AIG stock slip below its issue price of secondary offering of $29. The US treasury has sold 200 million AIG shares at $29 per share.
The U.S. Treasury is barely breaking even on its investment in beleaguered insurance giant American International Group, according to an early litmus test of market interest in the firm's stock.
The Treasury sold 200 million shares of AIG at $29 per share, a slight discount from their closing price and not far above the $28.73 average price the Treasury will need to recoup its full investment in the company.
The $8.7 billion total sale, which included 100 million shares sold by AIG itself, was also far smaller than than the $10 billion to $20 billion banking sources had been throwing around, and hinted at a persistent lack of investor interest in the firm despite its apparent strides.
Treasury acquired the shares under extreme duress, as the potential failure of the insurance giant threatened to exacerbate an already severe financial crisis in late 2008.
Tuesday's sale represented the first step in removing generous support for the insurance behemoth, which totaled over $180 billion in several installments.
Treasury will remain by far the majority shareholder of AIG, but its holdings now comprise 77 percent of the total, down from 92 percent before the sale.
"We're hopeful that we can recover all the investment that we made," Tim Massad, the Treasury's acting secretary for financial stability said during a conference call with reporters.
But he added that the extent of losses — or profits — would not be known until Treasury fully exits its stake.
Massad said there is no specific timetable for the sale of remaining shares. He added that, following an agreed "lock-up" period of 120 days, the Treasury would continue to reduce its holdings "in an orderly fashion."
"We're going to sell in a way to maximize value to the taxpayer," Massad said.
Treasury raised $5.8 billion on Tuesday. All told, it needs to raise $47.5 billion to break even on the equity portion of its investment in AIG.
Who Could Forget?
AIG's share sale is important for the U.S. government, which is trying to sell out of multiple investments it made in companies during the financial crisis.
The bailouts were highly unpopular, especially after it became known that top managers in the very same AIG unit that drove the company into a rut had continued to pay themselves handsome bonuses even while receiving taxpayers' help.
The AIG share sale is also a key moment for Chief Executive Officer Robert Benmosche. Benmosche, who became AIG's fifth CEO in less than five years in August 2009, halted a plan to break the company up in a fire sale of its parts.
He instead embarked on a revival centered around two core businesses: U.S. life insurer SunAmerica and global property insurer Chartis. Other businesses were sold, taken public or left to operate with a view toward an eventual sale.
AIG was literally minutes from bankruptcy when it was rescued in September 2008. The various iterations of the rescue package ended up being worth $182 billion, dwarfing various other bailouts around the world during the financial crisis.
The question now is how quickly the U.S. government exits its investment and whether it breaks even.
Benmosche has said he expects the government to be out of its AIG position by mid-2012. Fitch Ratings said recently its own models for the company assume the government is out by the end of 2012.
( Source: Reuters )
( Source: Reuters )
Long lasting debate over how to cut spending to deal with deficit of the country and raise borrowing power of the country, US lawmakers proposing $ 1 trillion spending cuts, Vice President Joe Biden said Tuesday.
His comments were somewhat optimistic sign that democrats and republicans might work out a deal to cut the deficits and increase debt limit of $ 14.3 trillion before August 2 deadline.
"I think we're in a position where we'll be able to get well above $1 trillion pretty quick in terms of what would be a down payment on the process," Biden said after a three-hour meeting on Capitol Hill with top lawmakers.
Republicans have said that any deal to raise the debt limit would have to include spending cuts of equal size.
A $1 trillion "down payment" could allow Congress to back a debt-limit increase which would cover the country's borrowing needs roughly through February 2012.
That would require Congress to revisit the politically painful issue before the November 2012 elections.
Democrats and Republicans agree that the United States needs to reduce budget deficits by $4 trillion over the coming decade to ensure its debt remains at a manageable level.
Negotiators are considering deficit-reduction targets that would trigger automatic spending cuts and perhaps tax increases if they are not reached in coming years.
That would give them more time to resolve stubborn disputes over taxes and costly federal healthcare programs that have derailed other bipartisan deficit-reduction efforts.
Deep Divide Over Healthcare Programs
Biden reiterated the Democratic position that any deficit-reduction deal would need to include tax increases.
It was unclear whether the $1 trillion would consist of spending cuts alone, as Republicans insist.
In their third round of talks, the group examined the Medicare and Medicaid government health plans for retirees and the poor, which represent nearly a quarter of all federal spending and are expected to eat up a growing portion of the budget in coming decades as the population ages and medical costs continue to outstrip inflation.
