Headline Financial News 1/26/2009

• Pfizer is plunking down $68 billion ($33 in cash and .985 per share) to purchase Wyeth.  This values the Wyeth at $50.19 a share versus Friday's close of $43.74.  Pfizer is cutting its dividend in half, laying off 10% of its workforce, and reported a 90% decline in fourth-quarter profit.  Remarkably, Pfizer was able to convince a bank consortium to commit to $22.5 billion for debt financing.  Who says banks aren't lending?  If you already have $20 billion or so laying around, banks are more than willing to lend you another $20 billion or so.

• Speaking of banks not lending, the Wall Street Journal has an article showing that bank lending has declined for most large banks receiving TARP money between the third and the fourth quarter.  Critics claim that this is proof that the "TARP has failed" while others say that banks wouldn't have lent a dime in the fourth quarter without the TARP.  I'll let my readers decide which is closer to the truth.

• Caterpillar is planning to cut 20,000 as fourth quarter profit fell 32% on a steep drop in demand.  The company also issued a weak outlook.

• Smurfit-Stone, North America's second largest maker of corrugated packaging filed for Chapter 11 bankruptcy protection in the face of declining demand and heavy debt payments.    

• Speaking of Chapter 11, the Financial Times has a good article discussing how liquidation risks have grown due to the lack of availability of "debtor in possession" financing in the US.  US companies face a greater risk of liquidation as previous big providers of DIP financing, such as GE Capital, have left the business pushing up the cost of this type of financing.  DIP financing is necessary to get companies through the Chapter 11 reorganization period.  The article makes the case that an increase in liquidations are likely to lead to more job losses and a more protracted economic downturn.   

• The Car parts sector is looking for a $10 billion federal bail-out, because it never hurts to ask. 

• Possibly the worst news I've read all morning:  Goldman is canceling its annual Davos World Economic Forum party which is usually a real humdinger.  Really horrible news.  I'm not at all surprised that it was reported on the front page of the Financial Times.