The Huntsman chemicals company says two banks providing funding for its disputed takeover by Hexion Specialty Chemicals have backed out of the deal.
Huntsman Corp. sued the banks in September, charging they had interfered with the buyout. Huntsman said early Tuesday, the day the buyout was expected to close, that it had been informed by Hexion that Credit Suisse and Deutsche Bank won’t close on the buyout.
Hexion tried to walk away from the $6 one hour cash.5 billion takeover agreed to last summer, citing Huntsman’s deteriorating finances. Huntsman took them to court and won.
Hexion has now been told by the banks that an appraisal suggesting the combined company would be solvent does not meet the conditions of a commitment letter on the deal.
Brutal market activity has ravaged the ranks of blue chip stocks.
As newcomers enter this fraternity, some of the old guard has lost its membership while others are capitalizing on the financial meltdown.
The virtues of stocks in a number of industries have become more visible as the blue chip ranks have thinned. Up-and-comers include insurers Ace Ltd. and Aflac; handset chipmaker Qualcomm; food-service provider Sysco; and industrial manufacturer Emerson, based in Ferguson, Mo.
They replace the likes of Fannie Mae, Freddie Mac, AIG, Morgan Stanley, Wachovia and General Motors, once mainstays of elite portfolios. Even General Electric, Citigroup and Pfizer have lost some of their luster.
"A reputation takes a long time to build and is easy to lose," said Mark Adelman, portfolio manager of the $47 million Westcore Blue Chip Fund in Denver. "Some stocks once considered blue chips are now on the ’suspect’ list, while others have proven they’re blue chip."
JPMorgan Chase and Wells Fargo have taken advantage of the subprime debacle to become even mightier blue chips. Companies such as IBM, Intel and American Express also managed to maintain their trustworthy aura.
Worth the bet?
The term "blue chip" comes from the game of poker, in which the blue chips have the highest value, yet these are the stocks favored by conservatives rather than gamblers. They represent large companies with widely accepted products, good credit quality and low stock volatility.
However, this doesn’t mean investors should buy into these companies without looking into their financial statements.
"One has to be much more cognizant of balance sheets of companies than even one year ago," said Steven Check, editor of The Blue Chip Investor newsletter and portfolio manager of the $20 million Blue Chip Investor Fund in Costa Mesa, Calif. "There could be something bad hidden somewhere."
DON’T MISS OPPORTUNITIES
There is renewed focus on the management’s competence and track record, Adelman said. Investors must think carefully about what stocks they pick, yet keep in mind that they’ll miss a big opportunity if they wait too long, he said internet payday loans.
One new blue chip is Ace Ltd., a global insurance and reinsurance company that has strengthened its balance sheet and weathered the storms in recent years, said Adelman. Another he likes is asset manager Invesco Ltd., which has hired new management and improved its business while remaining an inexpensive stock in light of its franchise and growth opportunities.
Some tech stocks that lost blue chip status in the bursting of the tech bubble have made a comeback, Adelman said, noting Qualcomm and data network giant Cisco Systems in particular.
Stock prices have become detached from actual businesses, Check said, yet quality companies will at some point again reflect their strength.
Emerson, with a broad range of industrial business, has had solid earnings for a long time and plenty of free cash flow, said Check. Supplemental insurer Aflac shouldn’t be disregarded simply because it is a financial stock, he said. He lists drug store chain Walgreen as another new blue chip.
BLUE CHIPS CAN FADE
"Just because a company is a blue chip doesn’t mean it is always going to be one," said Paul Nolte, investment director of Hinsdale Associates in Hinsdale, Ill. "Look at its last five years of earnings, see how much debt it has, see if its dividend has risen over time and whether it has a low relative valuation."
Many stocks are inexpensive and that means opportunities, said Nolte. Avoid firms whose debt, while not actually indicating imminent failure, could nonetheless limit future ability to do business, he said.
Nolte has elevated Sysco, PepsiCo and Coca-Cola to the top echelon of blue chip stocks because no matter what happens in the economy, consumers will continue to buy their products.
