News Archive


Batista’s OGX files for bankruptcy protection in Brazil


RIO DE JANEIRO |
Wed Oct 30, 2013 4:26pm EDT

RIO DE JANEIRO (Reuters) – OGX Petróleo e Gas Participações SA, the Brazilian oil company controlled by former billionaire Eike Batista, sought court protection from creditors on Wednesday in Latin America’s largest-ever corporate bankruptcy filing.

The bankruptcy protection request, which was confirmed by the court in Rio de Janeiro, came after OGX failed to reach an agreement with creditors to renegotiate part of its $5.1 billion debt load.

The request marks another chapter in the unraveling of Batista’s once high-flying industrial empire, which he has been dismantling in recent months after disappointing output from offshore OGX wells set off a crisis of investor confidence.

If the court approves the request, OGX will have 60 days to come up with a corporate restructuring plan. The company’s creditors, which include the California-based bond fund Pacific Investment Management Co (PIMCO), and U.S.-based investment fund BlackRock Inc, will then have 30 days to endorse or reject the plan.

Officials at OGX and EBX, Batista’s holding company, did not immediately respond to telephone calls and emails seeking comment.

An OGX bankruptcy is unlikely to have a significant effect on Brazil’s economy. The company is barely out of its start-up phase and produces almost no crude oil, and most of its debt is held by foreign bondholders. But the fate of sister company OSX Brasil depends almost entirely on OGX, whose market value has plummeted by nearly $45 billion since its stock peaked in October 2010.

Batista created OSX, which had to scale back efforts to construct the largest shipyard in the Southern Hemisphere, to build and lease oil production and service vessels to OGX.

A renowned dealmaker who once boasted he was on track to become the world’s richest man, 56-year-old Batista has seen his personal fortune reduced by over $30 billion in the last 18 months as investors punished the share price of his listed companies.

The downward spiral forced Batista to start breaking up his Grupo EBX conglomerate, which also included a port operator, mining and energy interests, and an entertainment company.

Batista’s rapid decline has become a symbol of Brazil’s own economic troubles. After a decade-long boom in which investors poured cash into Brazil and Batista’s enterprises, Latin America’s largest economy has been in a rut for nearly three years, frustrating predictions that the country was poised to join the ranks of developed nations.

OGX’s decision to seek protection from creditors came as no surprise. After missing a $44.5 million interest payment owed to bondholders on October 1, OGX scrambled to restructure its debt before the end of a 30-day grace period or be declared in default on $3.6 billion in bonds.

The process was rocky from the outset, and OGX called off the talks with creditors on Tuesday, leaving a bankruptcy filing as the only viable option to buy more time in its quest to save the company.

RACING TO PUMP OIL

Brazil’s 8-year-old bankruptcy law is similar to Chapter 11 proceedings in the United States, and gives OGX a chance to reduce its liabilities and emerge as a going concern. Bondholders will play a key role in the process, though in recent bankruptcy cases – such as those of power companies Celpa SA and Grupo Rede Energia SA – some creditors complained that judges privileged the claims of state-owned banks over theirs.

Indeed, bankruptcy cases have not always moved smoothly through Brazilian courts and some judges have been sympathetic to pressure from different stakeholder groups like employees, pensioners and shareholders, at times putting their interests above those of creditors, said Paulo Rabello de Castro, head of SR Rating, a Brazilian credit rating agency.

Investors worldwide will be watching as the OGX proceedings unfold. If bondholders feel they are not treated fairly in the restructuring process, foreign investors may think twice before investing in other Brazilian companies, analysts say.

PIMCO and Blackrock declined to comment. PIMCO held nearly $387 million worth of OGX bonds in registered funds at the end of June, according to the latest data provided to Lipper.

OGX is racing to start output at an offshore oil field called Tubarão Martelo by the end of November, its best hope for a source of revenue that could help the restructuring process. Failure to get Tubarão Martelo producing will make it harder to find an investor to buy all or part of the field and could lead to the breaking of contractual obligations to Brazil’s oil regulator, the ANP.

