News Archive


Lockheed wins more than $1 billion contract for C-130J aircraft


Lockheed Martin Corp has been awarded a contract worth more than $1 billion for 32 C-130J aircraft, the Pentagon said on Wednesday.

The work is expected to be completed by April 2020, the Department of Defense said in its daily digest of major contract awards.

Earlier this year, Lockheed announced that it had reached a verbal agreement with the U.S. Air Force for a five-year contract to build up to 83 C-130J Super Hercules transport planes for the Air Force, Coast Guard and Marine Corps through 2020.

The planes are able to touch down on austere landing zones – essentially makeshift runways – and often used for humanitarian relief missions, special operations, aerial refueling, close air support and search and rescue.

(Reporting by Idrees Ali in Toronto; Editing by Tom Brown)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Z57VCpGmA9o/story01.htm

Oil bogs down Wall St. as S&P 500 clings to gain for 2015


Wall Street dropped on Wednesday as Brent crude slid towards 11-year lows and Apple weighed on the SP 500 index, which clung to a meager gain for 2015.

The SP energy sector .SPNY was the poorest performer among the 10 major sectors, down 1.47 percent after forecasts of a short winter in North America and Europe piled pressure on the oversupplied commodity.

Shares of Exxon (XOM.N) lost 1.33 percent while Chevron (CVX.N) dipped 1.27 percent.

Apple (AAPL.O) was the heaviest drag on the SP 500 and Nasdaq Composite, falling 1.31 percent. Fears of potentially soft iPhone sales have helped push that stock down 9 percent in the past month.

Wednesday’s losses undid much a broad rally in the previous session that was similarly influenced by tech and energy stocks.

Netflix (NFLX.O) and Amazon.com (AMZN.O), the SP 500’s top two performers in 2015, dipped 2.02 percent and 0.70 percent respectively.

Nike (NKE.N), this year’s best-performing Dow component, fell 1.57 percent.

“There is no consistency and no upside follow-through, which is disturbing, but that’s been the pattern all year,” said Donald Selkin, chief market strategist at National Securities in New York.

The major indices deepened their declines in the last few minutes of trade. The Dow Jones industrial average .DJI finished 0.66 percent weaker at 17,603.87 points and the SP 500 .SPX lost 0.72 percent to 2,063.36.

The Nasdaq Composite .IXIC dropped 0.82 percent to 5,065.85.

For the year, the SP 500 held onto modest 0.2 percent gain, while Nasdaq was up about 7 percent. The Dow, however, was down about 1.2 percent in 2015.

Hobbled by growing global supply and lower demand in Asia, the energy sector has fallen about 24 percent this year, easily the SP’s worst performer. Hurt by a rout in commodities, the materials index .SPLRCM has fallen 10 percent in 2015.

Trading volumes were low and were expected to remain thin on Thursday, the last trading day of the year.

Volume on U.S. exchanges was 4.6 billion shares, compared to a 7.4 billion average over the last 20 trading days, according to Thomson Reuters data.

Billionaire investor Carl Icahn’s Icahn Enterprises LP (IEP.O) agreed to buy Pep Boys-Manny Moe Jack (PBY.N) for about $1 billion, hours after Bridgestone Corp (5108.T) quit the race for the U.S. auto parts retailer. Pep Boys fell 2.90 percent and Icahn Enterprises (IEP.O) dipped 0.97 percent.

Fairchild Semiconductor (FCS.O) rose 3.7 percent after it received a revised offer from the Party G Group, with new terms on termination fees if the takeover fails to secure regulatory approvals.

Weight Watchers (WTW.N) soared 19 percent, extending gains for the third day after the company launched an advertising campaign last week featuring Oprah Winfrey.

Declining issues outnumbered advancing ones on the NYSE by 2,183 to 898. On the Nasdaq, 2,010 issues fell and 826 rose.

The SP 500 index showed 15 new 52-week highs and no new lows, while the Nasdaq recorded 54 new highs and 58 new lows.

(Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4eKn5b0OdXU/story01.htm

Puerto Rico to default on some debts, will pay GO debt


SAN JUAN Puerto Rico will default for the second time in five months, but will pay the bulk of $1 billion due on Jan. 4, including its most senior debt, Governor Alejandro Garcia Padilla said on Wednesday.

The Caribbean island’s biggest payment, $328.7 million in general obligation debt, will be paid, the governor told reporters at a press conference in San Juan. More than half of that payment was made by taking revenues from other commonwealth agencies, he added.

A default on general obligation (GO) debt would have been seen as a more serious stumble because those bonds have the strongest legal protections of any of the island’s obligations.

However, it also keeps alive the drama surrounding its deteriorating finances and $70 billion debt load as investors wait for the next shoe to drop.

The default opens the door to potential litigation from affected creditors, while the island must now turn its focus to trying to achieve a consensual debt restructuring with GO holders before its next big payment of $1.9 billion is due in July.

The governor said he is meeting with creditors in early January, though he did not give a specific date.

When asked about a shutdown of key government services, Garcia Padilla told reporters at a press conference: “We have to do all we can to avoid that situation.”

The U.S. Commonwealth, suffering from a near decade-long recession with a 45 percent poverty rate and a shrinking tax base due to people leaving the island, first defaulted in August when it failed to make the full payment on its Public Finance Corp (PFC) bonds.

One creditor source with significant GO holdings said Puerto Rico’s decision to pay GO debt buys it some credibility as debt restructuring talks continue. “I’m glad we can enjoy our holiday, because there’s going to be a lot of heavy lifting to do when we get back,” the source said.

David Tawil, co-founder of hedge fund Maglan Capital, said a default of GO bonds is also probably inevitable in the long-term, but that there is a slim possibility that either Congress will take action or a settlement could be reached with creditors ahead of a default. Either way, he warned that Puerto Rico is still in the very early stages of dealing with its massive fiscal challenge.

“Citizens need to know that necessary infrastructure and services are there and there is not going to be a government shutdown,” Tawil said.

The island will default on a $35.9 million payment due to its Infrastructure Finance Authority (PRIFA). It will also default on $1.4 million due to its Public Finance Corp, but will make payments to most other authorities. The island was facing a bill of about $1 billion had it made all payments.

Padilla said about $163 million of the GO payment came from clawing back revenues from several agencies, including the highway authority, the convention center authority and the island’s busing authority. Garcia Padilla on Dec. 1 granted the U.S. territory power to take revenues from those agencies to keep payments on GO debt current.

“The use of over $100 million in reserved funds to make debt service payments for several of the Commonwealth’s issuers should underscore that the Commonwealth is running out of options to pay its debt,” said Melba Acosta Febo, president of the Government Development Bank.

POTENTIAL LAWSUITS

The announcement now opens the door to litigation from holders of defaulted bonds. One creditor source with exposure at one of the clawed-back agencies told Reuters lawsuits are being considered and could be filed immediately, but creditors have not decided whether the cost of litigation is worthwhile.

Daniel Hanson, an analyst at Height Securities who follows Puerto Rico, said any litigation will focus on Puerto Rico’s credibility. Garcia Padilla has consistently said the island was on the brink of a humanitarian crisis, yet it is able to pay the bulk of its debt and dished out about $120 million in Christmas bonuses this month, Hanson pointed out.

Such questions could also hamper Puerto Rico’s efforts to convince U.S. Congress that it is in desperate need of legislative aid, Hanson said.

The U.S. Treasury has been pushing Congress to allow the island to restructure its debts under U.S. bankruptcy law. A Treasury spokesman said Wednesday that the latest default “demands swift Congressional action” for a restructuring with independent oversight.

The House is expected to hold a Jan. 5 hearing on Puerto Rico’s financial problems.

The source with significant GO exposure acknowledged that clawing back certain debt to pay GO holders is legal, but said a lawsuit would likely focus on whether Puerto Rico met the legal requirements needed to exercise clawbacks, namely proving it was cash-strapped and had no other choice.

Bond insurer Ambac Financial, which insures about $863 million in PRIFA bonds, on Tuesday wrote a letter to Garcia Padilla challenging whether the clawbacks were used properly under Puerto Rican laws.

