Arquivos de maio, 2009

Bens de Edemar ficam para a massa falida (Adriana Aguiar, de São Paulo)
 
Uma decisão do Superior Tribunal de Justiça (STJ), de ontem, deu uma nova esperança aos credores do Banco Santos. Os ministros da Segunda Seção do STJ julgaram, por unanimidade, que os bens pessoais do ex-controlador da instituição, Edemar Cid Ferreira, devem ficar sob a competência da Segunda Vara de Falências de São Paulo e, assim, serem utilizados para o pagamento da massa falida. Isso deve representar quase R$ 300 milhões a mais ao caixa dos credores se somados um imóvel, obras de arte e objetos de decoração, segundo o administrador judicial da massa falida do Banco Santos, Vânio Aguiar. O que, juntamente com o valor em caixa, já são aproximadamente R$ 800 milhões recuperados. A dívida total, no entanto, é estimada em cerca de R$ 2,8 bilhões. Calcula-se que há cerca de 3 mil credores.
Até então, havia um conflito na própria Justia se esses bens ficariam com o processo de falência ou seriam direcionados para a União, conforme decisão anterior da Justiça Federal. A Sexta Vara Criminal Especializada em Crimes contra o Sistema Financeiro Nacional e em Lavagem de Valores de São Paulo tinha decretado o confisco dos bens em favor da União como consequência da condenação penal de Edemar Cid Ferreira e outros dirigentes do banco por gestão fraudulenta. Porém, o STJ reverteu essa decisão.
O relator do caso, ministro Massami Uyeda, ressaltou que a decretação da falência confere ao juízo universal da falência a competência para distribuir o patrimônio da massa falida aos credores conforme as regras legais. Após o pedido da falência, segundo ele, é inviável o prosseguimento de atos de expropriação patrimonial contra a falida em outros juízos. Depois de um debate sobre o tema, todos os ministros resolveram acompanhar o voto do relator.
A decisão já era esperada, de acordo com o administrador judicial da massa falida, Vânio Aguiar. “O STJ veio a confirmar o entendimento exaustivamente consolidado na Justiça e previsto na legislação brasileira”, afirma. O presidente do comitê de credores do Banco Santos, Jorge Queiroz, também comemorou o resultado do julgamento. “A decisão trouxe segurança jurídica ao garantir a proteção dos ativos dos credores”, diz.
Agora, a massa falida já se prepara para fazer a divisão dos valores que já estavam em caixa, os cerca de R$ 500 milhões, segundo Vânio Aguiar. O que deve ocorrer nos próximos meses. Já em relação aos novos bens que devem ser transferidos para a massa falida, segundo a decisão de ontem do STJ, ainda há um outro obstáculo. Isso porque, ainda há uma liminar a favor de Edemar Cid Ferreira que bloqueou a venda desses bens – tanto as obras de arte como o imóvel onde ele reside – sob o argumento de que seriam posses de outras empresas, a Atlanta Participações e a Cid Ferreira Collection Empreendimentos Artísticos. O mérito dessa ação ainda terá de ser decidido para que haja a liberação ou não desses bens para irem à leilão promovido pela massa falida. Procurado pelo Valor, o atual advogado de Edemar, Luiz Rodrigues Corvo, não quis se manifestar sobre os processos.
O Banco Santos foi liquidado pelo Banco Central em novembro de 2004. Na época, o BC constatou irregularidades no balanço financeiro, como a avaliação de operações com derivativos acima do preço de mercado. Também verificou que o banco não vinha provisionando corretamente recursos para se proteger de devedores duvidosos, o que provocou um rombo no seu patrimônio líquido. A falência do banco foi decretada pela Justiça paulista em setembro de 2005

Vara de Falências vai julgar destino dos bens de ex-dono do Banco Santos
Ministros do STJ julgaram conflito de competência nesta quarta-feira (13).
Decisão aumenta chance de pagamento aos credores do Banco Santos.
Do G1 (Globo), em São Paulo – 13 maio 2009
Em uma discussão sobre conflito de competência, o Superior Tribunal de Justiça decidiu por unanimidade nesta quarta-feira (13) que caberá à Segunda Vara de Falências de São Paulo julgar o destino dos bens sequestrados da massa falida do Banco Santos, o que aumenta as chances de os bens serem devolvidos à iniciativa privada.
 
Se os ministros do STJ dessem a decisão sobre os bens para a Sexta Vara Criminal Federal Especializada em Crimes contra o Sistema Financeiro Nacional, aumentariam as chances de os bens do Banco Santos serem devolvidos à União. A decisão foi adotada pelos 10 ministros da 2ª Seção do STJ. A presidente da seção não vota.

