I Want My Buyback Back.....Daimler Is Doubling Down Again

Wow! This adds up to a buyback of € 12 billion within 24 month..... Unfortunately my February post was spot on.... It is amazing that they still call this optimization of their capital structure. Based on todays share price their latest effort to" increase the return to shareholders" amounted in a loss of roughly € 2 billion or 30 % in just 12 month..... And all this in the face of a recession, high fuel prices hurting especially Mercedes, EADS in freefall, their truckbusiness hitting a wall, their financing unit under pressure ( margins, higher risk provision for lease vehicles , rising delinquencies etc....), their 20% Chrysler investment close to insolvency ( don´t know exactly if they are on the hook for more...UPDATE: Chrysler Taps $2 Billion Line of Credit from Daimler ), etc....... On the other hand one has to ask why the sharesholders are voting in favour for this kind of nonsense.... They deserve to pay the price. The free cashflow in Q1 was just over € 1 billion.... If this run rate continues i think that even the slow moving rating agencies will take a look at their "A" rating with a positive outlook. But with their models at work they might reward Daimler with an upgrade (as their outlook is sugesting ).....

Glückwunsch! Insgesamt summiert sich das Aktienrückkaufprogramm auf satte 12 Mrd € binnen 24 Monaten.... Damit bestätigt das was ich im Februar befürchtet habe.... Es grenzt schon an eine gewisse Arroganz den erneuten Rückkauf über 6 Mrd € immer noch als Optimierung der Kapitalstruktur zu vermarkten. Und das nachdem das letzte Rückkaufprogramm binnen 12 Monaten fast 2 Mrd € ( entspricht 30 % ) versenkt hat. Soviel Chuzpe verdient schon fast wieder Respekt...... Besonders wenn man bedenkt das die nächste Zeit besonders für Daimler alles andere als rosig aussehen wird. Eine weltweite Rezession oder zumindest ein deutlich langsameres Wachstum, hohe Spritpreise die nicht gerade die Hersteller großer Wagen bevorzugen, CO2 Diskussion, die wichtige Finanzbeteiligung EADS im freien Fall, Die 20% Beteiligung von Chrysler faktisch insolvent ( bin mir nicht sicher ob hier noch Nachforderungen drohen UPDATE: Chrysler Taps $2 Billion Line of Credit from Daimler ), das Nutzfahrzeuggeschäft bricht gerade massiv ein, die Finanzsparte als Hauptgewinntreiber kommt stark unter Druck ( Margen, Ausfälle, fallende Rückkaufswerte ), usw...... Auf der anderen Seite muß man sich schon Fragen was die Aktionäre geraucht haben um solch wahnwitzige Programme zu befürworten. Den Preis für diese Kurzsichtigkeit werden Sie wohl noch teuer bezahlen müssen...... Der free Cashflow von Daimler in Q1 betrug ca 1 Mrd €........Sollte dieses Missverhältnis noch länger anhalten dürften selbst die nicht immer cleveren Ratingageturen Ihr "A" Rating mit positiven Ausblick eher früher als später überdenken. Obwohl man bei deren Bewertungsmodellen nie genau weiß ob nicht sogar ein nicht wie Ausblick inmpliziert Daimler mit einem Upgrade belohnt wird.....

Daimler For the further optimization of Daimler’s capital structure, the Board of Management of the company decided to carry out a new share buyback program. The Supervisory Board of Daimler AG has approved this decision. In exercise of the authorization granted by the Annual Meeting of April 9, 2008, the decision of the Board of Management allows for the buyback of 10% or approximately 96.4 million of the outstanding shares for a maximum amount of EUR6 billion. In order to optimize the buyback, shares may also be acquired with the use of derivatives.

Daimler’s capital structure is to be further optimized with the goal of reducing the use of equity capital, which is more expensive than debt capital. This will avoid investment decisions being limited by excessively high capital costs. ....

The shares acquired will later be cancelled without any reduction in Daimler’s share capital. It will also be possible to use some of the shares to serve stock option plans.

The company started its first share buyback program at the end of August 2007. By March 28, 2008, 99.8 million shares had been bought back for EUR6.2 billion.

Can anyone see the impact of almost € 6 billion........`

Kann in dem Chart irgendeiner die verpulverten € 6 Mrd ausfindig machen...... ?

Share Buyback based on the Authorization of the 2007 Annual Meeting
Period	No. of Shares Acquired	Average Price (EUR)	Purchased Volume (EUR)
Total	99,768,314	62.11	6,196,752,952.16
March, 2008	27,622,866	53.62	1,481,249,244.31
February 2008	22,185,448	55.69	1,235,524,406.33
December 2007	4,384,000	69.10	302,953,032.70
November 2007	16,366,000	69.05	1,130,005,849.60
October 2007	13,445,000	74.29	998,821,360.14
September 2007	14,390,000	66.72	960,165,710.94
August 2007	1,375,000	64.02	88,033,348.15

I have to repeat myself and point to this brilliant quote from Stuart Rose via the great piece from Jeff Matthews How to Buy Back Stock: Not “Just Because We Can” .

Auch auf die Gefahr das ich mich wiederhole verweise ich auf dieses Zitat von Stuart Rose aus dem extrem lesenswerten Post von Jeff Matthews hat zu diesem How to Buy Back Stock: Not “Just Because We Can” .

"At that point in time, we still have, Doug, correct me if I'm wrong -- about 200,000 shares outstanding on the old buyback. Again, we -- like we buy our stock like we do everything else, if there's an opportunistic place to buy it. We don't just buy it arbitrarily because we can, we buy it to support what we consider basically ridiculously low levels."

AMEN!

I Want My Buyback Back....Lehman Edition

As most of the readers know i´m not a fan of stock buybacks ( see label ). To me this is just a desperate way to manage the stock price in the short term. Often enough to unload options or ta mask the dilution of all the option given to employees ( see end of the post ) ... I really urge you to read the entire piece from Floyd Norris. There is much more about the Lehman debacle....

Wie die meisten Leser bereits wissen bin ich überhaupt kein Fan von Aktienrückkäufen. Meiner Meinung nach ist das in erster Linie ein Werkzeg um kurz und maximal mittelfristig den Aktienkurs zu pushen. Fast immer damit vom Management währenddessen Aktienoptionen versilbert werden können oder die Verwässerung durch die mehr als großzügige Vergabe von Aktienoptionen kaschiert werden kann ( siehe letzten Absatz im Posting ) ...... Unter dem Label könnt Ihr einige weiter prominente Beispiele finden wie sinnlos und zum Teil existensgefährendend etliche dieser angeblich dem "Shareholdervalue" dienenden Käufe gewirkt haben...... Ich empfehle zudem dringend den komplette Artikel von Floyd Norris zu lesen. Dort sind etliche zusätzliche Details zum Desaster von Lehman zu lesen.....