General obligation bonds with an 8 percent coupon and maturing in 2035 were slightly higher on Wednesday, traded at an average price of 73 cents on the dollar compared to 71.726 on Tuesday. The average yield fell to 11.501 percent from 11.716.

The island owes about $400 million due February 1, mostly to Puerto Rico Sales Tax Financing Corp, or COFINA. The monies for this payment are already held in reserve, Garcia Padilla said.

(Reporting by Megan Davies in New York and Nick Brown in San Juan; additional reporting by Ed Krudy in New York and Rory Carroll in San Francisco; Writing by David Gaffen; Editing by W Simon and Diane Craft)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fRG6KnK09TM/story01.htm

Oil down more than 3 percent on U.S. crude build; Brent near 2004 low


NEW YORK Crude prices fell more than 3 percent on Wednesday, with Brent sliding toward 11-year lows, after an unusual build in U.S. stockpiles and signs Saudi Arabia will keep adding to the global oil glut.

Crude inventories in the United States, the world’s largest petroleum producer, rose 2.6 million barrels last week, the U.S. Energy Information Administration said. Analysts polled by Reuters had expected a draw of 2.5 million barrels.

Stockpiles hit record highs at the Cushing, Oklahoma delivery hub for U.S. crude’s West Texas Intermediate (WTI) futures. Gasoline and heating oil also posted larger-than-expected stock builds.

“In all the years I have been doing this, I have never seen builds in the last week of December,” said Tariq Zahir, crude futures trader at Tyche Capital Advisors in Long Island, New York.

“At least for tax consequence reasons, refiners always ramp up runs at the year-end, and there’s a draw. This is a first for me.”

Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, called it “just another bearish data point in a series of many that have dominated 2015 and will likely continue to do so heading into 2016”.

Crude prices, however, did not lose much after their initial decline on the EIA data. Some attributed that to thin, holiday-season volumes. WTI’s front-month contract traded just over 240 million barrels on Wednesday, about half of levels seen two weeks ago, Reuters data showed.

Crude prices began falling on Tuesday itself, retracing gains in post-settlement trade after preliminary inventory data from industry group American Petroleum Institute showed a build. EIA’s data on Wednesday confirmed that.

Brent, the global oil benchmark, settled down $1.33, or 3.5 percent, at $36.46 a barrel. Its session low was $36.35, less than 40 cents from a 11-year bottom struck last week.

WTI finished the session down $1.27, or 3.4 percent, at $36.60.

Crude prices have plunged two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States created a global surplus of between half a million and 2 million barrels per day.

Ali al-Naimi, oil minister of OPEC leader Saudi Arabia, said the kingdom will not limit production, the Wall Street Journal reported.

China’s energy consumption in 2015 grew at its lowest since 1998, the official news agency Xinhua said, adding to the market’s downside.

(Additional reporting by Libby George in London; Editing by David Gregorio)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3zu4aj0ZspM/story01.htm

Apple to pay Italy 318 million euros, sign tax deal


MILAN Apple Inc will pay Italy’s tax office 318 million euros ($348 million) to settle a dispute over allegations it failed to pay taxes for six years, a source with direct knowledge of the matter said on Wednesday.

The maker of iPhones and iPads will also sign an accord next year on how to manage its tax liabilities from 2015 onward, the source said.

The deal comes as the European Union and national governments take a tougher stand against profit-shielding arrangements used by multinational companies.

Italian prosecutors have been investigating allegations that Apple failed to pay corporate taxes to the tune of 879 million euros in 2008-2013 by reducing its taxable income when it booked profits generated in Italy through its Irish subsidiary, sources told Reuters earlier this year.

“Apple will pay the tax agency 318 million euros and will sign a new tax accord for fiscal years 2015 onwards early next year,” the source said.

The tax office earlier confirmed a report in La Repubblica newspaper that it had reached a deal with Apple, but declined to say how much the U.S. company had agreed to pay.

The source said that while the judicial probe, which also involves three Apple managers, remained open for now, the settlement with the tax agency would likely have a positive impact on the investigation.

