Tuesday, March 31, 2009

Financial Headlines 3/31/2009

In bankruptcy news:

  • Sun-Times Media Group files for voluntary Chapter 11 bankruptcy.  In a continuing sign of the rapidly deteriorating economics of print media, the publisher of the Chicago Sun-Times voluntarily threw in the towel.  The company will continue to operate its newspapers as it attempts to restructure and stabilize its operations.  More sad news for lovers of newspapers, myself included.
In near-bankruptcy news:
  • More details emerged of President Obama's hardball tactics with GM and Chrysler.  In addition to forcing out GM CEO Rick Wagoner, and ordering Chrysler to do a deal with Fiat, the President hopes that dividing the companies into "good" and "bad" assets and potentially sending them into bankruptcy to purge their biggest problems is the solution for the US auto industry.  The general message?  Get your act together because you're not getting more money from the government until you significantly restructure.  My favorite part of the plan is the fact that Cerberus Capital will likely lose its entire equity stake in Chrysler.  I never quite understood why the government should bail a private equity firm out of its crappy investment,  even if it was in the interest of maintaining some sort of manufacturing sector in the United States.  
  • General Growth Properties, the mall REIT that has managed to default on lots of debt without being forced into Chapter 11, has failed to win a reprieve from bondholders.  However, creditors have yet to force GGP into bankruptcy.  Why?  Perhaps because creditors realize that attempting to dump a bunch of malls into this horrible commercial real estate market would be disastrous.  Furthermore, General Growth's mall operations are stable and bondholders are hoping for a greater recovery outside of bankruptcy court. 
  • GMAC and CIT have yet to win approval to issue government-backed debt nearly three months after winning approval to become bank holding companies.  No word on why the FDIC hasn't approved their applications, but CIT, whose debt implies borrowing costs north of 18%, is a little irked to say the least.  Without a cheaper funding source, CIT would need to sell assets, which is about as palatable in this market as attempting to sell a bunch of malls (see GGP above.)
Equity futures are higher for some inexplicable reason.  Perhaps they're just taking a breather from yesterday's pummeling.  But with a significant amount of economic data, bailout news, and earnings releases on the horizon, volatility is certain to stick around.

No comments: