Bradway Capital

Oak Hill Partners Capital Call

2009-10-13T14:03:00.002-04:00

Check your e-mail for another opportunity to invest with Oak Hill Capital Partners, which just issued a capital call for a worthwhile investment.

Oak Hill Capital Partners Quarterly Call

2009-09-18T11:57:00.002-04:00

Oak Hill Capital Partners held its fall quarterly call this week. Check your e-mail for a summary of the call, which includes Oak Hill's macroeconomic view and details on some of the companies in its portfolios.

The Liquidity Premium

2009-06-12T13:21:00.002-04:00

by Zhiwu Chen and Roger G. Ibbotson 06-03-09
Liquidity has many different, but similar meanings. In every case, it is related to the ease of movement. In the banking system, liquidity measures the degree to which loans are made. In the securities markets, liquidity is the ease with which transactions can be made. In valuation, liquidity has an impact on value: The more liquidity an asset has, the more value it has, all other things being equal. The absence of liquidity lowers the value of the asset by the amount of an illiquidity discount.
In the financial crisis, it is quite natural that the financial media are focusing on liquidity in bonds and loans. The president and Congress are providing bailout money so that financial institutions can prop up balance sheets to make it easier for them to start lending again. Corporations, such as automobile manufacturers, are not able to meet their cash flows with their illiquid assets and cannot get sufficient financing. Potentially healthy corporations or individuals are not able to get refinancing as their loans become due.
In this article, we instead focus on liquidity as the ease of executing securities in general, especially equities. We focus on liquidity's impact on valuation and in particular its impact on security returns. We will demonstrate that less-liquid securities have higher expected returns.
Clilck here for the complete article

Longleaf Funds Holds Annual Shareholder Meeting

2009-05-28T12:49:00.000-04:00

Southeastern Asset Management, which runs the Longleaf Fund family, held its annual shareholder meeting on May 7 and had an optimistic outlook for stocks over the next five years. Bradway portfolios have investments with the Longleaf Partners Small-Cap fund, which this year has posted a gain of 13.2 percent. That's 11 points better than its benchmark, the Russell 2000 index.

Fund manager Mason Hawkins noted that the historic drop in stock prices between September and March 9 was the largest decline since 1932. While many investors panicked, Longleaf enthusiastically purchased stock in high-quality companies at very attractive discounts. “What distinguished this bear market from all others was the fact that many best-in-class industry leaders were offered at less than half of conservative appraisals,” Hawkins said. “The fourth quarter of 2008 teed them up for long-term investors like no time before.”

The fund concentrates on buying companies with strong management, a clear competitive advantage and financial strength. “We’ve never owned better companies at cheaper prices across the board in the three Longleaf Funds that we owned on March 9, 2009, and we confidently believe we have the best foundations in place to produce the funds’ best returns,” Hawkins said.

The firm believes the stock market will move much higher over the next five years.

Manager Staley Cates answered several common questions about investing in a bear market. His answers are worth reading. To read the full transcript of the report, click here. If you'd like to view the slides that accompany the presentation, click here.

Portfolio Changes

2009-05-18T16:11:00.002-04:00

We have selectively reduced our equity exposure by taking profits in some of the Consensus Portfolio because we believe the market has run too far, too fast. In addition, we have been taking profits in both the Real Estate and Assets Portfolios to prepare for the upcoming capital account distributions.

June 4 conference call scheduled

2009-05-06T12:16:00.000-04:00

The next Bradway Financial monthly conference call will be held at 6 p.m. on June 4 at Wampanoag Country Club in West Hartford, CT. We will present our view of the current investment environment and opportunities and then answer any questions you may have. We hope that you will join us for the presentation and stay for a catered social hour with the entire Bradway team. To RSVP, please call or e-mail Barbara Giard at 800-726-1622, ext. 1, or barbara@bradwayfinancial.com by May 22.

If you are unable to attend, you can still listen to the call via telephone.

Buffett: Berkshire to capitalize on turmoil

2009-05-04T14:57:00.003-04:00

At an event that is typically filled with hoopla, Warren Buffett spent much of his company's shareholder gathering this weekend defending a rough year. And he didn't hold out much hope in the near term for better results in many of Berkshire Hathaway Inc.'s (BRKA) businesses, The Wall Street Journal reported.

"We will continue to do quite well in our insurance and utility operations. We won't do well in other operations," Buffett said.

But Buffett was upbeat about opportunities for Berkshire, saying he believes the company is well positioned to capitalize on current market turmoil.