Apple could not immediately be reached for comment. Previously the company told Reuters that it is one of the largest taxpayers in the world and paid every euro of tax it owed wherever it did business.

The global financial crisis spurred cash-strapped governments to crack down on tax avoidance and prompted complaints that companies cutting their tax bills to the bare minimum were getting an advantage in breach of EU rules.

The agreement with Italy comes as an EU tax ruling on Apple’s dealings with Ireland is looming. The EU last year accused Ireland of swerving international tax rules by letting Apple shelter profits worth tens of billions of dollars from revenue collectors in return for maintaining jobs.

The ruling could have a “material” impact on Apple if it was determined that Dublin’s tax policies represented unfair state aid, forcing the U.S. company to pay past taxes for up to 10 years, it has said.

Apple is one of several companies, including Google and Amazon, to become the target of tax inquiries in Europe and beyond.

The European Commission has already ordered Dutch authorities to recover up to 30 million euros from U.S. coffee chain Starbucks and Luxembourg to do the same with Fiat Chrysler for their tax deals.

Apple is also facing criticism on its home turf in the United States because of the so-called inversion deals, whereby a company redomiciles its tax base to another country.

Apple holds $181.1 billion in offshore profits, more than any other U.S. company, and would owe an estimated $59.2 billion in taxes if it tried to bring the money back to the United States, a recent study based on SEC filings showed.

In a recent interview with the CBS television news show “60 Minutes,” Apple Chief Executive Tim Cook dismissed as “total political crap” the notion that the tech giant was avoiding taxes. He also dismissed the idea of bringing profits back to the United States because of the cost to the company.

“I don’t think that’s a reasonable thing to do,” he said.

(Editing by Paola Arosio, Mark Potter and Alan Crosby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/DF0rom0hHko/story01.htm

Puerto Rico Governor to address debt crisis as deadline looms


NEW YORK/SAN JUAN Puerto Rico Governor Alejandro Garcia Padilla will address the island’s debt crisis at a press conference Wednesday, as it nears a Jan. 1 deadline for a near-$1 billion debt payment.

The island has already defaulted on some of its roughly $70 billion in debt, which Garcia Padilla has said is not payable and requires restructuring. He will speak at 1 p.m. local time (12 p.m. ET) Wednesday, according to a statement.

Puerto Rico has already signaled that some of the payment due will not be paid, opening the door to potential litigation with creditors.

Analysts and sources close to the matter expect Puerto Rico to pay the roughly $330 million in general obligation debt due on Jan. 1, but nothing is certain.

Puerto Rico has been negotiating with creditors to try and persuade them to take a reduction.

The U.S. Commonwealth, suffering from a near decade-long recession with a 45 percent poverty rate and a shrinking tax base due to people leaving the island, first defaulted in August when it failed to make the full payment on its Public Finance Corp (PFC) bonds.

One source with GO debt exposure said debtors usually advise creditors ahead of time when they plan to default, and Puerto Rico had not indicated a default to GO creditors.

Puerto Rico’s general obligation debt carrying an 8 percent coupon and maturing in 2035 last traded on Tuesday with an average price of 71.726 cents on the dollar. .

Island officials have given clear warnings of defaults. Garcia Padilla said last week that it is “very, very unlikely” there will be no default on debt due Jan. 1 and has also said the island has “no money”.

Melba Acosta, president of the island’s Government Development Bank (GDB) was quoted in local media saying the island is expected to default on a Jan. 1 payment on its PRIFA bonds.

Daniel Hanson, an analyst at Height Securities who follows Puerto Rico, said in a Tuesday report that GO bonds have a “very high” probability of being paid, but that the island will likely skip some $35 million in Infrastructure Finance Authority (PRIFA) bonds, $1.4 million in PFC bonds, as well as possibly $91 million on bonds at its buildings authority (PBA).

Another creditor-side source told Reuters on Tuesday that some creditors were preparing possible lawsuits in the event of default, but it was unclear how quickly they could be filed.