President Barack Obama and Republicans hope to slow the growth of the two programs, but they are deeply divided about how to do so and their plans differ by $1.86 trillion.
Finding common ground will be difficult as the election season heats up.
Polls show that a Republican plan to scale back Medicare for future retirees is unpopular with the public and Democrats see an opportunity to pick up votes by campaigning against it.
Democrats are hoping for victory later on Tuesday in a special U.S. House of Representatives election in a Republican-leaning district in upstate New York, where Medicare's future has been a major issue.
Adding to the pressure, Senate Democrats plan a vote this week on the plan, which has already passed the House, in order to force their Republican colleagues to take a stand on it.
Some Republicans say Biden's talks are laying vital groundwork for an eventual compromise on measures to ensure that the national debt remains at a sustainable level, but that Obama will ultimately be required to seal the deal.
The group, which is next scheduled to meet on Thursday, had already found about $150 billion in cuts in areas like farm subsidies and federal employee retirement benefits.
On healthcare, both sides have suggested changes to the way in which the federal and state governments administer Medicaid.
The Treasury Department is tapping pension funds and other pots of money now that the country has reached its debt limit, but has warned that it will exhaust those measures by Aug.2.
Failure to increase the debt limit by then could force the United States to miss interest payments on its debt, which could push the country back into recession and rattle markets across the globe.
However, a new poll by Pew Research Center found that Americans are more concerned about increased government spending than they are about a debt default.
Costco Wholesale ( NASDAQ: COST ) reports quarterly earnings below wall street expectations as shares tumble more than 2 % in premarket trade. Income for the third quarter grew 6% as growth of new memberships increased.
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| Costco Wholesale |
Costco posted earnings of $324 million, or 73 cents per share, for the period ended May 8. That's up from $306 million, or 68 cents per share, a year ago.
The current quarter's results included an inventory charge of 7 cents per share.
Revenue climbed 16 percent to $20.62 billion from $17.78 billion, just edging out Wall Street expectations.
Costco said its results included sales from its 50 percent owned Mexico joint venture, which accounted for 3 percentage points.
Analysts polled by FactSet, who typically exclude one-time charges, expected earnings of 77 cents per share.
Sales at stores open at least a year increased 12 percent, with the figure up 10 percent in the U.S. and 18 percent internationally.
Removing the impact of rising gasoline prices and strengthening foreign currencies, sales at stores open at least a year gained 7 percent. The metric climbed 6 percent in the U.S. and 11 percent overseas.
Sales at stores open at least a year is a key gauge of a retailer's health because it excludes results from stores opened or closed during the year.
Costco Wholesale, based in Issaquah, Wash., currently runs 581 warehouses, including 425 in the U.S. and Puerto Rico, 80 in Canada, 32 in Mexico, 22 in the U.K., seven in Korea, six in Taiwan, eight in Japan and one in Australia.
The nation's biggest wholesale club has been among the top performers during the down economy and now, with more discretionary income in the pockets of shoppers, Costco had capitalized on the additional free spending.
Private equity firm Golden Gate Capital is buying California Pizza Kitchen ( NASDAQ:CPKI ) for about $470 million. The deal will provide a cash of $ 18.50 per share, 11 % premium of Tuesday's closing price of $16.71. Stock jumped more than 9 % to $ 18.36 in premarket trade.
California Pizza began exploring a potential sale of the company in February. The Los Angeles company's board unanimously approved the deal and recommends stockholders tender their shares in the tender offer.
The acquisition is expected to close in the third quarter.
Golden Gate's other restaurant buyouts include the purchase of On the Border last year. And last month Lawson Software agreed to a $2 billion acquisition offer from Golden Gate and Infor.
California Pizza began exploring a potential sale of the company in February. The Los Angeles company's board unanimously approved the deal and recommends stockholders tender their shares in the tender offer.
The acquisition is expected to close in the third quarter.
Golden Gate's other restaurant buyouts include the purchase of On the Border last year. And last month Lawson Software agreed to a $2 billion acquisition offer from Golden Gate and Infor.
A Munich Re unit has cancelled a trip to Monaco for top executives after details of a sex party in Budapest emerged and it became clear that the so-called incentive trips for sales execs have not been a single event.