Berkshire last year suffered its worst year ever. Among its hard hit holdings were Wells Fargo & Co., and Moody's Investors Service. Berkshire's shares have fallen more than 30 percent since the end of September.

Buffett this weekend fretted that bank stocks could suffer further, thanks to the government's current stress tests of financial firms. His worry: Regulators might paint with too broad a brush and fail to recognize strengths that differentiate companies.

"Maybe the whole idea is not such a hot idea," said Berkshire Vice Chairman Charles Munger.

Buffett said he is especially interested in U.S. deals. "We're always open to things internationally," he said, "probably a little less so now because there are things going on in the United States that are interesting to us."

Highlights from Berkshire Hathaway meeting

2009-05-04T14:55:00.001-04:00

To read some highlights of Warren Buffett's and Charles Munger's remarks at the Berkshire HathawayInc. shareholder meeting this past weekend, click here.

Loews swings to a loss

2009-05-04T14:40:00.003-04:00

Loews Corp. (L) and insurer CNA Financial Corp. swung to first-quarter losses, their third-straight period of red ink, as investment losses continue to pressure the companies' results.

Loews remade some of its portfolio last year by shedding its stake of cigarette maker Lorillard Inc. As such, that make the conglomerate more exposed to 90-percent owned CNA, which some critics had called among the worst-run property-and-casualty insurers.

But underwriting improved last year while unrealized investment losses mounted, as they did with many insurers in the wake of the stock market's slump. A new chief executive also came in at the start of 2009.

Loews this week reported a net loss of $647 million, or $1.49 a share, compared with a prior-year profit of $662 million, or $1.05 a share. Revenue dropped 16 percent to $3.02 billion.

Beyond investment losses, notably at CNA, Loews' latest results were hurt by another $1 billion write-down on oil-and-gas properties at its HighMount Exploration business. Loews recorded $1.17 billion in write-downs for the fourth quarter.

At CNA, it posted a loss of $195 million, or 84 cents a share, compared with a year-earlier profit of $187 million, or 69 cents a share. Excluding investment losses, earnings fell to 56 cents from 82 cents. The mean estimate of analysts surveyed by Thomson Reuters was 26 cents.

Loews is also a majority owner of Diamond Offshore Drilling Inc., which a week ago reported its first-quarter profit rose 20 percent on higher revenue and margins. The company also again declared a special cash dividend in addition to its regular dividend.

Regulators: Wells Fargo needs to raise capital

2009-05-04T14:29:00.002-04:00

Regulators have told Wells Fargo & Co. (WFC) to shore up its finances after government "stress tests" showed the bank would have trouble surviving a deeper recession, The Associated Press reported today.

Wells Fargo is one of several banks that regulators will force to hold larger buffers to protect them against possible future losses, according to two people familiar with the matter who spoke on condition of anonymity because of the sensitivity of the process.

Representatives from San Francisco-based Wells Fargo did not immediately respond to requests for comment Monday morning.

After originally being scheduled for release Monday, the results of the government's stress tests now are expected Thursday afternoon. The delay comes amid aggressive lobbying from banks that were told they would need to boost their capital positions.

The stress tests of the 19 largest financial firms are a centerpiece of the Obama administration's plan to stabilize the banks. The tests estimate losses the banks would face in a "what-if" scenario that includes 10.3% unemployment and a 22% drop in home prices during the next two years.

Fidelity National Info. Services Income Drops

2009-04-29T11:18:00.002-04:00

Fidelity National Information Services Inc.'s (FIS) first-quarter net income fell 53 percent as a year-earlier gain and the stronger dollar made comparisons difficult for the information-technology company.

President and CEO Lee A. Kennedy warned yesterday that the company expected the challenging market conditions to continue throughout 2009. Still, Fidelity reaffirmed its earnings target of $1.60 to $1.66 a share.

Earlier this month, Fidelity strengthened its presence in the financial-information-technology market by acquiring Metavante Technologies Inc. (MV) in a stock deal valued at $2.9 billion, with Fidelity saying the deal would add to earnings in 2010. Major ratings agencies reacted positively to the news, as both companies have recurring revenue streams, which can help IT providers mitigate the recession.

Fidelity reported net income of $33 million, or 17 cents a share, down from $70.5 million, or 36 cents a share, a year ago. Net earnings from continuing operations rose to 18 cents a share from 6 cents, as the prior year's quarter included a $50 million gain from discontinued operations.
Excluding items, earnings rose to 31 cents a share from 26 cents.

Bank of America tops estimates, but focus is on credit woes

2009-04-20T21:26:00.003-04:00

Bank of America Corp. (BAC) warned of worsening loan default problems Monday even as it posted a first-quarter profit of $2.81 billion.