While the ANP has said a bankruptcy filing would not automatically cause OGX to lose its production leases and exploration rights, it stressed that any failure to meet the conditions of these contracts would result in their loss. That would strip OGX of any chance of generating future revenue.

The company needs about $250 million of debt or equity financing to keep operating through April 2014, it said in a recent presentation to bondholders. Without new financing, OGX said it would run out of cash in the last week of December.

During talks, OGX and the bondholders discussed a potential $150 million credit line aimed at funding the company’s exploration campaign for a few more months. But there was disagreement over Batista’s plan to have bondholders convert debt into equity as well as the terms of his potential departure from the company, sources told Reuters last week.

To keep OGX running, a bankruptcy judge will have to decide if output from Tubarão Martelo and other offshore and onshore areas are sufficient to keep the company operational and allow for some repayment to creditors.

OGX holds rights to areas that may no longer be considered commercially viable, not for lack of oil, but because the regulatory definition of viable requires the company to have sufficient cash to develop the resource. Selling all or part of those contracts could help keep the company alive.

“I think there is some value in OGX’s offshore assets,” an oil executive who has seen geological data about OGX’s prospects and fields. “If the price is right I think someone may well buy them and that they could produce pretty well.”

Brazil’s slow judicial system, though, could prevent an agreement from being reached before OGX loses its oil rights.

($1 = 2.19 reais)

(Additional reporting by Jennifer Ablan in New York; Writing by Todd Benson; Editing by Gerald E. McCormick and Richard Chang)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fdz5n7mVgnI/story01.htm

Qatar seeking to build $1 billion stake in Bank of America


Wed Oct 30, 2013 4:13pm EDT

(Reuters) – Qatar’s sovereign wealth fund, one of the world’s most prolific investors, is building a $1 billion holding in Bank of America (BAC.N), seeking to benefit from the U.S. economic recovery, the Financial Times reported, citing sources close to the plans.

Qatar Holding, the investment arm of Qatar Investment Authority (QIA), began buying BofA shares about two years ago, the newspaper said on its website, citing a person close to the fund. The FT added that Qatar had bought more of the bank’s shares when their price fell to $7-$8 last year. (link.reuters.com/kas34v)

BofA’s stock closed at $14.17, up 2 cents, on the New York Stock Exchange. A $1 billion stake at this price represents less than 1 percent of BofA, which has a market capitalization of about $151.2 billion, according to Thomson Reuters data.

Under newly appointed Chief Executive Ahmed Al-Sayed, QIA has been on an aggressive expansion spree, hiring bankers and senior executives with experience ranging from mergers and acquisitions in Asia to retail and luxury investments in Europe.

The FT said QIA had hired Michael Cho, a former co-head of Asia mergers and acquisitions at BofA, for a senior role in its mergers and acquisitions department.

Three sources had told Reuters in September that Qatar Holding had hired Ugo Arzani, most recently a BofA managing director in London, as its new head of consumer and retail investments.

The sources had also said that QIA, worth more than $100 billion, was scouting for opportunities in Asia and the United States in a bid to reduce its exposure to Europe and diversify its investment portfolio.

In recent years, QIA has picked up minority stakes in several large global companies such as Royal Dutch Shell (RDSa.L), Tiffany Co (TIF.N), Siemens (SIEGn.DE), Glencore Xstrata (GLEN.L) and Swiss banking giant Credit Suisse (CSGN.VX).

BofA declined to comment and QIA could not be reached for comment outside working hours.

(Reporting by Richa Naidu in Bangalore; Editing by Leslie Gevirtz)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/_5K2nxXEnzE/story01.htm

Fed maintains strong stimulus as U.S. growth stumbles


WASHINGTON |
Wed Oct 30, 2013 3:21pm EDT

WASHINGTON (Reuters) – The Federal Reserve extended its support for a slowing U.S. economy on Wednesday, sounding a bit less optimistic about growth and saying it will keep buying $85 billion in bonds per month for the time being.

