News Archive

Comcast offers to divest customers to win TWC approval

(Reuters) – Comcast Corp offered to sell 1.4 million pay TV subscribers to Charter Communications Inc for $7.3 billion as part of a transaction aimed at winning regulatory approval for its proposed $45 billion takeover of Time Warner Cable.

Comcast also said it would divest another 2.5 million subscribers into a new publicly traded company, dubbed SpinCo for now, to be one-third owned by Charter and two-thirds by Comcast shareholders.

The deal would make Charter – whose own bid for Time Warner Cable was thwarted by Comcast’s higher offer – the second-biggest U.S. pay TV company with 5.7 million customers, overtaking Cox Communications Inc.

Charter’s shares rose as much as 10 percent to $142.70 in early trading on Monday. Comcast shares were up 1.4 percent at


Comcast would have less than 30 percent of the U.S. residential cable or satellite TV market after the deal, the company said in a statement.

The agreement is contingent on Comcast’s Time Warner Cable deal being approved by the Justice Department and the U.S. Federal Communications Commission, a process that could take many months.

Analysts said the deal was a pre-emptive move by Comcast ahead of a review of the deal by regulators.

“Comcast wanted to do this deal now with Charter so it could get in front of regulators at the Justice Department and the FCC at the same time as the Time Warner Cable deal,” a source familiar with the matter said.

The source said there was a standstill agreement with Charter stipulating that it cannot gain full control of SpinCo for four years. Comcast will have no ownership in SpinCo.

SpinCo would have an estimated enterprise value of $14.3 billion and an equity value of $5.8 billion, Charter and Comcast said in an investor presentation. (

The divestments, mostly in the U.S. Midwest, would deliver about $19.5 billion in value to Comcast shareholders, the companies said.

“For Charter, this deal is a transformative event and sets them up over time to consolidate the balance of the rest of the cable industry,” Pivotal Research Group analyst Jeff Wlodarczak told Reuters, adding that the deal was good for both parties.


Charter’s deal with Comcast marks an acceleration of John Malone’s effective return to cable through his investment vehicle Liberty Media Corp, which owns about 27 percent of Charter, Wlodarczak said.

Liberty Media got involved in working with Comcast but Charter did the nuts and bolts of the deal, the source said.

Cable pioneer Malone, who set up the largest cable operator in the United States before selling it to ATT in 1999, returned to the U.S. cable market with Liberty’s investment in Charter in March 2013.

In addition to the divestments, Charter and Comcast will swap about 1.6 million customers.

Charter will get the Detroit and Minneapolis-St. Paul markets, the companies said in the presentation.

Comcast will get parts of the Los Angeles, New York state, western Massachusetts, North and South Carolina and parts of Texas and Georgia markets.

Time Warner Cable had 11.2 million residential video subscribers as of March 31, while Comcast had 22.6 million.

Charter, which also reported better-than-expected first-quarter revenue, said it expected to fund the purchase of 1.4 million customers through debt.

Time Warner Cable shares were up 1 percent at $141.01.

(Additional reporting by Abhirup Roy and Sruthi Ramakrishnan in Bangalore; Editing by Saumyadeb Chakrabarty)

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BofA suspends buyback, dividend increase after capital error

(Reuters) – Bank of America Corp said on Monday it will suspend a planned increase in its quarterly dividend as well as its latest stock buyback program because it miscalculated a measure of the capital on its books.

The second-largest U.S. bank said because of the mistake it had to reduce by $4 billion the capital level that regulators watch. The figure equals about three-quarters of the extra money that regulators had approved for returning to shareholders over the next four quarters.

The Federal Reserve ordered Bank of America to suspend and resubmit its 2014 capital plans within 30 days. Its shares fell 4.7 percent at midday.

The Fed said the bank must correct the errors in its regulatory capital calculations and ensure no further reporting problems. (

Bank of America said it expects its revised request for buybacks and dividends to be lower than the one announced in March. The Fed had approved buying back $4 billion of BofA shares and increasing the dividend by more than $1.5 billion a year, or to 5 cents per share from 1 cent quarterly.

