Financial life in a big town

Shares of Blockbuster Inc. sank 30 percent Wednesday after the video rental chain warned that it may have to file for Chapter 11 bankruptcy protection.

Competition from DVD-by-mail company Netflix Inc. and DVD vending machines operated by Coinstar Inc. have eroded the Dallas company’s revenue even as it staggers under a heavy debt load.

Blockbuster said in a regulatory filing late Tuesday that it was suffering "significant liquidity constraints" and could have to file for bankruptcy protection if it was unable to convince creditors to restructure a big chunk of its debt or business continued to deteriorate.

The company has had to close about 1,300 stores and wants to shut down hundreds more. It had about 5,200 stores worldwide in January, excluding franchised shops. About 3,500 of those were in the U.S.

The company is trying to update its business, setting up video-rental kiosks like those run by Coinstar and offering a DVD-mailing service. It added 2,000 kiosks in 2009 and expects to have more than 10,000 by the middle of this year — but NCR Corp., which operates the kiosks, is "under no obligation" to install or run them, Blockbuster said bad credit personal loan lenders.

Blockbuster is also pursuing several measures to help shore up cash. It wants to sell some of its international business, and it is pursuing a debt-for-equity swap to help alleviate its debt burden. It wants to swap all or part of its senior subordinated notes for common stock. It said it owed $975 million under senior secured notes and senior subordinated notes as of Jan. 3. Even if the swap goes through, it could significantly dilute current shareholders.

Meanwhile, the company predicts further declines in its sales. The chain said it expects a key sales measure to drop in the mid-single digits to high single digits in 2010 — and a "further deterioration" could leave it unable to service its debt, leading to default.

The company’s key sales measure sank 16 percent in the fourth quarter — a dismal holiday season performance despite higher advertising. It lost $435 million compared to a loss of $360 million in the last three months of 2008.

Source

Simon Property Group Inc. late Wednesday reiterated its interest in buying General Growth Properties Inc. despite General Growth’s announcement that it has reached a $2.6 billion equity deal with Brookfield Asset Management Inc.

If approved by a bankruptcy court judge, the deal announced Feb. 23 by Chicago-based General Growth (Pink Sheets: GGWPQ) would allow the operator of the Regency Square Mall to exit Chapter 11 bankruptcy protection and possibly avoid being taken over.

Officials with Simon (NYSE: SPG), based in Indianapolis, called the deal between General Growth and Brookfield “inferior and highly conditional.”

Last week, Simon offered General Growth $10 billion, including $9 billion in cash. A total of $7 billion would have gone to creditors and $3 billion to shareholders.

In a letter to Simon executives, General Growth officials rebuffed the offer, saying it was “not sufficient to pre-empt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company’s stakeholders cash advance america.”

After learning of General Growth’s deal with Brookfield, Simon officials accused General Growth officers of not following the due-diligence process it referred to.

“General Growth’s proposed recapitalization amounts to a risky equity play on the backs of its unsecured creditors,” Simon officials said in the release. “While continuing to block the immediate and certain 100 percent cash recovery provided by Simon’s offer, General Growth has pre-empted its own self-proclaimed ‘process’ in favor of a highly speculative and risky plan to attempt to raise $5.8 billion of new capital in today’s uncertain markets.”

General Growth filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April last year. In December, it won court approval to restructure about $10.25 billion of its debt on 103 of its 200 properties.

Source

Bills that would change intrastate access charges — the fees phone companies charge each other for their customers’ in-state long-distance calls.

HB1750 > Introduced by Rep. Timothy Jones, R-Eureka — This one has already passed the House and has been sent to the Senate. It would reduce intrastate charges by 50 percent over 10 years. Exempts companies with fewer than 25,000 lines. Contains no explicit approach for companies to make up any revenue lost.

SB698 > Introduced by Sen. John Griesheimer, R-Washington — Would lower rates by 50 percent over five years. Companies serving high-cost areas would be allowed to raise their rates to make up the lost revenue.

SB 785 > Introduced by Sen. Kurt Schaefer, R-Columbia — Would reduce rates by 45 percent, but would offset those losses through a state universal service fund, supported by fees on companies that provide Internet-based phone service and mobile radio service. The act also exempts companies with fewer than 25,000 lines.

Source

The biggest gathering of the global mobile phone industry begins on Monday in Barcelona, and much of the talk will be about the company that is not there: Apple.

Its iPhone has been imitated by larger competitors like Samsung Electronics, Nokia, LG and Research In Motion. All of them will be showing touch-screen devices and application stores, two innovations popularized by the iPhone.