In announcing the widely expected decision, Fed officials nodded to weaker economic prospects due in part to a fiscal fight in Washington that shuttered much of the government for 16 days earlier this month.

The central bank noted that the recovery in the housing market had lost some steam and suggested some frustration at how slowly the labor market was healing.

However, it also dropped a phrase expressing concern about a run-up in borrowing costs, suggesting greater comfort with the current level of interest rates.

“Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months,” the policy-setting Federal Open Market Committee said. “Fiscal policy is restraining economic growth.”

The Fed’s statement differed only slightly from the economic assessment it delivered after it last meeting in September, and the reaction in financial markets was relatively subdued.

U.S. stocks sold off slightly, while the dollar climbed against the euro and the yen. Prices of U.S. Treasuries turned negative, pushing yields higher.

“On balance, the Fed’s statement was slightly less dovish than expected,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange. He cited the central bank’s abandonment of a phrase that expressed concern about an earlier tightening in financial conditions, including higher mortgage rates.

In its statement, the Fed said the labor market had shown “some” further improvement, tempering its description after a recent weakening in the jobs figures.

“Until the economic data strengthens, and strengthens meaningfully, I think expectations for tapering (the bond purchases) are going to remain subdued,” said Krishna Memani, chief investment officer at Oppenheimer Funds in New York. “The likelihood of anything happening in December is modest.”

Kansas City Federal Reserve Bank President Esther George dissented, as she has at every FOMC meeting this year, favoring a modest reduction in the pace of bond purchases.

UNTAPERED

The Fed shocked financial markets last month by opting not to scale back its bond buying, after allowing a perception to harden over the summer that it was ready to start easing off on the stimulus. Its caution has since been vindicated.

Consumer and business confidence has been dented by the bitter political fight that triggered the government shutdown and pushed the nation to the brink of a potentially devastating debt default, and a slew of recent data has pointed to economic weakness.

Reports on Wednesday showed U.S. private-sector employers hired the fewest number of workers in six months in October, while inflation stayed under wraps last month.

Other recent data on hiring, factory output and home sales in September had already suggested the economy lost a step even before the government shut down. Readings on consumer confidence this month have shown the fiscal standoff rattled households.

The soft tone in the data has led markets to recalibrate forecasts for a tapering in the bond purchases and has pushed rate hike expectations further into the future.

After the Fed’s decision, traders of short-term U.S. interest-rate futures kept bets in place that the central bank will wait to raise overnight rates until at least April 2015.

In response to the deepest recession and weakest recovery in generations, the central bank lowered rates to near zero in December 2008 and has more than quadrupled its balance sheet to $3.8 trillion.

The Fed left its guidance on when it may raise rates unchanged, repeating that it would keep them near zero as long as the jobless rate remained above 6.5 percent and inflation did not threaten to rise above 2.5 percent.

The response to the Fed’s aggressive easing of monetary policy has not been uncontroversial, with some Fed hawks and many Republicans arguing there is a risk of runaway inflation or financial market bubbles.

However, core Fed officials, including Chairman Ben Bernanke and his presumptive successor, Vice Chair Janet Yellen, have argued that the threat of persistently high unemployment is the most pressing issue right now.

Data on Wednesday showed consumer price inflation at just 1.2 percent in the year through September, well below the central bank’s 2 percent target.

(Corrects first name of second analyst quoted)

(Editing by Krista Hughes and Tim Ahmann)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/wcaS4cumaAI/story01.htm

U.S. private hiring slows, inflation stays muted


WASHINGTON |
Wed Oct 30, 2013 3:13pm EDT

WASHINGTON (Reuters) – U.S. private-sector employers hired the fewest workers in six months in October while tepid domestic demand kept inflation benign last month, suggesting the economy was still in need of stimulus from the Federal Reserve.

The slowdown in private job growth was the latest signal that the labor market has taken a step back in recent months and the clearest indication yet that a 16-day federal government shutdown weighed on economic activity.

Fed officials stuck to their monthly $85 billion bond-buying pace at the end of a two-day meeting on Wednesday and said fiscal policy was restraining economic growth.