2008, TRIBUNE MEDIA SERVICES INC.
Asian and European leaders gathered for the second day of a 43-nation summit on Saturday with the Herculean task of propping up the confidence of panic-stricken markets fearful of a worldwide recession.
Leaders woke to news that Wall Street had closed at 5- year lows, but the losses in the main indexes of around 3.5 percent were not as bad as expected given that shares in Japan had slumped 9.6 percent and Europe had sunk 5.4 percent.
The financial crisis has injected urgency into the Asia-Europe Meeting (ASEM) of 27 EU member states and 16 Asian countries, a biennial talking shop usually shorn of substance.
Leaders queued up on Friday to pledge cooperation to tackle the turbulence by taking what a communique called “firm, decisive and effective measures in a responsible and timely manner.”
“Through such concerted efforts, leaders expressed full confidence that the crisis could be overcome,” the statement said free credit report.com.
Europe’s main goal in Beijing is to rally Asian support for a united front at a financial crisis summit that U.S. President George W. Bush will convene next month in Washington.
“Europe would like Asia to support our efforts, and we would like to make sure that on November 15 we can face the world together and say that the causes of this unprecedented crisis will never be allowed to happen again,” said President Nicolas Sarkozy of France, which currently holds the rotating EU presidency.
Sarkozy told Chinese President Hu Jintao that he wanted concrete decisions from the Washington talks, but feared the United States would be content with “principles and generalities,” according to a French presidential official.
President Bush will host world leaders November 15 for a summit to confront the world financial crisis, the White House announced Wednesday.
He will invite the leaders of the G20 group of countries "to discuss the financial markets and the global economy," White House spokeswoman Dana Perino said.
The leaders will try to "agree on a common set of principles" for reforming regulation of the markets, she said.
Bush will host a dinner at the White House the night before the summit, she said.
The event will come after the November 4 presidential election. Perino said it is "too early to say" whether the president-elect will attend the summit.
"We don’t know what that president will want or not want to do," she said, but added that the White House will seek his "input."
Bush was joined over the weekend by French President Nicolas Sarkozy and Jose Manuel Barroso, the president of the European Commission, at Camp David, where he said it is "essential that we work together because we’re in this crisis together cashadvance."
Bush said the summit will include developed and developing nations from around the world and suggested it could be the first of a series of high-level meetings.
The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union.
The managing director of the International Monetary Fund, the president of the World Bank, the United Nations secretary-general, and the chairman of the Financial Stability Forum also have been invited to participate, Perino said in a written statement.
Federal Reserve Chairman Ben Bernanke testified Monday that Congress should consider passing a new stimulus package to try to jump start the economy.
Bernanke, speaking before the House Budget Committee, came just short of an outright endorsement of a package to pump tax dollars into the economy. But he clearly said the economy needs additional help from Congress.
"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," he said.
Experts said Bernanke’s testimony gives an important lift to the chances that Congress will pass some sort of stimulus package, perhaps in a lame duck session after the November election and before the new Congress takes office in January.
"Effectively, the Fed chairman is giving Congress a green light to go ahead with an additional fiscal stimulus package," said Brian Bethune, chief U.S. financial economist for research firm Global Insight.
Earlier this year, Congress approved a $170 billion plan - nearly $100 billion in payments to tax filers - to boost consumer and business spending. Talk has grown louder in recent weeks in Washington and on the presidential campaign trail for further steps including an extension of unemployment benefits, infrastructure spending and other measures.
Bernanke’s comments were cheered by House Speaker Nancy Pelosi, D-Calif.
"Chairman Bernanke added his voice to the chorus of economists, experts and policymakers who insist that America needs a job-creating recovery package to get our economy back on track and to restore consumer and investor confidence," said a statement released by her office.
The Bush administration said it was open to discussing a new stimulus package with lawmakers but said it did not see Bernanke’s statements as a blanket endorsement of any plan proposed so far by Congress.
