News Archive


Sears may separate Lands’ End, Auto Center as sales slide


Tue Oct 29, 2013 4:54pm EDT

(Reuters) – Sears Holdings Corp (SHLD.O) is considering splitting off its Lands’ End clothing and Sears Auto Center businesses, after another quarter of declining same-store sales.

The company’s shares rose 7 percent, as investors assessed the latest attempt by the operator of Sears department stores and the Kmart discount chain to turn around its business.

Analysts said recent moves to dispose of assets, while perhaps negative in the long term, could reassure creditors and vendors and help to ensure sufficient liquidity for now.

Sears has been suffering from declining sales since 2005, when hedge fund titan Edward Lampert merged the two iconic chains in an $11 billion deal.

Sears, still controlled by Lampert, said on Tuesday that same-store sales for the 12 weeks ended October 26 fell 3.7 percent.

The company said it now expected a net loss of between $532 million and $582 million for the third quarter ending November 2, wider than the $498 million loss reported a year earlier.

The company will release its results around November 21.

Battling intense competition from Target Corp (TGT.N), Wal-Mart (WMT.N) and Amazon Inc (AMZN.O), Sears launched last year a turnaround plan including shutting stores, selling real estate and shedding other assets.

Sears spun off its Orchard Supply Hardware Stores unit in December 2011. It announced plans in 2012 to spin off its Sears Hometown and Outlet businesses and certain hardware stores.

“They have cut the fat. Now they are cutting in the muscle,” Morningstar analyst Paul Swinand said, referring to the company’s plan to consider separating businesses such as Lands’ End.

Hoffman Estates, Illinois-based Sears said any separation of Lands’ End would not be structured as a sale but would be through a deal that would benefit shareholders.

Lampert indicated in 2012 that assets such as Lands’ End, which Sears bought for about $2 billion in 2002, could be separated.

The company said on Tuesday that it is exploring strategic alternatives for Sears Auto Center, which offers auto repair services and spares. It has started repositioning the business around non-tire related services.

Sears also said that Sears Canada Inc (SCC.TO), in which it holds a 51 percent stake, would sell five store leases, including its flagship downtown Toronto store, to Cadillac Fairview Corp Ltd for C$400 million ($383 million).

Sears said it is looking to close even more underperforming Sears and Kmart stores and use the savings to fund its more profitable outlets.

The company’s shares were up at $59.43 on the Nasdaq on Tuesday morning.

($1 = 1.04 Canadian dollars)

(Reporting by Siddharth Cavale in Bangalore and Dhanya Skariachan in New York; Editing by Saumyadeb Chakrabarty and Kirti Pandey)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/DATMV6FUAt8/story01.htm

Airbus won’t deliver fewer than 25 A380 a year: CEO in paper


PARIS |
Tue Oct 29, 2013 4:29pm EDT

PARIS (Reuters) – Airbus kept its 2013 goals for the A380 despite a dearth of orders, but struck a more cautious note for future years, saying it would not on average deliver fewer than 25, which is below the level built into its longer-term financial targets.

Chief Executive Fabrice Bregier told a French newspaper Airbus would both sell and deliver 25 of the world’s largest passenger jets in 2013, meeting its targets.

“We will deliver 25 this year,” Bregier told Les Echos. “I have no intention of dropping below this rate in the years to come. The question is whether we will be able to increase sustainably to 30 aircraft (a year).

“The target of reaching breakeven on the program in 2015 is based on that rate (30). At 25 a year, this target would be harder to reach, but on a scale that would still be marginal.”

Airbus parent EADS (EAD.PA) told analysts in May that it aimed to bring the loss-making plane to breakeven point in 2015 based on an average delivery rate of 30 aircraft a year.

An Airbus spokesman said A380 targets had not changed.

Deliveries have been held in check this year as Airbus installs a permanent fix to the recent problem of wing cracks on the huge double-decker jet, which entered service in 2007.

But analysts say it must on average deliver 30 a year to reach its breakeven goal for the program in 2015, or else cut costs further and push the breakeven threshold below 30.

Industry sources told Reuters last week that Airbus planned to carry out a review of its flagship jet due to slow sales and had not ruled out shaving A380 output to avoid gaps in 2015 when a handful of the jets remain unsold.

They also said the review would examine other possible long-term options including making the 525-seat jet even bigger to reduce unit costs amid competition from large twinjets.