That would mark the second time the bank has scaled back its proposed capital plan. Earlier this year the Fed ordered Bank of America to tweak its request because the original version would have left it with inadequate capital to withstand a hypothetical economic crisis. (

As part of the Dodd-Frank financial reform law, banks are required to submit proposed changes to dividends or share repurchases each year.

The bank identified the errors over the past week as it prepared a quarterly filing with the U.S. Securities and Exchange Commission, a person familiar with the matter said. It notified the Fed and worked through the weekend so it could announce the adjustments on Monday, the source said.

The problems were related to how it calculated the value of structured notes that investment bank and brokerage Merrill Lynch had issued. Bank of America agreed to buy Merrill Lynch hours before Lehman Brothers filed for bankruptcy in September 2008 and inherited the notes.

The reduction in regulatory capital and capital ratios will not affect the company’s historical consolidated financial statements or shareholders’ equity, it said.

The bank also said a third party will review its processes before it resubmits its capital plan to the Fed.

Former Chief Executive Officer Ken Lewis won praise for the Merrill deal, which was seen as preventing the brokerage’s demise.

Bank of America shares dropped 75 cents to $15.20 on the New York Stock Exchange. Until Friday’s close, the stock had barely budged since the start of the year. The KBW bank index slipped about 1.7 percent in the same period.

(Reporting by Peter Rudegeair in New York and Tanya Agrawal in Bangalore; Editing by Don Sebastian, Ted Kerr and Jeffrey Benkoe)

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UK prosecutor charges US-based ex-Barclays staff in Libor probe

LONDON (Reuters) – Britain on Monday filed its first criminal charges against U.S.-based Libor traders, as the UK arm of a complex global investigation into alleged benchmark interest-rate rigging stretches across the Atlantic.

The Serious Fraud Office (SFO) charged three former traders at British bank Barclays (BARC.L) – director of dollar fixed-income swaps Jay Merchant and dollar interest rate derivative traders Alex Pabon and Ryan Reich – with conspiracy to defraud in connection with its Libor inquiry.

A provisional hearing has been scheduled for the three men, who the SFO confirmed were currently in the United States, at Westminster Magistrates Court in London on May 27.

Lawyers for Reich and Merchant, Ben Rose of Hickman and Rose and Brian Spiro of BCL Burton Copeland, respectively, said their clients refuted any allegations of wrongdoing.

“He (Reich) is not guilty of this offence and will vigorously contest these allegations at his forthcoming trial,” Reich’s lawyer said in an emailed statement.

Merchant’s lawyer said: “Should this matter proceed, he (Jay Merchant) has no doubt that he will be fully vindicated and it will be shown that he acted at all times in a right and proper manner.”

Pabon’s London lawyer was not immediately available for comment.

The charges could prompt the first extradition to Britain from the U.S. in the lengthy investigation into the alleged rigging of Libor (London interbank offered rate), a central cog in the global financial system.

The SFO, which has now charged 12 in connection with its criminal Libor investigation, declined to comment on any extradition request or give further details about the charges.

The investigation into benchmark interest rates has been overshadowed by a parallel inquiry into allegations of foreign-exchange market rigging, which on March 5 reached into the heart of London’s financial establishment when the Bank of England suspended a staff member.

However, the inquiry into alleged fixing of Libor and related Euribor rates, against which around $450 trillion of financial contracts from derivatives to consumer loans are priced, has so far seen U.S. and European authorities fine 10 banks and brokerages $6 billion and charge 16 men.

The SFO in February charged three former London-based Barclays Libor submitters – Peter Johnson, Jonathan Mathew and Stylianos Contogoulas – over a two-year scheme to rig rates and in March charged three former ICAP (IAP.L) brokers with fraud-related Libor offences.


Barclays was the first bank to settle U.S. and UK regulatory allegations of rate manipulation, paying around $450 million in fines in 2012. But even regulators admitted privately they were taken aback by an ensuing public and political backlash, which forced out four top Barclays directors, sparked a fraud squad probe and several parliamentary reviews.

