Financial life in a big town

Mervyns LLC, the low-end department store chain that has been languishing for several years, could be the latest casualty of the fiercely competitive retail climate.

The privately held company, which operates about 175 stores in seven states but primarily in California, is facing bare shelves and a cash crunch as vendors are delaying shipments and key lenders that provide finance and credit to apparel makers have stopped approving orders.

"We are advising clients to hold off shipments primarily due to lack of communications from management," said Bob Carbonell, chief credit officer at Bernard Sands LLC, a credit monitoring company.

Carbonell, who said he’s working with several dozen clients that sell to the chain, noted that Mervyns had been consistently providing financial updates until about a week ago.

A person close to the company who spoke on condition of anonymity because of the sensitivity of the issue said GMAC Commercial Finance stopped approving orders of merchandise last week.

Squeezed by high-end department stores at the top and large discounters like Wal-Mart Stores Inc. (WMT, Fortune 500) at the bottom, the 59-year-old Mervyns has been shuttering stores and leaving states such as Oregon and Washington since 2005, after a consortium of private equity players including Sun Capital Partners Inc. bought Mervyns from Target Corp (TGT, Fortune 500). for $1.2 billion.

Mervyns, Sun Capital and GMAC did not immediately return calls for comment.

The chain’s heavy concentration in California, which is among the states hardest hit by the housing crisis, has made a turnaround harder.

Consumers in those hard-hit regions are being forced to make hard choices, Carbonell said: "Do you go shopping at Mervyns or do you pay for gas and food?" He added, "Everybody is fighting for the same piece of the pie."

In April, Mervyns appointed John Goodman, who had been president and general manager of the Dockers brand — a key supplier to Mervyns — as president and chief executive fast cash payday loan. The company announced the next month that it had hired a real estate advisory firm to sell five to 10 underperforming stores that also had high real estate value. Mervyns said then that the move was expected to generate $25 million to $50 million in cash to fund operations and new growth.

The financial struggles of Hayward, Calif.-based Mervyns are another worry for the nation’s malls, which have seen more and more vacancies amid store bankruptcies and closings. On July 9, Steve & Barry’s LLC, once a growing force in low-priced fashion, filed for Chapter 11 bankruptcy protection. At the time, company officials said no decision had been made about possible store closures.

It joins home furnishings chain Linen ‘n Things Inc., catalog retailer Lillian Vernon Corp. and specialty retailer Sharper Image Corp (SHRPQ). in filing for bankruptcy protection this year. Sharper Image, which is now being liquidated, is selling its remaining assets to an investment group for $49 million. 

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Fugitive hedge-fund swindler Samuel Israel turned himself to federal authorities in Massachusetts after nearly a month on the lam, the U.S. attorney’s office said Wednesday.

Israel turned himself into Southwick, Mass., police between 9:15 and 9:30 a.m. Wednesday, said Suzanne Anderson, police Chief Mark Krynicki’s assistant. She said he was being processed at Southwick Police headquarters and referred all further questions to federal authorities.

Southwick is 95 miles away from the federal prison in Ayer, Mass., where Israel was to report last month to serve his sentence.

Israel disappeared June 9 on the day he was supposed to report to prison. His car was found on a bridge over the Hudson River with the words "Suicide is Painless" - the theme song for the "MASH" television show - scrawled in dust on the hood.

Because no body was found beneath the 150-foot-high bridge where his car was abandoned, authorities believed from the start that he faked his disappearance.

The 48-year-old Israel, a co-founder and chief executive of the now-collapsed Bayou hedge funds, was sentenced in April to 20 years in federal prison for conspiracy and fraud. He was also ordered to pay $300 million to his victims.

Prosecutors said he and two other men persuaded investors to put $450 million into the Stamford, Conn.-based company by announcing nonexistent profits and providing fake audits.

Meanwhile, they made millions in commissions on trades that lost money for investors quick payday loans. The fund’s collapse prompted calls for stricter oversight.

Officials said that after Israel abandoned his car, he took off in a white recreational vehicle carrying a motor scooter and his belongings. He was believed to be staying at RV parks, campgrounds or highway rest areas.