Parts for the A380 such as strong metal forgings have to be ordered up to two years ahead, meaning time is running out for a decision on output in 2015, which is the critical period for EADS financial targets concerning the aircraft.

FINE-TUNING

A union source said the upstream production rate of 2.8 per month – or 30 planes annually based on an 11-month industrial calendar – had already slipped slightly in the past two weeks.

“We fine-tune our production on a monthly basis; we have done so successfully in the past and will do so in the future,” an Airbus spokesman said when asked about the union comment.

Executive Vice President Tom Williams told Reuters last week that small variations in production would “not be a crisis” and ruled out allowing factories to produce A380s that were unsold.

In a bid to boost A380 sales, Airbus has formed a marketing partnership with Doric Lease Corp which has placed a provisional order for 20 superjumbos. Industry sources say the race is on to finalize the order, possibly at next month’s Dubai Airshow.

However, the venture only takes effect in 2016.

In the newspaper interview, Bregier also confirmed that Airbus may opt to stretch the A380 some time next decade, but said the current version suited the majority of airlines.

“Personally, I think the A380 program will have a stretched version, maybe in 10 or 15 years from now,” he said.

Bregier reaffirmed the main EADS financial target of reaching a 10 percent margin in 2015 excluding the new A350 program, which he said was going according to plan.

He said Airbus would maintain production of narrowbody A320 planes at 42 a month to ease pressure on the supply chain and ensure a smooth transition to a new version due to enter service in 2015.

(Editing by Leila Abboud and James Regan)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/URoael4qZGM/story01.htm

Dow, S&P 500 hit record closing highs on Fed outlook


NEW YORK |
Tue Oct 29, 2013 5:11pm EDT

NEW YORK (Reuters) – The Dow and SP 500 ended at record highs on Tuesday after economic data supported views that the Federal Reserve would keep its stimulus intact for several months and IBM (IBM.N) rallied after the company announced a stock buyback.

IBM gave the biggest boost to the Dow, which led the day’s gains. The stock, which also helped drive the SP 500’s advance, jumped 2.7 percent to $182.12 after the company’s board of directors approved another $15 billion for stock buybacks.

In the latest economic data, a gauge of U.S. consumer spending rose in September, but another report showed consumer confidence fell sharply in October because of worries about the impact of the partial government shutdown.

The data added to evidence of sluggish economic growth just as the Fed began a two-day policy meeting. Expectations are high that officials are unlikely to shift monetary policy this week as they wait for more evidence of how badly Washington’s budget battle has hurt the U.S. economy.

“The ghosts of tapering are not coming this Halloween,” said Omar Aguilar, chief investment officer for equities at Charles Schwab Corp. “The government shutdown pushed the tapering discussion further out.”

That’s likely to keep a floor under stocks for the near term at least, though longer term, slow growth in earnings and especially in revenue may be a concern, he said.

Limiting some of the day’s gains in both the Nasdaq and the SP 500, Apple (AAPL.O) shares dropped 2.5 percent to $516.68 a day after the iPad and iPhone maker delivered disappointing results.

The Dow Jones industrial average .DJI gained 111.42 points, or 0.72 percent, to end at 15,680.35, a record close. The Standard Poor’s 500 Index .SPX rose 9.84 points, or 0.56 percent, to finish at 1,771.95, also a record closing high. The SP 500 hit another intraday record high at 1,772.09.

The Nasdaq Composite Index .IXIC advanced 12.21 points, or 0.31 percent, to close at 3,952.34.

Tuesday’s rally brings the SP 500’s gain for the year to date to 24.2 percent.

In the latest technical issue to befall the Nasdaq exchange, the Nasdaq OMX Group (NDAQ.O) said human error left the exchange unable to transmit index values for nearly 45 minutes, leading to a temporary halt in options trading on some stock indexes.

The Dow also got a boost from Pfizer Inc (PFE.N), which rose 1.7 percent to $31.25 after the drug company reported better-than-expected third-quarter earnings.

As has been the case in recent quarters, more companies have been beating analysts’ earnings expectations than revenue expectations. With results in from 281 of the SP 500 companies, 68.7 percent have topped profit expectations, above the long-term average of 63 percent, while just 52.5 percent have beaten revenue estimates, below the 61 percent rate since 2002, based on Thomson Reuters data.

Cummins Inc (CMI.N) slumped 5.2 percent to $127.90. It was the SP 500’s worst performer after the U.S. maker of engines and other vehicle components reported lower-than-expected quarterly profit on Tuesday and cut its full-year outlook.