Its policy on share buybacks was to avoid the dilution caused by grants of restricted shares and options issued to employees, and that meant it bought back about as any shares as it issued.

It succeeded. The number of shares outstanding at the end of the first uarter was virtually the same as it was at the end of the 2004 fiscal year, after adjusting for a stock split.

In the 13 quarters from the end of that year through this year’s first quarter — that is, before the new $2.8 billion loss — Lehman reported net income of $11.9 billion, and spent $11.8 billion on share repurchases.

It paid an average price of $62.19 for shares that dropped under $23 after the shake-up was announced.

Adding shareholder value at its best.......Needless to say that on almost every conference call i heard "Wall Street Finest" pressed management on more buybacks...... And this in sectors like homebuilders during 2007, retailers, banks, etc......

Ein besonders gelungener Fall dem Aktionär gutes zu tun....... Überflüssig zu erwähnen das während fast aller Anaylstenkonferenzen denen ich in den letzten Jahren beigewohnt habe jedesmal eine Anhebung des Aktienrückkaufes "angemahnt" wurde..... Und das auch noch im Jahr 2007 in Branchen wie den Homebuilders, Banken, Einzelhandel usw......

Compare this with this brilliant quote from Stuart Rose via the great piece from Jeff Matthews How to Buy Back Stock: Not “Just Because We Can” .

Vergleicht das mit diesem Zitat von Stuart Rose aus dem extrem lesenswerten Post von Jeff Matthews hat zu diesem How to Buy Back Stock: Not “Just Because We Can” .

"At that point in time, we still have, Doug, correct me if I'm wrong -- about 200,000 shares outstanding on the old buyback. Again, we -- like we buy our stock like we do everything else, if there's an opportunistic place to buy it. We don't just buy it arbitrarily because we can, we buy it to support what we consider basically ridiculously low levels."

Thanks Stuart/Jeff

This quote comes via Naked Capitalism

Back in the early 1990s, when Sallie Krawchek was an analyst at Sanford Bernstein covering Wall Street, she observed that it was better to be an employee of an investment bank than a shareholder. That if anything has become more true over time.

AMEN!

They Are Back... Debt Fueled Buybacks From Junk Rated Companies....

I missed them.... I would have bet that this kind of behaviour was out of favour at least for another few months.... I don´t know anything about DirectTV as a company but it is very brave to buy back the stock within 2 percent of the ATH on debt... I doubt that this kind of action is in the best interest of the shareholder..... Nevertheless it is a clear sign that at least some live has come back into the credit markets.....Here are a few examples of what could easily happen when buybacks go sour....The Great Private Equity Cash Robbery of 2007 from, Big Buybacks Begin to Haunt Firms, Eddie Lampert Is Averaging Down....., Reviewing The Home Depot Buyback History......., "I Want my Buyback Back" .....

Ich habe Sie vermißt......... Endlich gibt es wieder kreditfinanzierte Aktienrückkäufe von Unternehemn die eh schon im Junkbereich bewertet sind ! Bin ehrlich erschrocken das dies bereits jetzt wieder möglich zu sein scheint. Ich habe keinerlei Kenntnis über die durchführende Firma Direct TV aber meine Erfahrung sagt mir, das wenn man dieses Verhalten bei einem Aktienkurs nahe dem Allzeithoch an den Tag legt, diese Käufe allzu häufig nicht sehr "clever" und im langfristigen Interesse der Aktionäre sind .......Immerhin ein klares Zeichen das sich die Lage am Kreditmarkt erstaunlich schnell entspannt hat ...... Hier ein paar prominente Beispiele wie solche Dinge ausgehen können......The Great Private Equity Cash Robbery of 2007 from, Big Buybacks Begin to Haunt Firms,Eddie Lampert Is Averaging Down....., Reviewing The Home Depot Buyback History......., "I Want my Buyback Back"

DirecTV To Sell $2.5B Of Debt To Fund Buyback Barrons Tech Trader
DirecTV (DTV) this morning announced plans to buy back up to $3 billion of stock, or just over 10% of its outstanding shares. The company also said it will raise $2.5 billion through the issuance of new debt with the proceeds to be used to fund the buyback. DirecTV plans to sell $1.35 billion of senior notes due 2016 plus another $150 million for over-allotments; it also intends to to raise $1 billion in in incremental term loan under its existing senior secured credit facility.

In connection with these transactions, DTV said it reached an agreement with Liberty Media (LMDIA) which limits their voting power to their current ownership percentage of 47.9%, regardless of the number of shares we buy through the repurchase program.

JP Morgan, Banc of America Securities and Credit Suisse
were the joint bookrunning managers for the sale .

BORROWER: DIRECTV HOLDINGS LLC/ DIRECTV FINANCING CO
AMT $1.35 BLN COUPON 7.625 PCT MATURITY 5/15/2016
TYPE SR NTS ISS PRICE 100 FIRST PAY 11/15/2008
MOODY'S Ba3 YIELD 7.625 PCT SETTLEMENT 5/14/2008
S&P DOUBLE-B SPREAD 395 BPS PAY FREQ SEMI-ANNUAL
FITCH N/A MORE THAN TREAS NON-CALLABLE 4 YEARS*
*NON-CALLABLE 4-YEARS, THEN AT 103.813, 101.906, 100.
MAKE-WHOLE CALL 50 BPS.
EQUITY CLAWBACK 3-YEAR 35 PCT AT 107.625.

WSJ DirecTV Group Inc. said it plans to raise $2.5 billion in new debt to buy back stock, a sign that skittish credit markets are on the mend -- at least when it comes to well-performing companies with conservative balance sheets.

Borrowing money to buy back stock is a transaction few, if any, companies have been able to undertake in recent months, since the credit market crunch began.

DirecTV's bankers went into the market Wednesday, selling all $1.35 billion of DirecTV bonds to investors in the afternoon. The eight-year bonds pay annual interest of around 7.625% and were priced at par, or their full value. J.P. Morgan Chase & Co. led the bond sale. The $1 billion secured loan, meanwhile, matures in 2013 and is expected to be sold later in the week.

DirecTV has long carried substantially less "leverage" -- debt relative to its earnings -- than other satellite and cable companies. Wall Street had been expecting the company to undertake a buyback using borrowed funds for many months. Plans were on hold until Liberty completed the purchase of its stake in the company from News Corp., a deal that was finalized in February. Liberty, though, was supportive of the deal, having said in the past that it believed DirecTV was "underleveraged."

A Liberty spokesman said the company supported the buyback as a "great way to return capital to shareholders."

