ben Bernanke, the Federal Reserve chairman, reportedly told a CNBC reporter that markets had misread his testimony before Congress last week during which he had seemed to hint that the Fed might pause in raising interest rates. Stocks and bonds rallied in response. But, after suggesting at a Washington correspondents' dinner over the weekend that the markets had "misunderstood" him, the sell-off began. What, exactly, is the Fed likely to do on May 10? And what will that mean for investors?

Check out a related podcast from Jeremy Siegel on what rising interest rates mean for investors and the U.S. economy.

Questions about listening to/downloading podcasts? Just ask for help!

Many CEOs Receive Dividends on 'Phantom' Stock

From today's WSJ: Amid the drive to tie executive pay more closely to company results, a little-known and poorly disclosed practice is allowing many executives to receive hundreds of thousands of dollars a year in dividends on performance stock -- shares that they may never earn...Performance, or "phantom," shares are a form of restricted stock paid to an executive only if the company meets certain performance targets. Dozens of other CEOs are paid dividends on unvested restricted stock, which typically requires the recipient only to wait several years before actually receiving the shares, regardless of performance...

Read the whole article HERE

"Revenues are Good, Costs are Bad" and Other Business Myths

From this week's Harvard Working Knowledge newsletter Bottom Line column ("a monthly column that details innovative methods for increasing profit from an existing business without costly new initiatives"): The key to a company achieving its full potential is precise thinking and business discipline on the part of every manager, says Jonathan Byrnes. Start by clearing out all that bad business mythology.

Read the whole article HERE.