Another decliner was JPMorgan Chase (JPM.N), down 0.1 percent at $52.73 after a person familiar with the situation said the preliminary $13 billion deal set by the bank’s CEO and the U.S. attorney general has hit a stumbling block.

Homebuilders’ shares climbed after home prices rose 0.9 percent in August, more than had been expected, according to the SP/Case-Shiller index. Lennar (LEN.N) jumped 1.5 percent to $37.38.

(Editing by Nick Zieminski and Jan Paschal)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/tewixZyHdAc/story01.htm

JPMorgan’s $13 billion deal hits stumbling blocks: sources


Tue Oct 29, 2013 4:16pm EDT

(Reuters) – JPMorgan Chase Co’s preliminary $13 billion deal to resolve federal and state investigations into its mortgage bond business has hit some stumbling blocks, two people familiar with the talks said on Tuesday.

In a draft settlement circulated late on Sunday, JPMorgan sought a provision that effectively shut down any criminal inquiries into the bank’s packaging and sale of mortgage securities, apart from an investigation by California prosecutors that the bank has already disclosed, one of the people said. The bank had previously agreed to keep all criminal probes out of the settlement, the person added.

A second person familiar with the talks said there appeared to be a misunderstanding over the issue.

Also at issue is a long-running disagreement between the bank and the Federal Deposit Insurance Corp over legal liabilities from JPMorgan’s takeover of Washington Mutual assets and obligations during the financial crisis.

JPMorgan, which acquired Washington Mutual from the FDIC for $1.9 billion at the height of the financial crisis, has disputed its responsibility to cover losses incurred by investors on the failed thrift’s mortgage securities.

Reuters reported exclusively on September 30 that the dispute threatened the preliminary deal.

The Department of Justice has sought a provision in the settlement that prohibits JPMorgan from seeking to push the WaMu liabilities from the settlement onto the FDIC.

The bank has not yet agreed to such a provision, one of the people familiar with the talks said. Talks have not yet broken down over the disagreements and negotiations are continuing, the person added.

$23 BILLION WAR CHEST

JPMorgan chief executive Jamie Dimon has sought to put liabilities stemming from the 2007-2009 financial crisis behind the bank.

For Dimon, a delay or breakdown in the negotiations would put him further away from showing investors and employees that he can end the expense and damage to the bank’s reputation caused by the litigation.

The largest U.S. bank said it set aside $23 billion earlier this month to pay for legal issues, and will continues to face more than a dozen government investigations globally, even after it puts the mortgage probes behind it.

The Justice Department alone is investigating the bank for everything from bad derivative bets, to whether it gave jobs to the children of government officials in China to secure business there, to whether it played a role in the manipulation of Libor benchmark interest rates.

The DOJ has led negotiations to resolve multiple state and federal probes into JPMorgan’s mortgage bond business and that of the firms it acquired during the financial crisis.

On Friday, one of the agencies, the Federal Housing Finance Agency, grew impatient waiting for the completion of the package and separately signed a $5.1 billion settlement with JPMorgan. Some $4 billion of that had been seen as counting toward the $13 billion amount.

Dimon met with U.S. Attorney General Eric Holder in late September in Washington to reach the tentative package deal.

Holder and Dimon are both overseas this week. Holder is in Morocco attending a conference and meeting with local counterparts. Dimon is traveling in Europe this week, according to a person familiar with his itinerary.

(Reporting by David Henry in New York and Aruna Viswanatha in Washington; Editing by Bernard Orr)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/vrAWUcinOX4/story01.htm

Goldman Sachs’ co-head of commodities Shenouda to leave: memo


NEW YORK |
Tue Oct 29, 2013 4:04pm EDT

NEW YORK (Reuters) – The co-head of Goldman Sachs’ (GS.N) global commodities business, Magid Shenouda, is leaving the bank after 14 years, according to an internal memo seen by Reuters on Tuesday.

London-based Shenouda, who has run the commodities business for the past two years alongside New York-based Greg Agran, joined the firm as an executive director in oil trading in 1999, and had run European oil as well as power and gas.

“He has been responsible for driving several key acquisitions, as well as the expansion of our business activities into new regions and products, including the build-out of our Energy, Coal, Freight and Emissions franchise,” the co-heads of the securities division, which includes commodities, said in the memo. They are Isabell Ealet, who had run commodities until 2011, and Pablo Salame.