A Segunda Vara de Falências paulista defende que os bens do banqueiro Edemar Cid Ferreira sejam destinados ao pagamento dos credores da massa falida. O G1 entrou em contato com o advogado de Edemar, Arnaldo Malheiros Filho, e aguarda manifestação.
 
O Banco Santos sofreu intervenção em 2004 e Edemar Cid Ferreira foi condenado a 21 anos de prisão pelos crimes de gestão fraudulenta, formação de quadrilha e lavagem de dinheiro. A falência do banco foi decretada pela Segunda Vara de Falências paulista.
 
Mas a Sexta Vara Criminal, por sua vez, decretou o bloqueio de bens e imóveis das empresas do grupo Santos supostamente utilizadas para desviar patrimônio do banco.

How Private Equity Could Rev Up the U.S. Economy
Two out of five private equity firms will disappear. The rest will feast off the financial wreckage
By Peter Carbonara and Jessica Silver-Greenberg
Business Week
Donald B. Marron, founder of the $3 billion private equity firm Lightyear Capital, has been eyeing financial wreckage for more than a year. In early 2008 Marron, the former chairman and chief executive of brokerage PaineWebber, sent teams of analysts to scout out more than 200 struggling U.S. financial firms. So far Marron has made only one deal, buying a stake in student lender Higher One last summer. But the 74-year-old art aficionado, whose starkly modern New York office brims with abstract paintings, says dealmaking will soon pick up dramatically. “We expect this trend to continue,” he says.
While some attention has been paid to the vultures now circling the troubled banking sector, private equity is beginning to venture out across the economy in search of deals big and small. Glen T. Matsumoto, a partner in Swedish buyout shop EQT Partners, is looking for more ways to spend the $1.5 billion his firm has amassed for infrastructure and energy plays, having picked up Michigan energy company Midland Cogeneration Venture in March. Brian A. Rich of Catalyst Investors, an upstart buyout shop with $300 million in assets, recently plowed $5.6 million into Mindbody, a California software company. He’s hoping to invest in more cash-starved technology and media outfits. “We think it’s a great time to put capital out,” says 48-year-old Rich, who ran Toronto Dominion’s (TD) U.S. merchant banking arm before starting Catalyst in 2000.
It’s been a rough two years for private equity firms, those freewheeling and much-vilified financiers who buy companies only to sell them later for a profit. The buyout boom that ended in 2007 wasn’t pretty; many of the deals made at the height of the frenzy have been disasters. Bankruptcy courts are littered with private equity blunders, including household names Chrysler, Tribune (TXA), and Linens ‘n Things. Such high-profile blowups heightened private equity’s reputation as a group of fast-buck artists who are better at destroying companies than running them.
But a strange thing has happened. While the experts were proclaiming—and maybe even celebrating—their death, private equity firms were quietly bulking up their war chests and readying themselves for a new wave of deals. By some measures they’re stronger than ever: Firms are sitting on a record $1 trillion with which to make new purchases, according to research firm Preqin. “They are showing up at the party with a wheelbarrow full of cash,” says Donna Hitscherich, a professor at Columbia Business School.
Slowly and deliberately, firms are mobilizing their forces to exploit huge opportunities being created by the recession. Some big buyout firms, filling the void created by the financial crisis, are acting like traditional investment banks, providing loans to troubled companies and even advising executives on mergers. Some firms are aggressively hiring and firing buyout specialists, turning the cold eye they usually train on companies onto themselves. Other firms are prowling bankruptcy courts in search of cheap assets or are capitalizing on government stimulus spending. “There is every reason to believe that private equity will have tremendous opportunity once we hit bottom,” says Colin Blaydon, director of the Center for Private Equity & Entrepreneurship at Dartmouth’s Tuck School of Business.
When private equity starts cranking up its dealmaking machine—and it will, eventually—the $1 trillion it has amassed could help revive the economy by pumping crucial capital into the markets. “Private equity will be an integral part of this country’s economic recovery,” says Gregg Slager, a senior partner at accounting firm Ernst & Young. Noted Stephen A. Schwarzman, founder of Blackstone Group (BX), in the private equity firm’s March annual report: “Getting the world economy moving again will take more than government intervention.”
STILL ATTRACTING INVESTORS
Private equity’s surprising resurgence is a study in managing through a downturn. With markets and businesses blowing up all around them, buyout firms calmly made their case to big investors that they were still worthy stewards of capital. In 2008 they attracted $554 billion from pension funds, university endowments, and other big investors, down only modestly from the record $625 billion the previous year. Even this year’s seemingly small tally thus far of $49 billion still puts private equity on track to match 2004’s total of $206 billion, the sixth-highest ever.