In App Planet, a special section of the sprawling Fira de Barcelona convention grounds in the city’s center, more than 50 small software developers, many of whom make applications for the iPhone, will display the device’s capabilities. Elsewhere, manufacturers of netbooks and other mobile, connected devices will show their answers to the iPad, the tablet computer Apple introduced last month in San Francisco.

Meanwhile, Apple’s longtime rival, Microsoft, will be seeking some attention for the first glimpse of its Windows Mobile 7 operating system software for cell phones. The company does not plan to offer it on devices yet, according to people familiar with the company’s plans. Microsoft’s impact on the industry has been diminishing in the face of increased competition from other operating systems.

Apple, one of those new competitors, has never exhibited at big industry trade shows, including the Mobile World Congress. Secretive and focused, Apple rarely ventures beyond its own well-staged promotions. The company has sent executives to the Barcelona show, but has never taken center stage.

“They typically do not exhibit at non-Apple events, but we would very much like to have them join us,” said Claire Cranton, a spokeswoman for the GSM Association, the organizer of the annual Barcelona convention. “Apple products will be highly visible at the show.”

Apple has leapfrogged its Asian rivals to become the world’s third-largest maker of smartphones, the fastest-growing part of the mobile phone market. As of December, Apple had a 16.4 percent share of the market, behind Nokia and Research In Motion, which makes the BlackBerry, according to Strategy Analytics. And Apple is growing faster than either one.
Apple’s ’s growing influence on the global mobile industry stems from the way the iPhone convinced consumers to use wireless data. Wireless carriers worldwide have been seeking to increase their revenue from data use, like texting or browsing the Web, as the revenue from voice calls decline. The iPhone’s 133,000 apps that do anything a computer can do and more increase data use.

“With the iPhone, Apple has changed the paradigm of the mobile phone industry, just as Apple changed the MP3 industry with the iPod,” said Carolina Milanesi, an analyst at Gartner, a research firm free business cards. “They have shifted the focus from the technology to the services.”

The new iPhone 3GS will be part of the official display of T-Mobile, the wireless unit of Deutsche Telekom, which sells the device in 12 countries and is the exclusive seller in Germany.

Michael Hagspihl, a T-Mobile vice president in Bonn in charge of relations with cell phone makers, said the iPhone had brought T-Mobile 1.2 million new customers in Germany. “It’s been a real success for us,” Hagspihl said. “The iPhone has brought lots of new customers to our network, and our data consumption has gone through the roof.”

Should Apple ever decide to sell the iPhone through multiple operators in the United States, T-Mobile USA would definitely be interested, Hagspihl said.

So far, AT&T has the exclusive American rights to the iPhone.

But in France and Britain, Apple ended exclusive relationships and is selling the iPhone through several operators besides its original partners, France Telecom’s Orange and Telefonica’s O2.

Even after losing the exclusive selling rights in France, Orange has had no decline in iPhone sales, said Cynthia Gordon, an Orange vice president who oversees the relationship with Apple.

“Apple has had a major impact on the overall market and a very positive impact on Orange’s business,” Gordon said.

Orange is one of Apple’s biggest operator partners, Gordon said.

The French operator sells the iPhone in 29 countries in Europe, Africa, Asia and the Middle East. Through October, Orange had sold 1.7 million iPhones, which she said was more than any other operator in Europe and Africa.

IPhone sales are helping Orange offset declines in voice revenue, Gordon said.

“It has been a platform for us to build on our own sales,” she said. Besides attracting new customers and retaining old ones, the iPhone allowed Orange to develop the Orange TV Player, a programming application for viewing 60 TV channels on the iPhone in France.

Apple and Orange developed the application together, she said.

Source

A closely-watched manufacturing index blew away all expectations Monday, raising hopes that the U.S. economy is not just back on solid ground, but heading higher at a good clip.

Good news for the United States, to be sure, but connecting the dots to the Canadian economy is a bit more complicated.

"Anytime we see positive economic news out of the U.S., it’s a sign that our strongest trading partner is improving and we can expect to see knock-on effects on our own economy," said Meny Grauman, senior economist at CIBC World Markets.

"The direct links are not there but it’s definitely an encouraging sign in general that there is some support for Canadian economic recovery."

