News Archive

Alibaba discloses powerful partners, reveals slowing growth

BEIJING (Reuters) – Alibaba Group Holding revealed the members of its powerful 27-person partnership and board on Monday, while disclosing that the Chinese e-commerce giant’s growth has slowed from the red-hot pace of recent quarters.

In an updated prospectus for what could be the largest tech IPO in history, Alibaba said the partnership includes founder Jack Ma, Executive Vice Chairman Joseph Tsai and Chief Executive Officer Jonathan Lu. The group has the exclusive right to nominate a majority of Alibaba’s nine-member board, effectively ensuring control of the company rests in the hands of insiders.

Among four independent directors asked to join a post-IPO board were former Hong Kong Chief Executive Tung Chee Hwa, Yahoo Inc founder Jerry Yang, and J. Michael Evans, former vice chairman of Goldman Sachs Group Inc.

Alibaba is expected to eclipse Facebook Inc’s $15 billion initial share sale in 2012 when it debuts late this summer. But investors and governance experts have raised questions about Alibaba’s scant disclosures, and Ma’s murky web of third-party transactions.

Tung’s inclusion may open doors for Alibaba, though his tenure was marked by controversy. He is the father-in-law of corporate finance chief Michael Yao.

“His family relationship is a negative from a Western governance point of view, but probably a positive from an Asian” perspective, said Boston University School of Management professor James Post. “The board will be the place where ‘East meets West’ governance happens at Alibaba in the years to come.”

The company’s five executive board directors are Ma, Tsai, Lu, Chief Operating Officer Daniel Zhang, and Masayoshi Son, founder of SoftBank Corp, Alibaba’s biggest shareholder with a 34.3 percent stake.

Alibaba previously said its partnership encompassed 28 members, elected annually. It did not explain the change on Monday.


Monday’s filing also divulged more information about the operations of Alibaba, which handles more transactions than AMZN.O and eBay combined.

Alibaba reported its net income in the quarter ended March climbed 32 percent to 5.543 billion yuan ($892.7 million). Revenue was up 38 percent to 12.031 billion yuan, compared to a 62 percent increase in the previous quarter.

Shares of Yahoo, which tend to move in sync with the perceived valuation of its roughly 24 percent slice of Alibaba, closed more than 5 percent lower.

Alibaba’s eBay-like Taobao saw gross merchandise volume rise 32 percent to 295 billion yuan in the March quarter. For Amazon-like Tmall, volume was up 90 percent to 135 billion yuan. Both rates of growth were down from previous quarters.

“From the fourth quarter, you’re always going to have a drop-off quarter to quarter, but this is a pretty big one,” said Ronald Josey at JMP Securities.

(Reporting by Paul Carsten and Matthew Miller; Additional reporting by Liana Baker in New York and Alexei Oreskovic in San Francisco; Editing by Greg Mahlich, Leslie Adler and Paul Simao)

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U.S. top court rejects Argentina appeal in bond fight

WASHINGTON/BUENOS AIRES (Reuters) – The U.S. Supreme Court declined on Monday to hear Argentina’s appeal over its battle with hedge funds that refused to take part in its debt restructurings, an unexpected move that risks toppling Latin America’s No 3 economy into a new default.

The high court left intact lower court rulings that ordered Argentina to pay $1.33 billion to the so-called holdouts who refused 2005 and 2010 debt swaps in the wake of its catastrophic 2001-02 default on $100 billion.

This could open the door to claims from other holdouts worth as much as $15 billion, a hefty sum for a slowing economy struggling with rapidly dwindling foreign reserves.

The news triggered a nosedive in Argentine stocks and bonds after investors expected the court to delay its decision and give Argentina time to negotiate with holdouts or restructure its exchange bonds outside of New York legislation.

The impact on global markets was muted given the country’s economic isolation since its default.

Argentina has previously refused to pay up. It argues it does not have the funds and cannot give holdouts preferential treatment over exchange bondholders after many of them bought the debt at a massive discount and are claiming payback in full.

If it sticks to that position, U.S. District Judge Thomas Griesa could prevent full payment to exchange bondholders even though the country is able and willing to pay them.

This could result in a default by June 30, when payments are due on discount bonds governed by New York, further setting back Argentina’s return to international capital markets.

“It’s a very damaging scenario for Argentina,” said Marco Lavagna at Ecolatina consultancy, noting that how lower courts implemented their rulings was key. “Maybe something could open up there and allow for negotiation.