Skipping a payment on the GO bonds could be a jolt to the municipal bond market as GOs are viewed as safe. Puerto Rico’s GO bonds are backed by the good faith, credit and taxing power of the commonwealth and its bond documents state that such debt will constitute a first claim on available commonwealth resources.

Garcia Padilla on Dec. 1 granted the U.S. territory power to take revenues from public agencies such as the highways agency HTA, PRIFA and its convention center authority in order to pay GO debt and maintain essential services.

Default on any debt is likely to lead to litigation, but there is a “very high degree of certainty” that a missed payment on GO bonds would trigger lawsuits, Moody’s Senior Credit Officer Ted Hampton said last week.

Puerto Rico’s plight has gained increasing attention in Washington D.C., where the U.S. Treasury has been pushing Congress to allow the island to restructure its debts under U.S. bankruptcy law. The House is expected to hold a Jan. 5 hearing on Puerto Rico’s financial problems.

A GO default could be the most significant since Detroit defaulted on GO bonds in 2013. John Miller, co-head of fixed income for Nuveen Asset Management, which holds around $300 million in par value of insured Puerto Rican paper, said last week that not paying GO debt would be “very negative” for Puerto Rico bonds.

(Reporting by Megan Davies in New York; additional reporting by Nick Brown in San Juan; Editing by Diane Craft and W Simon)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/fRG6KnK09TM/story01.htm

Oil down 3 percent on surprise U.S. crude build; Brent near 2004 low


NEW YORK Crude prices fell 3 percent on Wednesday, with Brent sliding toward 11-year lows, after an unusual build in U.S. stockpiles and signs Saudi Arabia will keep adding to the global oil glut.

Crude inventories in the United States, the world’s largest petroleum producer, rose 2.6 million barrels last week, the U.S. Energy Information Admkinistration said. Analysts polled by Reuters had expected a draw of 2.5 million barrels.

Stockpiles hit record highs at the Cushing, Oklahoma delivery hub for U.S. crude’s West Texas Intermediate (WTI) futures. Gasoline and heating oil also posted larger-than-expected stock builds.

“In all the years I have been doing this, I have never seen builds in the last week of December,” said Tariq Zahir, crude futures trader at Tyche Capital Advisors in Long Island, New York.

“At least for tax consequence reasons, refiners always ramp up runs at the year-end, and there’s a draw. This is a first for me.”

Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, concurred. “This week’s EIA data is just another bearish data point in a series of many that have dominated 2015 and will likely continue to do so heading into 2016.”

“In short, not much the bulls can pull from and certainly the bears have plenty to sink their teeth into,” Jarvis added.

Crude prices did not lose much after their initial decline on the data, with some traders citing thin volume.

“If crude holds here, it is still not a breakdown,” said Jeffrey Grossman, futures dealer at BRG Brokerage in New York.

After settling higher on Tuesday, prices retraced some gains after the industry group American Petroleum Institute said its numbers showed a surprise build. The EIA numbers on Wednesday confirmed it.

The front-month in Brent, the global oil benchmark, was down $1.16 at $36.63 per barrel by 11:18 a.m. EST, less than $1 from a 2004 low hit last week.

WTI’s front-month fell $1.22 to $36.65.

Crude prices have plunged two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States created a global surplus of between half a million and 2 million barrels per day.

Ali al-Naimi, oil minister of OPEC leader Saudi Arabia, said the kingdom will not limit production, the Wall Street Journal reported.

Slowing demand growth, particularly in Asia, has weighed on prices. China’s energy consumption in 2015 grew at its lowest since 1998, according to official news agency Xinhua.

(Additional reporting by Libby George in London; Editing by David Gregorio)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3zu4aj0ZspM/story01.htm

KaloBios Pharmaceuticals files for bankruptcy in wake of Shkreli arrest


KaloBios Pharmaceuticals Inc (KBIO.O), a biotechnology company that fired Chief Executive Martin Shkreli earlier this month after his arrest on charges of securities fraud, filed for Chapter 11 bankruptcy on Tuesday.

The filing comes weeks after KaloBios received financing from Shkreli to avert closing down, only to have those plans upended by his arrest.

