Chrysler to file Chapter 11

The shareholders get a haircut, too.

 

Deal isn't done until all the parties agree. What's the problem with that?

Not sure what the question means. Why wouldn't a reorg. plan be approved by the bankruptcy court?

Fiat is contributing technology, and the UAW is contributing, I assume, wage and benefit cuts. Not sure if your ownership percentages are correct, I've seen other numbers. The current bondholders are likely to get something, for one thing.

Fiat looks to be in better shape than Chrysler, so I guess they are lucky to have a renowned Italian management team instead of the one Chrysler has.

barfo

 

More good news.

http://cbs2chicago.com/business/chicago.unemployment.figures.2.997271.html

Unemployment Up Again In Chicago In March

But Many Cities Fare Much Worse

CHICAGO (CBS) ― Unemployment rose again in the Chicago area last month, and is now approaching the 10 percent mark.

In the Chicago metropolitan area, unemployment rose from 9.2 percent in February to 9.4 perecnt in March, according the Bureau of Labor Statistics.

The bureau defines the Chicago metro area as the city and suburbs, Naperville, Joliet, Northwest Indiana, and Kenosha, Wis.

But compared to some metro areas, Chicago isn't faring badly. There are 109 metropolitan areas in the country that posted unemployment rates of 10 percent or more in March, up from a mere 14 such areas in 2008. The highest was in El Centro, Calif., where unemployment stood at 25.1 percent – as bad as the national average during the depths of the Great Depression in 1933. Also faring poorly were Merced, Calif., with 20.4 percent, Yuba City, Calif., with 19.5 percent, and Goshen, Ind., with 18.8 percent.

The area around Goshen and Elkhart, Ind., also saw the largest unemployment increase from February to March with an increase of a staggering 13 percent.

Among regions with a population of 1 million or more, the Detroit area, home to the struggling titans of the auto industry, had the worst March unemployment figure with 14 percent.

The lowest major metro area unemployment figures were seen in New Orleans, with 5.3 percent, and Oklahoma City, with 5.6 percent.

 

10%? Hell, we have to be unemployed here in Portland uphill, both ways, in the snow.

I wonder if we will have a migration of "Callies" to Oklahoma when CA turns into a dust bowl?

barfo

 

Even more good news.

http://www.reuters.com/article/poli...Type=RSS&feedName=politicsNews&rpc=22&sp=true

Underscoring the difficulties Obama faces, new government data on Wednesday showed the economy contracted at a 6.1 percent annual rate in the first quarter, a steeper-than-expected decline.

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiz06xRmmeOQ&refer=worldwide

Fed Is Said to Seek Capital for at Least Six Banks (Update2)

April 29 (Bloomberg) -- At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said.

While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said. The Federal Reserve is now hearing appeals from banks, including Citigroup Inc. and Bank of America Corp., that regulators have determined need more of a cushion against losses, they added.

By pushing conversions, rather than federal assistance, the government would allow banks to shore themselves up without the political taint that has soured both Wall Street and Congress on the bailouts. The risk is that, along with diluting existing shareholders, the government action won’t seem strong enough.

“The challenge that policy makers will confront is that more will be needed and it’s not clear they have the resources currently in place or the political capability to deliver more,” said David Greenlaw, the chief financial economist at Morgan Stanley, one of the 19 banks that are being tested, in New York.
Final results of the tests are due to be released next week. The banking agencies overseeing the reviews and the Treasury are still debating how much of the information to disclose. Fed Chairman Ben S. Bernanke, Treasury Secretary Timothy Geithner and other regulators are scheduled to meet this week to discuss the tests.

Options for Capital

Geithner has said that banks can add capital by a variety of ways, including converting government-held preferred shares dating from capital injections made last year, raising private funds or getting more taxpayer cash. With regulators putting an emphasis on common equity in their stress tests, converting privately held preferred shares is another option.

Firms that receive exceptional assistance could face stiffer government controls, including the firing of executives or board members, the Treasury chief has warned.

Geithner today endorsed legislation before Congress that would tighten oversight of credit card fees, interest rates and penalties, saying banks should view the pending legislation as a sign of what lies ahead.

“This is a very important signal,” Geithner told reporters after a meeting at the Treasury. “I think it’s important that we see that affect behavior.”

Re-elected Board

Also today, Bank of America Corp. shareholders re-elected the entire 18-member board including Chairman and Chief Executive Officer Kenneth Lewis, according to a person familiar with the matter.

The directors were re-elected by a “comfortable margin,” according to the person, who declined to be identified because the results hadn’t been made public. While Lewis has been at the helm, the bank has received $45 billion in government aid.

Lewis said earlier this month that the Charlotte, North Carolina-based bank “absolutely” doesn’t need more capital, while adding that the decision on whether to convert the U.S.’s previous investments into common equity is “now out of our hands.”

Citigroup, in a statement, said the bank’s “regulatory capital base is strong, and we have previously announced our intention to conduct an exchange offer that will significantly improve our tangible common ratios.”

