Canwest Global Communications Corp. has won a $50.7-million arbitration award from Sun-Times Media Group Inc., formerly Hollinger International, in a dispute over the purchase in 2000 of Hollinger's Canadian newspaper group.
Canwest originally said it was owed $84 million in "adjustments and claims" arising from the $3.2-billion deal for the former Southam newspaper chain of big-city dailies and half of the National Post.
Hollinger, the media group formerly led by now-imprisoned Conrad Black, contended that Canwest owed it $116 million.
The dispute erupted publicly in 2003 and the private arbitration process began in February 2007 and concluded last June. The decision, with allocation of interest and legal costs still to be determined, is subject to appeal on points of law in Ontario Superior Court.
"While the proceedings have been protracted over several years, we obviously feel justified that the time and effort it took to pursue the claim has been worth it," Canwest CEO Leonard Asper stated Thursday.
"The results demonstrate the value of our resolve in dealing with this issue."
John Douglas, Canwest's vice-president of public affairs, said he couldn't speculate on the prospects of collecting from Sun-Times Media, which reported a net loss of US$168.8 million in the third quarter as its operating revenue fell 15 per cent from a year earlier to US$78 paydayloans.8 million.
The company, which in Black's late-1990s heyday ranged from the Victoria Times Colonist to the Montreal Gazette, the London Telegraph, the Jerusalem Post and a host of trade publications, now has shrivelled into a rump of Midwest community newspapers around the tabloid Chicago Sun-Times.
The company, which recently underwent a board shakeup after having its stock delisted by the New York Stock Exchange, said it held US$99.8 million in cash at Sept. 30, plus frozen Canadian asset-backed commercial paper with a face value of $20.2 million.
There also was $44.8 million in escrow accounts, being held primarily for defamation litigation, and Sun-Times Media Group listed total assets of $480 million, against liabilities of $801.7 million including over $600 million of tax liabilities.
"We're not in a position to say what they can and can't do," Canwest's Douglas said.
He added that he is not at liberty to discuss the dispute beyond saying there were multiple points at issue as the Toronto arbitrator's decision, running to 300 pages, is subject to a confidentiality agreement.
Canwest stock gained four cents to 50 cents Thursday morning on the Toronto Stock Exchange, down from $6 a year ago.
GM also plans to reduce production by adding weeks of shutdown at some plants.
The Wentzville location, where workers make the GMC Savana and Chevrolet Express full-size vans, will be down the week of March 2, said Bob Wheeler, the plant’s communications manager, on Monday. That’s in addition to the weeks — starting Jan. 5, Jan. 12, Feb. 16 and Feb. 23 — already announced.
GM has been making deep cuts to its global production during the first quarter of 2009 to align its inventory with weakened demand payday loan.
When Uncle Sam comes calling, not even the jobless are exempt.
Unemployment aid is taxed as regular income for the federal government and most states, said Mark Steber, vice president of tax resources at Jackson Hewitt Tax Service Inc. If you don’t choose to withhold taxes from your check, you could have a balance due on April 15, even as you struggle to pay the bills.
"Unfortunately, it’s a surprise in many cases," Steber said.
But those on the job hunt have recourse to some tax breaks on these expenses:
— Mileage costs during trips to interviews and the unemployment office. In the first half of last year, you can claim 50.5 cents on the mile; in the second half, 58.5 cents.
— Mailing and printing costs for r
With last week’s re-introduction in Congress of a bill to rein in what critics say are abusive credit card practices, the stage is set for a Washington battle that will determine whether entrepreneurs and other credit card users get relief soon from soaring rates and fees.
The Credit Cardholders’ Bill of Rights was introduced Thursday by Rep. Carolyn Maloney, D-N.Y., in the House, and Senators Mark Udall, D-Colo., and Charles Schumer, D-N.Y., in the Senate. The legislation would take a number of steps to restrict credit card issuers, including:
"A credit card agreement is supposed to be a contract, but in recent years cardholders have lost the ability to say no to unfair interest rate hikes and fees," Maloney said in a press statement. "This bill levels the playing field between card companies and cardholders while fostering fair competition and free market values."
Many of these same provisions - including the bans on retroactive rate increases and on double-cycle billing - were already put in place in December through new regulations issued by the Federal Reserve and other federal agencies. Those new rules, however, don’t take effect until July 2010. Maloney’s bill specifies that new regulations would be enacted 90 days after President Obama signs the bill into law.