Still, continuing nervous credit markets kept a lid on how much money the company could borrow. "We recognize this level of debt will not optimize our balance sheet, but we think it's a prudent step in today's challenged credit markets," Chief Executive Chase Carey said on the company's conference call.

Still, analysts said other companies that deliver strong performances could also seek to take on leverage more aggressively, analysts say.

> "Wall Street Finest" ........ Thank god there are still some CEO´s that ignore them.... This example via Jeff Matthews sums it up How to Buy Back Stock: Not “Just Because We Can” . A must read!

> Was wären wir nur ohne den weisen Rat von "Wall Street Finest".... Schön zu sehen das es zumindest vereinzelt noch Verantwortliche gibt die es schaffen diesen Weisheiten zu widerstehen.... Dieses Beispiel von Jeff Matthews Beispielhaft How to Buy Back Stock: Not “Just Because We Can” . Nicht verpassen!

"We've seen a very meaningful rally in the credit markets, and there's been a dramatic drop-off in the supply of new debt from a year ago," said Paul Scanlon, a bond fund manager at Putnam Investments in Boston. "People are now testing the waters again and pushing the risk boundaries a bit further," he added.

I Want My Buyback Back ..."Daimler Edition"

Look at the chart what $ 3.5 billion have done for the stock.... They bought at an average price close to € 70...... This adds up to a loss of € 750.000.0000 in just 6 month..... Needless to say that they bought close to historic highs for the stock and the "return to sharholders" is a whopping negative 21 percent....... With the next € 4 billion now ready to "maximize share holder value" the averaging down can begin.......

Seht Euch den Chart an was satte 3,5 Mrd € zur Performance beigetragen haben....... Daimler hat zum Durchschnittskurs von 70 € zugekauft...... Das ganze sumiert sich binnen 6 Monaten mal eben zu einer Wertvernichtung von 750.0000.000 €...... Überflüssig zu erwähnen das ein Großteil der Käufe nahe der historischen Höchststände der Aktie praktiziert worden ist und die anvisierte Optimierung zugunsten der Aktionäre hat mit minus 21 Prozent nicht ganz die Erwartungen erfüllt....Mit den nächsten 4 Mrd € kann das Verbilligen jetzt ja losgehen........

Share buyback program Daimler

In order to optimize its capital structure, the Group initiated a share buyback program in August 2007. In this context, it was announced that up to €7.5 billion would be applied to buy back nearly 10% of the company’s own shares. By the middle of December 2007, 50 million shares had been acquired for €3.5 billion. These shares were canceled by the end of the year. The share buyback program will be continued today.

At least they hadn´t to issue new debt to finance this "smart" move.....

Immerhin muß Daimler im Gegensatz zu anderen diese Transaktion nicht mit neuen Schulden finanzieren....

Sustainable?

I must admit that i havn´t heard of this indicator before. I especially like the long time view. The chart is clearly showing that something isn´t working.... Keep this in mind when the spin masters once again point to the "stronger than ever balance sheets" and that companies are awash in cash etc......This is coming from the same guys that said the same thing about the banks balance sheets 12 month ago...... But when you believe the experts news like Capital access: US drops from global top 10 shouldn´t be worrisome.... ;-).......

This graph from the FT Germany is showing the difference from the cashflow minus capital spending, dividends & net equity emissions from non financials vs the national income....

On top of this they are pointing out that the S&P 500 is currently trading at 20.4 time 2008 estimated GAAP earnings.....So much for the "cheap market" spin that is still en vogue....

And we all know that the estimates from Wall Street Finest are still way too high.

Examples like The Great Private Equity Cash Robbery of 2007 from & Big Buybacks Begin to Haunt Firms from Jeff Matthews may explain why the balance is looking so streched......

GAAP tut ganz schön weh FTD Kapital
Tut man es frecherweise doch, schaut man bei der Recherche zunächst mal ziemlich verdutzt aus der Wäsche. Laut S&P notiert der S&P 500 nämlich sage und schreibe mit dem 20,4-Fachen des geschätzten US-GAAP-Gewinns - von 2008. Selbstredend kann man diese Zahlen nicht ernst nehmen, da die Gewinnschätzungen ja durch die - ganz bestimmt nur vorübergehenden - Kalamitäten im Finanzsektor entstellt sind.

> Hier ein Beispiel von Wall Street Finest das zudem zeigt wie abseits aller Realität selbst die Schätzungen für 08 sind.

> Zudem empfehle ich jedem The Great Private Equity Cash Robbery of 2007 & Big Buybacks Begin to Haunt Firms von Jeff Matthews zumindest eine Teilerklärung dafür zu finden warum die Bilanz des Charts so übel aussieht.

Probieren wir es also mit einem anderen herkömmlichen Bewertungsansatz: der Dividendenrendite.

Doch gemessen an Zahlungen über die vergangenen vier Quartale beträgt auch die weiterhin gerade mal zwei Prozent, wobei ironischerweise der Finanzsektor mit einer Rendite von 3,3 Prozent hervorsticht und insofern nur noch vom Telekomsektor überboten wird. Legt man die Dividendenerwartungen für 2008 zugrunde, ergibt sich für den S&P 500 eine Rendite von 2,2 Prozent. Schön, aber wenn in Europa 3,8 Prozent winken, dürfte man von Amerika doch wohl zumindest drei Prozent erwarten. Nur müsste der S&P 500 schon dafür um gut ein Fünftel fallen.

Nicht doch, werden viele nun einwenden. Immerhin kaufen die US-Firmen Aktien zurück wie wild. Doch wie etwa die Citigroup zeigt, kann man sich darauf ebenso wenig verlassen wie auf die verheißenen Dividenden. Und wie lange werden die nichtfinanziellen US-Kapitalgesellschaften in der Kreditkrise wohl noch eine Finanzierungslücke nach Investitionen, Dividenden und Netto-Aktienrückkäufen von acht Prozent des Nationaleinkommens durchstehen? Ein paar Wochen vielleicht.

> Ich muß gestehen das mir dieser Indikator bisher noch nicht untergekommen ist. Was ihn aber besonders aussagekräftig macht ist die Tatsache das er über mehrere Jahrzehnte aufzeigt das besonders in letzter Zeit etwas nicht "gesund" ist. Behaltet das im Hinterkopf wenn mal wieder die Arien auf die so starken Bilanzen und die hohen Cashbestände von "Expertenseite" hingewiesen wird......Das sind oftmals dieselben die vor 12 Monaten identisches zu den Bankenbilanzen zu sagen hatten..... Bleibt zu hoffen das bei Meldungen wie Capital access: US drops from global top 10 die Experten nicht allzuweit daneben liegen.... ;-)

Have A Nice Weekend

Posting will be light until Monday. I suggest to read The Great Private Equity Cash Robbery of 2007 from one of my favourite bloggers Jeff Matthews and the excellent summary from FT Alphaville on monolines The bond insurers, a $200bn problem and Wilbur Ross

Werde bis Anfang nächster Woche wohl nicht zum bloggen kommen. Kann bis dahin jedem wärmstens The Great Private Equity Cash Robbery of 2007 von einem meiner liebsten Blogger Jeff Matthews empfehlen sowie die erstklassige Zusammenfassung von FT Alphaville zum Thema der Anleiheversicherer The bond insurers, a $200bn problem and Wilbur Ross

Enjoy Cramer vs Santelli ! A must see!!