Sex, Drugs and Rock`n Roll have ruled those trips to destinations such as Mallorca, Dubai, Kitzbühel and Seychelles, according to German tabloid Bild, which quoted sources who took part in the trips.
Bild published videos and photos showing sales agents snorting white powder at a company-sponsored party, prompting Ergo, the Munich re subsidiary who owns accident and life insurance provider Hamburg Mannheimer, to deny the substance was cocaine.
"The pictures published in Bild show a drinking game with salt, Tequila and lemon juice," the company said in a statement. Tequila and lemon are shown in the photographs alongside big lines of white powder.
Ergo has invited top executives to entertainment trips at least three times a year and the so called Top-5 Club was the equivalent of a “nothing is impossible” party, according to Bild. The company is not denying that these trips have taken place.
Last Thursday, details of an organized sex party in Budapest emerged, prompting Munich Re to admit it had hired 20 prostitutes.
The party for about 100 insurance agents was held at Budapest's historic Gellert spa back in 2007. 20 women where given arm bands and then escorted party attendees to bed, earning a stamp on their forearm to keep a running tally of their services.
The executives who signed off on the party left the company before the "single incident" was exposed, Munich Re said. The party was hosted for independent contractors who sold insurance products for Munich Re’s Ergo Insurance Group. Bild reported that the party has cost the company 3,000 euros ($4,200) per participant.
Now the company is canceling a forthcoming trip of the Top-5 Club to Monaco and the Formula 1 race. “Such a trip does not fit into the current environment”, an Ergo spokesperson said in a statement.
Mahindra Satyam today said it will take a call on relisting on the New York Stock Exchange at an appropriate time, once it has closed the chapter on the massive accounting fraud perpetrated by founder and former chairman B Ramalinga Raju.
Mahindra Satyam Internal Audit Head Sunil Sangar said accounting procedures in the USA are getting converged to International Financial Reporting Standards (IFRS) and in such an event, the company will wait for a clear picture to emerge.
"It was from April 1, 2011. But it has been deferred. Relisting will depend on a couple of things. As of now we have to close the earlier period. And then we have to take a call (on relisting). It is impossible to comment at this time. First, we want to complete our commitments. Then we will take a call on that," Sangar told PTI on the sidelines of the announcement of the company's Q4 results.
The firm was forced to delist its American Depository Receipts (ADRs) from the New York Stock Exchange in October, 2010, over its inability to file restated accounts on or before October 15, 2010, as required by the US markets regulator.
While announcing the decision to delist the ADRs, Mahindra Satyam said it would go for relisting after making its accounts current as per the US standards.
The company completed re-auditing its financial accounts for the controversial period when founder B Ramalinga Raju fudged accounts and as per Indian Accounting Standards , they became current last year.
"Currently, we are in dialogue with the US Securities Exchange Commission (SEC) to figure out what areas we have problems. We hope to settle this by October and then trigger the process of relisting," Nayyar said earlier in the press conference.
The information and broadcasting ministry has proposed to increase foreign direct investment limit across media platforms -- in direct-to home, internet protocol TV (IPTV), multi-system operators and FM radio -- to bring in consistency, according to sources.
The FDI in DTH, IPTV and MSO is likely to be raised from 49% to 74%, while the investment in FM radio will be increased from 20% to 26%. The proposal based on broadcast regulator Trai's recommendations has been sent to the department of industrial policy and promotion (DIPP) under the ministry of commerce.
Sources said that foreign investment up to 26% was allowed through the automatic route earlier but now any FDI above 26% will be allowed after it is approved by the foreign investment promotion board (FIPB). Investment cap of general entertainment channels (100%) and news and current affairs channels (26%) will remain the same. The I&B ministry has rejected Trai's proposal to reduce FDI in GEC and in local cable operators.
Sources in the ministry said that DTH, IPTV, Mobile TV and HITS require substantial infrastructure augmentation, which needs huge investment. There was also need for convergence of technologies in the broadcast and telecom sector where 74% foreign investment is allowed.
Gujarat — The art of engineering growth
The engineering sector is one of the largest segments in the overall industrial sector growth of any country and is recognised as a key driver for the development of all the other sectors of an economy.
In Indian context, the engineering sector has over last decades experienced robust growth, as the country has a strong base in engineering and capital goods. High industrial growth, infrastructure development and favorable policies , has helped Indian engineering sector outlook achieve prominence so much so that today Indian engineering goods are gaining acceptance in overseas markets, with exports of engineering goods increasing to more developed nations in the western hemisphere.