Shenouda’s plans were not immediately known. The departure was first reported by SparkSpread. Goldman Sachs has also recently replaced Peter O’Hagan, who was global head of commodities sales, SparkSpread said.

(Reporting by Jonathan Leff; Editing by Gary Hill)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/tCOGemMGxo4/story01.htm

U.S. mortgage burden gets lighter in second quarter


WASHINGTON |
Tue Oct 29, 2013 3:51pm EDT

WASHINGTON (Reuters) – Mortgage payments in the second quarter took the smallest bite out of U.S. households’ after-tax income in at least three decades, Federal Reserve data showed on Tuesday.

Homeowners spent 7.9 percent of after-tax income on mortgage payments during the period, the lowest in records going back to 1980 and a tenth of a point less than in the prior quarter.

The drop came despite a sharp increase in mortgage rates in May, and could represent a combination of rising incomes and a rush by homeowners to refinance loans before rates rise further.

Interest rates remain historically low, largely thanks to years of ultra-easy monetary policy at the Federal Reserve.

Overall debt service costs for households were the equivalent of 9.9 percent of after-tax income between April and June, which was just above a record low.

(Reporting by Jason Lange; Editing by James Dalgleish)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/JIBD-t2mh4A/story01.htm

U.S. judge denies class action status in Deutsche Bank lawsuit


NEW YORK |
Tue Oct 29, 2013 3:33pm EDT

NEW YORK (Reuters) – A U.S. judge on Tuesday refused to allow shareholders to proceed as a group in a lawsuit accusing Deutsche Bank AG (DBKGn.DE) of misrepresenting the risks of mortgage-related investments that were central to the financial crisis.

The ruling by U.S. District Judge Katherine Forrest in New York effectively ends the class action against the German bank, although shareholders could proceed individually.

Forrest ruled that an expert hired by the shareholders to give an opinion on whether the market for Deutsche Bank shares was efficient was unqualified and used a flawed methodology.

“For this court to rely on testimony from someone who lacks real expertise asks this Court to dispense with the need for real qualifications,” Forrest wrote.

Renee Calabro, a spokeswoman for Deutsche Bank, said it was “pleased with the court’s decision.” John Grant, a lawyer for the plaintiffs at Robbins Geller Rudman Dowd, did not responded immediately to requests for comment.

Filed in 2011, the lawsuit accused Deutsche Bank of issuing false and misleading statements about its health in the run up to and during the global financial crisis.

The lawsuit said Deutsche Bank packaged and sold mortgage-backed securities and collateralized debt obligations that it knew were riskier than it told the market.

The lawsuit also accused Deutsche Bank of misrepresenting its risk management practices and said it was too slow to write down impaired mortgage securities.

The misrepresentations enabled Deutsche Bank to inflate its stock price and maximize its profits, but as the bank began announcing losses in 2008 its stock price fell 87 percent to $21.27 in January 2009 from $159.59 in May 2007, the lawsuit said.

In March, Forrest denied a motion by the bank to dismiss the lawsuit, and the plaintiffs moved to certify plaintiffs who bought shares in the United States from January 3, 2007, through January 16, 2009.

The lawsuit is led by shareholders Building Trades United Pension Trust Fund, Steward Global Equity Income Fund, and Steward International Enhanced Index Fund.

‘SIGNIFICANT FLAWS’

Forrest, in denying class certification on Tuesday, focused extensively on the qualifications of the expert hired by the plaintiffs, Michael Marek.

Forrest said Marek’s expertise came from acting as an expert in securities class actions, which she said was “not sufficient.” She added that he had “not been specially trained by academics in the field; he has not written articles, taught any courses, or conducted any relevant research.”

The judge said Marek’s training instead “appears to have been one year he spent working for a firm after college and then his work for an economist who was later indicted for submitting false declarations.”

The economist, John Torkelsen, pleaded guilty in 2008 to lying to judges about secret payments he took from plaintiffs’ law firms. Among the firms he worked for was Milberg, which at the time was at the center of a massive kickback scandal.

Robbins Geller, which represents the Deutsche Bank plaintiffs, spun out of Milberg in 2004.

Even if Marek was qualified, Forrest said his analysis suffered from “certain significant flaws.”

Forrest said Marek failed to consider that more than 90 percent of Deutsche bank securities were traded outside the United States, in Germany, which he conceded drove U.S. pricing.