Although Bank of America said higher revenue from the purchase of Merrill Lynch & Co. helped offset a surge in credit costs, it took a $13.4 billion provision for credit losses during the first three months of the year. The amount of its problem loans more than tripled to $25.7 billion and CEO Ken Lewis said he couldn't predict when the bank's credit morass would end.

The bank's stock fell $2.58, or 24.3 percent, to $8.02 as the overall stock market plunged. Bank of America earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.

Bank of America, as other banks have done, attributed its profit to trading activities on markets including bonds. But troubled loans, also known as nonperforming assets, increased to $25.7 billion from $7.8 billion a year ago. The bank also lost $1.8 billion on credit card services, after posting a profit a year ago.

"Credit is bad and we believe credit is going to get worse before it will eventually stabilize and improve," Lewis said during a conference call with analysts. "Whether that turn is later this year or in the first half of 2010, I'm not going to hazard a guess."

Buffett speaks about Wells Fargo

2009-04-20T21:22:00.004-04:00

In an interview with Fortune magazine, Warren Buffett spoke about his take on Wells Fargo & Co. (WFC). Buffett's Berkshire Hathaway is the bank's largest single investor. To read the full article, click here.

Copano Energy maintains cash distribution

2009-04-16T12:21:00.002-04:00

Copano Energy (CPNO) yesterday set a cash distribution for the first quarter of 57.5 cents per unit, or $2.30 per unit on an annualized basis, for all of its outstanding common units. This distribution is equal to its distribution for the fourth quarter. The distribution will be payable on May 15 to holders of record at the close of business on May 1.

"Copano has elected to maintain its 57.5-cent quarterly distribution to unitholders. Management concluded that it would be inappropriate to consider our traditional quarterly increase in light of challenging economic and commodity price conditions in the first quarter and the ongoing efforts we are asking our employees and service providers to make with respect to reducing our costs. We are encouraged by recent commodity price developments, however, and feel cautiously optimistic regarding pricing trends as 2009 progresses," CEO John Eckel said.

Summary of Interviews with Fairholme Manager

2009-04-09T19:17:00.003-04:00

Bruce Berkowitz relies on his team’s bottom-up research efforts to construct the Fairholme portfolio and, as such, he makes no claims about being able to predict what will happen at a macroeconomic level. He is, however, acutely aware of some macroeconomic headwinds that many companies are subject to. “We are going through a de-risking—a deleveraging not just at the individual level, but at the corporate level,” he notes. One example he offers is insurance companies, whose investment portfolios are worth much less than they used to be. As a result, Berkowitz explains, insurance companies are being forced to reduce equity exposure at the worst possible time because of capital ratio requirements, which, in his view, has created tremendous pressure in the markets. He also believes that this forced deleveraging will continue for companies and municipalities with defined benefit plans, many of which now have very large unfunded liabilities, as they cannot afford to maintain equity exposures at past levels.

Click here for the entire article.

Bank of America to raise capital?

2009-04-09T13:21:00.001-04:00

Bank of America Corp. (BAC), the largest U.S. bank, needs to raise $36.6 billion in equity to bring capital ratios in line with its peers, according to Oppenheimer & Co.

With investors reluctant to commit new funds to lenders, Bank of America is more likely to raise capital by converting preferred stock to common, or issuing 5.2 billion shares through the Treasury Department’s Capital Assistance Plan, analyst Chris Kotowski wrote in a report to clients on Wednesday. Under the Treasury program, Bank of America may issue shares for $6.24 each, the report said.

Bank of America has already accepted two rounds of taxpayer support totaling $163 billion that included preferred stock purchases and asset guarantees. Chief Executive Officer Kenneth Lewis has said the company will rebound from a fourth-quarter loss without more government assistance.

“It is perhaps unusual to model highly dilutive equity raises into earnings forecasts, but we believe that in the current environment, until credit quality stabilizes and capital requirements are more precisely known, it is the prudent thing to do,” Kotowski wrote.

“We disagree with his assumption,” said Scott Silvestri, a spokesman at Bank of America.

Wells Fargo projects record first-quarter earnings

2009-04-09T13:13:00.005-04:00

Wells Fargo & Co. (WFC) today said it expects first-quarter earnings of $3 billion, easily exceeding Wall Street projections as the bank fights its way through the mortgage meltdown.

The bank, the nation's second-largest home lender, joins several rivals in saying results improved early this year. "Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results," Chief Financial Officer Howard Atkins said in a statement issued two weeks before earnings will officially be released.