Partly that’s because returns haven’t been as awful as feared. Private equity funds lost an estimated 20% in 2008. That was on a par with hedge funds and handily beat U.S. stocks (-37%), real estate (-38%), and commodities (-47%). Big investors think private equity will perform better in the future, too. U.S. corporate pensions are assuming their private equity holdings will return 10.1% a year over the next five years, compared with an estimated 7.8% for hedge funds, according to research firm Greenwich Associates.
The nation’s largest pension fund, California Public Employees’ Retirement System, even boosted its target for private equity holdings in its portfolio by four percentage points last year. “We’re strongly committed to private equity, which helps diversify the portfolios of long-term investors,” says CalPERS’ spokesman Clark McKinley. Robert Hunkeler, who manages the $13.1 billion in International Paper’s (IP) pension funds, says he’s keeping his stake in private equity at 5% despite recent losses.
The next few years will be dismal for many firms, no question. Buyout shops may be sitting on piles of cash for new purchases, but their portfolios also are stuffed with companies at risk of folding unless they can refinance their debt. Boston Consulting Group estimates that 20% to 40% of private equity firms will disappear altogether in the next few years.
But the wiliest players have inoculated themselves from the worst of the pain. During the boom years, firms used a number of slick tricks to extract money from companies right away and ease potential losses. First they loaded the companies they bought with debt and kept the proceeds for themselves. Then they collected ongoing management fees from those same companies.
Often they did both. Kohlberg Kravis Roberts, founded in 1976 by Henry R. Kravis and George R. Roberts, pulled off the biggest buyout ever in October 2007 when it joined with another big firm, TPG, to buy Texas utility TXU for $45 billion. (KKR also pulled off the largest transaction during the last buyout boom with its $31 billion bid for RJR Nabisco in 1989, the controversial deal immortalized in the book Barbarians at the Gate.) After picking up TXU, KKR and its private equity partners immediately collected $300 million from TXU for “certain services” associated with the deal, according to filings with the Securities & Exchange Commission. Plus, the firms are “entitled to receive an aggregate annual management fee of $35 million,” which “will increase 2% annually.” TPG and KKR declined to comment.
Private equity firms also exploited the remarkably easy lending environment during the boom, negotiating financing terms with unprecedented flexibility. Firms often had to put up minimal capital to close a deal. The maneuvers are paying off now.
Consider the tale of Chrysler. Cerberus Capital Management—named after the mythical three-headed dog that guards the gate of Hades—bought the troubled carmaker in May 2007 for $7.4 billion. Founder Stephen A. Feinberg, a secretive financier with blue-collar roots, has, with hard-nosed dealmaking, transformed Cerberus over the years from a scrappy vulture into a private equity stalwart. In the case of Chrysler, Cerberus contributed only $1.2 billion in cash. And even though Chrysler has filed for Chapter 11, Cerberus isn’t likely to lose all of that money; it may be able to offset some of its losses with Chrysler Financial, the carmaker’s lending arm, which isn’t part of the bankruptcy. Cerberus could merge the lender with another Cerberus investment, GMAC Financial. “It is a big hit,” says one Cerberus executive of the bankruptcy. “But it won’t break the company.”
To be sure, the days of larger-than-life dealmaking are over. Banks are no longer providing the loans that fuel the biggest buyouts. Small purchases will replace megabuyouts, and firms will likely focus their energies on sprucing up operations rather than extracting fees and engineering financial gains. “It’s back to the future,” says William E. Ford, chief executive of General Atlantic, a private equity firm with $13 billion in assets.
Some firms have even begun to deemphasize buyouts, quietly transforming themselves into diversified financial players that provide a wide array of money management, trading, and advisory services. Schwarzman, the 62-year-old head of Blackstone Group, is aggressively filling the void left by the Lehmans of the world. Schwarzman’s ambitions are as grand as his New York City apartment, a 35-room triplex once owned by John D. Rockefeller. At the firm’s start in 1985, Schwarzman and co-founder Peter G. Peterson shared a secretary and oversaw a grubstake of just $400,000. Today Schwarzman, infamous for a lavish birthday party he threw himself in 2007, sits atop more than $90 billion in assets and employs more than 1,340 people. Blackstone collected $410 million last year—not from its bread-and-butter buyout business but from advising other companies on mergers, acquisitions, and restructurings. Said Schwarzman in the firm’s annual report: “Our financial advisory group delivered record fees last year by meeting the demand for a trusted, independent adviser.”