Forrest said Marek also failed to consider that, during the time in question, both the United States and Germany instituted short-sale bans, even though he acknowledged arbitrage was an important driver of an efficient market.

Marek did not immediately respond to a call or an email seeking comment.

The case is IBEW Local 90 Pension Fund v. Deutsche Bank AG, et al, U.S. District Court, Southern District of New York, No. 11-04209.

(Reporting by Nate Raymond in New York; additional reporting by Jonathan Stempel; Editing by Eddie Evans and Jim Marshall)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/rLMZFAPLRmg/story01.htm

Time Warner Cable CEO Britt says he has cancer


Tue Oct 29, 2013 3:25pm EDT

(Reuters) – Time Warner Cable (TWC.N) Chief Executive Glenn Britt disclosed to employees on Tuesday that he is undergoing treatment for cancer but said he will continue working until his retirement at the end of the year.

Britt, who has been CEO since 2001, said in a memo to employees that he beat melanoma five years ago but that the cancer has returned. He said doctors discovered it when they ran tests for a problem he was having with his voice over the summer.

The company had previously announced in July that Chief Operating Officer Rob Marcus, 48, would become CEO and join the company’s board of directors as chairman starting January 1.

Britt’s health will not affect that transition plan.

“I am thankful that the transition to Rob was planned early, and was well underway before I got sick. The transition has been seamless so far and is nearly complete,” Britt said.

Britt added that he feels “good and am optimistic about my prognosis. I have no intention of letting this cancer slow me down.”

(Editing by Dan Grebler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/AfiUP7rT9Rk/story01.htm

UBS, Deutsche Bank confirm cooperation in forex probes


ZURICH |
Tue Oct 29, 2013 2:58pm EDT

ZURICH (Reuters) – UBS and Deutsche Bank confirmed they were cooperating with regulators probing alleged rigging in the $5.3 trillion-a-day foreign exchange market, with UBS saying it had taken “swift action” to review its operations.

The confirmations by two of the world’s biggest players in the currency markets come as investigations broaden, with the U.S. Justice Department acknowledging publicly for the first time that it was involved.

UBS Chief Executive Sergio Ermotti told journalists on Tuesday that his bank had moved quickly to launch an internal investigation of its forex operations and was working with regulators. He did not provide further details.

Deutsche Bank said separately that it was cooperating with regulators and that the investigations were “in early stages.” Deutsche declined to comment further.

Several countries have now opened investigations amid media reports that traders have manipulated some fixings – snapshots of where currencies are trading at a particular time in the market – which are used to price trillions of dollars worth of investments.

UBS shares fell almost 8 percent following news that the Swiss regulator FINMA had imposed a temporary 50 percent increase in the amount of capital the bank holds against risk weighted assets, to cover potential costs of unknown legal probes.

Asked whether FINMA’s move was linked to the foreign exchange investigation, Ermotti said there was no indication the top-up was related to a single item but rather it was an assessment based on the entire portfolio of UBS.

The uncertainty surrounding possible rate manipulation raises painful memories for UBS and its shareholders. It was one of the first financial institutions rapped for its role in the rigging of the Libor interest rate benchmark.

Unlike UBS and British rival Barclays, Deutsche Bank has not yet reached a settlement over allegations it was involved in a scam to manipulate global benchmark inter-bank lending rates including Libor.

Deutsche did, however, surprise investors earlier on Tuesday by setting aside 1.2 billion euros ($1.7 billion) for potential litigation.

ACTION TAKEN

Earlier UBS told investors it had taken and would continue to take “appropriate” action in respect to staff as a result of the ongoing review of its forex trading, without elaborating.

FINMA said earlier this month it was investigating several Swiss banks for possible wrongdoing. It did not name those under scrutiny but said multiple banks around the world were potentially implicated.

Earlier this month, the chairman of cross-town rival Credit Suisse said his bank had not found any evidence of malpractice in the forex market following inquiries from regulators.

The most popular benchmark is the WM/Reuters “fix”, set at 4.00 p.m. London time, using actual trades and order rates from Thomson Reuters and rivals such as EBS during a one minute “fix” period. WM, a unit of State Street, calculates the benchmark using the median of the trades and the orders.

Thomson Reuters is the parent company of Reuters News, which is not involved in the rate fixing process.

($1 = 0.7262 euros)

(Additional reporting by Edward Taylor, writing by Caroline Copley, Thomas Atkins and Sinead Cruise in London; Editing by Anthony Barker)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/TlOusjIz4C4/story01.htm