Here are some thoughts on the "stimulus plan"....

Nachfolgend ein paar Gedanken zum gefeierten Plan zur Stimulierung der US Wirtschaft.....

Thanks to John Darkow

Hat tip to Matt Davis

Eddie Lampert Is Averaging Down.....

I think this is what experts are calling "averaging down" or "catching a falling knife"...... Can´t hide my Schadenfreude that the ponzi scheme is coming to an end..... :-) . Isn´t Eddie Lampert one of Cramers favourites and wasn´t he praised as another Buffet not long ago. Here is Cramer applauding buybacks just 2 weeks ago... To me he looks more and more like "Eddie the Eagle"

Das nennt man wohl "verbilligen" oder in "ein fallendes Messer greifen"...... Es fällt mir schwer meine Schadenfreude übder den bis vor kurzem noch extrem bewunderten Eddie Lampert zu verbergen. Noch vor einem halben Jahr wurde er in einem Atemzug mit Buffet genannt und war einer der bestverdienensten Hedge Fonds Manager überhaupt. Here ein abschreckendes Beispiel wie von einem der populärsten US "Experten" vor gerade einmal 2 Wochen die Aktienrückkäufe regelrecht gepriesen worden sind. Momentan sind wohl eher Vergleiche mit "Eddie the Eagle" angebracht...... :-)

Sears Holdings warns EPS to drop as much as 51%/ Marketwatch Sears Holdings warned Monday that fourth-quarter earnings per share may fall as much as 51% from last year, as nine-week Sears Domestic same-store sales fell by 2.8% and Kmart same-store sales fell by 4.2%. Lower sales were seen across most categories, with notable declines in the Sears apparel and tools categories and the Kmart seasonal categories. It expects fourth-quarter earnings between $2.59 and $3.48 a share, compared to the previous year's fourth-quarter's $5.33. Analysts polled by Thomson Financial had expected fourth-quarter earnings of $4.43 a share.

March 2007 We allocate capital to initiatives that we believe will provide the greatest returns and create the most value for our shareholders. 2006 was no different, as we deployed capital to repurchase shares,......., as follows: $816 million used for share repurchases (we repurchased over 6 million shares in the year at an average price of about $133 per share);

August 2007 The company repurchased 9.6 million of its shares for a total of $1.5 billion during the second quarter ( $ 156,25 )

November 2007 We repurchased 6.7 million common shares at a total cost of $0.9billion (or $131.72 per share) under our share repurchase program duringthe third quarter of fiscal 2007

Jan 2008 During the ten weeks ended January 11, 2008, we repurchased 4.9 million common shares at a total cost of $513 million (or $105.46 per share) under our share repurchase program.

>But don´t worry...... Here comes another desperate attempt to avoid another leg down in the stock...

>Aber keine Angst.... Hier kommt postwendend ein weiterer ziemlich verzweifelter Versuch die Aktie vorm freien Fall zu bewahren....

We currently expect to end the fiscal year with approximately $1 billion in cash and cash equivalents, excluding Sears Canada. The expected cash and cash equivalents balance indicated does not give effect to any share repurchase activity after January 11, 2008

>Time to pile on more debt to buy the stock at a "bargain" price close to $ 90 today..... Making things worse according to Jeff Matthews is the fact that the lack of management quality isn´t isolated to the buyback topic... Herb Greenberg is also very critical in his latest take History Repeating Itself with Sears. More bashing comes from Barry Ritholtz

> Höchste Zeit sich neu zu verschulden um die "günstige" Aktie heute zu knappen $ 90 einzusammeln.... Verschlimmert wird das ganze noch dadurch das die Managementqualität lt Jeff Matthews anscheinend nicht nur beim Thema Aktienrückkäufe einige Defizite hat...... Hier kommt eine weitere Breitseite in History Repeating Itself with Sears von Herb Greenberg. Noch mehr Verrisse kommen via Barry Ritholtz

> That´s why we call them "Wall Street Finest"......

Credit Suisse lowered its recommendation on the stock to ``underperform'' from ``outperform'' and slashed its price estimate to $70 from $150.

> Brilliant!

Multiple Fire Sales At UBS After $ 10 Billion Write Down

Looks like the UBS comment from just a few weeks ago in UBS Write Down Estimates "Best Case $ 6 Billion, Worst Case.... that the write down´won´t be big was quite an understatement..... Will be fun to watch how long the term "maximum clarity" will be up to date this time ;-) . I´m pretty sure that the same survey about bonuses for the UBS will bring less "euphoric" results..... It´s about time to learn the new version of the Investment banking lexicon: The post-credit squeeze edition. HILARIOUS!

Sieht ganz so aus als wenn der Kommentar der UBS in UBS Write Down Estimates "Best Case $ 6 Billion, Worst Case.... das die Abschreibungen nicht "wesentlich" sein werden ein wenig untertrieben gewesen ist. Welch Überraschung..... Wird spannend zu sehen sein wie lange die Haltwertzeit der "maximum clarity" in diesem Falle vorhalten wird ;-) . Ich bin mir ziemlich sicher das die gleiche Umfrage zu Bonuszahlungen" für die UBS weniger "euphorische" Vorhersagen hergeben würde..... Höchste Zeit die für die neueste Version des Investment Banking Lexicon: The post-credit squeeze edition. Köstlich!

UBS to Sell Stakes After $10 Billion in Subprime Writedowns
UBS AG, Europe's largest bank by assets, said it will write down U.S. subprime investments by $10 billion and raise 13 billion francs ($11.5 billion) by selling stakes to investors in Singapore and the Middle East.

UBS expects a loss in the fourth quarter, and may have a loss for 2007, the Zurich-based company said in an e-mailed statement today.

Securities firms and banks had announced about $66 billion of losses and markdowns linked to the collapse of the U.S. subprime mortgage market this year. UBS reported its first loss in almost five years in the third quarter after the subprime contagion led to about $4.66 billion in markdowns on fixed-income securities and leveraged loans.