Argentina hinted last month it might consider negotiating with holdouts but could not do so until December 31 of this year when a clause in its debt swaps prohibiting it from offering holdouts better terms expires.

Whether Argentina can keep stalling investors and U.S. courts until that date remains to be seen.

Argentine stocks .MERV were down 7.3 percent by 1730 GMT, while the U.S. dollar-denominated benchmark 2033 Discount bonds ARGGLB33=RR fell 7.86 points in price to bid 75.010. Siobhan Morden, New York-based head of Latin American strategy at Jefferies LLC, said the market reaction was relatively mild as investors waited to see how the government would respond.

The government was not immediately available for comment on Monday but state-run news agency Telam said President Cristina Fernandez would deliver a televised address on Monday night.

The decision comes at an unfortunate time for Argentina which has been trying to normalize relations with foreign investors and creditors in order to regain access to international funds.


Argentina wants to avoid making full payment to holdouts led by hedge funds Aurelius Capital Management and NML Capital Ltd, a unit of billionaire Paul Singer’s Elliott Management Corp, that Fernandez has slated as “vultures”.

Creditors holding about 93 percent of Argentina’s bonds agreed to participate in the two debt swaps in 2005 and 2010, accepting between 25 and 29 cents on the dollar.

Some groups such as the IMF, the Washington-based global lender, have said they are worried a ruling against Argentina will make it more difficult for other countries to restructure their debt and put financial calamity behind them.

“This is surprising because it is giving a precedent for any ‘vulture fund’ to go against any country, so any country is vulnerable in a restructure,” said Sebastian Centurion at ABC Exchange.

Others say collective action clauses that are now broadly used now in sovereign debt issuance should prevent Argentina’s particular case becoming a precedent. Emerging markets did not react to the news of the Supreme Court decision.

In a double blow to Argentina on Monday, the U.S. Supreme Court also ruled that creditors can seek information about Argentina’s non-U.S. assets in a case about bank subpoenas that is part of the country’s decade-long litigation with holdouts.

The question was whether NML could enforce subpoenas against Bank of America and Banco de la Nacion Argentina. The court’s ruling may nonetheless have limited impact in part because of Argentina’s limited assets around the world.

NML has in the past pursued Argentine assets aggressively in its fight to get full repayment for its bonds, in 2012 even seizing an Argentine navy ship in Ghana.

On the issue of paying bondholders, Argentina had said in its most recent court filing that the government would struggle to pay the bondholders in full while also serving its restructured debt.

In that scenario, “Argentina will have to face, objectively, a serious and imminent risk of default,” the filing said.

The bondholders dispute that assessment, saying in their own court filing there was evidence presented in lower courts that Argentina could afford to pay.

“We are reviewing the decisions from the Supreme Court today and what the next steps might be, but we have no other comment at this time,” a spokesman for NML told Reuters.

(Additional reporting by Daniel Bases in New York and the Buenos Aires bureau; Editing by Howard Goller, Kieran Murray and Andrew Hay)

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Wall Street ends up after deal news

NEW YORK (Reuters) – U.S. stocks closed slightly higher on Monday, supported by a flurry of merger news, but gains were limited as investors kept a close watch on rising oil prices caused by turmoil in Iraq.

Based on the latest available data, the Dow Jones industrial average rose 5.27 points or 0.03 percent, to end unofficially at 16,781.01. The SP 500 gained 1.62 points or 0.08 percent, to finish unofficially at 1,937.78. The Nasdaq Composite added 10.45 points or 0.24 percent, to close unofficially at 4,321.11.

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal)

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BofA’s Merrill fined for mutual fund overcharges

(Reuters) – Bank of America Corp’s Merrill Lynch unit was fined $8 million and will reimburse $24.4 million to customers to settle allegations that it overcharged more than 47,000 retirement accounts and charities that invested in mutual funds.

The Financial Industry Regulatory Authority, Wall Street’s self-funded regulator, on Monday said the restitution is in addition to $64.8 million that Merrill has already repaid, making the total payout about $97.2 million including the fine.

Like many rivals, Merrill has offered mutual fund shares in multiple classes. Typically, Class A shares carry lower fees than Class B and C shares, but also carry upfront sales charges.

FINRA said Merrill failed to provide promised sales charge waivers on many retirement accounts for more than five years beginning in January 2006, relying instead on financial advisers it did not properly supervise to do so.