In their case to date against former London-based Barclays traders already charged, SFO lawyers have said they have sifted through “vast amounts” of documents, adding that much of the evidence against Johnson, Mathew and Contogoulas was in email form.

The three men, who are next expected to appear in court towards the end of July, are the first to face charges for the alleged manipulation of the U.S. dollar-denominated Libor rate. Ten other men face U.S. and UK criminal charges for manipulating yen-denominated Libor.

The SFO has already charged three other men as part of its Libor investigation, including Tom Hayes, a former yen derivatives trader at UBS (UBSN.VX) and Citigroup (C.N), who pleaded not guilty in December.

Hayes is due to stand trial in January 2015 on eight charges of conspiring with staff from at least 10 major banks and brokerages to manipulate yen Libor rates between 2006 and 2010.

Terry Farr and James Gilmour, two brokers from RP Martin, have been charged and pleaded not guilty to similar fraud-related offences. Their trial has been scheduled for September 2015, in part to allow the SFO time to bring charges against further alleged co-conspirators.

(Editing by Erica Billingham)

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Wall St. boosted by merger flurry; Pfizer lifts Dow

NEW YORK (Reuters) – U.S. stocks rose on Monday, rebounding from the previous session’s decline, amid a flurry of merger and acquisition activity in the pharmaceutical sector.

Pharmaceuticals outperformed other sectors after U.S. drugmaker Pfizer Inc (PFE.N) was said to be working on its next move in a potential $100 billion bid to take over Britain’s AstraZeneca Plc (AZN.L), after two earlier bids were rejected.

Pfizer was the biggest gainer on the Dow Jones industrial average, up 3.9 percent at $31.94.

Separately, Forest Laboratories Inc (FRX.N) said it would buy Furiex Pharmaceuticals Inc (FURX.O) for up to $1.46 billion, including milestone payments to access Furiex’s promising treatment for irritable bowel syndrome.

Furiex Pharmaceuticals shares jumped 30 percent to $104.12 while Forest Laboratories shares were up 0.4 percent at $90.27.

Adding optimism about the economy, data showed contracts to buy previously owned U.S. homes rose in March for the first time in nine months, in the latest sign that the housing market was stabilizing after a recent wobble.

“Clearly investors are shifting focus to the rich economic calendar we have this week and other events like the FOMC meeting and away from geopolitical concerns,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

U.S. President Barack Obama on Monday announced new sanctions against some Russians to stop President Vladimir Putin from fomenting a rebellion in eastern Ukraine, but said he was holding broader measures against Russia’s economy “in reserve.

The Dow Jones industrial average .DJI rose 110.08 points, or 0.67 percent, to 16,471.54, the SP 500 .SPX gained 8.48 points, or 0.46 percent, to 1,871.88 and the Nasdaq Composite .IXIC added 12.654 points, or 0.31 percent, to 4,088.215.

On the benchmark SP index, financial stocks were among the worst performers, with the sector .SPSY down 0.2 percent. Bank of America shares were down 4.6 percent at $15.22 while Goldman Sachs (GS.N) fell 0.9 percent to $156.81.

Bank of America Corp (BAC.N) said it would suspend a $4 billion stock buyback program and a planned increase in its quarterly dividend after it miscalculated the treatment of certain structured notes related to its acquisition of Merrill Lynch in 2009. The company also said it would resubmit its 2014 capital plan to the Federal Reserve. ID:L3N0NK41L

On the Nasdaq, Inc (AMZN.O) was one of the biggest losers, extending Friday’s sharp decline following its earnings statement. The stock was off 2.2 percent at $296.90. Netflix Inc (NFLX.O) was down 2.5 percent at $313.98.

Comcast Corp (CMCSA.O) offered to sell 1.4 million pay TV subscribers to Charter Communications Inc (CHTR.O) for $7.3 billion as part of a transaction aimed at winning regulatory approval for its proposed $45 billion takeover of Time Warner Cable (TWC.N).