Southwick, where Israel turned himself in, is near the Connecticut line about 100 miles southwest of Boston.

Israel’s girlfriend, Debra Ryan of Armonk, was arrested 10 days after his disappearance and charged with aiding and abetting his escape.

Authorities say Ryan confessed that on the day Israel was to surrender, she drove her car and he drove the RV to a rest area about 55 miles north of New York City. Israel parked the RV there, and the two drove back to their home.

Ryan could face as many as 10 years in prison if convicted in the scheme. 

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The clown trying to win your mother’s heart has a new rival and this guy’s royalty.

After watching its bigger rival McDonald’s Corp (MCD, Fortune 500). try to woo mothers and grab a share of the family budget, Burger King Corp. (BKC) — known for its edgy ads featuring a man with an oversize plastic king mask — is launching a new marketing and promotional campaign Monday targeted to moms.

"A large part of our customer base is parents with children," said Russ Klein, president of global strategy, marketing and innovation. "As a parent, the challenge is always trying to get the kinds of things you want to but have some dimension of fun."

The centerpiece of the effort, Klein said, is a new kids’ meal featuring a four-ounce serving of Kraft macaroni and cheese, lowfat milk and the company’s "Fresh Apple Fries", which are uncooked apple slices shaped like french fries and served with low-fat caramel dipping sauce. The meal will go on sale Monday for $3.49 and will be a permanent fixture on Burger King’s menu.

The launch will be followed by an in-restaurant merchandising and television ad campaign, with the first commercial airing July 7. That spot will introduce "Little King" meant to be the masked king’s young son.

The company will be offering free samples of its apple fries through July in New York, Los Angeles, Chicago, Miami and Houston. Burger King will also give away samples at Jonas Brothers concert tour sites. Burger King is an official sponsor of the group’s "Burning Up Tour" and will be offering some free tickets to the concerts.

Klein declined to specify the value of the advertising and marketing effort, saying only that the company will spend millions "supporting this vehicle."

Burger King certainly isn’t the first fast food restaurant to try to convince moms to listen to the pleas in the backseat for fast food free instant credit score estimator. McDonald’s launched a public relations campaign targeted to mothers last year in a bid to neutralize criticism that the company’s food is a contributor to childhood obesity.

The McDonald’s approach included adding a bevy of healthier menu items to its menu meant to entice both kids and parents, including "Apple Dippers" — pre-cut slices of apples similar to the new Burger King version. The chain also started a "mom’s quality correspondence" campaign in which six mothers got a behind-the-scenes look at how the chain operates. The moms write about their experience on the company’s Web site.

Zack’s Investment Research senior analyst Anne Northrup said McDonald’s has been "a trailblazer" in changing the perception that fast food is an indulgence that will likely lead to gaining a few extra pounds.

But convincing parents to correlate healthy eating with the home of the Whopper may not so be easy, particularly since Burger King has been lambasted by critics for not switching to trans-fat free oil as fast as some of its competitors. The chain has committed to making the switch in all of its restaurants by the end of the year. Wendy’s International Inc (WEN)., meanwhile, cut out trans fat oil in August 2006.

Northrup said getting parents to take their families to Burger King may also be dependent on the pace of the chain’s remodeling campaign. Burger King has been attempting to turn around its sales partly by renovating its restaurants.

Northrup said a large number of the chain’s unit are still more than 30 years old.

"That’s a key driver of earnings growth in the next few years," she said. 

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CALGARY–Fertilizer producer Agrium Inc. says it is looking forward to record profits as "unprecedented demand for crop inputs."

The Calgary-based company said it expects second-quarter earnings of US$2.80 to $3 per share, up from previous guidance of $1.92 to $2.22, "due to very strong results from both our retail and wholesale operations."

Agrium's results are "particularly impressive given that the North American spring application season has been hampered by excessively cold and wet weather this year," president and CEO Mike Wilson said in a release.

"Continued strong global crop prices have created unprecedented demand for crop inputs and we foresee an extended demand-driven cycle."