As usual, the loonie is throwing a wrench into the works. It rose by almost a full penny Monday alone, pulled along by higher prices for oil and other commodities. In its first day of 2010 trading, the Canadian dollar jumped 0.87 of a cent (U.S.) to 96.02 cents. The U.S. Institute for Supply Management’s index came in well ahead of economists’ expectations, rising to 55.9 in December, up from 53.6 in November. That’s also its highest level in almost three years. A reading above 50 indicates expansion. The bigger the difference, the faster the expansion.

"It’s huge," said Derek Holt, vice-president of economics with Scotia Capital.

"If the U.S. manufacturing sector really is stabilizing and recovering, then given the seamless cross-border integration of manufacturing production, it’s going to be a boon to Canada as well.

"The trillion-dollar question is: Is it believable?" Holt said.

The index first registered growth in August after 18 months of contraction, hitting a low of 32 high quality business cards.9 a year earlier.

One concern is the recovery may not be broad enough. Fewer industries reported growth in December than in the past couple of months, said Sal Guatieri, senior economist at BMO Capital Markets.

"It’s a glass half-full or half-empty scenario. Half the industries did report growth. We could take it as a positive or a negative."

But that doesn’t automatically mean the demand for Canadian products will be strong.

"It’s more positive if we see domestic spending strengthening in the U.S. That implies more demand for Canadian exports," Guatieri said.

"Consumer spending has turned modestly higher and the jury is still out on business investment. It picked up in the third quarter then weakened in the fourth."

Canada lacks a broad index to gauge the health of the manufacturing sector.

But economists have spotted signs of growth. In November, the monthly labour-force survey by Statistics Canada showed a small gain in manufacturing jobs.

Canadian manufacturers have been hamstrung by the rising dollar, which makes their products more expensive for U.S. customers.

"Economic fortunes may be rising, but a stronger Canadian dollar goes along with that and counteracts some of those positives. It makes the recovery in Canadian manufacturing more complicated," Grauman said.

"It will continue to be an issue over the next few months."

Source

General Motors is recalling some 22,000 Chevrolet Corvettes, because of potentially leaky roofs, National Highway Traffic Safety Administration said Wednesday.

The recall includes 2005-2007 model year Corvettes with removable roofs and 2006-2007 Corvette Z06s, according to GM.

A problem with the adhesive between the roof panel and the frame could cause them to pull apart, the agency said.

"If there is a complete separation, the roof panel may detach from the vehicle," according to the NHTSA. "If this were to occur while the vehicle was being driven, it could strike a following vehicle and cause injury and/or property damage."

Dealers will install a new design roof panel free of charge to correct the problem, NHTSA said in its recall notice.

The safety recall is expected to begin next month. Owners are being told Chevrolet at 1-800-630-2438 or at www.gmownercenter.com. 

Source

EDWARDSVILLE — Construction of a four-story office building in downtown Edwardsville is expected to begin early next month.

Scott Plocher, speaking for the developers, said construction would be completed in about a year. He said the entire building would be leased to a single tenant — a business already located in Edwardsville — and would help keep at least 50 or 60 well-paid jobs in the city.

He said that business would announce its plans in coming weeks.

Plocher is president of Highland-based Plocher Construction, a partner in the development group, North Main Street Plaza LLC, and will build and manage the $6 million, 30,800-square-foot structure.

"We believe it is a good project at the right time," he said.

The building will be in the 100 block of North Main Street, near the Madison County Courthouse and Administration buildings. It will replace existing buildings at 130 North Main Street, between Erato on Main, a wine bar-restaurant, and Big Daddy’s Patio Bar & Grill.

The project will include a public walkway from Main Street to parking lots at the rear of the building. New construction will also make it possible for Erato to add an outdoor dining area. Chris Byron, part owner of Erato, is among a group of lawyers who are investors in North Main Street Plaza.

In August, about 30 people demonstrated against demolition of the existing structures — parts of which are a century old — but Plocher said it would be "virtually impossible" to renovate them under today’s codes. He said the developers do not consider them historic, though they are in the city’s Downtown Historic District. The Historic Preservation Commission later approved demolition.

Plocher said the commission wanted a design that complemented the look of older downtown buildings, and that the exterior design will resemble the century-old Wildey Theatre down the street. The city owns the long-closed theater and recently decided to undertake its renovation.

Other opposition to the North Main Street Plaza project focused on the developers’ request for $125,000 in assistance for asbestos abatement and demolition from the city’s existing downtown TIF fund no fax payday loans. Plocher said the request was reasonable because of the need for asbestos abatement, the difficulty of demolition due to the buildings’ age and proximity to other buildings, and the additional expense of building a structure in keeping with the historic look of the business district.

