Dumb Dutch Bankers panickING
Beating up on bankers is a bit too popular of late, but some bankers deserve to be singled out for recognition.
ING has come along way in 17 years; not long ago it was the “Postal Bank” of the Netherlands, but mergers over the years built it up into a formidable organization with a management team that was clearly not up to the task of managing the beast they had created.
Only last Friday they insisted they had no need for new capital, but they were either lying or clueless...take your pick.
The Dutch government is bailing the Dutch bankers out to the tune of $13.4 billion...which will barely restore their capital ratios to acceptable minimum levels. Apparently they just figured out there was a storm brewing:
The announcement came after top bank executives spent the weekend in urgent talks with government and central bank officials concerned about the prospect that ING might collapse when trading opened on Monday. Shares of ING fell more than 27 percent on Friday in Amsterdam after the company said it expected to post a third-quarter loss of 500 million euros as a result of 1.6 billion euros in write-downs....CEO Michel Tilmant commented “market conditions have changed dramatically in recent weeks and have led to an internationally recognized belief that going forward, in this market environment, capital requirements for financial institutions should be higher.” NYT
ING’s prowess, or lack thereof, in stock picking has long been on display at their in-house asset management operations. But they were not content to merely lose money for the clients, and apparently took a flyer in their capital account as well…
The bank has also been hurt by its exposure to the extremes of the stock market, he said, as ING had 3.5 billion euros of unhedged equity exposure in its equity investment portfolio at the end of June.
Unhedged...aka Long and Wrong. That might have cost them $2 billion over the past 4 months.
Have fun at the marathon, it will probably rain.
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The Netherlands to Provide $13 Billion to the ING Group
New York Times
ING Gets $13.4 Billion Injection From the Netherlands
Bloomberg
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position
Neuberger Auction: Jeff Lane, Carlyle Want To Keep It Real
Dick Fuld’s inability to monetize part or fall of Lehman Brothers Neuberger & Berman asset management operation contributed to his downfall. Of course, getting a bunch or irate money managers on the same page after they watched their parents stock implode was probably not too easy, and the employees no doubt demanded huge retention packages to stick around.
It was a clusterfuck pure and simple, and now Neuberger probably only managers half the assets they did 6 months ago, if not less.
I had originally pegged the value of the subsidiary at $5 billion while analysts spoke of a number closer to $8 billion.
The eventual deal to sell the company after Lehman imploded was far more modest-Bain Capital and Hellman & Friedman announced they would purchase the venerable operation for $2.15 billion a few weeks ago.
But ex-Neuberger honcho Jeff Lane, who put in a brief stint as the head of Bear Stearns Asset Managment after Jimmy Cayne booted Richard Marin, is now trying to put in a competing bid, although it is unclear if this is on behalf of his new employer, Modern Bank.
Private-equity firm Carlyle Group has teamed up with former Neuberger Berman chief executive officer Jeffrey Lane to make a rival bid for Neuberger, the crown jewel of Lehman Brothers Holdings Inc.’s asset-management unit.
Late last month, Bain Capital LLC and Hellman & Friedman LLC’s announced an acquisition of Neuberger and other Lehman money-management assets for $2.15 billion. The price paid by Bain and Hellman—about half the firms’ initial bids—was a steep discount to the amount Neuberger would have sold for prior to Lehman’s collapse......The private-equity firm argues that the actual price is closer to $1.55 billion due to provisions and adjustments in the sale agreement. It demands a “real auction” for the assets. A federal bankruptcy court will hold a hearing Thursday on the matter. Judge James Peck, which has yet to approve Bain and Hellman’s acquisition, will also hear objections to the deal from the official creditors committee and unofficial bondholders group.
Never underestimate the ability of Wall Street bigwigs to mess up a seemingly healthy operation. Maybe Lane can salvage something, and perhaps a chairman emeritus role can be found for 105 year-old Roy Neuberger.
God only knows what he thinks about all of this.
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Jeffrey Lane
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Carlyle, Lane to Launch Bid for Neuberger
WSJ
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position
Paulson’s Plan Ready For Primetime
What took so long? Hank Paulson is a banker...we know because he helped take Webvan public. Webvan was ill-conceived, much like some of the stuff Hank has come up with in recent weeks. But thanks to Warren Buffett and the Europeans, along with a little American ingenuity, we finally have cobbled together a workable plan. Or at least presentable.
Paulson is beginning to look like Frankenstein, thanks to a lack of sleep, and this plan hopefully combines the best parts of what we have seen over the past few weeks.
The Treasury plans to spend $25 billion each for stakes in Citigroup and JPMorgan, people said. Another $25 billion will be divided between Bank of America and Merrill, which agreed last month to be acquired by Bank of America. Wells Fargo is to get at least $20 billion, Goldman and Morgan Stanley will each get $10 billion, and State Street and Bank of New York will get about $3 billion each, people said.
The government will obtain its stakes with a type of security designed not to dilute the value of common shares.
None of nine banks getting government money was given a choice about it, said people familiar with the plans. All of the banks involved will have to submit to compensation restrictions as mandated by Congress, people said. Bloomberg
All sides are trying to spin the dilution issue here, the terms should become public tomorrow morning. What interest rate will the preferred dividends pay? And how will it impact the bank's unsecured debt?
Dilutive Capital Raises are the Latest Wall Street Fad
Running a public company is no cake walk. Occasionally I have owned stocks in companies that have decided to raise capital out of the blue, merely taking advantage of a strong stock price and attendant low cost of capital a richly valued stock brings.
But while that move might set the BuySide a twitter, as they speculate as to the motives of management that is playing coy, it is infinitely more astute than going to market when Mr. Market has you over a barrel and you are desperate for the money. Jack Welch might have left Jeffrey Immelt with a powder keg of businesses ready to blow, but Immelt's move to raise money on onerous terms is not likely to put him in the GE Hall of Fame.
And if you are sick of his continual PR campaign at wholly owned subsidiary CNBC, Morningstar has their own take on the deal. GE is arguably a hedge fund in drag.....what will they do with the capital? And will it spark a rally in the stock, assuming they price the secondary tomorrow morning in the hole and the El-Erian thesis works its magic? It has worked for Goldman and JP Morgan, and might just might restart the feint heartbeat at the Dow stalwart.
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GE Raises $15 Billion; Buffett Gets Preferred Stake
Bloomberg