Besten Dank an Zeitenwende

UBS Press Release & Deutsche Version
UBS strengthens capital base and adjusts valuations
UBS has introduced measures to substantially strengthen its capital position, adding CHF 19.4 billion of BIS Tier 1 capital. These include an issue of CHF 13 billion of new capital. This has been placed with two strategic investors: Government of Singapore Investment Corporation Pte. Ltd. (GIC) ( see GIC Website) with CHF 11 billion, and an undisclosed strategic investor in the Middle East with CHF 2 billion.


> To be honest i´m surprised that Singapore has two vehicles and that GIC has assets over $ 300 billion. I´ve heard so for only from Temasek HoldingsUnocal) in relation with Singapore. It´s very impressive that such a small country with an estimated GDP of $ 140 billion, a population under 5 million and especially without a resource base has managed to accumulate close to $ 500 billion in Assets Singapore/Wikipedia. Chapeau!

> Ich bin ehrlich erstaunt das Singapur zwei staatlich kontrollierte Fonds zur Verfügung hat und das GIC mit über 300 Mrd $ so groß ist. Ich habe bisher im Zusammenhang mit Singapur immer nur den Namen Temasek Holdings gehört. Es ist beeindruckend wie es ein kleines Land mit unter 5 Mio Einwohnern, einen BSP von knappen 140 Mrd $ und vor allem ohne Rohstoffbasis schafft fast 500 Mrd $ in Staatsfonds zu pumpen Singapur/Wikipedia . Chapeau!

At the same time, UBS has revised key input parameters of the models that are used to estimate lifetime default and resulting losses for sub-prime mortgage pools. As a result of these revisions, UBS will write down its US sub-prime holdings by approximately a further USD 10 billion.

After these actions, UBS projects a strong BIS Tier 1 ratio of above 12%. ...

In response to continued deterioration in the US sub-prime mortgage securities market, partly driven by increased homeowner delinquencies but mainly fuelled by worsening market expectations of future developments, UBS has revised the assumptions and inputs used to value US sub-prime mortgage related positions. This will result in further writedowns of around USD 10 billion, primarily on CDO and "super senior"1 holdings. In light of continued deterioration in the sub-prime market, valuations of UBS's remaining sub-prime positions reflect the extreme loss projections implied by the prices achieved in the very limited number of observable market transactions in US sub-prime related securities and indices up to the end of November.

As the basis for its wealth and asset management business, UBS wishes to maintain a very strong capital base under all circumstances. Growth in net new money continues, with inflows in Global Wealth Management & Business Banking totalling about CHF 30 billion in October and November. It will therefore strengthen its capital position by issuing new capital in transactions with strategic investors, by selling treasury shares, and by replacing its 2007 cash dividend with a stock dividend.

> Must hurt to sell shares at fire sale prices that they have bought back for a better use of their capital. In Q2 the stock price was in a range of 70-80 Swiss Francs, today close to 50 Swiss Francs. And in total they are selling 36.4 million shares......... Well done!

> Muß sehr schmerzen die teuer zurückgekauften Aktien jetzt zu Schleuderpreisen zu verscherbeln. Ironischerweise sollten die Rückkäufe seinerzeit ja die effektivere Nutzung des Kapitals ermöglichen. Im 2. Quartal lag der Preis zwischen 70 und 80 Schweizer Franken, heute nahe 50...... Und insgesamt werden knapp über 36 Mio zuvor erworbene Aktien nahe Tiefstkursen vertickert...... Gut gemacht!

Strategic investors subscribe to issue of CHF 13 billion of new capital
UBS has reached agreements with two strategic investors – GIC and one other – to subscribe to an issue of CHF 13 billion of mandatory convertible notes. This is subject to the approval of UBS shareholders at an extraordinary general meeting (EGM) which will take place in mid-February 2008. GIC has committed to subscribe to CHF 11 billion and the other investor to CHF 2 billion. The notes will pay a coupon of 9% until conversion into ordinary shares, which must take place on or before a date approximately two years after issuance. The proceeds of the issue will count as Tier 1 capital for BIS capital adequacy purposes after EGM approval.

Sale of treasury shares
The Board of Directors of UBS has further approved the re-sale of 36.4 million treasury shares previously intended to be cancelled. UBS has received indications of interest in a share issue, is considering these and will place these shares over time. This will increase BIS Tier 1 capital by approximately CHF 2 billion.

Proposed replacement of 2007 cash dividend by stock dividend
The Board of Directors proposes to replace the 2007 cash dividend with a stock dividend, i.e. a bonus issue of new shares. This will boost Tier 1 capital by CHF 4.4 billion, of which approximately CHF 3.3 billion is a reversal of accrued dividend for the first nine months of the year and the balance is dividend that will now not accrue. This is subject to EGM approval.

In total, these three actions, when completed and approved, will strengthen UBS's regulatory Tier 1 capital by approximately CHF 19.4 billion. After completion, and taking into account the expected fourth quarter loss, the firm's BIS Tier 1 capital ratio will improve to above 12% from 10.6% at 30 September 2007.

Marcel Rohner, Group Chief Executive Officer, UBS, said: "Conditions in the US mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities. In the last several months, continued speculation about the ultimate value of our sub-prime holdings – which remains unknowable – has been distracting. In our judgement these writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation. Together with the strengthening of our capital base this will allow us to concentrate on sustaining and developing our client businesses.

Information on GIC
GIC is a global investment management company established in 1981 to manage Singapore's foreign reserves. With a network of eight offices in key financial capitals around the world, GIC manages a broad diversified portfolio across countries and asset classes that includes equities, fixed income, foreign exchange, commodities, money markets, alternative investments, private equity, real estate and infrastructure investments.

More insights via FT Alphaville UBS boggles - $10bn of writedowns, $17bn in emergency capital

Bank Capital "Tightening the safety belt" / Economist

Crunch, crunch......And they are still only talking about subpirme...... I assume lots of banks are already regretting their massive buybacks during the past years..... Just ask Fannie, Freddie, Countrywide etc...... But this is also true for almost every other company out there. Jeff Matthews has more on this topic Big Buybacks Begin to Haunt Firms SCHADENFREUDE!

Man kann den Credit Crunch deutlich hören....Und bisher wird immer nur das Thema Subprime angeführt...Ich bin mir sicher das etliche Bankvorstände Ihre Aktienrückkauforgien aus den letzten Jahren schon jetzt bereuen....... Fragt mal bei Fannie, Freddie, Countrywide usw nach......... Gleiches gilt aber inzwischen aber wohl für die meisten Firmen. Hier ein nettes Beispiel von Jeff Matthews Big Buybacks Begin to Haunt Firms


Bank Capital "Tightening the safety belt"
THE only thing bankers can have felt grateful for this Thanksgiving was a rest. Confidence in subprime-related mortgage products continues to fall. Rating agencies are slashing collateralised-debt obligations (CDOs) faster than you can slaughter turkeys. Analysts at Goldman Sachs reckon that, despite the large write-downs already announced by financial institutions, another $108 billion-worth of losses on subprime CDOs have yet to surface (see chart). Adding to the gloom, a $2 trillion source of mortgage funding in Europe, known as the covered-bond market, was temporarily suspended on November 21st because of sliding prices.