As a result, about 41,000 small business retirement plans, and 6,800 charities and 403(b) retirement plan accounts available to ministers and public school employees, improperly paid sales charges on Class A shares or bought other share classes carrying higher fees, FINRA said.

Roughly 16,200 of these accounts will share in the $24.4 million payout, settlement papers show.

“Investors must be able to trust that their brokerage firm will offer the lowest-cost share classes available to them,” FINRA enforcement chief Brad Bennett said in a statement.

Merrill neither admitted nor denied FINRA’s charges in agreeing to settle.

A spokesman, Bill Halldin, said Merrill notified FINRA and voluntarily began making refunds after discovering the matter, which did not affect individual brokerage accounts or individual retirement accounts.

Bank of America is based in Charlotte, North Carolina, and bought Merrill on Jan. 1, 2009.

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Siemens and Mitsubishi challenge GE with Alstom offer

MUNICH/PARIS (Reuters) – Germany’s Siemens and Japan’s Mitsubishi Heavy Industries presented a joint offer to France’s Alstom on Monday that included 7 billion euros ($9.5 billion) in cash, challenging a bid by General Electric.

Under the deal, Siemens offered to buy Alstom’s gas turbines business for 3.9 billion euros in cash, and MHI to buy stakes in Alstom power assets including hydroelectric power equipment and grid, to be held in separate joint ventures.

MHI would inject 3.1 billion euros in cash into Alstom and offer to take a stake of up to 10 percent in the French firm from shareholder Bouygues (BOUY.PA).

“Alstom would remain an independent energy and transport player with a strong brand,” Siemens Chief Executive Joe Kaeser said. “Its energy business would be strengthened through the partner MHI and we intend to explore opportunities with Alstom to create a European rail champion for the world market.”

Alstom said it would review the proposal in the coming days.

Sources familiar with the matter said the offer would be worth over 1 billion euros more than GE’s, taking into account the value of the parts of the power businesses that would remain under Alstom’s control.

Mitsubishi would like to buy the Alstom stake alongside the French government but would not walk away from the deal if Bouygues was unwilling to sell, the sources said, adding that Bouygues would be contacted very soon.

GE (GE.N) said it had made progress in its discussions with the French government on its offer for Alstom’s energy business, which included “proposing alliances in energy and transport”. A spokesman said GE would not however be drawn into a bidding war.

The race to acquire power activities from the French train and turbine maker has entered a crucial week, ahead of a June 23 deadline set by GE for its 12.4 billion euro bid for all of Alstom’s energy arm, which includes its thermal power, renewable power and grid businesses.

The French government has criticized GE’s proposal and gave itself powers to veto a deal on the grounds it does not want Alstom, an innovator and big employer, to sell the bulk of its business to a foreign firm without the state having a say.

The government has also tried to negotiate better offers and alliances to preserve Alstom as a player in both transport and energy, seeing both as vital national industries at a time when unemployment is stuck above 10 percent and voters are increasingly turning towards the far-right.

French Finance Minister Michel Sapin said Alstom and the government would examine both offers once they are on the table and base their decision on that.

Alstom, best known overseas for making TGV high-speed trains, employs 18,000 people in France, around a fifth of its workforce. It was rescued from near bankruptcy by the state a decade ago and has since largely relied on public orders for power and rail equipment.


A rival offer gives France more leverage against GE as it seeks more job guarantees and a promise to keep major offices in France to secure the nation’s energy independence. Alstom is a supplier of turbines for nuclear plants worldwide, and Paris fears that having these fall under U.S. control could jeopardise exports in the atomic power industry.

However, it is far from certain whether the government, Alstom and its top shareholder Bouygues would genuinely support a Siemens-Mitsubishi offer over that of GE.

Bouygues said it had not yet been approached by Mitsubishi or the government about its 29 percent Alstom stake, but it would support whichever proposal was favoured by Alstom’s board.

Siemens CEO Kaeser and MHI’s chief Shunichi Miyanaga will present their plan to France’s lower house of parliament at 1500 GMT on Tuesday, and are likely to face tough questions from lawmakers worried about national interests.

The government has already secured a pledge from General Electric to create 1,000 new jobs in France within three years of a deal, but Sapin said on Sunday he expected the U.S. conglomerate to further improve its offer.

Siemens followed suit, saying on Monday it would offer a three-year job guarantee for workers at the gas business in France and Germany and said the alliance between Alstom and MHI would create more than 1,000 jobs in France.