“It (data) suggests accommodative policy might be necessary for longer and more aggressive monetary policy might be needed to break the lack of momentum in the economy,” said Laura Rosner, an economist at BNP Paribas in New York.

Employers in the private sector added 130,000 new jobs to their payrolls this month, the ADP National Employment Report showed on Wednesday. That was the lowest reading since April and was below economists’ expectations for a gain of 150,000 jobs.

It was the fourth straight month that private jobs growth slowed, according to the ADP data. There was a marked slowdown in hiring by small businesses, where payrolls increased 37,000 last month, well below the 68,000 new jobs created in September.

Mid-sized firms also hired fewer workers than in September.

“The government shutdown and debt limit brinkmanship hurt the already softening job market in October,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania.

Moody’s Analytics is a joint developer of the ADP report.

While the ADP data does not have a good track record of predicting the government’s more comprehensive non-farm payrolls count, it suggested that report will find weakness as well.

The government will publish its closely watched payrolls report on November 8. Payrolls gained 148,000 in September, with the unemployment rate hitting a near five-year low of 7.2 percent.

But if average monthly jobs growth continues at less than 150,000, where it has been over the last three months, that would make it difficult for the jobless rate to fall further.

In a separate report, the Labor Department said its Consumer Price Index increased 0.2 percent last month as a rebound in energy prices offset an unchanged reading in food costs. The CPI had edged up 0.1 percent in August.

In the 12 months through September, the CPI increased 1.2 percent, the smallest gain since April.

FED TO STAY THE COURSE FOR A WHILE

The weak labor market picture and benign inflation environment should allow the Fed to stay the course on its monthly bond purchases for a while as it tries to stimulate the economy through low interest rates.

The Fed targets 2 percent inflation, although it tracks a gauge that tends to run a bit below the CPI.

“We do not expect tapering (of bond purchases) to begin before January at the earliest,” said Michael Hanson, an economist at Bank of America Merrill Lynch in New York.

But traders read the Fed’s statement as being a bit hawkish. U.S. stocks fell in choppy trade, while the dollar advanced against a basket of currencies. Prices for U.S. Treasury debt surrendered early gains and were last trading lower.

There was no sign of underlying inflation pressures last month. The so-called core CPI – which strips out the volatile energy and food components – nudged up 0.1 percent. It rose by the same margin in August.

Last month’s rise took the increase in the core index over the past 12 months to 1.7 percent after advancing 1.8 percent in August.

This measure touched a two-year low of 1.6 percent in June and the slowdown last month could catch the attention of some Fed officials who are concerned about inflation being too low.

Last month, inflation was lifted by a 0.8 percent rise in energy prices, which accounted for about half of the rise in the CPI. Energy prices had dropped 0.3 percent in August.

Food prices were flat in September, producing the weakest reading since May.

Shelter and medical care costs accounted for most of the increase in the core CPI last month. Owners’ equivalent rent of primary residence rose 0.2 percent after rising 0.3 percent in August. It is the biggest single component in the CPI.

Medical care costs increased 0.3 percent, with hospital services rising 0.7 percent. Medical care, which makes up more than 9 percent of the core index, has been one of the key contributors to the low inflation early in the year.

Apparel prices recorded their biggest drop since March.

“Inflation remains tame, although the recent trend toward slowing still appears to have stopped, even with the dip in the change from a year ago in core in September,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in Valhalla, New York.

(Additional reporting by Luciana Lopez in New York; Editing by Dan Grebler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Q9-C7lBMuTM/story01.htm

Boeing to place much of 777X design work outside Seattle


NEW YORK |
Wed Oct 30, 2013 2:37pm EDT

NEW YORK (Reuters) – Boeing Co (BA.N) has decided to place a significant amount of design work for its coming 777X jetliner in cities outside the Seattle area, where the current 777 was designed and is being built, according to an internal memo reviewed by Reuters and confirmed by Boeing on Wednesday.

“It has been decided that much of the detailed design will be carried out by Boeing engineering teams in Charleston (South Carolina), Huntsville (Alabama), Long Beach (California), Philadelphia and St. Louis,” the memo said. The Boeing Design Center in Moscow will also support the design activity.