The company said its forecast assumes there is no unfavourable financial impact from its Egyptian nitrogen facility EAgrium, at which construction was halted in April“due to permitting and other delays created by the Egyptian government."

A syndicate of banks providing financing for the project has requested the suspension of future draws on a credit facility and says the loan is in default no qualifying payday advance.

Agrium said it expects government approval but has "concerns these issues may not be resolved in the near term, in which event EAgrium's shareholders would be exposed to the loss of their total equity commitment."

Agrium has $165 million invested in the project with a total equity commitment of $280 million.

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OTTAWA–The federal government recorded a $1.2-billion budgetary deficit in March, likely trimming its surplus for the just-completed fiscal year to $10.2 billion.

The Finance Department says the deficit last March was half what the government experienced in March 2007, when it spent $2.4 billion more than it earned.

The department also says preliminary accounting points to a $10.2-billion surplus for the 2007-08 financial year that ended March 31, the exact amount forecast in Finance Minister Jim Flaherty's budget in February.

The federal government's revenues were up $1 billion, or 5.2 per cent, in March, largely as a result of higher receipts in taxes from individuals cheap payday loans. Program expenses were flat.

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VIENNA, Austria – Oil prices spiked a new trading high Tuesday, sweeping past $129 (all figures U.S.) a barrel as supply concerns intensified the momentum buying that has lifted crude deeper into record territory.

The June contract for light, sweet crude traded as high as $129.31 in electronic pre-opening trading on the New York Mercantile Exchange before settling back to $128.75, up $1.70.

Prices are currently being driven higher by supply concerns. This latest surge comes after OPEC's president was quoted as saying his organization won't increase its output before its next meeting in September.

The imminent expiration of the June contract is adding to the volatility. The contract will end at the close of trading Tuesday.

The contract reached a new closing high of $127.05 Monday after Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, was quoted by a government newspaper as saying OPEC won't increase its output during the U.S. summer driving season, which begins this weekend. OPEC's next meeting is scheduled for Sept. 9.

Concern about supply has recently become the primary driver of the market, replacing earlier worries about a weakening dollar, and not even Saudi Arabia's promise last week of an additional 300,000 barrels of crude a day could alleviate those new concerns.

Despite that pledge from the world's leading oil producer and the U.S. move to temporarily stop filling government stockpiles, prices have shown no indication of stopping their record run.

Through Monday's close, the front-month contract has hit nine trading or closing records in 11 sessions pay day loans. Analysts have said speculative buying has also contributed to oil's record high run.

In other news lifting prices, independent refiner Holly Corp. said a key unit at its New Mexico refinery was shut down for repairs, cutting estimated May gasoline production by as much as 756,000 gallons per day. The shutdown occurred while the fluid catalytic cracking unit was being brought back online from a previous shutdown May 7.

The refinery in Artesia, New Mexico, is Holly's largest.

As oil prices reach new heights, so have gasoline and diesel costs.

"Average gasoline prices in the U.S. rose for an eighth straight week and for the 15th time this year, up 1.8 percent or 6.9 cents to a record $3.791 a gallon," noted Stephen Schork in his Schork Report. "Gasoline at the pump is averaging 28.5 percent above last year's pace.''

Drivers in some parts of the U.S. are paying considerably more, however. Gas pump prices in parts of California have been stuck above $4 a gallon for weeks now.

In other Nymex trading, heating oil futures rose 0.14 cent to $3.7665 a gallon while gasoline prices rose 4.89 cents to $3.2855 a gallon. Natural gas futures rose 17.9 cents to $11.133 per 1,000 cubic feet.

Associated Press Writer Thomas Hogue contributed to this report from Bangkok, Thailand.

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Royal Bank of Canada disclosed Wednesday its results for the February-April quarter will be hit by $855 million in writedowns "relating to market conditions."

The writedowns will be worth $420 million after tax, Canada’s largest bank said.

"We are not happy about taking any writedowns and certainly do not take them lightly," president and CEO Gord Nixon said in a statement.