An earlier version of Maloney’s bill passed the House last September, but failed to get out of committee in the Senate. The Schumer/Udall Senate version now goes up against the Credit Card Accountability, Responsibility and Disclosure Act, an even stronger bill sponsored by Senator Chris Dodd, D-Conn., head of the Senate Banking Committee cheap payday advance. The Dodd bill would prohibit all retroactive rate increases, regardless of whether cardholders were late with payments, as well as limit what kinds of fees banks may charge their credit card customers.
Credit card companies are expected to oppose the bill. The American Bankers Association, which represents several major credit card companies, says that a 90-day implementation would be too onerous for banks to put into effect.
"In effect, these new regulations completely rework the current credit card system and mark the beginning of a new market structure for credit cards," ABA President Edward Yingling said in a prepared statement.
"Precipitous action, such as the implementation period in the new bill, could have serious and detrimental effects on consumers and the economy at a time when access to credit is in particular demand."
Industry critics don’t buy that argument.
"Three months seems like plenty of time to rejigger their computer systems," said Travis Plunkett of the Consumer Federation of America, which backs increased credit card regulation. "There are plenty of ways to allow the banks a reasonable period of time to implement the law without making consumers wait for a year and a half while they’re still dealing with practices that the Federal Reserve has determined are unfair and deceptive."
If legislation does make it through Congress, it’s almost certain to be signed by Obama, who during his presidential campaign endorsed credit card reform. Obama singled out unilateral rate hikes and rate changes on existing debt as two industry practices in need of abolition.
Despite a packed Congressional calendar, Plunkett says he’s hopeful of quick action on credit card legislation.
"Over the years I’ve been pretty pessimistic about the opportunities for federal legislation, but the prospects are really good," he says. "Members of Congress are hearing from constituents on this issue. Sixty-thousand people wrote the Federal Reserve. This is a very big issue with the American public."
Bank of America Corp., the largest U.S. bank by assets, posted its first loss since 1991 and cut the dividend after receiving emergency funds from the government to support the acquisition of Merrill Lynch & Co.
The fourth-quarter loss of $1.79 billion, or 48 cents a share, compared with net income of $268 million, or 5 cents, a year earlier, the Charlotte, North Carolina-based company said in a statement today. Results didn't include a $15.3 billion loss at Merrill, acquired this month. The 32-cent dividend was slashed to a penny. Citigroup Inc. analyst Keith Horowitz estimated on Jan. 11 that the bank had a $3.6 billion loss.
The losses, coupled with the government lifeline of $138 billion, raise doubts about the future of Chief Executive Officer Kenneth D. Lewis, who engineered takeovers of unprofitable New York-based brokerage Merrill and ailing mortgage lender Countrywide Financial Corp. during the worst market slump since the Great Depression. Bank of America plummeted 75 percent in New York trading through yesterday since the Merrill deal was announced in September.
“This thing is unraveling so fast Lewis may know his job is lost,” said Paul Miller, an analyst at Friedman Billings Ramsey Group Inc. in Arlington, Virginia, who has an “underperform” rating on Bank of America. The management team has “lost credibility,” he said before results were announced.
Changing Course
The bank rose 63 cents, or 7.6 percent, to $8.95 in early trading at 6:21 a.m. in New York.
The government said earlier today it will invest $20 billion in Bank of America and guarantee $118 billion of assets to help the company absorb Merrill and prevent the financial crisis from deepening. The agreement is part of a commitment to “support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.
Lewis, 61, said Sept. 15 the purchase of Merrill gave Bank of America “one of the premier wealth management” companies and was “a great opportunity for our shareholders.” He also said at the time that the company didn't anticipate needing further financial aid from the government. The takeover was announced as New York-based securities firm Lehman Brothers Holdings Inc. announced the biggest bankruptcy in U.S. history.
Bank of America officials then told regulators last month that the Merrill deal might be abandoned because of worse-than- expected results, three people with knowledge of the situation said. The government insisted the transaction proceed because its collapse would create new turmoil in the financial system, the people said earlier this week, declining to be identified because the talks were private.
Stock Slide
Bank of America fell 18 percent yesterday to $8.32 in New York Stock Exchange composite trading, closing at the lowest level since March 25, 1991. The decline occurred on speculation the company would need financial assistance because of losses at Merrill.