“However, at this time, no decisions have been made about 777X design or build in Puget Sound,” the memo said.

The news was seen as a blow to engineering workers in Washington state and a sign that the jobs building the more efficient version of Boeing’s best-selling wide-body plane could migrate to lower-cost, nonunion states, especially Boeing’s production facility in South Carolina.

“This is another step in Boeing’s war against SPEEA, the engineers’ union in Seattle,” said Scott Hamilton at aviation consultancy Leeham Co in Seattle. “Boeing has been systematically moving engineering jobs out of Washington all year.”

The move also comes as Washington state Governor Jay Inslee is considering proposing a package of tax incentives to persuade Boeing to put 777X design and assembly work at its giant factory in Everett, Washington, where the current 777 is made, and keep work in the Puget Sound region, which encompasses Everett, Seattle and Renton, where Boeing has facilities.

Washington state officials and congressional members did not immediately respond to requests for comment.

Union officials said they expected some 777X work will be sourced from the Puget Sound region.

Shifting entirely away from the Everett factory, they said, likely would bring problems similar to those experienced with Boeing’s 787 Dreamliner, which has suffered a series of glitches, including unstable, overheating batteries and repeated mechanical failures. Design and parts for the 787 were sourced from suppliers around the globe.

“Puget Sound is Boeing’s center of experience in commercial aircraft design,” said Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace (SPEEA), the union representing Boeing engineers and technicians.

“As engineering tasks are shared with other talented engineering groups, we fully expect Puget Sound to play the key integrating role needed to avoid a replication of the problems experienced by the 787 program.”

Boeing has been considering whether to build the 777X at its factory in North Charleston, South Carolina, and is acquiring land adjacent to that factory. But the company reiterated on Wednesday that it has not yet decided where to build the jet.

“We are studying our options on build work for the 777X, but no decisions have been made at this point,” Boeing spokesman Doug Alder said.

Hamilton, the industry analyst, said the decision to move 777X engineering work was a blow to Washington state’s effort to keep all things 777X in Washington and “may well be the harbinger that final assembly will wind up elsewhere, presumably Charleston,” he said.

The 777X is undergoing numerous sales campaigns in the Middle East and Asia that are expected to yield more than $50 billion in orders in coming weeks. The biggest order is expected to come at the Dubai Airshow on November 17, when Emirates Airways is expected to place a landmark order for 100 or more 777X jets, worth some $30 billion, according to industry sources.

The memo released on Wednesday was signed by Michael Delaney, vice president of engineering at Boeing’s commercial airplanes division, and Scott Fancher, vice president airplane development.

It said Boeing’s goal is to bring engineering skill from across the company to tackle a project as large as the 777X. The company also said it would apply “lessons learned” from the 787 and 747-8 programs. The new structure of design, “will allow for an efficient use of resources and enable Boeing to resolve design issues effectively the first time,” the memo said.

(Reporting by Alwyn Scott; Editing by Gerald E. McCormick and Tim Dobbyn)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Wa8GxajdDGc/story01.htm

German-Swiss tax deal could be revived, conservatives say


BERLIN |
Wed Oct 30, 2013 2:20pm EDT

BERLIN (Reuters) – Chancellor Angela Merkel’s conservatives want to revive a bilateral tax agreement with Switzerland in coalition talks with the Social Democrats, who blocked the proposed tax deal in the upper house last year.

Markus Soeder, finance minister in the state of Bavaria, told journalists in Berlin the federal and state governments in Germany could get significant funds if the bilateral deal with Switzerland was ever approved.

Soeder, one of the conservative Christian Democrats’ leaders in the coalition talks, said he was in favor of tightening rules on tax evasion, in comments supported by another conservative negotiator, Norbert Barthle.

The Christian Democrats and SPD are in talks on a right-left “grand coalition” government after Merkel’s ruling conservatives fell short of an absolute majority in September’s election.