Plocher said the redevelopment is expected to boost property taxes to about $133,000 from about $8,000. A development agreement provides that 60 percent of the projected $125,000 annual tax increment would go to the developer and 40 percent to the city. The TIF district will expire in 2020.

The City Council voted 4-2 last week to approve the agreement, which included the money for abatement and demolition.

Alderman Rich Walker, one of the dissenters, said he thought the project would be good for the city but objected to providing money to developers before increased tax revenues started coming in. He said it would be inconsistent with what the city had done in two previous TIF projects.

City Administrator Ben Dickmann said Mayor Gary Niebur and his administration were pleased by the outcome.

Dickmann said the developers did what they were asked and "put forward a design that was a better fit for downtown than a lot of new construction. We believe it will help us retain professional offices downtown. It will add office space so we will be positioned to take advantage when this recession ends."

Dickmann said Edwardsville is lucky for a city of its size to have two major downtown development projects planned or under way.

Work continues on Plaza on the Park, a combined retail and residential development on two corners of the intersection of Vandalia and Buchanan streets. Dickmann said total investment in that project will be about $14 million. Its developer is Joseph E. Meyer & Associates of Edwardsville.

Source

George Weston Ltd. executives say they’re still hunting for acquisitions, but hinted the company could be closer to making a move after months of searching for the right fit.

"Obviously a lot of values have gone up in a lot of companies, but not many in our space," chairman and president Galen Weston Sr. told analysts in a conference call on Tuesday.

"There’s probably going to be stuff coming due from a number of sources. We are scouring the nation, north and south, to ensure that nothing passes us by which we feel would be appropriate for us."

North America’s largest baked goods maker reported that its third-quarter net earnings dropped 52 per cent to $86 million, or 56 cents per share, for the quarter ended Oct. 10.

That was down from a year-ago profit of $180 million, or $1.29 per share, largely because of foreign exchange losses.

Revenue totalled $9.78 billion for the quarter, down about $100 million from $9.88 billion last year. Analysts had expected revenue of $9.90 billion, according to Thomson Reuters.

Toronto-based Weston said most of its revenue came from Loblaw, a publicly traded grocery retailer that it controls.

Its Weston Foods sector, which includes the baking business, accounted for just $502 million of revenue, down 26 per cent from a year before.

George Weston has been selling assets in recent years in an attempt to tighten its focus. Last year, the company sold its Neilson dairy business to cheese maker Saputo for $465 million and its U.S. fresh baked goods division to Grupo Bimbo for $2 cash advance loan.5 billion (U.S.).

Since those sales, the company has said it would use the $3.3 billion in cash, along with $1.6 billion in short-term investments, to make an acquisition, but that it didn’t feel pressure to make a play quickly.

Excluding discontinued operations following the sale of Weston Food’s dairy and bottling operations at the end of last year and its U.S. fresh bread and baked goods business early this year, Weston’s overall net income was $71 million or 44 cents a share in the third quarter.

George Weston said its net earnings in the most recent quarter took a beating from a 58 cent charge per common share related to unrealized foreign exchange losses.

In last year’s third quarter, spanning a 16-week period ended Oct. 4, 2008, Weston’s net earnings from continuing operations was $119 million, or 81 cents per share, while net earnings including discontinued operations was $180 million. or $1.29.

But the company said that excluding the foreign exchange losses and other items, its performance in the third quarter was "strong" compared with last year.

George Weston said brand and product development efforts continue while plant and distribution optimization and other cost-cutting measures remain a priority.

It said the sale of its dairy and bottling operations in the fourth quarter of 2008 negatively impacted sales growth by about 26 per cent, but foreign currency translation positively impacted sales growth by about 2 per cent.

Source

Creditors of Saad Investments Company Ltd (SICL) held their first official meeting on Thursday, accountancy firm Grant Thornton said, taking a next step in the troubled firm’s restructuring process.

Banks are seeking repayment of a loan of up to $2.8 billion taken out in 2007 by Cayman Islands-registered SICL, a unit of Saudi investment firm Saad Group.

The meeting took place in the Cayman Islands, SICL’s court-appointed liquidator Grant Thornton said in a statement.

A spokesman for Saad Group declined to comment.

Regulators and bankers are grappling with up to $22 billion of debt restructurings at Saad and a second Saudi firm, Algosaibi, viewed by some as the biggest financial blow to the region since the global credit crisis began.

The two groups are involved in a complex legal dispute. Algosaibi said in October it would ask a New York court for a default judgment against the billionaire head of Saad, Maan al-Sanea, over allegations he defrauded the company out of $10 billion payday cash advances.