Wells Fargo, which acquired Wachovia Corp. in December, said its larger market share punched up the company's mortgage business during the quarter. The strong performance comes as the housing market showed signs of thawing and home owners rushed to refinance existing loans.

It expects to report earnings of $3 billion, or 55 cents a share, on revenue of about $20 billion. Analysts surveyed by Thomson Reuters were looking for earnings of 23 cents a share on revenue of $18.98 billion.

At just Wells Fargo, revenue is seen rising some 16 percent. Wachovia was expected to contribute about 40 percent of the combined company's revenue. Meanwhile, the expected quarterly profit would be a record for Wells Fargo.

The bank reported $100 billion in mortgage originations during the quarter, providing loans to more than 450,000 people either purchasing or refinancing a home. Wells Fargo mortgage applications rose 41 percent to $190 billion, with $100 billion yet to close at the end of the quarter.

Mr. Atkins said he sees this as a sign of strong second-quarter originations. The dollar value of applications was up 64 percent from the prior quarter, with a record number submitted in March.

Moody's lowers Berkshire Hathaway rating

2009-04-09T13:11:00.003-04:00

Warren Buffett's Berkshire Hathaway Inc. (BRKA) took another blow from a rating company, this time from Moody's Corp., a big Berkshire holding. Moody's on Wednesday lowered the long-term issuer rating of Berkshire to Aa2 from its top Aaa rating. It cited the weakening economy and "severe decline in equity markets."

Berkshire has had big losses in its portfolio, which includes large financial companies such as Wells Fargo & Co. and American Express Co. Buffett is weathering one of the toughest markets since he took over Berkshire in 1965. Its shares are down 33 percent over the past year. Further downgrades could impact borrowing costs, and hurt its ability to charge maximum rates for insurance policies written by its subsidiaries.

Last month, Fitch Ratings stripped Berkshire of its AAA, citing concerns about its stock holdings and exposure to several long-term derivatives contracts written in recent years. In late March, S&P revised its rating outlook for Berkshire to "negative" from "stable" due in part to concerns about its equity holdings. But it retained its AAA rating on Berkshire.

FIS to acquire Metavante

2009-04-02T14:45:00.003-04:00

Fidelity National Information Services Inc. (FIS) yesterday agreed to acquire Metavante Technologies Inc. (MV), a provider of processing services to financial institutions, in a stock deal valued at $2.94 billion, Dow Jones Newswires reported.

The deal strengthens Fidelity National's presence in the financial-information technology market. IT providers generally rely on a steady stream of recurring revenue, which will help them through the economic downturn, but weakness in the U.S. financial sector can still affect the companies.

Under the deal, Fidelity will swap 1.35 shares of its stock for each Metavante share held. The deal values Metavante at $24.57 a share, a 23 percent premium to its Tuesday closing price.

Fidelity National Chairman William P. Foley II will serve as chairman of the combined company, while Metavante Chairman and Chief Executive Frank R. Martire will be chief executive.

Fidelity National and Metavante have "highly diversified and recurring revenue streams," the companies said. In 2008, the companies generated pro forma combined revenue of $5.2 billion. Fidelity expects the deal to produce cost savings of roughly $260 million and begin adding to earnings in 2010.

Metavante, a 2007 spin-off of Marshall & Ilsley (MI), has been offering processing services to financial institutions for more than 40 years. Its services include outsourced deposit, loan, and trust account processing, check processing, electronic funds transfer, commercial treasury services, and health-care payments services. The highly acquisitive firm has made a series of purchases in recent years that have broadened its footprint in all of its sectors.

Foster Wheeler lands Indian coal power deal

2009-04-02T14:34:00.001-04:00

Foster Wheeler AG (FWLT) announced today that a subsidiary of its Global Power Group has entered into a 20-year agreement with BGR Boilers Private Ltd., an affiliate of BGR Energy Systems Ltd., to provide an advanced technology license for wall-fired subcritical and supercritical pulverized-coal steam generators to be sold in India.

The terms of the agreement were not disclosed. The contract value will be booked immediately upon the approval of the Indian government. Future royalty payments will be booked over the life of the agreement.
I
n addition, the two companies have agreed to cooperate on multiple prospective projects under separate contracts within the next five years, with Foster Wheeler providing the engineering and design along with selected major components.

“This agreement with BGR to jointly serve the domestic power market in India represents a major step forward in our strategy to steadily expand our global presence,” said David J. Parham, executive vice president of Global Sales and Marketing, Foster Wheeler Global Power Group. “As India’s need for electric power continues to increase, the Foster Wheeler-BGR team will be positioned to add value by providing the Indian power generators with high-quality advanced technology to meet their growing power production needs.”