Merkel said the planned deal with Switzerland last year would have brought Germany tax revenues of 2 billion euros ($2.74 billion)or more. Most would have gone to Germany’s 16 states.

The SPD and the Greens, who control Germany’s upper house of parliament, scuppered the deal, arguing it was too lenient as it would have protected the anonymity of German account holders while imposing a tax on their assets.

The EU’s six biggest countries agreed this year to increase cooperation to pile pressure on tax havens which want to protect bank secrecy.

(Reporting by Matthias Sobolewski; writing by Erik Kirschbaum; editing by Andrew Roche)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3pu8GUgHH94/story01.htm

Twitter hit with $124 million lawsuit over private stock sale


NEW YORK |
Wed Oct 30, 2013 2:15pm EDT

NEW YORK (Reuters) – Twitter Inc was sued for $124 million on Wednesday by two companies claiming the social media darling fraudulently had them organize a private sale of its shares to stoke investor interest for an initial public offering then canceled it.

In a lawsuit filed in U.S. District Court in Manhattan, Precedo Capital Group Inc and Continental Advisors SA accused Twitter of using the aborted sale as a way to give the money-losing company a $10 billion market valuation and higher IPO price.

“Twitter never intended to complete the offering on behalf of Twitter stockholders, in the private market, thereby causing substantial damages to the plaintiffs in the loss of commissions, fees and expenses, as well as through their business reputation,” the lawsuit said.

The financial firms seek $24.2 million of compensatory damages, $100 million of punitive damages and other remedies.

Jim Prosser, a spokesman for Twitter, in a statement said the company had never had a relationship with Precedo or Continental Advisors.

“Their claim is completely without merit,” he added.

The lawsuit comes as anticipation builds for Twitter’s IPO, widely considered the most highly awaited since Facebook Inc went public in May 2012.

Last week, the San Francisco-based company said it would offer its shares at between $17 and $20 each, valuing the company at up to about $11 billion. No date has been set yet but market watchers believe the IPO could happen as early as next week.

Twitter was holding its first large investor lunch in New York on Wednesday. Institutional investors who met with Twitter this week say they are optimistic about its upcoming IPO and see it as a more conservative offering than Facebook’s splashy IPO.

Like many Silicon Valley start-up companies, Twitter has paid employees and contractors using private stock.

According to the lawsuit, it was worried about repeating some problems afflicting Facebook’s $16 billion offering.

In particular, the lawsuit said Twitter sought to avoid the potential for excess supply of company shares by controlling the buyers and sellers of those shares in the private market.

Precedo, an Arizona-based broker dealer, and Continental, a Luxembourg financial adviser, said they were contacted by GSV Asset Management, an approved buyer of Twitter stock, about marketing a fund that could only purchase Twitter shares.

GSV allegedly had negotiated an agreement with Twitter in which it would arrange the sale of up to $278 million of shares owned by employees and others, in blocks of $50 million.

Precedo and Continental said they lined up commitments for the first $50 million block and set up road shows in the United States, Europe and Asia where GSV managing partner Matthew Hanson disclosed material non-public information about Twitter.

But they said Twitter eventually blocked the sale after learning that Precedo and Continental had attracted investors willing to pay $19 a share, considerably above the $17 or less offered in other private market transactions.

The firms now say Twitter “never intended” to allow the private stock sales to go forward.

“Twitter’s intention was to induce Precedo Capital and Continental Advisors to create an artificial private market wherein Twitter could maintain that a private market existed at or about $19 per share for the Twitter stock,” they said.

The case is Precedo Capital Group Inc. v. Twitter Inc, U.S. District Court, Southern District of New York, No. 13-07678.

(Reporting by Nate Raymond; Editing by Tim Dobbyn and Cynthia Osterman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/NpTPj_D5GlA/story01.htm

U.S. demand for trucks, other vehicles drives strong GM profit


DETROIT |
Wed Oct 30, 2013 3:35pm EDT

DETROIT (Reuters) – General Motors Co (GM.N) on Wednesday posted a better-than-expected third-quarter profit as the U.S. automaker’s new lineup of pickup trucks and other revamped models boosted North American results.