An industrial and economic powerhouse , Gujarat shines bright guiding India to prosperity. Gujarat is not just the land of enterprise but a land where change is inherent, where change is being in sync with the times. A land where change is about absorbing the knowledge, information, tools for development of one and all - from early days.
The remains of the ancient Indus Valley Civilisation found at the most developed port town of Lothal and urbane Dhola Vira, the under-water and well developed city of Dwarka are examples of the knowledge of technology people had in those times.
The magnificent remnants of the incredible buildings, be it shaking minarets, Jama Masjid, innumerable forts and palaces, are all indication to the unparalleled knowledge and application of engineering in construction in Gujarat.
Gujarat has also been home to a number of scientists, engineers and technologists who have propagated and shown ways to use science for betterment of the people.
This rich tradition of scientific temper continues even in modern times. It has been home to some of the biggest names in Indian and global scientific community, the Father of Indian Space Research Dr Vikram Sarabhai, Father of hybrid cotton Chandrakant Patel and even school to Nobel laureate Venkatraman Ramakrishnan.
Gujarat has always traversed this thin line of believing and living Science as the knowledge that serves the purpose of making lives of its people better, be it pure sciences, applied sciences or their practical utility through engineering. Gujarat - the state where engineering is but a tool that provides sharp edge to its Enterprise!
Gujarat today has around 5 per cent of India's population and 6 per cent of India's geographical area but accounts for 17% of India's fixed capital investment ; 22 per cent of India's exports, 42 per cent of India's pharmaceuticals; 62 per cent of India's petrochemicals; 65 per cent of India's plastic industry and 80 per cent of diamond processing.
The state's significant contribution to Indian economy has made India visible in a competitive market situation globally .Gujarat's strategic location, ports, longest coastline, road and rail network, proactive government and businesssavvy population make a perfect ground for businesses to flourish. It also boasts of world-class performance in its production of cotton, castor, cumin, denim, processed diamonds, sponge iron, wall clocks. The vast pool of skilled labour required for all the burgeoning sectors is met by several engineering and diploma colleges which churn out a ready-to-hire skilled workforce.
The State outshines its peers in offering uninterrupted power supply, state-wide gas grid, rich gas reserves, extensive road and rail network and airports. Gujarat's engineering sector is no exception. It has witnessed impressive growth and development. Many multinational companies have established their manufacturing base in Gujarat. Various engineering industries are spread all over Gujarat - Castings & Forgings (Ahmedabad, Rajkot, Vadodara), Brass Parts (Jamnagar), Diesel Engine and Parts (Rajkot), Textile Machinery Parts (Surat, Surendranagar), Automobile components (Ahmedabad, Rajkot), Machine Tools (Rajkot), Air & Gas Compressors (Ahmedabad), Industrial valves (Ahmedabad), etc.
In Gujarat, the Automobile sector has been growing tremendously in the last few years. The automobile components are manufactured mainly at Ahmedabad, Rajkot and Vadodara. The presence of engineering, foundry and casting industries in the State enables the sourcing of local components required for the automobile assembly /passenger cars. Rajkot has been a key leader in diesel engines for decades and has a major share in auto component business across the country, supplying major share of spare parts used in automobiles in the country.
The state of Gujarat has also seen flow of investments in sectors as preengineered steel building, High Pressure Cylinders, Submerged Arc Welded (SAW) Pipes, Investment Casting, Manufacture of automobile components , and setting up automobile assembly units.
Today Gujarat has left its lasting impression in the engineering sector of the country. It contributes a greater than 10% share of production of sponge Iron, Electric Motors, Compressors, Steel Pipes, Ball and roller bearings, brass parts, construction machinery, casting copper rods, textile machinery, transmisison line towers, television picture tubes, submersible pumps, environmental control equipment and gears.
Gujarat is also a national leader in metallurgical industry, fabrication of metal products, machinery and equipment , electricals and automotives, including transport equipment.
Gujarat's engineering industry has many achievements to its credit. It is the largest producer of sponge iron in the country, largest exporter of wall clocks in the world, meets all the needs of brass parts of the country, has largest ship breaking year and is a largest producer of SAW and ERW pipes.
The sector continues to attract a major share of investment over years. This is evident from the last Vibrant Gujarat Global Investors Summit that was held on January 12-13 , 2011, where a total of 569 memorandum of understandings were inked with potential investment to the tune of Rupees 238,896.24 crore.