The shares have dropped 42 percent since Jan. 6 when Lewis told employees that he expected the company's performance to fall short of estimates. The company is cutting as many as 35,000 jobs to reduce annual costs by about $7 billion. Bank of America also has taken steps to counter loan losses by selling a $2.8 billion share of its China Construction Bank stake.
Today's emergency action shows how government officials, led by U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, have failed to quell concerns about the viability of the nation's biggest banks, even after deploying $350 billion of financial-rescue funds. Financial companies have disclosed more than $1 trillion of writedowns and credit market losses since 2007 linked to the collapse in subprime mortgages, according to data compiled by Bloomberg.
TARP Funds
The Bank of America plan mirrors the emergency actions taken in November for New York-based Citigroup, when the government explicitly insured the bank against losses on toxic assets, with taxpayers footing the bill. The U.S. backed up $306 billion of Citigroup real-estate loans and securities, sharing losses beyond $29 billion for what may be some of the company's worst holdings.
In the Bank of America deal, the government will protect a $118 billion pool of assets that a U.S. official said includes residential and commercial real-estate holdings and credit- default swaps. The official spoke to reporters on a conference call on condition of anonymity cash advance.
The $20 billion purchase of preferred shares, which carry an 8 percent dividend, will be made later today. The funds come from the first half of the Treasury's Troubled Asset Relief Program. The U.S. Senate voted yesterday to allow the release of the next $350 billion of the program.
Fire Fighting
“This is more short-term fire-fighting tactics,” said Ed Rogers, chief executive officer of Tokyo-based hedge-fund adviser Rogers Investment Advisors Y.K.
The U.S. had already injected $15 billion into Bank of America and $10 billion into Merrill to bolster the combined company against the credit crunch.
Bank of America charged off $5.54 billion of loans as uncollectible, equal to 2.36 percent of total average loan and leases, compared with 0.91 percent a year earlier, the statement said. The provision for loan losses increased to $8.5 billion from $6.45 billion in the third quarter because of “economic stress on consumers,'' the bank said.
Merrill Lynch's loss included writedowns of $1.9 billion on leveraged loans, $1.2 billion in investment securities and $1.1 billion on commercial real estate. The company also cut the value of its contracts with financial guarantors by $3.2 billion, Bank of America said. Merrill's wealth management division had $2.6 billion in net revenue with the best performance stemming from its U.S. advisory unit, the bank said.
Thain's Role
Merrill's results weren't part of the bank's financial statements because the transaction was completed on Jan. 1.
The Countrywide acquisition is “on track'' and likely to reach $900 million in annual cost savings by 2011, the bank said.
Lewis has spent $129 billion on acquisitions, including regional lenders FleetBoston Financial Corp. and LaSalle Bank, credit-card issuer MBNA and investment manager U.S. Trust Co.
Bank of America agreed to buy Merrill, the world's largest brokerage firm, after a weekend of negotiations between Lewis and Merrill CEO John Thain, for $19.4 billion.
Acquisitions
“Bank of America has all kinds of problems with its acquisitions,” said Gary Townsend, a former bank analyst and president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “They've been so acquisitive, they find themselves with very little in tangible equity.”
Bank of America became aware of Merrill's fourth-quarter losses after shareholders approved the takeover on Dec. 5, the Wall Street Journal reported earlier today, quoting a statement from the company. After the vote, Paulson and Bernanke warned Lewis about the risks to the financial system if the deal was scrapped, the Journal said, citing unidentified people familiar with the matter.
The agreement with the Treasury, the Fed and FDIC calls on Bank of America to absorb the first $10 billion of losses from its pool of assets, the “large majority” of which were assumed with the Merrill purchase, according to the government's statement. The company will absorb 10 percent of any additional losses, with the government on the hook for the remainder.
Fed Backstop
The Fed will backstop assets with a loan, after the government's first $10 billion in losses, shared by the Treasury and the FDIC. The asset pool includes cash assets with a current book value of as much as $37 billion and derivatives with maximum potential future losses of as much as $81 billion, according to the term sheet provided by the government.
Separately, the FDIC said today it plans to propose changing its bond-guarantee program for banks to cover debt as long as 10 years, up from the current three-year maturity. The FDIC also plans to propose rule changes to the Temporary Liquidity Guarantee Program.
The U.S. government will use all of its resources “to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the joint statement said.
Bernanke said earlier this week that troubled assets remain a “continuing barrier to private investment” in financial institutions and recommended that they be extracted with government help. He urged a “comprehensive plan,” with one possibility being to erect a so-called bad bank to purchase and administer the troubled loans and securities.