While GM’s China operations remained stable, profit margins in the core North American market hit a two-year high on the strength of vehicles like the Chevrolet Silverado pickup and Impala sedan which allowed GM to boost pricing by $400 million.

Like its smaller U.S. rival, Ford Motor Co (F.N), GM also offered a more optimistic picture of Europe, where the company’s revenue rose for the first time in two years.

GM’s shares rose as much as 4.1 percent, the largest one-day percentage gain in nearly two months. They were still up 3.4 percent at $37.27 late on Wednesday afternoon on the New York Stock Exchange.

Europe has been a focus for investors since GM went public in November 2010 following its bankruptcy reorganization and a $49.5 billion government bailout in 2009.

GM Chief Financial Officer Dan Ammann said the No. 1 U.S. automaker’s European unit remains on track to achieve its target of breaking even in the next year or so. GM has lost money in Europe for 13 straight years.

“The story in Europe overall is really consistent with the plan we laid out,” he told reporters. “Our overall objective of getting to break-even by mid-decade, clearly we’re well on track toward that.”

Excluding one-time items, GM earned 96 cents a share, 2 cents more than analysts polled by Thomson Reuters I/B/E/S had expected. The quarter included charges related to the repurchase of preferred stock and an impairment of goodwill in the company’s South Korean operations.

MARGIN BOOST

GM has set a goal of hitting 10 percent profit margins in North America by mid-decade. In the third quarter, GM’s margin in the region jumped to 9.3 percent, which Citi analyst Itay Michaeli said “adds credibility” to GM’s margin target.

GM’s U.S. finance chief, Chuck Stephens, said the fourth-quarter margin would be lower than in the third quarter, but still higher than a year ago.

Ford’s North American profit margin in the third quarter was 10.6 percent.

Also on Wednesday, Japanese automaker Honda Motor Co (7267.T) and Chrysler Group both reported strong U.S. sales in the quarter.

GM’s third-quarter net income attributable to common shareholders fell to $757 million, or 45 cents a share, compared with $1.48 billion, or 89 cents a share, in the year-ago quarter. But operating earnings rose almost 15 percent to $2.64 billion.

Revenue rose 3.7 percent from last year to $38.98 billion, but that was short of the $39.49 billion analysts had expected.

“So much for the profits warning that was worrying the market,” Morgan Stanley analyst Adam Jonas said in a research note, adding the results may cause Wall Street to raise 2014 profit estimates slightly. “(Third-quarter) results for GM were more treat than trick.”

GM’s operating earnings in North America jumped 27 percent to a better-than-expected $2.19 billion. Analysts polled had expected $2.13 billion.

Stephens acknowledged production of the new full-size pickup trucks suffered slightly in October due to a shortage of axles from supplier American Axle (AXL.N), but the automaker expects to make up that lost output in the current quarter. He also said the issues would have no impact on next year’s launch of related large SUVs.

‘AHEAD OF PLAN’

The loss in Europe fell by more than half to $214 million from a loss of $487 million last year as GM squeezed out $400 million in costs and boosted revenue year over year for the first time since the third quarter of 2011. Analysts had expected a loss of $267.7 million.

“We believe management is ahead of plan to be break-even in Europe by mid-decade,” Buckingham Research analyst Joseph Amaturo said of GM in a research note.

GM’s comments echoed those by Ford, which last week forecast turning a profit in Europe by 2015.

CFO Ammann said GM will incur “significant” restructuring costs for closing its assembly plant in Bochum, Germany, by the end of 2014 and some of the charges may affect financial results as early as the fourth quarter of this year. He did not outline the expected savings from the move.

GM said in a U.S. regulatory filing on Wednesday that it was in talks with Bochum labor officials to finalize severance terms for the plant’s hourly workers.

So far this year, GM’s restructuring in Germany has cost $64 million and eliminated 250 jobs, according to the filing. The company said it expected to complete restructuring programs in Europe in the fourth quarter that would cost another $100 million and cut an additional 390 jobs.