All this turmoil is focusing attention on banks' capital ratios, the amount of money they set aside as a percentage of assets to cover unexpected losses. This cushion is being squashed in a number of ways. First, net losses eat directly into capital. Second, since capital ratios are typically calculated on the basis of how risky a bank's balance sheet is, the ratings downgrades add to the amount of rainy-day money banks need to set aside. Third, assets are growing as banks take on the financing of more off-balance-sheet vehicles, which again adds to the capital they need.

At some banks, capital ratios are dropping fast. UBS, a Swiss bank, has seen its tier-one ratio (which divides a bank's risk-weighted assets by its core capital) fall from 12.3% at the end of the second quarter to 10.6%. At Citigroup the tier-one capital dropped to 7.3% in the third quarter, down from 7.9% in the previous one. It remains comfortably above the 6% threshold that American regulators use to define institutions as well capitalised. But as expectations of further write-downs grow, it and others with deteriorating capital ratios will be under pressure to reverse the trend.

There are a number of ways for banks to improve things. They can suspend share buybacks. Or sell non-core assets: Merrill Lynch's stake in Bloomberg, a financial-information provider, looks eminently disposable. They can cut dividends: expectations are growing that Citigroup will do so. In more extreme cases, they could issue new shares: the bond insurers, which depend on impeccable credit ratings and are important for the health of the banking system, may have no choice but to raise capital. One, French-owned CIFG, has been promised $1.5 billion.

Rights issues and punier dividends would be bad news for shareholders. But the really pernicious effect of capital weakness comes when banks rein in their lending and investment activity in order to keep their capital ratios constant. Back-of-the-envelope calculations from Goldman Sachs suggest that if banks suffer a $200 billion loss on subprime mortgages but want to keep their capital ratios at an average level of 10%, that would stifle lending by a whopping $2 trillion.

Regulators may tighten the screw as well. Confidence in the tier-one capital ratio favoured by European regulators seems to have evaporated, says Simon Samuels, an analyst at Citigroup. Investors seem to pay closer attention to more cautious capital measures such as the leverage ratio, which does not allow for any risk-weighted adjustment to assets.

Some regulators may be tempted to take a more conservative approach, perhaps by imposing additional charges on individual banks. They should be wary: banks may need to swerve to avoid a capital crisis; but slamming on the brakes entails dangers of its own.

Deutsche Bank Buybacks & Foreclosures

I just couldn´t resist. Every time we hear the phrase "buyback" the stock jumps. It doesn´t matter if these buybacks will occur or not. I have been stumbling on a review of what the buybacks have done for the shareholders of Deutsche Bank. Taking todays share price they buybacks have resulted in a loss of over $ 350 mio. So far....... I assume that their focus now that the shares are trading around 85 and 30 percent of the peak is to preserve their core capital ...... Nice timing!

Da konnte ich einfach nicht wiederstehen. Jedesmal wenn der Begriff "Aktienrückkauf" in den Mund genimmen wird steigen in der Regel die Aktien. Und das unanhängig davon ob diese Käufe auch jemals durchgeführt werden. Ich bin in den letzten Tagen auf diese Betrachtung der Rückkäufe durch die Deutsche Bank gestolpert. Und basierend auf dem aktuellen Preis sieht es ganz so aus als wenn hier mal eben 250 Mio € " nicht optimal and die Aktionäre zurückgegeben worden sind. Bisher....... Und ich kann mir sehr gut vorstellen das da der Aktienkurs knappe 20% vom Durchschnittskurs und ca. 30 % from Hoch zurückgekommen ist der Focus jetzt eher auf die Stärkung des Kernkapitals liegt...... Tolles Timing!

And when looking at the following graphs and other charts from their analyst presentation i think they already regret some of the buybacks .....

Und wenn man sich die nachfolgenden Grafiken und die Chart der Analystenpräsentationansieht bin ich mir ziemlich sicher das Sie einige der Aktienrückkäufe schon bereuen....

Foreclosure wave sweeps America / BBC
Cleveland, Ohio, is an industrial city on the banks of Lake Erie in the US "rust belt".

It is the sub-prime capital of the United States. One in ten homes in the city is now vacant, and whole neighbourhoods have been blighted by foreclosed, vandalized and boarded-up homes.

THE SUB-PRIME CRISIS IN CLEVELAND / Interactive Map

Many of these homes are now owned by the banks and investment pools owning the mortgages, and the company making the most foreclosures in Cleveland is Deutsche Bank Trust, which acts on behalf of such investment

Next comes a raher grim view from Citi via the FT

Nachfolgend ein recht kritischer Bericht von der Citigroup via der FT

Beware the “uber leveraged” trio — Barclays, RBS and Deutsche

Research by Citi’s Simon Samuels suggests that, depending on the measure used, Europe’s banks need to fix capital deficits that run as high as 20 per cent - on average!

Most strikingly, however, are Europe’s “uber leveraged” trio — Barclays, RBS and Deutsche Bank — where capital deficits range from 60% to 80% of market cap.

To put this graph into perspective you have to click here .... The graph above shows the enlarged version of the right scale....

Um diese Grafik ins Verhältnis zu setzen ist ein Blick auf diesen Chart empfehlenswert....Mein vergrößerter Ausschnitt zeigt den rechten Teil der Skala.....

Forget the Lesson, Learn it Twice / Hussman

If you want to read what Hussman has to say about the Hindenburg omen click here

Die Kommentare von Hussman zum sog. Hindenburg Omen gibt es hier



Forget the Lesson, Learn it Twice
In addition to my overall concern about risks here, both to stocks and to the economy more generally, I think it's fascinating to watch how investors seem to partition certain stocks as if they are entirely “above the law” and impervious to any risk of overvaluation, “free entry” of competition, earnings dilution, margin erosion, or other factors. Investors took this view with dot-com and tech stocks in the late 1990's, with disastrous results (even for legitimate growth stocks like Cisco, which dropped from a bull market high of 82 to a bear market low of 8 with no intervening splits).

One way to identify these speculative darlings is to examine the extent to which investors focus on a growth story and blissfully ignore how a company treats them as shareholders. Speculative investors think of stocks as gambling stubs at the race track - they don't stop to think about the stream of cash flows that they can expect to actually receive as shareholders over the long-term.

