An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.
The Carlyle Group said in a statement on Thursday that as Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, was unable to reach a deal with lenders it expected those lenders to take possession of the fund’s remaining residential mortgage-backed securities assets.
Carlyle said it had worked “exhaustively” to assist Carlyle Capital and took “extraordinary measures” to help it through its liquidity crisis.
It stressed that Carlyle Capital Corp (CCC) was a separate legal and business entity, and that it believed CCC would not have a measurable impact on Carlyle’s other funds, investments and portfolio companies. Carlyle Group said that Carlyle Capital’s defaults did not trigger cross-defaults for any Carlyle borrowings.
The Carlyle Group, based in Washington, DC, has more than $75 billion under management payday loan. One of the world’s largest private equity firms, it owns companies including TV ratings firm Nielsen, doughnut seller Dunkin’ Brands and former General Motors unit Allison Transmission.
Carlyle Capital said in New York late on Wednesday that talks with lenders deteriorated after a decline in the value of its mortgage investments, which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.
A “successful refinancing is not possible,” Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.
The credit crisis, triggered last year when subprime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to tighten credit and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities — the investments that Carlyle Capital was set up to invest in.
Employers unexpectedly cut jobs in February at the steepest rate in nearly five years, a second straight month of employment losses that heightened fears the world’s largest economy has skidded into recession.
“The question appears no longer to be are we going into a recession but how long and deep it will be,” said economist Joel Naroff of Naroff Economic Advisors Inc in Holland, Pennsylvania.
The Labor Department on Friday said 63,000 non-farm jobs were eliminated on top of an upwardly revised loss of 22,000 in January, sharply contrary to Wall Street economists’ forecasts that 25,000 positions would be added in February.
The department also halved the number added in December to 41,000 from the 82,000 estimated a month ago, in a move that underlined the steady deterioration in the U.S cash till payday. labor market.
“The underlying trends are horrible, with worse to come,” said economist Ian Shepherdson of High Frequency Economics in Valhalla, New York. The Federal Reserve “has to ease (U.S. benchmark interest rates) much more,” he said.
The U.S. central bank already has cut its federal funds target rate by 2.25 percentage points since September to its current 3 percent level and is widely expected to slash it again at its next policy-setting session on March 18.
A Reuters poll on Friday found that most major Wall Street dealers expect the fed funds rate to be at 2 percent and possibly lower by the end of April.
STOCK PRICES SUFFER
Financier Wilbur Ross will invest as much as $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd, the bond insurer said Friday.
WL Ross & Co. will purchase $250 million worth of common stock and commit to buying an additional $750 million shares at the company’s option, and Ross will be appointed to Assured Guaranty’s board.
Bond insurers have struggled to maintain "AAA" ratings as bonds they back lose value amid the credit crisis. Assured Guaranty has been seen as one of the strongest in the sector, despite some exposure to the weakening credit markets.
The closing of the initial $250 million investment is subject to regulatory approvals; any subsequent investments will require shareholder approval, which the company will request at its 2008 annual meeting.
In order to draw on the $750 million commitment, Assured Guaranty (AGO) must maintain ‘AAA’ (stable) ratings for itself, and ‘AA’ ratings for Assured Guaranty Re Ltd http://us-no-fax-payday-loans.com. from credit ratings agencies Standard & Poor’s, Moody’s (MCO) and Fitch. Furthermore, the credit quality of its financial guaranty portfolio and investment portfolio must not decline significantly.
Merrill Lynch & Co. acted as financial adviser to Assured on the deal.
Billionaire Wilbur Ross has agreed to invest up to $1 billion in Assured Guaranty Ltd (AGO.N: Quote, Profile, Research), bypassing big bond insurers like Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) in favor of a rival that has largely avoided the credit problems plaguing the industry.
Ross agreed to buy $250 million of common shares of Assured and committed to purchase up to $750 million in additional stock at the company’s option.