Ammann also reaffirmed that GM’s break-even target does not include any material impact from savings generated by the company’s alliance with French automaker Peugeot SA (PEUP.PA).

GM recently said it would shift the financial reporting of its profitable Russian market to the European unit from the international operations, but Ammann said that does not change the break-even timetable.

China’s earnings slightly improved and GM’s China partner, SAIC Motor Corp (600104.SS), on Wednesday posted a stronger-than-expected profit. However, markets outside China, including India and Southeast Asia, were a hindrance due to more competitive pricing by competitors, Ammann said.

Analysts said Japanese automakers were taking advantage of the weaker yen to offer deals.

(Editing by Maureen Bavdek and Matthew Lewis)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/eOUOm1l6GDo/story01.htm

Madoff trustee may pursue $8 billion claims vs. banks in feeder fund cases


NEW YORK |
Wed Oct 30, 2013 2:12pm EDT

NEW YORK (Reuters) – A federal judge has made it easier for the trustee seeking money for Bernard Madoff’s victims to pursue more than $8 billion of claims against banks and other financial firms that received money from “feeder funds” that profited from the swindler’s massive Ponzi scheme.

U.S. District Judge Jed Rakoff said federal bankruptcy law did not require the trustee, Irving Picard, to obtain final court orders against the feeder funds before pursuing claims against third parties to which those funds transferred money.

In a decision made public on Wednesday, the Manhattan judge said a contrary holding “could cause bankruptcy proceedings to drag on unnecessarily for years, wasting court resources as well as creating unnecessary uncertainty for potential defendants who may be subject to recovery proceedings.”

The ruling keeps alive claims in roughly 57 cases, against defendants including affiliates of Bank of America Corp (BAC.N), Barclays Plc (BARC.L) and Standard Chartered Plc (STAN.L), that will now be handled in the U.S. bankruptcy court in Manhattan, court records show.

Picard said he has so far recovered $9.5 billion of the roughly $17.3 billion of principal that Madoff’s customers lost.

“This is a significant development in the liquidation proceedings as the … trustee’s current subsequent transfer complaints seek recoveries in excess of $8 billion,” Amanda Remus, a spokeswoman for Picard, said in a statement.

Robinson Lacy, a Sullivan Cromwell partner representing some of the third-party transferees, declined to comment.

The case related to Fairfield Sentry Ltd and Kingate Global Fund Ltd, two feeder funds that in 2009 went into liquidation.

Feeder funds sent customer assets for investment to Bernard L. Madoff Investment Securities LLC, which from time to time then returned payments based on the profits shown in often fictitious account statements. The feeder funds would then use these sums to pay clients, fund managers and others.

“COMPLEX CASE”

Picard, a partner at the law firm Baker Hostetler, claimed he was authorized on behalf of Madoff victims to recover sums illegally transferred to the funds by Madoff’s firm, and later transferred to the third parties.

In his decision, Rakoff said bankruptcy law did not require the trustee to bring or fully complete litigation against initial transferees, the feeder funds, before pursuing the third party transferees.

The judge also rejected an argument by some of the third party transferees that Picard missed a December 2010 deadline, two years after Madoff’s fraud was uncovered, to sue them.

“In a complex case like this one, it is unreasonable that the trustee, who is a stranger to any non-debtor transactions, would be expected to bring all recovery proceedings against subsequent transferees” within two years, he said.

Picard has asked the U.S. Supreme Court to review a lower court ruling that blocks him from suing JPMorgan Chase Co (JPM.N), UBS AG (UBSN.VX) and other banks he believes aided the fraud.

Madoff, 75, pleaded guilty in March 2009 and is serving a 150-year prison term. Five former employees of his firm are now on trial in Manhattan for having allegedly aided in his fraud.

The case is Securities Investor Protection Corp v. Bernard L. Madoff Investment Securities LLC, U.S. District Court, Southern District of New York, No. 12-mc-00115.

(Reporting by Jonathan Stempel in New York; Editing by Alden Bentley)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/AfRIrPb2NyI/story01.htm