Charter Communications shares rose 7.3 percent to $139.56 after the company also reported a 15 percent jump in first-quarter revenue.

(Editing by Bernadette Baum)

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Pfizer chases AstraZeneca for potential $100 billion deal

LONDON (Reuters) – U.S. drugmaker Pfizer Inc is working on its next move in a potential $100 billion battle for Britain’s AstraZeneca Plc after having two bids rejected, a chase welcomed by investors in both companies as deal making grips the healthcare industry.

Pfizer said on Monday it made a 58.8 billion pounds ($98.9 billion) bid approach to AstraZeneca in January and had contacted its British rival again on April 26, seeking to further discuss a takeover.

Buying AstraZeneca would boost Pfizer’s pipeline of cancer drugs and create significant cost and tax savings.

AstraZeneca shares were up 13 percent on news of the latest approach, which would be the biggest foreign acquisition of a British firm and one of the largest pharmaceutical deals. Pfizer rose 4 percent on the New York Stock Exchange.

Under British takeover rules, Pfizer has until May 26 to announce a firm intention to make an offer or back away.

The renewed approach comes amid a wave of mergers and acquisitions in the sector, pushing the value of deals to $153 billion so far this year, as the industry restructures amid healthcare spending cuts and competition from cheap generics.

“Society wants products faster, they want more products and they want value,” Pfizer Chief Executive Ian Read told reporters. “Industry is responding to society’s request for increased efficiencies and productivity.”

Read said AstraZeneca had declined to engage in talks and the U.S. group was now considering its options, but he remained convinced that combining the two companies made strategic sense and would benefit AstraZeneca investors.

Read told U.S. analysts that since the initial approach to AstraZeneca four months ago, both companies had seen experimental drugs fare well in trials. At the same time, Pfizer concluded it was too difficult to pursue big deals domestically while being on the hook for higher U.S. tax rates.

“We’re coming from a position of strength, on our near-term pipeline” of experimental drugs, Read said.

Recent favorable data include results for Pfizer’s experimental breast cancer medicine palbociclib, studies testing new uses for its Xeljanz arthritis drug and trials showing its Prevnar vaccine for children also prevents pneumonia in the elderly.

AstraZeneca said Pfizer’s suggested offer undervalued the company “very significantly,” adding that Pfizer wanted to pay 70 percent in shares and only 30 percent in cash. AstraZeneca urged its shareholders to take no action and said it remained confident of its independent strategy.

Pfizer’s original proposal, made to the board of AstraZeneca on January 5, would have valued AstraZeneca shares at 46.61 pounds each – a premium of around 30 percent at the time.

AstraZeneca said the proposal comprised 13.98 pounds in cash and 1.758 Pfizer shares for each AstraZeneca share.

“My guess is it will go for somewhere between 50 and 55 (pounds a share),” said Dan Mahony, a fund manager at Polar Capital, who raised his stake in AstraZeneca in February last year. “I doubt Pfizer will want to go completely hostile.”

Most of Pfizer’s past deals have been conducted on a friendly basis, including its 2009 purchase of Wyeth for $68 billion. But it has been willing to play hardball if needed, as it did in 2000 with its $90 billion purchase of U.S. rival Warner-Lambert, with which it won full ownership of cholesterol fighter Lipitor, the best-selling drug of all time.

Industry analysts said Pfizer was likely to have to offer more than in January due to a run-up in AstraZeneca shares since then, so the value of any new offer could be above $100 billion.


Pfizer’s declaration turns up the heat under AstraZeneca Chief Executive Pascal Soriot, who has been in the job since October 2012 and who made clear last week he saw an independent future for the group, flagging spin-offs of two non-core units as one option to create more value.

Soriot has been credited with reviving AstraZeneca’s previously thin pipeline of new drugs, badly needed to offset a wave of patent expiries on older drugs, and shares in the group have now risen more than 60 percent under his tenure.

However, his overhaul – including an ambitious plan to move the company’s research and corporate headquarters to Cambridge, England – is still a work in progress and he has also come under fire from some shareholders over executive pay.