Investors had hoped that Ross’s WL Ross & Co LLC would help rescue Ambac, after reports last month that the tycoon was eyeing an investment in the second-largest bond insurer. Ambac’s efforts to raise new capital are progressing more slowly than hoped, according to people briefed on the matter.
Even without new funds, though, Ambac’s main unit has enough capital to maintain its top credit ratings, Moody’s Investors Service said on Friday.
The combination of positive and negative news meant that Ambac’s shares traded as much as 8.3 percent lower and 2.5 percent higher before settling to essentially unchanged.
Assured Guaranty shares rose as much as 15.8 percent.
Ross told Reuters that he had chosen Assured Guaranty because it needs capital to pursue new business, rather than to cure damage.
“The idea of this capital is .. cash advance. not to simply patch a hole,” Ross said in a telephone interview, adding that he was still in conversations with other bond insurers.
The toy industry and the nation’s leading standardization group released a plan Thursday that hopes to make sure toys manufactured around the world are safe.
The much-awaited proposal comes from the Toy Industry Association (TIA) and the American National Standards Institute (ANSI).
"This effort is a preventative plan to anticipate and discover hazards going forward," said Lane Hallenbeck, Chair of the ANSI Steering Committee that helped develop the plan.
The TIA/ANSI report contained three main recommendations:
Mandatory design hazard analysis
The groups proposed that toy companies test their products for design defects, the leading cause of recalls. Sue DeRegon, safety expert who was on the TIA/ANSI working committee, said the tests can be carried out by the companies themselves or by third-party laboratories.
Industry analysts say a majority of recalls come from careless designs that use dangerous small parts. Only a small percentage of recalls are due to hazards related to chemicals like lead paint.
Factory audits
The new safety proposal recommends that factories worldwide submit to regular manufacturing and quality audits in order to be certified under the new toy safety initiative quick payday loan. DeRegon said the audits would "most likely" be conducted by third party firms.
Mandatory Safety Testing
TIA-ANSI recommended that toy companies, including those that use overseas factories, perform mandatory safety checks by accredited labs to make sure their products meet current federal regulations pertaining to chemical, mechanical and other hazards.
Toy companies are currently not required to prove that their products have been tested for safety issues.
The recommendations will be available for public review on ANSI’s Web site for one month. Following the public comment period, a final proposal will be presented to the TIA Board for adoption and implementation.
Top U.S. electronics retailer Best Buy Co (BBY.N: Quote, Profile, Research), facing stagnant sales at home, said on Friday it would ramp up its expansion in China but would not grow through partnerships with local rivals.
Best Buy will invest substantially and open a large number of stores in China in the next five years, and will launch online sales in the country in the next 24 months, Bob Willett, chief executive officer of Best Buy International, said in an interview. He declined to give specific figures.
Willett denied Chinese media reports that Best Buy was in talks on a possible share swap with GOME Electrical Appliances Holdings Ltd (0493.HK: Quote, Profile, Research), China’s top electronics retailer.
“(We are) not in the process of having any talks with GOME or other Chinese retailers on cooperation,” he said.
Last week, Best Buy cut its full-year outlook, citing a softer U.S. economy, but remained ambitious in its expansion plans, aiming to increase the number of its stores in China by about 20 percent to as many as 193 in its 2009 fiscal year, which ends on March 1 next year.
The new stores planned in China include 20 to 25 Five Star stores and five to eight self-branded stores credit report. All new Best Buy-branded stores will be based in or around Shanghai, where the company opened its first and only such store in China in early 2007.
Best Buy, which bought a majority stake in Jiangsu Five Star Appliance Co in 2006, will boost its ownership of the company to 100 percent by the end of 2010 as part of the purchase agreement, Willett said.
Best Buy faces tough competition in China from GOME and Suning Appliance Co 002024.SZ, the country’s second-largest electronics retailer.
Strained by war, recently discharged veterans are having a harder time finding civilian jobs and are more likely to earn lower wages for years due partly to employer concerns about their mental health and overall skills, a government study says.