Warren Buffett's annual letter

2009-04-01T13:57:00.004-04:00

We have posted excerpts from Warren Buffett's annual letter to Berkshire Hathaway shareholders. You can read it here.

IR strengthens balance sheet, warns on earnings

2009-03-31T15:04:00.005-04:00

Ingersoll-Rand Co. Ltd. (IR) today announced a series of actions designed to strengthen its financial flexibility and enhance its credit profile. The company also reduced its dividend and earnings outlook for both the first quarter and full year.

IR intends to offer a benchmark-sized amount of senior notes. In addition it will offer $300 million in aggregate principal amount of exchangeable senior notes due 2012, exchangeable into cash and shares of the company's Class A common shares. In addition, the company has arranged an expansion of a 364-day trade receivables financing facility to provide an additional $200 million of financing over current levels and expects agreement execution by April 1.

The net proceeds from the notes offerings along with the expansion of the receivables financing facility will be used to repay the bridge loan that matures in June 2009 and provide additional liquidity for the company.

IR's board also authorized a reduction in the quarterly common stock dividend to 7 cents per share from 18 cents per share, effective with the September 2009 dividend payment. “We recognize the importance of the dividend to our shareowners,” said Herbert L. Henkel, chairman and CEO, “but we believe that the reduced payment will enhance liquidity and our ability to pay down debt in the short-term and make investments for our future growth.”

The company expects estimated first-quarter adjusted diluted earnings per share to be at the low end of its previously forecasted range of a 15-cent loss to breakeven. This earnings estimate excludes non-recurring costs such as those related to the acquisition of Trane and restructuring costs.

For the full year, revenue is expected to be down 17 percent vs. the 8 to 9 percent originally forecast. Earnings per share from continuing operations would be approximately 45 cents below the bottom end of the previous guidance range of $1.85 to $2.25 per share. Estimates for both the first quarter and the full year are preliminary and could change.

TXI earnings down, but beat estimates

2009-03-27T13:21:00.004-04:00

Texas Industries, Inc. (TXI) today reported that its third quarter profit declined 30 percent. Net income was $10.3 million, or 37 cents per share, and included after tax gain of $3.2 million, or 12 cents per share, from the sale of real estate associated with its north Texas aggregate operations. Net income for the quarter a year ago was $14.6 million, or 53 cents per share.

Analysts polled by Thomson Reuters expected the company to post a quarterly loss of 2 cents per share on revenue of $186.6 million. Shares of TXI rose $4.69, or 22 percent, to $25.09 in afternoon trading.

"Our results reflect the exemplary work of our employees and the benefits of their operating decisions during the last six months," CEO Mel Brekhus said. "We have suspended the operation of some of our plants, adjusted shifts, reduced overtime, trimmed head count and otherwise altered the way we operate our facilities, and it is paying off."

"TXI remains focused on pursuing every opportunity to meet market demand as cost effectively as possible," Brekhus said. "Our unit costs only increased 2, 4 and 10 percent in our consumer products, aggregate and cement segments, respectively, despite a decline in shipments of approximately 30 percent for all major products. A specific example of our results is the fact that our ready-mix volumes are down 28 percent and our yards per man hour metric is down only 6 percent. Additionally, we recently announced internally a wage and salary freeze beginning June 1 and the board of directors, executive officers and I have voluntarily chosen to reduce our compensation in fiscal year 2010."

Moody's cuts ratings for Wells Fargo, Bank of America

2009-03-27T12:33:00.003-04:00

Moody's Investors Service this week cut various credit ratings on Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC), including junking their preferred stock, saying the banking giants' capital ratios could be pressured in the short term.

The downgrades included slashing Wells Fargo's preferred-stock rating to B2, or five steps into junk territory, and Bank of America's eight notches to B3.

Both were in part because of the capital-ratio worries and "the probability that systemic support will be needed," said Moody's Sean Jones, a senior vice president. Such support could be harmful to owners of preferred stock, he added.

Moody's said the ratings changes are part of its changing methodology in rating banks, including the increasing importance of capital adequacy. Such capital measurements include tangible common equity, which has become pivotal as it is essentially a gauge of what common shareholders would get if an institution were dissolved.

Moody's doesn't expect Wells Fargo and Bank of America to generate "sizable amounts of capital" until the second half of 2009 or next year, at the earliest. It noted Wells will likely need to record impacts from write-downs, various losses and merger costs and loan losses from its pre-merger portfolio because of the deteriorating housing market. For Bank of America, it too will have to deal with "significant" additional loan-loss reserves into next year, resulting in weak earnings and "significant additional pressure" on the company's "already modest" tangible common equity.