"I think we just need to wait and see," said White House spokeswoman Dana Perino. "We’re open to ideas and we’ll take a look at what comes our way."
Bernanke, who with Treasury Secretary Henry Paulson has led the government’s extraordinary efforts in recent weeks to stem the financial crisis, was asked by Rep. Rosa DeLauro, D-Conn., whether the economy is in a recession.
"We are in a serious slowdown," Bernanke said, refusing to give the yes-or-no answer DeLauro said she wanted.
He said "recession" is a technical description of economic conditions faxless payday advances. "Whether it’s called a recession or not is of no consequence," Bernanke said.
Some economists saw Bernanke’s comments as his most dire assessment yet of the U.S. economy.
"The Fed has accepted that the rate cuts and actions, even if they are of help to the financial sector, will not be adequate to stabilize the economy," said Arpitha Bykere, economic analyst for RGE Monitor.
Most of Bernanke’s nearly 90-minute appearance focused on economic stimulus. He said that Congress should consider another measure but nonetheless declined to say how much money should be spent. He said that’s a decision for Congress, not the Federal Reserve.
Bernanke suggested Monday that any stimulus program should be activated as quickly as possible to boost the economy when it is facing its greatest period of weakness.
In addition, Congress should weigh whether to make credit more available to consumers, homeowners, businesses and other borrowers, Bernanke said. He said that loan guarantees and direct lending by government are among the ways lawmakers can get credit flowing again.
Democrats have been pushing for a second stimulus package for months. Among the proposals they’ve put forward: extend jobless benefits, increase food stamps, invest in infrastructure projects and impose a requirement for a foreclosure moratorium.
Republicans have made their own proposals, which focus more on tax breaks than direct payments. Among them, reduce or suspend the capital gains tax and offer a bigger tax break for home buyers.
The presidential candidates, whose crisis-related stimulus plans largely differ from one another, nevertheless both call for suspending the income tax on unemployment benefits and temporarily exempting seniors over 70-1/2 from having to make withdrawals from their IRAs and 401(k)s.
At Monday’s hearing, Rep. Brian Baird, D-Wash, pushed Bernanke about the value of spending on infrastructure projects, such as roads and water projects. Such projects have economic value, but it generally takes a long time for spending on such projects to get into the system, Bernanke said. Baird responded that in his district and across the country there are many projects ready to go and lacking only funding.
Lawmakers also questioned Bernanke about the need to help state and local governments avoid budget cuts. The federal government could loan states money at significantly lower rates than available in the financial markets, he said.
Dutch financial group ING said on Monday it will sell its Taiwan life insurance unit to Fubon Financial for $600 million, a day after securing a 10 billion euro ($13.5 billion) government cash injection.
As policy makers around the world pour in billions of dollars of state cash to help stabilize their banks, financial institutions such as ING and U.S. insurance giant AIG have been selling off non-core overseas assets to help shore up their capital positions.
“ING is affected by the global financial crisis, and they need to adjust their asset allocation as a group,” Fubon President Victor Kung told reporters. “That is why we got this chance… We are sure we’ve bought a good company at a very reasonable price.”
The Dutch financial giant announced the deal after it became the latest European bank to seek government funding by agreeing to a government cash injection on Sunday.
Following a weekend of intense talks after its share price was slashed by more than a quarter in the latest trading session and the partial nationalization of rival Forbis two weeks ago, ING was seeking to shore up its financial position pay day advance.
“The market environment has changed over the last two weeks and the expectations for capital levels have changed following massive capital injections in financial institutions worldwide,” ING Chief Executive Michel Tilmant said on Sunday.
“We have accepted the consequences of this situation and welcome the support of the Dutch state,” he told an evening news conference, flanked by Dutch Finance Minister Wouter Bos and central bank president Nout Wellink.
ING will issue 10 billion euros worth of securities to the Dutch state, which will have a position similar to common shareholders. The transaction is designed not to dilute shareholder capital.