Shkreli was arrested on Dec 17 for engaging in what U.S. prosecutors said was a Ponzi-like scheme at his former hedge fund and a pharmaceutical company he previously headed.

Shkreli gained notoriety when, as the chief executive of Turing Pharmaceuticals, he raised the price of a drug used to treat a dangerous parasitic infection to $750 a tablet from $13.50. He resigned as Turing CEO on Dec 18.

KaloBios plans to use bankruptcy to “evaluate its strategic alternatives” and to develop a restructuring plan, according to documents filed with the U.S. bankruptcy court in Wilmington, Delaware.

A chief restructuring officer, Eugene Davis, was appointed on Dec. 23, according to court documents.

KaloBios named Shkreli as its CEO on Nov. 20, after Shkreli and a consortium of investors bought about 70 percent of its shares for an average price of $1.51, and agreed to provide additional financing.

The stock rocketed as high as $45.82 per share after Shkreli’s investment was disclosed.

Shkreli had said that KaloBios’ lenzilumab was a promising candidate for treating rare diseases.

The stock has been suspended from trading by Nasdaq since Thursday, when it last traded at $23.59 per share.

The company listed assets of $8.4 million and liabilities of $1.9 million.

KaloBios said on Monday said two of its directors, Tom Fernandez and Marek Biestek, had resigned.

KaloBios did not immediately respond to requests for comment.

(Reporting by Tom Hals in Wilmington, Delaware and Rishika Sadam in Bengaluru; Editing by Sunil Nair and Steve Orlofsky)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/6Ci5jSpJefU/story01.htm

Wall Street lower as Brent retreats, Apple drags


Wall Street was lower on Wednesday as Brent crude slid back towards the 11-year low it hit last week and Apple weighed on all three major indexes.

Crude oil gave up its gains from Tuesday after forecasts of a short winter in North America and Europe piled pressure on the oversupplied commodity.

The SP 500 energy sector led nine of the 10 major SP sectors lower with a 1.14 percent decline. Shares of Exxon were down 0.8 percent at $78.56, while Chevron was down 1.2 percent at $90.11.

The energy sector has fallen 23.54 percent for the year, easily the worst performer on the index, followed by a 9.17 percent decline in materials, caused by a rout in commodities.

Trading volumes are expected to remain thin on the last trading days of the year.

“The next few days, you’re not going to get a lot of action here,” said Jeff Kravetz, regional investment director at U.S. Bank Wealth Management in Phoenix, Arizona.

“Traders are ready to tie a bow on 2015 very happily, because it was one of those years when most asset classes didn’t work,” he said.

At 11:06 a.m. ET (1606 GMT), the Dow Jones industrial average was down 31.42 points, or 0.18 percent, at 17,689.56, the SP 500 was down 5.26 points, or 0.25 percent, at 2,073.1 and the Nasdaq Composite index was down 16.42 points, or 0.32 percent, at 5,091.52.

Apple was the biggest drag on all three indexes, falling 1.3 percent to $107.31. Concerns about potentially soft iPhone sales have hit the stock in recent weeks.

The SP 500 stayed in positive territory for the year, up a marginal 0.52 percent, while the Nasdaq Composite was up 7.33 percent. The Dow Jones industrial average, however, was down 0.91 percent in 2015.

Data showed pending home sales fell 0.9 percent in November, after inching up 0.2 percent in October. Economists had expected a 0.5 percent rise in November.

Pep Boys was down 3 percent at $18.38. Carl Icahn agreed to buy the auto parts maker for about $1.03 billion, after Japan’s Bridgestone said it would not counter his offer. Icahn Enterprises was down 1.5 percent at $60.60.

Fairchild Semiconductor was up 3.3 percent at $20.68 after it received a revised offer from the Party G Group, with new terms on termination fees if the takeover fails to secure regulatory approvals.

Declining issues outnumbered advancing ones on the NYSE by 1,814 to 1,049. On the Nasdaq, 1,635 issues fell and 987 rose.

The SP 500 index showed 13 new 52-week highs and no new lows, while the Nasdaq recorded 35 new highs and 31 new lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4eKn5b0OdXU/story01.htm