Wells Fargo's shares are down 46 percent this year, while Bank of America shares are down 51 percent.

Winters shifts to high-quality companies

2009-03-25T10:06:00.005-04:00

David Winters, manager of the Wintergreen Fund, was quoted in a March 8 Wall Street Journal story that highlighted some of the stock picks of top managers:

Amid market volatility, several stock-fund managers have been turning defensive.

Managers across investment styles have lately been buying stocks of companies that they expect will hold up better through the recession, and are trading at what they consider to be low prices. These include a range of companies, from makers of toothpaste and soaps, to food companies to pharmaceutical firms.

Look at David Winters, manager of Wintergreen Fund, which lost 39 percent last year and 18 percent so far this year. He is known for his experience in distressed investing, but even though there are plenty of ailing companies right now, he's buying stocks of high-quality businesses like Nestlé SA.

"You can buy such wonderful companies at cheap prices that it's less important" to look for distressed deals, he says.

He points out that Nestlé, a global food and beverage company, currently has a dividend yield of almost 4 percent. "Dividends are a bird in the hand versus two in the bush," he notes. Another dividend-paying stock that he likes is cigarette-maker British American Tobacco PLC, which has a yield of 5 percent.

The Wintergreen Fund had built up a big cash position in 2008, but Mr. Winters has been putting that money to work in the last few months, in both U.S. and foreign stocks.

He notes that while the momentum in the stock market is one-sided right now, going down, "at some point, this will end," he says. "I just don't know when."

Pakistan bank chooses FIS system

2009-03-25T10:00:00.002-04:00

Fidelity National Information Services (FIS) has announced that National Bank of Pakistan (NBP) has selected FIS Profile as its core processing solution.

NBP is Pakistan’s largest bank with more than 1,200 branches and a customer base of more than 10 million accounts. It is also the country’s leading lender with nearly two million customers.

Profile was chosen after a highly competitive in-depth assessment and evaluation process to select a core banking system best suited to helping NBP achieve its vision of becoming a world-class financial institution. The Profile core banking suite will initially be installed in 250 NBP domestic branches, followed by installation in the bank’s overseas locations.

Foster Wheeler lands Norwegian Sea contract

2009-03-25T09:53:00.002-04:00

Foster Wheeler AG (FWLT) has announced that its UK-headquartered subsidiary, Foster Wheeler Energy Ltd., part of its Global Engineering and Construction Group, has been awarded a contract by StatoilHydro ASA to undertake the front-end engineering design for the carbon dioxide (CO2)/amine project at the Åsgard B offshore production facilities in the Norwegian Sea.

The Foster Wheeler contract value for this project was not disclosed and will be included in the company’s first-quarter 2009 bookings.

Åsgard B is a semi-submersible production vessel which processes and exports gas and produced condensate from the Smørbukk and Midgard reservoirs in the Norwegian Sea. Foster Wheeler’s scope of work includes the front-end engineering design for debottlenecking of the existing amine unit and procurement services for long-lead items. The overall objective is to obtain maximum absorption of CO2 at Åsgard B through implementation of the proposed modifications during 2009 and 2010.

CommScope debt deals

2009-03-25T09:49:00.001-04:00

CommScope, Inc. (CTV) on March 20 completed the sale of $100 million aggregate principal amount of new 3.5 percent Convertible Senior Subordinated Debentures due 2024 and consummated the redemption of $175.5 million aggregate principal amount of its existing 1 percent Convertible Senior Subordinated Debentures due 2024, constituting all of the outstanding Existing Debentures. The net proceeds of approximately $98 million from the sale of the new debentures, along with borrowings under the company’s senior secured revolving credit facility, were used to redeem the existing debentures.

CommScope announced on March 13 that it had entered into separate purchase agreements to sell $83.25 million aggregate principal amount of new debentures. On March 16, the company entered into additional purchase agreements to sell an additional $16.75 million aggregate principal amount of new debentures, resulting in the issuance of a total of $100 million aggregate principal amount of new debentures.

The new debentures bear interest at the rate of 3.5 percent per year and will mature on March 15, 2024. The company is entitled to redeem the new debentures on or after March 20, 2012 and holders may require the company to repurchase all or a portion of their new debentures on March 20, 2012, March 15, 2014 and March 15, 2019.

S&P lowers ratings outlook for Berkshire Hathaway

2009-03-24T21:56:00.002-04:00

Standard & Poor's Ratings Services changed its ratings outlook on Berkshire Hathaway Inc. (BRKA) and its units to negative from stable, citing the drop in insurance operations capital caused by stock market declines.