"That said, these writedowns are manageable and our risk profile continues to remain within our risk appetite. This is due to our disciplined risk management, our strong balance sheet and our business diversity."

RBC Capital Markets will take the biggest writedown at $715 million, followed by the bank’s Corporate Support division at $140 million.

"RBC believes a significant portion of the writedowns reflect liquidity pressures on assets that we continue to hold, rather than underlying credit quality," the bank said.

The bank will also book a gain of $50 million, or $20 million after tax, on the change in fair value of liabilities "designated as held-for-trading as a result of its credit spreads widening over the second quarter."

The writedowns included:

– $200 million for credit default spreads on exposures to a subsidiary of U.S cash advance loans. monoline insurer MBIA Inc.

– $90 million related to retained positions in U.S. subprime collateralized debt obligations of asset-backed securities and other structured credit trading positions.

– $185 million on U.S. Auction Rate Securities, most backed by student loan collateral that is largely government-insured.

– $140 million at its U.S. Municipal GIC business, mostly mortgage-backed securities, discount bonds and notes.

– $175 million on other trading portfolios, primarily related to market liquidity.

– $65 million on "available-for-sale" holdings related to the deterioration in the U.S. subprime market.

The bank is scheduled to release full quarterly results on May 29. In February it reported a 17 per cent drop in first-quarter profit of $1.25 billion, including a $430-million pretax writedown at Capital Markets.

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Citigroup offered some investors an unwelcome dose of deja vu on Friday.

The largest bank in the United States presented its most comprehensive turnaround plan since Morgan Stanley banking and trading veteran Vikram Pandit took over as chief executive in December, but many of its key plans sounded all too familiar.

Pandit said on Friday that Citigroup Inc (C.N: Quote, Profile, Research) businesses would work together, allowing them to squeeze more revenue from individual products by selling them across multiple units. He also said he would cut costs and invest overseas.

If all this sounds familiar, there’s a good reason: it’s exactly what was promised at Citi’s last analyst day in December 2006 by the then-CEO, Chuck Prince, before he was succeeded by Pandit a year later.

“We thought Citi was going to start on a new road, and lo and behold, we’re down the same road again,” said Helena Ocampo, an analyst covering financial stocks at Sentinel Investments, which manages $5.6 billion of assets and owns Citi shares.

Skepticism helped push Citi’s stock down 2.8 percent to $23.63 on Friday, bringing its loss this year to nearly 20 percent.

To be sure, Pandit is making some bold moves credit scores. He said Citi would shed some $400 billion of non-core assets within three years, scale back in businesses like bond trading and ramp up in prime brokerage and electronic trading.

But by and large, Pandit is not proposing massive strategic changes, and is focusing instead on making sure Citi doesn’t see a repeat of the last two quarters, when it posted more than $15 billion of losses. 

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The first step to creating an effective wellness program is to develop a formal change management strategy that includes:

•Sponsorship by leadership

•Involvement of employees

•Targeted communication
•Education/tools to support learning

•Measures to assess progress

•Linkage to broader culture of health philosophies.

As part of the strategy, implementing incentives for wellness will create behavior change.

Incentives generally are used in three areas with varying levels of effectiveness: Annual Health Risk Assessment (HRA), participation in programs such as weight management and achievement of long-term goals (cholesterol levels, body mass index, or BMI).

Rewards generally are designed around three common approaches:

•Cash awards ranging from $35 to $500 per activity

•Reduced medical rates ranging from $5 to $10 per month

•Mandatory requirement to complete a health-related activity in order to be eligible for a certain medical plan.

Towers Perrin informally gathered information on the incentive programs of nearly 30 clients and found that the most prevalent goal of incentives is to encourage employees to complete an HRA no teletrak payday loans. Many employers also are now requiring that, where indicated, employees participate in an additional health-related activity based on the results of the HRA. It is important that the employer define the level of participation needed to earn the incentives.

Examples of health-related activities include biometric screening, wellness programs and disease management programs.

Once implemented, incentives are difficult to remove without employee backlash, so developing incentives that link to the broader change management strategy is critical.

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