Consider a possibly hypothetical company with $21 billion in tangible assets; two-thirds of which are IPO proceeds and about one-third of which are earnings that have been retained to-date. Now, if a company takes its IPO proceeds and invests them in cash and marketable securities, then as long as it doesn't generate net losses or other liabilities, the company must be worth at least the value of those assets, regardless of how much money was raised by issuing stock. Beyond that, however, any additional market value has to be backed up by an expectation that the company will actually deliver a stream of cash flows to shareholders over time.

What does “deliver” mean? Isn't it enough to report good earnings? Well, suppose that the 10-Q of this possibly hypothetical company notes that there are outstanding option grants to employees of 3.4 million shares at an average exercise price of $152, and another 11.5 million shares of outstanding option grants at an average exercise price of $244. If the current stock price is say, $645, you could whip out a calculator and confirm that the company has committed stock to employees worth $6.3 billion (the value in excess of the option strike prices), which is not much less than the total amount of earnings that have been retained to-date. That would be a lot like someone saying, “Hey man, I made a pizza for you,” eating it right before your eyes, and then saying “Hey man, I made two pizzas for you,” and eating those as well.

Often, companies use their retained earnings to “repurchase” stock, which is then handed over to employees as they exercise their stock options. What happens if the company doesn't repurchase stock? It simply dilutes the ownership claim of existing shareholders directly. The impact – a diversion of value from existing shareholders – is the same. For instance, suppose that the stock has a P/E of 50, and the company reports in its 8-K that “We currently anticipate that dilution related to all equity grants to employees will be at or below 2% this year.” A thinking investor might look at that and say, “Let's see. A P/E of 50 means that earnings represent 2% of the stock price, and the company is explicitly telling me that this is about the amount that will be given away in grants to employees.”

> I also recommend to read what Jeff Matthews has to say The Price of “Insanity” Doubles: Barron’s vs. Google

> Zu diesem Thema hat Jeff Matthews in The Price of “Insanity” Doubles: Barron’s vs. Google ebenfalls ein paar treffende Punkte zusammengefasst

If you actually observed that sort of thing, you would probably conclude that investors had not learned much from the experience of stocks with similar characteristics during the 2000-2002 market plunge. That collapse demonstrated that there is often a spectacular difference between the market price of a speculative stock at the height of its popularity, and the actual value of the cash flows that an investor in that stock will realize by owning that stock over time. There's no denying that there were stunning gains in many of the dot-coms before they came back to earth, but the round-trip was ultimately distressing.

Aw, then again, forget I even mentioned it. That dot-com thing was a once-in-a-lifetime event. The “possibly hypothetical” example above couldn't really exist in the real world. Investors have surely learned their lesson. Everybody knows that.

Speaking of distressing round trips – as of Friday, the Dow and S&P 500 closed Friday within a fraction of a percent of where they were minutes prior to the Fed's September 18th interest rate announcement. And just for the record, the Fed has still added zero liquidity to the banking system. The total amount lent by the Fed to the banking system through the discount window fell again last week to just $240 million. Total bank reserves fell in September, from $44.9 billion to $42.5 billion. The monetary base – the only monetary aggregate that the Fed directly controls, fell in September from $853.482 billion to $851.279 billion. At least $19 billion of temporary repos will come due on Thursday, so the Fed won't be “injecting liquidity” into the banking system when it predictably rolls these over.

Home Depot Hit As Credit Crunch Squeezes Deals

60 Days were enough to reduce the price by roughly 20 percent, force Home Depot to take an equity stake, guarantee some of the debt and eliminates lots of convenants that were given to the private equity buyer..... Look like the famous "private equity put" is still there but at a 30% lower pricelevel...... This deal looks similar to the Daimler/Ceberus/chrylser deal where Daimer was forced to step in to unload Chrylser.

60 Tage haben genügt um den Preis um 20% zu drücken, Home Deopt zu nötigen das sie entgegen dem ursprünglichen Plan eine Beteiligung behalten & noch zusätzlich für Schulden geradestehen müssen, die Kreditbestimmungen der Private Equity Käufer fast alle "lockeren Kreditbestimmungen" gestrichen worden sind usw......Sieht ganz so aus als wenn der sog. "Private Equity Put" der angeblich die Märkte nach unten absichert jetzt den Markt 30% tiefer absichert....... Dieser Deal ist fast ne 1:1 Kopie vom modifizierten Daimler/Ceberus/Chrylser Abschluß der Daimler ebenfalls zu ähnlichen Zugeständnissen genötigt hat um endlich Chrysler loszuwerden.

The global credit crunch has begun to put a squeeze on the buyout boom, with banks and private-equity firms forcing Home Depot Inc. to sell its struggling wholesale supply unit for much less than what had been agreed to just two months ago.

Home Depot's board yesterday agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June when the buyout boom was at its peak.

In addition, Home Depot itself will hold about 12.5% of the unit's equity, people familiar with the matter said, and guarantee some of the debt issued by the banks to finance the acquisition. That's significant because if the banks can't sell the debt in bond markets, and it sits on their balance sheet, they have to mark down its value, which some can ill-afford to do.

Just weeks ago, the buyout boom was a hugely profitable collaboration between private-equity firms and the Wall Street bankers who financed them. Now, amid the credit crunch, some private-equity firms and their bankers are at loggerheads as each camp tries to protect its bottom line, turning previously close allies against each other.

There are an estimated $400 billion in buyout deals working their way through the banking system. Wall Street committed to lend money for these deals as part of its plan to be in the "moving business," of packaging loans and equity stakes in the companies and selling them to investors, spreading out the risk of those transactions. With credit markets largely shut to big transactions, the banks have found themselves back in the old-fashioned "storage business," forced to keep the debt on their balance sheets and mark down its value.
Absorbing Write-Downs
In the process, the nation's banks might have to absorb tens of billions of dollars of write-downs. Such a toll would add to the pain of the far larger losses they are already toting up from the downturn in real estate and the meltdown in the market for mortgage securities.

That set the stage for the nasty squabble over HD Supply. The banks' argument: If the buyout firms could get a reduction in the price they were paying for the business -- Home Depot previously agreed to cut the price tag for the unit by about $1.3 billion to around $9 billion -- the banks should be able to change the terms of their financing for it and other deals. The buyout firms objected, saying a deal was a deal.

"This is what we pay them for," said one top buyout executive. "This is what underwriting is."

Caught in the middle are the companies that have agreed to be sold to buyout firms. Atlanta-based Home Depot, for instance, is suffering in part because of the downturn in the housing market and had planned to use the proceeds of the HD Supply sale to partially fund a $22.5 billion stock buyback plan. The $8.5 billion price tag will allow the retailer to go ahead with its buyback, a person familiar with the matter said, but it means that Home Depot will have sold the unit for little more than what it had spent to acquire the more than 40 wholesale contracting supply companies that make up the supply unit.