A Cayman Islands court on Sept 18 appointed Hugh Dickson, Stephen Akers and Mark Byers of Grant Thornton as joint official liquidators of SICL, the accountancy firm said, after hearing a winding-up order from creditors.

In addition to SICL, the Cayman court has appointed Grant Thornton liquidators to a further nine Saad Group companies, the accountancy firm said.

One of these companies is Singularis Holdings, which acquired a 3 percent stake in HSBC in 2007.

In July, a Cayman court froze the assets of SICL and a number of other international Saad units.

(Reporting by Tom Freke; editing by Simon Jessop and Andrew Callus)

Read more

The New York Yankees, who became World Series champs for the 27th time Wednesday night, logged the highest payroll in baseball for the 2009 season. This time, they definitely got what they paid for.

It wasn’t just the $201.4 million payroll that led to the Yankees’ successful season. It was how they spent that money — investing in the right players, not just the most expensive ones.

"One of the oldest truisms in business is that you have to spend money to make money, and the Yankees have clearly been successful in that this season," said Marc Ganis, a sports marketing consultant with SportsCorp Ltd. "But it’s all predicated on the success of the team on the field — if they didn’t win, it would be money poorly spent."

The Yankees stocked this year’s team with championship material players like CC Sabathia, A.J. Burnett and Mark Teixeira, and still managed to trim their payroll by about $8 million this season.

That wasn’t always the Yankee way.

The Bronx Bombers have had the highest payroll among all Major League teams since 1999, but they had no championship rings to show for it from 2001 to 2008. The team even embarrassingly missed the playoffs in the 2008 season despite strutting the highest payroll in baseball history.

During that eight-season stretch, the Yankees shelled out about $1.7 billion for their players’ salaries, including $148 million in luxury taxes that the team had to pay for sporting such a high payroll.

This season, the Yankees got a lot more bang for their buck … in more ways than one.

Adding up the dollars and cents. Applying a Society of Baseball Research metric, the Yankees were actually more efficient with their payroll this past season than were the hapless cross-town Mets, Cleveland Indians and basement-dwelling Washington Nationals.

The World Champs were only slightly less thrifty with their salaries than the Chicago Cubs, Houston Astros, and Kansas City Royals, all of whom missed the playoffs.

By those calculations, the Yankees paid $3.2 million per "marginal victory." That’s nearly twice as efficient as the Mets, who only won 70 games despite their $149 million payroll and paid $5.8 million per marginal victory.

In addition, a rough estimate of the team’s revenue in 2009 shows the Yankees cashed in on their success more than any other team. Multiply the number of people coming to games by the average ticket price ($73),and the Yankees took in about $270 million this season, or $69 million more than they shelled out for their payroll.

In 2008, the Yankees took in just $146.4 million from ticket sales, $63 million less than their payroll.

The Yankees’ 2009 revenue figure doesn’t even include additional playoff ticket sales they raked in, but most of that bonus playoff income will be offset by the hefty luxury tax that the team will have to pay this year.

Only five teams took in more revenue from ticket sales than they paid for their overall payrolls, and the Yankees’ $69 million in earnings was by far the highest net income of any team. The nearest competitor was the rival Boston Red Sox who took in $32 million more than the cost of their payroll.

Banking on the players. The team’s business strategies paid off more than just financially this season. The Yankees’ focus on top-of-the rotation pitching helped catapult them into the championship this year, said industry consultant Vince Gennaro.

Starters Sabathia, Burnett and Andy Pettite, set-up man Phil Hughes and closer Mariano Rivera pitched 52% of the Yankees’ innings during the regular season, but pitched 81% of the postseason innings and made 100% of the playoff starts.

Last year, the Yankees got the highest amount of innings from Pettite — their third starter in 2009.

The Yankees also got a big upgrade at first-base by signing Mark Teixeira, who not only out-performed last year’s starting first-baseman Jason Giambi at the plate, but Teixeira also provided gold-glove caliber defense.

But the Yankees’ new acquisitions also combined for something more than just improved skills. They played with a kind of exuberance that made them fun to watch and easy to like, even for non-Yankees fans.

"This team’s identity was about never giving up," said Ganis. "When you watch their walk-off celebrations, they look like giddy junior high schoolers out there."

(Payroll efficiency was created by the Doug Pappas of SABR. It is calculated by adding a team’s payroll that was above the minimum allowable payroll, and dividing that by the number of victories over 49 wins — a number of games Pappas figured a team of scrubs could win.)

Source