The rating agency said the capital adequacy of Berkshire's insurance operations was significantly lower at the end of 2008 than a year earlier, but it was still appropriate for the rating.

If the value of the company's equity holdings stabilizes or improves in the next 12 months or Berkshire is able to rebuild its capital position in the next one to two years, S&P will change the outlook back to stable. But if capital falls further, Berkshire's ratings could be cut one notch, the ratings agency said.

Class A shares of Berkshire lost nearly a third of their value in 2008 and have fallen another 12 percent this year. They closed Tuesday at $88,500, down 1.7 percent.

Earlier this month, Fitch Ratings cut its credit ratings on Berkshire from the top rating, saying no financial-oriented holding company should be rated AAA because of significant market volatility.

S&P affirmed all of its ratings on Berkshire, including its AAA/A-1+ counterparty credit rating.

Wells Fargo touts lending totals

2009-03-20T11:13:00.001-04:00

Wells Fargo & Co. this week said it extended $51 billion in loans and loan commitments to its customers in January, bringing the total credit extended to customers to $144 billion in the past four months.

That amount is nearly six times the $25 billion that Wells Fargo received from the U.S. Treasury last fall. The government has been pumping money into the financial system since the credit crisis crimped lending to consumers because investors, worried about rising defaults, have shunned that debt.

Of the $51 billion loaned by Wells Fargo in January, almost half was for home mortgages, with $14 billion to renew commercial loans, $7 billion in new commercial loans and $6 billion in consumer loans.

“Wells Fargo has remained ‘open for business’ throughout the credit crises and continues to prudently extend credit to creditworthy consumer and business customers throughout the United States,” Chief Financial Officer Howard Atkins said.

Earlier this month, Wells Fargo said it would slash its dividend 85 percent amid growing scrutiny from regulators and concerns about its once-strong balance sheet. The San Francisco-based bank last fall said it did not need government help when it announced a takeover of rival Wachovia.

Some critics have been contending that banks that have received investment from the Treasury Department haven’t been putting that money to work via new loans.

CommScope target price reduced

2009-03-17T12:49:00.003-04:00

Analysts at Stifel Nicolaus & Co. this week reiterated their "buy" rating on CommScope Inc. (CTV) but reduced their 12-month target price to $31 from $33. The stock is currently trading at $8.25.

Foster Wheeler gains Indiana refinery work

2009-03-17T12:40:00.002-04:00

Foster Wheeler (FWLT) today said that its Houston-headquartered subsidiary, Foster Wheeler USA Corp., part of its Global Engineering and Construction Group, has been awarded the full engineering, procurement and construction management services contract from BP Products North America Inc. for the Coker Pillar Project at its Whiting Refinery in Whiting, Ind.

This award is an increase in role for Foster Wheeler through the addition of the construction management services beyond the engineering, procurement and fabrication work for this project currently being executed by Foster Wheeler USA.

The value of the contract was not disclosed. The additional construction management award will be included in the company’s first-quarter 2009 bookings.

The Coker Pillar Project is part of the overall BP Whiting Refinery modernization project. This upgrade project will allow the refinery to increase its ability to process Canadian heavy crude and provides the potential to increase motor fuel production.

Army awards contract to URS

2009-03-16T15:23:00.002-04:00

URS Corp. (URS) last week announced it has been awarded an indefinite delivery/indefinite quantity contract to provide simulation, training and testing solutions to the U.S. military under the Army’s Program Executive Office for Simulation, Training and Instrumentation Omnibus Contract II program. The multiple-award contract has a maximum potential aggregate value to all 144 awardees including URS of approximately $17.5 billion over 10 years. Under the terms of the contract, URS can compete for, or be assigned, task orders for a variety of services, including providing training and testing, and support to simulated and live training events, as well as modeling, instrumentation, telecommunications, targeting and gaming systems.

Foster Wheeler lands India refinery deal

2009-03-16T15:19:00.002-04:00

Foster Wheeler (FWLT) last week announced that subsidiaries in its Global Engineering and Construction Group, Foster Wheeler Energy Ltd. and Foster Wheeler (G.B.) Ltd., have been awarded a contract by Indian Oil Corp. Ltd. (IOCL) for a grassroots refinery at Paradip, Orissa State, India. Foster Wheeler will include the booking, representing in excess of four million man-hours, in its first-quarter 2009 bookings.

Foster Wheeler will be the managing project management consultant for the major part of the development of the new refinery and will also execute the engineering, procurement and construction management (EPCm) for 15 of the key refinery process units, plus offsites, utilities and infrastructure.