> More on the Home Depot buybacks / Mehr zu den Aktienrückkäufen von Home Depot

How Long Can Home Depot And Others Masked Poor Results With Buybacks?

Reviewing The Home Depot Buyback History.......

Among the features of the original HD Supply deal were many of the innovations private-equity firms have introduced in recent years in their pursuit of maximum flexibility. Those innovations denied the lenders many of the protections traditionally written into loan agreements. For example, there were almost no performance requirements set for HD Supply. If it chose not to use its cash to pay interest, the lenders would have no choice but to accept more debt instead of money.

> Here more on this issue that didn´t matter just 60 days ago....Convenant Lite Loans & Toggle Bonds

> Hier mehr zu diesem Thema das bis vor 60 Tagen noch überhaupt kein Problem gewesen ist....Convenant Lite Loans & Toggle Bonds

Unfortunately for the banks, investors have been on a buyers' strike recently and have refused to buy debt that gives them few rights.

Need for Flexibility
The banks argued that if the target company was so weak that the buyers needed all that flexibility, and refused to put in any terms and conditions, they shouldn't be buying the company in the first place. The lenders initially asked the private-equity firms to guarantee the debt involved in the deal -- which the private-equity firms say they refused to do.

A recent report from Citigroup's banking analyst estimated that J.P. Morgan was holding $40.8 billion of leveraged buyout financing, some of which may wind up on the bank's balance sheet if it can't syndicate the deals.

'Market Out' Provision
The banks had been on uncertain legal ground in pushing for changes in their commitments, according to lawyers who were involved in the deal and many who weren't. Rushing to establish market share in the buyout business, they largely dropped many standard financing conditions in deals struck for private-equity clients in the past few years. For instance, few recent deals have carried an arcane provision known as the "market out" that previously had allowed banks to pull out of commitment if the general financing market deteriorated. Even conditions for declaring an "out" for a specific target company's performance had been tightly drawn for the banks -- in contrast to the strengthened flexibility of private-equity firms when it comes to the ability to renegotiate or walk away.

> Goldman, JPMorgan Stuck With Debt They Can't Sell to Investors

Just three of the 40 biggest pending LBOs have an escape clause that lets the buyer back out if funding can't be arranged,

The revised deal reduces the amount of debt the banks provided to about $6 billion. As part of the deal, the private-equity firms agreed to accept higher interest rates on portions of the debt, which offset some of the firms' other concessions. The buyout firms will write checks for almost $2.5 billion. The banks, in turn, will try to raise the $6 billion in debt from investors so they don't have to provide the entire sum themselves.

Most in the market still expect the bulk of the remaining private-equity deals to be completed. They point to HD Supply and the controversy around it as unusual for two reasons. It is one of the few deals in which the value of the equity as well as the debt involved in the deal was underwater, given the original $10.3 billion price tag, and is unlikely to be resold at anything near the current price anytime in the next few years.

Still, investors are warily trying to determine if other buyout deals might fall victim to similar problems. They have been scrutinizing real-estate-intensive deals, such as the pending buyout of Hilton Hotels Corp. and Harrah's Entertainment Inc., as well as radio broadcaster Clear Channel Communications Inc., whose sector has been hurt in recent weeks.

And they are already toting up losses that the banks will have to put on their books. In the $27 billion deal for First Data, for instance, some investors are figuring that the debt issued in connection with the deal is already worth 10% to 13% less than envisioned. That could mean seven banks sharing paper losses of more than $2 billion. The last-minute accord on the Home Depot's unit, with a reduction in the amount of debt, offers a potential road map for other deals that would avoid drastic write-downs.

If Leveraged Buybacks, Why Not Leveraged Dividends? / Kasriel

Kasriel from Northern Trust asks the right question. The management will be forced to do more "bondholder value" management. I recommend to read the Expedia story to see how the sentiment has collapsed within 3 weeks.

Kasriel stellt hier eindeutig die richtige Frage. Das Management wird sich zukünftig wohl immer mehr um die Belange der Anleihebesitzer kümmern müssen. Ein gutes Beispiel wie schnell die Stimmung gekippt kann man am Beispiel von Expedia sehen.

The equity investing community seems to get giddy when it hears the words "stock buyback." And why not if the stock is being bought back out of current profits? But what if the corporation is increasing its debt to fund its stock buybacks?

The chart below suggests that is what is occurring now and what occurred in the late 1980s and late 1990s. The red bars in the chart represent the dollar amount of the net issuance of equities of nonfinancial corporations. Readings below zero, which predominate, signify the net "retirement" of equities. As the chart shows, record amounts of nonfinancial corporate equities are being retired in this cycle. The blue line in the chart represents nonfinancial corporate borrowing as a percent of their nominal capital spending. If the percentage is rising, as it is now, then this indicates corporations are borrowing for purposes other than to fund their capital spending. If corporate borrowing is rising relative to capital spending and corporations are retiring equity, then it is likely that they are borrowing to fund their share buybacks.

Equity investors do not seem alarmed that corporations are leveraging themselves to fund stock buybacks. Would corporate borrowing to increase dividend payments be greeted equally as gleefully?

As an aside, with some risk starting to be priced into the credit market, funding stock buybacks via borrowing is getting more expensive. Ask Expedia . It recently had plans to buyback 42% of its shares, predominantly with borrowed funds. But with the credit markets having turned more discriminating in recent weeks, Expedia has scaled back its repurchase plan to only 8% of its shares.

Countrywide .... Genius At Work......

Why took it so long for anybody to adjust to reality ? I wonder what the buyers of these Bonds are thinking right now...

Warum es solange gedauert hat bis jemand die Realität anerkennt ist mit ein Rätsel. Das filt im besonderen für die Käufer dieser Bonds......

Countrywide conference call review october 2006
"Additionally, as previously announced, management is executing a capital optimization plan and the Board of Directors has authorized a share repurchase program of up to $2.5 billion. In connection with this program, the Company intends to repurchase $1 billion to $2 billion of its common stock in the fourth quarter financed through the issuance of high equity-content debt securities."

from May 2007!
Countrywide Financial Corporation Announces Agreement to Sell $2 Billion of Series A Floating Rate Convertible Senior Debentures Due 2037 and $2 Billion of Series B Floating Rate Convertible Senior Debentures Due 2037
Countrywide Financial will use a portion of the net proceeds from this offering to fund repurchases of up to 23 million shares of its common stock simultaneously with this offering and expects to use the remainder for general corporate purposes.

But as long the rating agency´s (taken from end of 2006) are either dumb or/and blind..... In 2007 no press release that the ratings have changed

Aber solange die Grahlshüter des Rating weiter auf beiden Augen blind sind...Die Daten sind von Ende 2006 (bisher hat es in 2007 keine Pressemitteilung über eine Änderung gegeben)