The leaders of 15 European nations agreed on Sunday to a plan to ease the global financial crisis by shoring up troubled banks.
French President Nicolas Sarkozy said the plan would refinance banks, guarantee interbank lending and ensure that troubled banks do not fail.
It also will protect individual depositors’ accounts and ease some regulations to give banks more flexibility.
The refinancing of the banks and the guaranteeing of interbank loans are good until the end of 2009.
"What we want is to give back banks the means to lend, to support the economy to enable households to borrow for mortgages or consumption and give companies the means necessary to invest for growth," Sarkozy said. "We cannot have a healthy economy and sustainable growth unless we have a solid financial sector."
Sarkozy announced the agreement after a meeting of leaders of the Eurozone countries, which use the euro currency. Sarkozy also holds the rotating European Union presidency.
European officials say the plan is not a gift to bank management and that managers, who contributed to the crisis should be held responsible. The refinancing will be made at market rates and will consider the financial health of the banks.
Each country will take slightly different approaches, because they have different laws and banking regulations, but their actions will be compatible.
"We have a tool kit and we will see what suits whom in order to achieve what we are setting out to achieve, which is to make sure that we don’t have an economic crisis in addition to the financial crisis approved payday advance in seconds. We need to get things moving again, shifting again. And when things have calmed down, we’ll go back to our basic training and responsibilities," Sarkozy said.
The leaders wanted to work quickly to reassure investors before the markets open on Monday. Sarkozy said France, Germany and Italy will hold Cabinet meetings on Monday and will announce concrete plans.
"These measures will be implemented in France without delay," Sarkozy said. British Prime Minister Gordon Brown met with Sarkozy and other leaders before the summit and told reporters there was "common ground now about what needs to be done" to soothe the financial markets.
On Wednesday, officials from the Eurozone countries will present their plan to the rest of the European Union at a meeting in Brussels, Belgium. Sarkozy said that they would then urge the United States to hold an international summit to manage the crisis.
"The crisis didn’t come from Europe. It began in the U.S. It has now become a worldwide crisis, and the issue of European structural institutions may be put on the table at some stage, but right now, we’re dealing an emergency. And we have to reform urgently an international financial system that needs to be reformed," he said.
– CNN Senior International Correspondent Jim Bittermann contributed to this report.
Illinois state regulators Friday shut down a bank owned by a group of Alton-area businesspeople less than three months after it was warned to change its ways over "unsafe and unsound" practices.
Meridian Bank, which was based in Eldred and had a branch in Alton, will go into receivership with the Federal Deposit Insurance Corp. All deposits have been transferred to National Bank, of Hillsboro, Ill., and Meridian’s five branches will re-open as National Bank branches today or Tuesday.
"The depositors of Meridian should look at this simply as the merger of two banks," said FDIC spokesman David Barr. "For them it will be business as usual, just with a new bank."
The FDIC brokered the takeover by National, which assumed all $36.9 million in Meridian’s deposits and bought about $7.55 million of Meridian’s assets, including buildings. Another roughly $31.6 million in assets, which likely includes loans and securities, will be absorbed by the FDIC, which will continue to collect payments on the loans and eventually sell them off, Barr said.
In July, Meridian reached an agreement with Illinois regulators in which it promised to stop "engaging in hazardous lending and lax collection practices." It also agreed to take steps to improve its balance sheet and oversight and install new management. It’s unclear how many steps in the 24-page agreement were reached before deadlines that set for mid-September and mid-October.
Barr said the decision to shutter Meridian was made by Illinois regulators. The state Division of Financial and Professional Regulation issued no public statement and a spokeswoman did not return messages Friday night.
In 2004, Meridian — then known as First Bank of Eldred — was bought by several Alton-area businesspeople, among them developer Clay Winfield and physician Dr. Timothy Kaiser. Winfield and Kaiser sit on the board of YTB International, a controversial online travel company based in Wood River. In 2006 the bank made a $2.5 million interest-only loan to YTB to expand its headquarters, a project being performed by a construction company owned by Winfield. In July, after the state stepped in, that loan was changed to more traditional terms.