“We believe this award demonstrates confidence in two of our key strengths, our broad and deep refining expertise and our proven track record in managing and safely executing the EPC phases of large, technically complex projects. We look forward to playing a key role in the safe and successful delivery of this strategically important project for IOCL,” said Michael J. Beaumont, chairman and CEO of Foster Wheeler Energy Limited.

2009-03-16T15:14:00.004-04:00

Global Partners reports fourth-quarter earnings

2009-03-16T15:14:00.003-04:00

Global Partners LP last week reported financial results for the three months and year ended Dec. 31.

Net income for the fourth quarter of 2008 was $12.7 million, or 78 cents per diluted limited partner unit, compared with net income of $11 million, or 72 cents per diluted limited partner unit for the same period in 2007. Fourth-quarter 2008 net income included a $2.8 million benefit resulting from a favorable adjustment of an environmental reserve that reduced operating expenses. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the three months ended Dec. 31 was $22.8 million, compared with $21.8 million for the same period in 2007. Distributable cash flow for the fourth quarter of 2008 was $15.9 million, compared with $13.3 million for the comparable quarter in 2007.

“The solid results we achieved in 2008 speak directly to the resilience of our business model,” said Eric Slifka, president and CEO. “The sharp rise in commodity prices, increased price volatility, higher borrowing costs, increased conservation and warmer than normal temperatures all contributed to a challenging year. We adjusted to the volatile market conditions by strengthening our margin management and tightening our expense controls. These efforts contributed to a strong finishing fourth quarter that accounted for a record 60 percent of our net income and 47 percent of our distributable cash flow.”

For the full year, net income was $21.1 million, or $1.40 per diluted limited partner unit, compared with $47 million, or $1.38 per diluted limited partner unit, in 2007.

“2008 was the first full calendar year we owned the refined petroleum product terminals we acquired from ExxonMobil. These assets are performing ahead of plan,” Slifka said. “Today, the environment within the refined petroleum products supply and distribution chain has improved dramatically from a year ago, creating opportunities for Global, which has a strong and diverse portfolio of terminal assets. In recent months, commodity prices have dropped significantly, interest rates have come down and the forward product-pricing curve generally has been favorable. Temperatures year-to-date in the regions we serve have been colder than normal, which bodes well for our distillates products. In addition, during the past year we refined our strategy to better manage the price volatility in our business. As a result of these factors, we are optimistic about the prospects for our business in the first quarter and in 2009.”

Berkshire loses top credit rating

2009-03-16T15:02:00.003-04:00

Fitch Ratings last week cut its credit ratings on Berkshire Hathaway Inc. from the top rating, saying no financial-oriented holding company should be rated AAA because of significant market volatility.

The rating agency has been reviewing ratings of insurance and financial services company amid the U.S. recession and global economic downturn, resulting in the downgrades of many companies’ ratings.

Fitch said Berkshire’s potential earnings and capital volatility are the result of its large, unhedged market exposures through investments in stocks and various derivative contracts and are “inconsistent with the stability required at the AAA level.”

Shares of Berkshire, owned by billionaire investor Warren Buffett, lost nearly a third of their value in 2008. The company posted a $15 billion decline in net unrealized gain on investment securities in 2008, largely tied to declining equity markets, partially offset by $5 billion of net income, Fitch said. Net earnings also fell to a six-year low during the year, with $3.3 billion of mark-to-market losses on equity index put contracts.

The firm does consider the diversity of Berkshire’s investments in retail, service and manufacturing companies as limiting the exposure somewhat, but said the degree of diversification in not sufficient to keep the AAA rating.

Moody's warns on Wells Fargo

2009-03-12T13:56:00.000-04:00

Moody's Investors Service warned today that it is considering downgrading the credit rating on Wells Fargo & Co. and changed the outlook on the ratings for J.P. Morgan Chase & Co. to negative as the banks are expected to see rising credit costs and deteriorating returns. But Moody's gave a more stern warning on Wells Fargo, saying the rising credit costs could hurt Wells Fargo's capital ratios. Moody's called the ratios "comparatively low" and said there is further risk of high loan-loss provisions in 2009 damaging that ratio. "Given the pressures on Wells Fargo's capital position, we believe that a multi-notch downgrade is likely for the bank financial strength rating," said Sean Jones, a senior vice president of Moody's. The late-Wednesday warning could increase the pressure on Wells Fargo to cut its dividend in order to shore up that capital ratio, following in the footsteps of other banks, including J.P. Morgan.