Along with Bank of America and New York-based Citigroup, some regional banks are likely to need additional capital, analysts have said.

More Capital

SunTrust Banks Inc., KeyCorp, and Regions Financial Corp. are the banks that are most likely to require more capital, according to an April 24 analysis by Morgan Stanley.

By taking the less onerous path of converting preferred shares, the Treasury is husbanding the diminishing resources from the $700 billion bailout passed by Congress last October.

“Does that indicate that’s what the regulators actually believe, or is it that they felt politically constrained from doing much more than that?” said Douglas Elliott, a former investment banker who is now a fellow at the Brookings Institution in Washington.

Geithner said April 21 that $109.6 billion of TARP funds remain, or $134.6 billion including expected repayments in the coming year. Lawmakers have warned repeatedly not to expect approval of any request for additional money.

Greater Losses

Some forecasts predict much greater losses are still on the horizon for the financial system. The International Monetary Fund calculates global losses tied to bad loans and securitized assets may reach $4.1 trillion next year.

Geithner has said repeatedly that the “vast majority” of U.S. banks have more capital than regulatory guidelines indicate. The stress tests are designed to ensure that firms have enough reserves to weather a deeper economic downturn and sustain lending to consumers and businesses.

He also said there are signs of “thawing” in credit markets and some indication that confidence is beginning to return. His remarks reflected an improvement in earnings in several lenders’ results for the first quarter, and a reduction in benchmark lending rates this month.

Financial shares are poised for their first back-to-back monthly gain since September 2007. The Standard & Poor’s 500 Financials Index has climbed 18 percent this month, while still 73 percent below the high reached in May 2007.

Finance ministers and central bankers who met in Washington last weekend singled out banks’ impaired balance sheets as the biggest threat to a sustainable recovery. Geithner has crafted a plan to finance purchases of as much as $1 trillion in distressed loans and securities. Germany has proposed removing $1.1 trillion in toxic assets.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Rebecca Christie in Washington at Rchristie4@bloomberg.net

 

http://www.ft.com/cms/s/0/f1bcd8f0-341e-11de-9eea-00144feabdc0.html

Citigroup scrambles to raise capital

By Francesco Guerrera in New York
Published: April 28 2009 19:20 | Last updated: April 29 2009 00:29

Citigroup has told US regulators it could fill the capital shortfall identified in the government’s “stress test” by selling large businesses, asking more investors to convert their preferred shares into common stock and reducing its balance sheet.

Executives are trying to persuade the government Citi does not need more capital beyond its recent plans to bolster its battered balance sheet and cut costs.

However, with days to go before the results of the tests are announced, Citi, which has been bailed out three times by the authorities, is looking for ways to avoid receiving more government help if the authorities insist on an increase in capital.

Bank of America, another lender whose test has highlighted the need for funds, is in talks with regulators over its needs and the possibility of converting the government’s preferred shares into common stock, bankers said. Analysts have estimated BofA could require up to $70bn in extra capital.

Citi executives argue that divestitures, such as the planned $5.2bn sale of Japan’s Nikko Cordial to Sumitomo Mitsui, the possible expansion of an existing conversion offer, and cost-cutting would ensure it has enough capital to withstand the crisis.

People close to the situation said Citi could sell several units in Citi Holdings, the division that holds its non-core activities. Citi executives do not rule out shedding businesses deemed as core but argue that, if the company has to raise capital, the first option is to accelerate plans to sell unwanted businesses.

Citi has also looked at adding to its planned conversion of $52bn of preferred shares held by the government and other investors by including trust-preferred shares, although that idea was losing ground last night. Some insiders argue it could be difficult to persuade holders of such shares – a hybrid of debt and equity – to exchange them for common stock because they rank as debt and pay interest.

People close to the situation said both Citi and BofA were contesting some of the conclusions made in the stress tests. Citi executives, led by finance chief Ned Kelly, are believed to have told regulators the estimates for losses on credit cards – based on rising unemployment – are too high.

Citi is also asking regulators to take into account the capital boost it will receive from the expected sale of a majority stake in its brokerage unit Smith Barney to Morgan Stanley as well as the likely disposal of Nikko.

That deal is expected to generate an accounting loss, because Citi’s acquisition price for the business is higher than the likely sale price but it would still result in a cash boost for Citi.

People close to the situation cautioned that discussions between Citi, Treasury and the Federal Reserve were fluid and details of the plans could change ahead of the release of the results of the stress tests next week.

Some Citi executives believe the government may still have to convert more of its preferred shares into common stock, *raising its holding above the 36 per cent it is due to take following the latest bail-out in February.

Citi shares closed down 5.9 per cent. BofA shares closed down 8.6 per cent at $8.15.

BofA declined to comment. Citi said its capital base was “strong”.

Additional reporting by Greg Farrell in Charlotte

 

The Grapes of Thunder? East of Garden Grove? Of Mice and Mexican Labor?