October 18, 2011   25 notes

TEXT-S&P lowers BSP ratings to ‘CC’, keeps on watch neg


— BSP is taking longer than we expected to refinance its senior secured notes maturing on Nov. 1, 2011, and the company may default on the imminent maturities.— We are lowering our long-term corporate credit rating on the Indonesian plantation company to ‘CC’ from ‘B-‘.— We are also lowering the issue rating on the notes, which BSP guarantees, to ‘CC’ from ‘B-‘.— We are keeping the ratings on CreditWatch with negative implications.Standard & Poor’s Ratings Services said today that it had lowered its long-term corporate credit rating on PT Bakrie Sumatera Plantations Tbk. (BSP) to ‘CC’ from ‘B-‘. We also lowered the issue rating on the US$185 million senior secured notes issued by BSP Finance B.V. to ‘CC’ from ‘B-‘. BSP irrevocably and unconditionally guarantees the notes. At the same time, we kept the ratings on CreditWatch, where they were placed with negative implications on Aug. 17, 2011.”We lowered the ratings because BSP is yet to receive final funding commitments from some of the participating banks, including one of the lead arrangers,” said Standard & Poor’s credit analyst Suzanne Smith. “The company continues to face delays in finalizing and drawing down on a syndicated bank loan to refinance the impending maturities of its notes.”We believe such delays jeopardize BSP’s ability to repay the US$185 million senior secured notes, which mature on Nov. 1, 2011.If BSP addresses the funding gap by a distressed exchange, we will assess the move as a de facto restructuring. We understand that the lead arrangers are looking at ways to involve existing bondholders to fill the funding gap.We view BSP’s liquidity as weak. BSP has a cash balance of about Indonesian rupiah (IDR) 600 billion (about US$66 million) as of June 30, 2011, and we expect the company to generate funds from operations of about IDR500 billion in 2011. These sources are insufficient to meet the company’s debt maturing over the next 12 months, including the principal repayment of US$185 million and accrued interest.”We aim to resolve the CreditWatch before or shortly after the maturity date of the notes,” said Ms. Smith. “We could lower the corporate credit rating to ‘SD’ (for selective default) and the issue rating on the notes to ‘D’ if the company defaults on the notes. We could raise the rating if BSP secures sufficient funding support in time and avoids defaulting on the bonds.”RELATED CRITERIA AND RESEARCH— Rating Implications Of Exchange Offers And Similar Restructurings, May 12, 2009— How Standard & Poor’s Uses Its ‘CCC’ Rating, Dec. 12, 2008— 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

October 17, 2011   42 notes

Will my local Borders store close?


In filing for bankruptcy protection today, Borders Group Inc. said that it plans to close 200 of its 500 superstores nationwide. This has left many book fans wondering: Is my local Borders store going to close? Here is a map of all the planned closings: A complete list of planned Borders closures can be found here: Borders Store Closings

October 15, 2011   67 notes

German private banks call Greece bankrupt -magazine


Schmitz called for a change in Basel III regulations, which spell out the amount of capital reserves that banks must set aside for so-called risk-weighted assets.Under the current Basel II rules and EU guidelines, all euro zone sovereign debt can be assigned zero risk, which has provided a strong incentive for banks to buy and hold government bonds.”The current situation shows that zero (risk weighting) accounting doesn’t accurately reflect reality,” Schmitz said.”Politicians are not tackling this issue, since it concerns them,” he added, explaining that this exemption has helped sovereign borrowers market their debt to banks.Hesse, the German federal state home to the country’s banking centre of Frankfurt, said late in September it would push for an end to the exemption of capital reserves for central government debt.”The exemption distorts investment markets and sweeps under the carpet the actual inherent risks,” said Hesse’s finance minister, Thomas Schaefer, and its economy minister, Dieter Posch, at the time.At the same time, Schmitz opposed a forced recapitalisation of German banks, because it would only cause further uncertainty in the markets.”Compulsory recapitalisations do not solve the political crisis of confidence,” he said.

October 12, 2011   57 notes

Alcoa profit hurt by slowdown, recession fears


CEO Klaus Kleinfeld warned of weak economic conditions through the year, particularly in Europe, “as confidence in the global recovery faded.”That sapped aluminum demand from the automotive, industrial products, construction and packaging sectors since the second quarter, with only the aerospace and transport sectors growing.The third-quarter profit jumped from a year ago, but was lower than the second quarter and fell short of Wall Street expectations, which had already been lowered because of a slump in global metal prices.Chief Financial Officer Chuck McLane said worries about Europe’s debt crisis had prompted customers there to reduce orders.Kleinfeld said that battered confidence was the biggest problem. “We’ve seen strength in many of our markets, despite the sharp slowdown in Europe that hurt our sequential results and I’m more concerned about lack of confidence than about market fundamentals.”It almost looks like the world is worrying itself into another recession and that should not be allowed to happen,” he told Wall Street analysts on a conference call.”I think the problems that we have today … those fears, not a shrinking market, were the main reason for the weak quarter.”Kleinfeld said Alcoa stuck with its forecast for global aluminum demand growth of 12 percent this year, although it expected a decline in Europe, North America and Brazil.But that decline will be made up by strength in emerging markets and he increased the growth forecast for China from 15 percent to 17 percent.Still, one analyst said things could get worse. “There’s a bigger decline in price so far in the fourth quarter and seasonally it’s worse,” said Charles Bradford of Bradford Research in New York.”You get the holidays toward the end of the year and that slows everybody down. It’s going to be much worse.”EARNINGS LAGAlcoa, the first Dow component company to report third-quarter results, said net earnings were $172 million, or 15 cents per share, compared with $61 million, or 6 cents per share, a year earlier.The Pittsburgh-based company said income from continuing operations was also 15 cents per share, but down from 28 cents per share in the second quarter. Analysts on average were expecting earnings of 22 cents per share, according to Thomson Reuters I/B/E/S.Alcoa said revenue rose 21 percent to $6.4 billion from a year earlier, but was 3 percent lower than the second quarter of this year as metals prices slumped sharply.Aluminum prices fell almost 20 percent in the third quarter on global economic concerns and Alcoa’s share price fell 41 percent during the same period.In his call with analysts, Kleinfeld blamed the price drop on, “very offensive short-selling going on by speculators.”They are betting against aluminum as a proxy for betting against the global economy,” the CEO said.Still, aluminum prices could easily rebound if the sentiment around the European economy shows any improvement, analysts said, which would immediately benefit Alcoa.”Visibility is very low, so it’s hard to know what’s around the corner, but even with earnings coming in below consensus, we shouldn’t overreact,” said Bridget Freas, an analyst with Morningstar in Chicago.”It’s a canary in the coal mine as far as economic activity. In terms of Q4, if the economy turns around and does better, I think Alcoa will turn around and do better,” said Stephen Massocca, fund manager with Wedbush Morgan in San Francisco.Alcoa stock was down 4.6 percent to $9.83 in after-hours trading on the New York Stock Exchange.