GE is ramping up its charm offensive in the French press with ads saying its proposed “alliance” with Alstom would create a global energy leader based in France while strengthening Alstom’s transport business.

“Tomorrow is made in France,” the ads read, below a drawing of a plane – a hint at the jet engines GE makes via the U.S.-French venture CFM – flying over a field of wind turbines.

GE Chief Executive Jeff Immelt told French lawmakers last month his group would set up global headquarters for the grid, hydro, offshore wind and steam turbines businesses in France. GE is also considering a tie-up in rail signalling that would give Alstom control of that business, he said.

The government is worried that Alstom would be too weak once reduced to its smaller transport arm, and has played up an alternative tie-up with Siemens, which also makes trains, as an opportunity to create a European rail champion.

But Alstom has not shown interest in Siemens’s rolling stock, and Siemens, while saying it would discuss the possibility of combining transport operations, made no promises that a deal would happen.

“Siemens intends to discuss diligently and in good faith solutions which create a strong European champion with global reach and sustainable business strategies going forward in the fields of mobility in the best interest of all parties involved,” it said.

(Additional reporting by Elizabeth Pineau, Benjamin Mallet, Matthieu Protard and Ingrid Melander in Paris; Writing by Maria Sheahan and Natalie Huet; Editing by Sophie Walker and Giles Elgood)

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City of Miami sues JPMorgan, claims mortgage discrimination

NEW YORK (Reuters) – The city of Miami has sued JPMorgan Chase Co, accusing the bank of predatory mortgage lending in minority neighborhoods that allegedly caused a wave of foreclosures during the last decade’s housing crisis.

The lawsuit, filed on Friday in federal court in Florida, said the country’s largest bank engaged in a continuous practice of discriminatory mortgage lending since at least 2004, violating the U.S. Fair Housing Act.

After issuing high-cost loans to minorities in the years before the housing crisis, JPMorgan later refused to refinance the loans on the same terms as it extended to whites, leading to defaults and foreclosures, the complaint said.

The lawsuit came just weeks after the city of Los Angeles filed similar claims against JPMorgan, seeking to recoup damages for lost tax revenue and increased city services needed in blighted neighborhoods.

“The Miami City Attorney’s claims are baseless and stand contrary to our long record of providing affordable housing to low- to moderate-income families across the region,” JPMorgan spokesman Jason Lobo said. The bank will defend itself against the claims, he said.

Wells Fargo Co, Citigroup Inc and Bank of America Corp also face lawsuits by Los Angeles and Miami for allegedly giving minorities home loans they could not afford, resulting in massive defaults.

The banks have contested the claims, saying they have records as responsible lenders.

Among major cities, Miami has led the country in foreclosures, and JPMorgan’s practices contributed to its problems, Friday’s lawsuit alleged.

Loans in predominantly minority neighborhoods in Miami were about 4.6 times more likely to result in foreclosure than loans in neighborhoods with a majority of white residents, the lawsuit said.

Miami is still being damaged because of the services needed to combat unsafe and dangerous conditions, crime and even gang activity at foreclosed properties, the lawsuit said.

Wells Fargo and Citigroup recently lost bids to have their lawsuits tossed.

A spokesman for the city of Miami did not immediately return a request for comment.

JPMorgan shares fell 0.2 percent to $56.91.

The case is City of Miami v JPMorgan Chase Co, U.S. District Court, Southern District of Florida, No 14-cv-22205

(Editing by Will Dunham and Jeffrey Benkoe)

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Bombardier lays off staff as new Learjet flight testing delayed

TORONTO (Reuters) – Canada’s Bombardier Inc (BBDb.TO) said on Monday that it has laid off more than 100 staff and let go 110 contract workers in the United States and Mexico due to delays in the flight test program for its all-new Learjet 85 business jet.

In the latest setback for its aircraft development program, which includes the behind-schedule and over-budget CSeries jetliner, Bombardier said a “few things” had affected the Learjet 85 development.

“Given that this was a real clean sheet design, using innovative technologies, we’ve had a learning curve and we’ve had some challenges,” said Bombardier spokeswoman Isabelle Gauthier. “We’re not where we expected to be in the program.”

The Montreal-based company has not said when it expects the Learjet 85 to enter service, following a postponement last year of its projected service date, or how much it will cost.