Read said it was premature to say who would lead a combined company.

Buying AstraZeneca would give Pfizer a number of promising – though still risky – experimental cancer medicines known as immunotherapies that boost the body’s immune system to fight tumors. It could also generate significant cost savings for the U.S. group.

Acquiring a foreign company also makes sense for Pfizer as it has tens of billions of dollars accumulated through foreign subsidiaries, which, if repatriated, would be heavily taxed.

The drugmaker has more recently been divesting certain operations, while mega-mergers had fallen out of fashion in the pharmaceuticals industry following skepticism about how well some of them have worked.


But CEO Read said large deals could also make good sense and buying AstraZeneca would “maintain the flexibility for the potential future separation of our businesses”.

The transaction would complement both Pfizer’s innovative drug businesses and also its established products business – comprising older and off-patent medicines – which many analysts expect to be eventually spun off.

Tim Anderson, an analyst at brokerage Bernstein, said AstraZeneca shareholders could be happy with a deal that gave them a hefty financial return, but Pfizer’s investors might have more mixed views about the wisdom of another very large deal.

In addition to using offshore cash, buying AstraZeneca would be tax-efficient since Pfizer could re-domicile to Britain and enjoy lower tax rates, thanks to attractive incentives to companies that manufacture and hold patents in the country.

Pfizer envisages combining the two drugmakers under a new UK-incorporated holding company, although the head office and stock market listing would remain in New York. But the suggested deal has triggered worries about jobs in Britain’s drug sector, viewed as a key industry by the government.

AstraZeneca has already laid off thousands of staff as it shrinks its cost base to cope with a fall in sales due to patent losses on blockbuster medicines, while Pfizer has shuttered a research site in Sandwich, southern England.

Read said Pfizer had contacted the British government about its plans on Monday, after Finance Minister George Osborne said on Friday that any deal was “a commercial matter between the companies.

Bank of America Merrill Lynch, JP Morgan and Guggenheim Securities are advising Pfizer.

($1 = 0.5948 British Pounds)

(Additional reporting by Ransdell Pierson in New York; Editing by Mark Potter, David Holmes and Bernadette Baum)

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Putin’s oil tsar emerged from shadows to wield vast power

MOSCOW (Reuters) – When Vladimir Putin brought Igor Sechin out of the shadows and into the Kremlin 14 years ago, Russian newspapers said they had no photographs of him and alluded to his behind-the-scenes influence by calling him Darth Vadar.

A man with no energy industry background, Sechin has served for two years as boss of Rosneft (ROSN.MM), a state-controlled company that under Putin swallowed up Russian oil assets to become the biggest publicly listed oil producer in the world.

A close lieutenant of Putin’s for more than two decades, Sechin is the most important figure among a list of Russians whose U.S. assets were frozen on Monday as part of sanctions intended to push Moscow to stop supporting a pro-Russian uprising in eastern Ukraine.

His biography has gaps – he was posted to Africa in the 1980s, officially as an interpreter for a Soviet trade body. But he is widely reported to have served, like Putin himself, as a spy during the dying days of the Soviet Union, which he has never denied.

That shared international cloak-and-dagger background has helped make him one of Putin’s most trusted aides and arguably the second most powerful man in Russia, despite having no official role in government since 2012.

He played a central role in Putin’s drive to reimpose the state’s authority over Russia’s most valuable asset, its energy industry, which had been carved up and sold off to oligarchs in rigged privatization auctions in the 1990s.

Sechin, 53, joined Putin in the Kremlin from the outset, quickly earning a reputation as a leader of the “siloviki” – a conservative faction of former members of the security services close to Putin who controlled the levers of power.

With reports growing in recent weeks that Sechin might be on a sanctions list, he has shrugged off the likely impact, saying last month they merely would unite people around Putin.

“As for the country’s loyal elite, sanctions have always led to the consolidation and concentration of forces against pressure from outside,” Prime news agency quoted him as saying.

The comment is a sign of Sechin’s loyalty to Putin, the single asset that has made him most useful to the president.