The Veterans Affairs Department report, obtained Thursday by The Associated Press, points to continuing problems with the Bush administration’s efforts to help 4.4 million troops who have been discharged from active duty since 1990.
The 2007 study by the consulting firm Abt Associates Inc. found that 18% of the veterans who sought jobs within one to three years of discharge were unemployed, while 1 out of 4 who did find jobs earned less than $21,840 a year. Many had taken advantage of government programs, such as the GI Bill, to boost job prospects, but there was little evidence that education benefits yielded higher pay or better advancement.
The report blamed the poor prospects partly on inadequate job networks and lack of mentors after extended periods in war, and said employers often had misplaced stereotypes about veterans’ fitness for employment, such as concerns they did not possess adequate technological skills, or were too rigid, lacked education or were at risk for post-traumatic stress disorder.
It urged the federal government to consider working with a private-sector marketing firm to help promote and brand war veterans as capable employees, as well as re-examine education and training, such as the GI Bill.
"The issue of mental health has turned into a double-edged sword for returning veterans. More publicity has generated more public awareness and federal funding for those who return home different from when they left. However, more publicity - especially stories that perpetuate the ‘Wacko Vet’ myth - has also made some employers more cautious to hire a veteran," said Joe Davis, spokesman for Veterans of Foreign Wars.
"The federal government needs to accelerate its hiring and training of these young veterans to fill the ranks of the retiring Boomer generation," he said.
A VA spokesman declined to comment, saying the report spoke for itself. Last November, the VA announced the initial hiring of 10 full-time staff as part of an effort to help veterans find jobs at the department.
Separately, a Labor Department report obtained by the AP showed that formal job complaints by reservists remained high, citing concerns about denied jobs or benefits after they tried to return to their old jobs after extended tours in Iraq. Reservists filed 1,357 complaints with the department in 2006, the latest figures available, down from nearly 1,600 in 2005, when complaints reached the highest level since 1991.
While complaints declined in 2006, the Labor Department report noted for the first time that figures in the previous years might have been inflated cash advance flexible payments. That’s because in some cases a single complaint was double counted after the case was closed in one state and then reopened in another state.
"The military has worked on assisting service members in completing and translating their skills to match equivalent civilian job descriptions; however, training for marketability may require much more preparation than having the ability to improve a resume," the VA study said.
"The federal government may need to reevaluate how it serves the needs of returning service members," it said.
Charles Ciccolella, the Labor Department’s assistant secretary for veterans’ employment and training, said the department provides a wide variety of services to veterans seeking jobs, including workshops that focus on resume writing and interview skills. Staff also are educating reservists about their job rights as well as seeking to connect veterans to new jobs, he said.
"The Department of Labor is constantly working to better assist transitioning service members and veterans as they enter or re-enter the civilian work force," Ciccolella said.
The two reports come as Congress and the Bush administration seek ways to improve veterans’ healthcare and benefits in light of a protracted Iraq war.
A Pentagon survey of reservists released last year found increasing discontent among returning troops about the government’s performance in protecting their legal rights after taking leave from work. Some legal experts have said those numbers may grow once the Iraq war winds down and more troops come home after an extended period in combat.
In recent weeks, some veterans groups and lawmakers have called for an overhaul of the GI Bill, which provides veterans with money to help them further their education.
The difficulty that veterans have had in finding jobs at higher wages has been going on for some time.
The latest VA study, numbering 199 pages, tracked a statistical sample of 1,941 veterans between the ages of 17 and 61, more than half of whom served in the Army. It found that from 1991 to 2003, about 9.5% of recent veterans were unemployed within two years of separation from active duty, compared with 4.3% for non-veterans of comparable age, gender and education.
The veterans also tended to have lower wages, although total income was often similar when factoring in disability pay and other government benefits, and to be in low-income families (under $29,000) for up to eight years after separation.
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