Japan’s Nikkei is at risk of falling back to a 26-year low as a deep recession and strong yen take a heavy toll on company earnings, overwhelming valuations showing shares at some of the cheapest levels on record.
Even after the Nikkei’s record 42 percent tumble last year, overseas portfolio managers are likely to be slow in embracing Japan again, having dumped about a quarter of their $276 billion in stock purchases made between 2005 and 2007.
“Demand is dropping fiercely for companies,” said Takashi Ito, a senior strategist at Nomura Securities.
But based on analysts’ earnings expectations, Japanese shares are still more expensive than the United States and Europe despite having suffered a bigger slide than those markets.
A corporate culture where firms hold shares in each other is one reason why valuations have been historically higher in Japan than other regions.
In the business year ending in March 2010, the price-to-earnings ratio of the top 500 Japanese companies is seen at 12.25 times compared with 14.13 for the current year, according to Thomson Reuters data.
That is still higher than the 10.88 forward P/E ratio for S&P 500 companies this year, and the single-digit levels some analysts see in European indexes such as Germany’s DAX
The yen’s record surge last year has added to the pain from the global economic downturn for top Japanese exporters such as Toyota Motor Corp, which called the current climate an unprecedented emergency in its 70-year history saving payday loans.
On a trade-weighted basis, the yen soared 25 percent in 2008, shocking Japan’s big companies and taking a big slice out of the value of already tumbling overseas profits.
Electronics giant Sony Corp will likely suffer an operating loss of about $1.1 billion — its first in 14 years — due to sluggish sales and the stronger yen, a source with knowledge of the matter said on Tuesday.
Highlighting how sharply the Nikkei slid, the price-to-book ratio — or much much the market is valuing companies compared to the value of their net assets — remains at just 1 after sliding to 0.87 last October when the stock index hit a low of 6,995.
Such levels are rare, indicating investors are valuing firms at less than what they could theoretically be liquidated for.
The drop to 0.87 was the lowest since 1991, according to figures from Thomson Reuters. Even during Japan’s decade of economic stagnation, deflation and banking crisis, the price-to-book ratio never fell below 1.
But analysts don’t think buyers will be swayed just yet.
“Unless investors can confirm the economy and corporate earnings will likely soon hit the bottom, buying based on those valuations won’t take place,” said Yutaka Miura, a senior technical analyst at Shinko Securities.
The small businesses sector in December suffered its largest one-month jobs decline in at least a decade, according to an employment report by payroll processor ADP, which estimates that small companies shed 281,000 jobs last month.
ADP (ADP, Fortune 500) defines small companies as those with 49 or fewer employees. Add in companies with staffs of less than 500 and the job-loss number increases to 602,000 - 87% of the total number of private sector jobs lost last month, according to ADP’s National Employment Report.
"I’m not surprised by ADP’s numbers," said Bill Dunkelberg, chief economist for the National Federation of Independent Business. "Retailers and restaurants all count on the fourth quarter to make it. But it was a really bad fourth quarter. Profits were killed, and because 80% of costs for small businesses are labor costs, they had to take drastic action."
With December’s report, ADP significantly reworked the methodology for its report to more closely align its monthly employment estimates with those published by the Bureau of Labor Statistics, which typically releases its report several days after ADP’s. In the process, ADP revised its historical figures for 2008.
Previously, ADP estimated that small companies added jobs to the economy every month until October. Its new, revised estimates show a net loss of small business jobs beginning much earlier in the year, starting with a February loss of 27,000 positions. Still, December’s loss of more than a quarter of a million jobs was by the far the year’s largest.
"Though the severity of job losses in recent month among small-size businesses has been less than that at larger-size ones, today’s employment declines clearly indicate that the recession has widened to include businesses of all sizes," said Joel Prakken, chairman of ADP’s research partner, Macroeconomic Advisers, in a statement accompanying the report.
In a conference call with reporters, Prakken said the hardest-hit sector was construction, and in particular, residential construction - an industry dominated by small proprietors 500 fast cash payday loans. Manufacturing is also on the decline, shedding jobs in 27 of the last 28 months, according, to ADP’s estimates.
Entrepreneur Linda Lankford, a hostel owner in Denver, is among those who had to cut staff in December. Lankford has been running Hostel of the Rockies for five years, and recently laid off three of her six full-time employees. She’s also cut the hours of the hostel’s housekeeper, which means that desk staffers must now take on cleaning responsibilities. Repairs to the hostel’s 105-year-old building are being made with used materials from Habitat for Humanity’s thrift store.