“He is very faithful. He has his own notion of honor, which

is to stay loyal till the bitter end,” said Yevgeny Muravich, who studied languages, including Portuguese, with Sechin at Leningrad State University, and worked with him in Mozambique.


Sechin’s languages were useful when posted to southern Africa in the 1980s, at a time when guerrilla wars in Portuguese-speaking Angola and Mozambique were two of the hot frontlines of the Cold War. He says he was serving in the military at the time.

Rosneft declined to comment on Sechin’s past jobs. Repeated requests for an interview were left unanswered.

After the fall of the Soviet Union, Sechin, like Putin, returned home to a Russian Federation suddenly shorn of its empire. The two men worked together in the St Petersburg mayor’s office in the 1990s where Putin began the rise that brought him to the Kremlin at the start of the new millennium.

When Putin took over as president from an ailing Boris Yeltsin, he brought Sechin to the Kremlin as deputy chief of staff, where he became known as a “grey cardinal” with power beyond his official title.

With most of the Russian oil industry then in the hands of oligarchs, Putin used Rosneft, a state-controlled firm that produced just 250,000 barrels of oil a day in 1998, to reassert the state’s role. Putin named Sechin Rosneft chairman in 2004.

Mikhail Khodorkovsky, a former oligarch who fell out with Putin and was jailed for more than a decade, says it was Sechin who masterminded the breakup of his Yukos oil firm, mostly sold into state hands after Khodorkovsky’s 2003 arrest.

After relentlessly extending its reach, Rosneft now produces 4.2 million barrels per day – 40 percent of Russia’s output and nearly 5 percent of the world’s. That is nearly double the output of Exxon Mobil, the biggest Western major.

When Putin took a break from the presidency and served as prime minister for a term from 2008-2012, Sechin served as deputy premier. When Putin returned to the Kremlin, he put Sechin in charge of Rosneft again, this time as CEO.

Under Sechin, Rosneft acquired BP’s (BP.L) half share in a Russian joint venture last year in a huge deal that left Britain’s largest company with a 20 percent stake in Rosneft.


By concentrating so much of the Russian oil industry in one state-controlled firm under the supervision of a personally loyal lieutenant, Putin reversed the chaos of the Yeltsin era, when Russia’s oil fields were divided among oligarchs.

Former employees at Rosneft say Sechin is a demanding boss.

“He rules with an iron fist, he keeps all figures in his head. He has a great memory and a fantastic ability to work long hours,” one former employee said.

Sechin strictly follows Putin’s instructions but also appears to influence the president. Industry sources say that in 2005 Sechin blocked plans that Putin had blessed for Rosneft to merge with Gazprom (GAZP.MM) because he did not like the way control of the behemoth would be shared.

“He follows orders from above (Putin), but sometimes he generates these orders,” said a top Russian executive who asked not to be named.

Putin and Sechin have also used Rosneft’s giant portfolio of undeveloped assets to win international influence.

While serving as deputy prime minister, Sechin struck exploration deals with Exxon Mobil (XOM.N), Norway’s Statoil (STL.OL) and Italy’s Eni (ENI.MI). Those partnerships seek to develop Rosneft’s vast offshore reserves and help it acquire know-how in extracting hard-to-recover oil.

Industry sources say Sechin cleared the way by convincing Putin to back a new tax regime that encourages firms to invest.

An industry insider told Reuters that Sechin’s ultimate goal was to turn the company into a global major, similar to BP (BP.L) and Shell (RDSa.L). Its purchase of Morgan Stanley’s oil trading business is a part of that drive.

(Additional reporting by Katya Golubkova, Editing by Timothy Heritage and Peter Graff)

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AOL investigates cyber attack, says user data compromised

BOSTON (Reuters) – AOL Inc on Monday urged its tens of millions of email account holders to change their passwords and security questions after a cyber attack compromised about 2 percent of its accounts.

The company said it was working with federal authorities to investigate the attack, in which hackers obtained email addresses, postal addresses, encrypted passwords and answers to security questions used to reset passwords.

It said there was no indication that the encryption on that data had been broken.

A company spokesman declined to say how many email accounts are registered on its system.

AOL said that it identified the breach after noticing a “significant” increase in the amount of spam appearing as spoofed emails from AOL addresses. Such emails do not originate from a sender’s service provider, but their addresses are edited to make them appear that way.

(Reporting by Jim Finkle; Editing by Richard Valdmanis and Sofina Mirza-Reid)

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U.S. justices agree to hear homeowner case against bank

WASHINGTON (Reuters) – The U.S. Supreme Court on Monday agreed to decide what process struggling homeowners need to follow if they want to back out of mortgages issued when lenders fail to adhere to a federal disclosure law.

The court will weigh whether homeowners need to write a letter to their lender or file a lawsuit in order to benefit from a provision of the federal law, known as the Truth in Lending Act. The law allows consumers to rescind mortgages for up to three years after the agreement was made if the lender does not notify them of various details about the loan, including finance charges and rate of interest.

The provision is typically used by homeowners who are struggling to pay their mortgages. Lawyers for consumers say mortgage companies routinely violated the law in the years prior to the 2008 financial crisis.

Appeals courts are split over what homeowners have to do.

The court agreed to hear an appeal filed by Larry and Cheryle Jesinoski over the $611,000 loan they obtained from Countrywide Home Loans Inc. in 2007. Countrywide is now part of Bank of America Corp(BAC.N).

Oral arguments and a decision are expected in the court next term, which begins in October and ends in June.

The case is Jesinoski v. Countrywide, U.S. Supreme Court, No. 13-684.

(Reporting by Lawrence Hurley; Editing by Howard Goller and Dan Grebler)

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Lidl postpones plan to open U.S. stores to 2018

BERLIN (Reuters) – German discount supermarket chain Lidl has delayed a plan to enter the U.S. market until 2018 after the surprise departure of two top executives last month.

Klaus Gehrig, chief executive of the Schwarz Group which owns Lidl, told German local newspaper Heilbronner Stimme that preparations to enter the United States were proceeding apace but the first stores were only planned for 2018. His comments were confirmed by a Lidl spokeswoman on Monday.

Lidl, which has expanded rapidly in Europe to some 9,000 stores in 26 countries, had been expected to open 100 stores in the United States as early as next year, mainly in East Coast markets like its German arch-rival Aldi.

Lidl is also planning to expand to Serbia and Lithuania, although it has not set a timetable for entering those markets.

Lidl declined to comment on the reason for the delay, but German media and analysts have speculated it could be linked to the departure last month of the group’s long-serving chairman.

The Schwarz Group said it had removed Karl-Heinz Holland, along with Dawid Jaschok as head of buying and marketing, due to “unbridgeable”, but undisclosed, differences over future strategy.

They were replaced by former consultant Sven Seidel and Robin Goudsblom, both aged 40.

Britain’s Tesco (TSCO.L) last year pulled out of the United States after a costly failure with a new low-price chain.

But Aldi, which first entered the United States in 1976, operates nearly 1,300 stores there, mainly in the Midwest and the East Coast, and recently announced a five-year plan to open another 650 stores across the country.

Germany’s Manager Magazin reported that Lidl’s Holland and Gehrig clashed over how to handle a pricing dispute with Coca-Cola and when Holland challenged a decision by Gehrig to remove Jaschok.

Based in Neckarsulm in southern Germany, Lidl is owned by Germany’s third-richest man, Dieter Schwarz, son of the company’s founder Josef Schwarz. Gehrig took over as group chief executive from Dieter Schwarz in 2004.

The Schwarz Group, which also owns the Kaufland hypermarket chain, saw its turnover rise over 9 percent to 74 billion euros ($102 billion) in the 2013/14 year, making it Europe’s third-biggest retailer behind Carrefour (CARR.PA) and Tesco. ($1 = 0.7227 Euros)

(Reporting by Emma Thomasson; Editing by Ruth Pitchford)

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