Last week, Bombardier laid off 100 permanent employees and let go 40 contractors working on the Learjet 85 at its Wichita, Kansas, site, Gauthier said. Forty other Learjet 85 staff at the facility, which has about 2,800 employees, were reassigned to different aircraft programs.

The company also let go 40 contractors and reassigned 200 permanent staff working on the Learjet 85 at its Queretaro, Mexico facility, which employs 1,800 people, she said.

The affected employees, in production and operations, will be called back after Bombardier makes more progress with flight testing, she said.

Flight tests continue on the Learjet 85, Bombardier’s largest business plane, but Gauthier would not say how many hours the aircraft has flown or when other test planes would begin flight.

The Learjet 85 was originally to enter service in late 2013, but early last year Bombardier postponed it to the summer of 2014.

The company has also been struggling with its CSeries commercial jet program. After an engine failed on May 29, ground testing resumed last week, but flight testing remains suspended.

The cost of the narrow-body CSeries, which will compete with the smallest jets made by industry leaders Boeing Co and Airbus, has ballooned to $4.4 billion, some $1.05 billion over original estimates. The service target has been pushed into the second half of 2015 from an initial target of late 2013.

In January, Bombardier cut 1,700 jobs across its aerospace unit in Canada and the United States to preserve cash.

(Reporting by Susan Taylor; Editing by Dan Grebler)

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BofA to use NY state database to flag illegal payday loans

NEW YORK (Reuters) – Bank of America Corp has become the first big bank to agree to use a New York regulator’s database to ensure it does not process illegal payments from payday lenders to state residents, Governor Andrew Cuomo said on Monday.

New York outlaws payday lending, or short-term consumer loans that mature the day the borrower receives his or her paycheck. New York’s Department of Financial Services began clamping down on such lenders in 2013 because the interest rates they charge can be high enough to be considered predatory.

Some lenders have tried to sidestep the prohibition by offering the loans over the Internet and using electronic payment and debit networks to collect on them.

To clamp down on this practice, the Department of Financial Services developed a database that identifies companies that may run afoul of the state’s ban on payday lending.

Bank of America plans to use this database to determine whether its merchant customers are using their bank accounts to make or collect on payday loans.

Benjamin Lawsky, New York’s Superintendent of Financial Services, said in a news release that the regulator would be looking to craft similar agreements with other banks in the coming weeks.

(Reporting by Peter Rudegeair; Editing by Lisa Von Ahn)

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J.C. Penney interfered with Macy’s deal with Martha Stewart: judge

NEW YORK (Reuters) – J.C. Penney’s pact with Martha Stewart Living Omnimedia to sell a line of home goods interfered with an exclusive deal between the celebrity’s company and Macy’s, a New York judge ruled on Monday.

In his ruling, however, Justice Jeffrey Oing of New York state court limited the damages that Macy’s could obtain.

Oing said Penney might be liable for damages over designs that Martha Stewart Living prepared for Penney and sold under a “JCP Everyday” label.

But, Oing said, despite bad behavior by Penney’s officials, Macy’s failed to prove by “clear, unequivocal and convincing evidence” that it was entitled to punitive damages.

“The behavior exhibited by JCP’s top executives, with JCP board ratification, has been less than admirable,” the judge said.

He noted that Penney terminated its chief executive officer, Ron Johnson, on April 8, 2013, before the trial ended, and called him “a casualty of his own hubris.”

The judge said JCP, its board and top executives were “publicly ridiculed and humiliated,” and that the strategy was a “colossal” failure that placed Penney on the verge of financial collapse. “These significant facts are a sufficient deterrent to JCP and other companies from acting in a similar way in the future,” the judge said.

The judge referred the issue of damages to a referee or special hearing officer.

Macy’s sued Penney and Martha Stewart Living after the two announced a partnership in December 2011. Macy’s said the agreement breached its contract with Martha Stewart that included exclusive rights to Martha Stewart-branded cookware, bedding and bath products.

In October, Penney and Martha Stewart Living announced a revised agreement that eliminated Stewart’s products in home goods categories to which Macy’s claimed exclusive rights.

In early afternoon trading, Macy’s shares were unchanged at $57.40, while JCPenney was down 7 cents at $8.54.

The case is Macy’s Inc v Martha Stewart Living Omnimedia Inc, 650197/2012, New York State Supreme Court, New York County.

(Reporting By Karen Freifeld; Additional reporting by Jonathan Stempel in New York; Editing by Richard Chang)

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