"When people were planning vacations months ago, gas was too high to travel, and the price of airfare has impacted my overseas guests," Lankford said. "My landlord is now waiting for my overdue rent, and to cover costs, I’m turning two dorms into apartments that I will lease for six months."
If Lankford doesn’t get enough bookings for her high season, which starts in June, she says she will have to do the same for her remaining nine dorms and shut down the hostel.
Michael Thurmond, commissioner of labor in Georgia, described ADP’s results as "deeply troubling," adding that small business, the backbone of the country, should be the primary generator of new jobs.
"This shows the rippling of economic pain," he said. "It began in housing and broadened to other sectors of economy. The credit crunch exacerbated the situation, which began to impact consumers, which then hit small businesses."
Thurmond expects that because most small businesses are in the service sector and depend on consumers who use credit cards, the nation can expect more rounds of deep layoffs.
"This data does not bode well for the future," he said. "We’re in a terrible economic cycle."
Ford Motor Co expects industrywide December U.S. auto sales to drop by some 35% from a year earlier with no sign of a turnaround in the first quarter of this year.
Ford, the No. 2 U.S. automaker, expects that full-year sales of light vehicles in the world’s largest market will drop to near 13.2 million for 2008, down from near 16.2 million in 2007, Ford’s chief sales analyst George Pipas said Friday.
The only other time the U.S. auto industry has seen a similar 3-million unit plunge in sales over the course of a single year was during 1974 in the wake of the first oil shock, Pipas told reporters.
Major automakers are set to release December and full-year 2008 sales data Monday. Analysts have said they see December light-vehicle sales slipping below the 10.2 million unit sales rate recorded a month earlier.
Annualized auto sales rates have declined on a quarter-to-quarter basis throughout 2008. The sales rate fell from 15.6 million vehicles in the first quarter to an estimated 10.6 million in the fourth quarter. Those figures include medium and heavy-duty truck sales of about 300,000 units on an annual basis.
"The sales rates have declined like a lead balloon, really," Pipas said. "I think when December comes in every segment will be down. Not one segment will be up versus a year ago."
"We’re not looking for the first quarter to be much different from what we saw in the fourth quarter," Pipas said.
The sharpest sales declines in 2008 came in full-size SUVs, a gas-guzzling category that U.S. consumers abandoned during the spring and summer spike in oil prices.
On a full-year basis, Pipas said, 2008 is on track to become the first year since 2000 that passenger cars have outsold light trucks in the United States. The light trucks category includes: pickups, SUVs and minivans.
Manufacturers have responded to the slump in truck sales with aggressive discounts in recent months, including cash rebates and low-rate financing.
Pipas said data tracked by Ford showed the average incentive on a full-size pickup truck was between $7,000 and $8,000 in December and near $7,000 for a full-size SUV fast payday loan no faxing.
By contrast, the average discount on a compact car was just $1,300 and near $2,000 for a mid-size car, he said.
With manufacturers scrambling to clear year-end inventory, average sales incentives across all vehicle segments were up about $900 in December from a year earlier, Pipas said.
Pipas said Ford expects that its own 2008 market share will end up just over 14%, down by about half a percentage point from a 14.6% share a year earlier.
In order to regain market share, Ford recognizes that it needs to have a more competitive line-up of small vehicles on the market reflecting the increasing importance of that segment, Pipas said.
Unlike its Detroit-based rivals General Motors Corp and Chrysler LLC, Ford has not sought an emergency loan from the U.S. government.
The No. 2 U.S. automaker, which borrowed more than $23 billion in 2006, has attempted to use its better financial position and recent quality gains to distinguish itself from its battered competitors in the eyes of car shoppers.
GM (GM, Fortune 500) and Chrysler were given a $17.4 billion bailout from the Bush administration. Ford has sought a $9 billion credit line from the government if the ongoing recession runs deeper and longer than it expects.
But Pipas said Ford’s sales planners expected to see industry-wide U.S. auto sales declines of between 20% and 30% in monthly sales reports in the first quarter.
Second-quarter sales results are also expected to show double-digit percentage declines, he said.
Ford (F, Fortune 500) does not expect U.S. auto sales to begin to stabilize until the second half of 2009 based on the view that the U.S. economy will begin to improve late this year, Pipas said.
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