In all, Meridian had $27.3 million in loans outstanding as of June 30. It’s unclear how many of them the state was concerned about, or which ones. Attempts to reach Winfield were unsuccessful and messages left at Meridian Friday evening were not returned.
Meridian had been expanding since its takeover by the Alton investors. In 2006, it bought branches in Carlyle and Altamont, Ill, for $23 million. And last year, it bought the deposits of National Bank’s branch in Carlyle.
Now those deposits are going back to National Bank. And Meridian is no more.
Regulators also shuttered Main Street Bank, based in Northville, Mich., on Friday. So far, 15 banks have failed in 2008.
More information for depositors is available at www.fdic.gov, or by calling 1-877-894-4713.
email@example.com | 314-340-8291
The Federal Reserve has agreed to provide insurance giant American International Group with a loan of up to $37.8 billion, on top of one made to the troubled company last month.
Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed income securities from AIG in return for cash collateral. These securities were previously lent by AIG’s insurance company subsidiaries to third parties (faxless payday loan online).
Last month, the Fed provided an $85 billion loan to the company, which was on the brink of bankruptcy.
Europe’s major stock markets hovered around the break-even point Tuesday even as lingering concerns over the credit crisis continued to haunt world markets and financial institutions.
Nearly three hours into the trading day, London’s FTSE 100 was down 0.2%, the CAC 40 in Paris gained half a point, and the XETRA DAX in Frankfurt was off 0.6%.
Russia’s two main stock exchanges — the RTS and MICEX — reopened several hours late on Tuesday, a day after suffering steep plunges. The RTS index fell about 20% Monday. The RTS exchange resumed normal trading at 1 p.m. (5 a.m. ET) and was up 2.6% to 889.1 points as of 2 p.m (6 a.m. ET). The MICEX, where most trading takes place, rose by 3% to 774.5 points. It opened at 1:15 p.m. (5:15 a.m. ET)
Meanwhile, Iceland intervened Tuesday to shore up its banking industry after it halted trading of six bank stocks a day earlier. The Kaupthing Bank said it had received a 500-million euro ($692 million) loan from the Icelandic Financial Supervisory Authority to "facilitate" its operations. Early Tuesday, the government said it was taking over operations at the Landsbanki bank but that it would be "business as usual.".
Also, the Central Bank of Iceland said Tuesday that it has fixed the interbank exchange rate of the country’s currency, the krona, at 175. The central bank’s decision follows huge falls in the value of the krona as the financial crisis spreads.
Other European banks were being battered on Tuesday as nervous investors sold their stocks. Share in the Royal Bank of Scotland were off more than 30%. Barclays had dropped about 9%by late morning (payday loan).
The developments came as European Union finance ministers were meeting in Luxembourg in emergency session.
Other world markets. After staggering out of the gates to start the week, some Asian and Pacific markets rebounded Tuesday.
South Korea’s KOSPI was up about half a percent and Australia’s All Ordinaries index gained 1.2%. The Taipei Weighted was up about a third of a point, but Bombay’s BSE SENSEX was off about 2%.
Japan’s Nikkei Exchange sported the biggest losses in Asia — the Nikkei closed down 3%, after being down 5% and below the 10,000 mark for the first time in nearly five years. Japan’s central bank rate held its main lending rate steady, disappointing investors looking for a cut coordinated with other central banks.
Chines and Hong Kong markets were closed for a holiday.
But Australia’s ASX-100 index finished up 1.8% after that nation’s central bank lowered its key lending rate by one full percentage point..
Latin American markets took a solid beating Monday. Argentina’s MerVal sloughed off 5.9% of its value. Both Brazil’s Bovespa and Mexico’s IPC slipped 5.4%.
In the United States, the Dow Jones industrials plunged by as much as 800 points on the day, falling below 10,000 for the first time since October 2004. The Dow erased more than half those losses, finishing the day down 3.6%.
– The Associated Press contributed to this report.
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