PROFITING FROM THE PAIN
Blackstone’s advisory clients range from troubled insurer AIG (AIG) to the Ukrainian government. In December Tim Coleman, who co-heads Blackstone’s reorganization and restructuring group, flew to Detroit to meet with Ford Motor’s (F) CEO, Alan Mullaly, and other top executives. Coleman’s recommendation: Rework the debt. After that initial meeting, Mullaly hired Blackstone and Goldman Sachs (GS) to dispense advice. The three companies spent the next few months brainstorming and hashing out strategies at Ford’s headquarters. “We worked ‘round the clock,” says Coleman. “There wasn’t room for anyone’s ego to get involved.” They brought their plan to bondholders in April, offering to exchange $1.8 billion in debt for $1.3 billion in equity. The investors agreed.
Like all tough-minded investors, private equity firms are busy looking for ways to profit from rivals’ pain—and even their own. College friends Rodger R. Krouse and Marc J. Leder are among the most aggressive. The two left Lehman Brothers (LEHMQ) in 1995 to forge their own firm, Sun Capital Partners, in Boca Raton, Fla. They had a tough time muscling into the clubby world of private equity, but since 2002 Sun Capital has bought more than 200 small and midsize companies and earned 20% a year. Among its holdings: restaurant chain Friendly Ice Cream and bagel chain Bruegger’s Enterprises. More than 10 of Sun Capital’s companies have filed for Chapter 11, including retailer Big 10 Tires, auto parts supplier Fluid Routing Solutions, and department store Mervyns. But Krouse and Leder, both 47, are capitalizing on the trouble by doling out high-interest, short-term loans to some of its bankruptcy victims. Sun Capital declined to comment.
Few private equity portfolios are as troubled as that of New York’s Apollo Management—but even its list of losers is presenting opportunities. The $45 billion Apollo owns bankrupt retailer Linens ‘n Things, along with struggling casino chain Harrah’s Entertainment and real estate firm Realogy. But Apollo recently raised $15 billion for new investments and plans to use a quarter of that stash to buy distressed debt, including the debt of some of its own holdings.
Junk bonds are familiar territory for Apollo founder Leon Black. The 57-year-old started Apollo in 1990 after leaving Drexel Burnham Lambert, the notorious investment bank that collapsed that year. Black’s interest in his own distressed debt is partly defensive and partly speculative. By buying back bonds aggressively, Black can try to prevent other vultures from picking up the debt and wresting control of his investments. He’s also likely betting that the bond prices will rise in value and that he’ll be able to sell them at a profit later. Apollo declined to comment.
FRENCH CONNECTION
Many private equity firms are taking a sharp pencil to their own books as well. Even as the giants are laying off staff and closing offices, they’re recruiting specialists in fields where they see opportunities. Apollo, for example, added former Morgan Stanley (MS) banker Neil Shear to its new commodities group. In a burst of recent hiring, Blackstone picked up infrastructure specialists Trent Vichie and Michael Dorrell from the New York branch of Australia’s Macquarie, among other recruits.
Carlyle Group, one of the largest and most secretive private equity firms, started preparing for a flood of bank deals last year. The 22-year-old firm, whose ranks have included such well-connected advisers as former President George H.W. Bush and former British Prime Minister John Major, has been expanding aggressively into real estate, venture capital, and other alternative assets—and has bagged some high-profile talent. Last year, Carlyle lured UBS (UBS) investment banker P. Olivier Sarkozy, half brother of the French President. Sarkozy has advised on a number of bank deals, including ABN Amro’s sale of LaSalle Bank to Bank of America (BAC) for $21 billion, part of a breakup of the Dutch bank.
At Carlyle, Sarkozy spends much of his day poring over balance sheets and scouring troubled mortgage portfolios. He has been traversing the U.S. for the past few months, visiting local banks in tiny towns and regional players in urban areas. Now Sarkozy, along with Blackstone, Centerbridge, and W.L. Ross, are in discussions with management at BankUnited (BKUNA), a struggling lender in South Florida. “Private equity will be a prime catalyst in the necessary recapitalization of banks, both here and globally,” says Sarkozy, 39. “The time is ripe.”
BARGAINS IN THE `CANDY STORE’
Perhaps the most combative arena for private equity these days is the bankruptcy courts. Buyout firms are swarming, making bids on busted businesses and in some cases entering into bidding wars. Lynn Tilton, the pugnacious founder of Patriarch Partners, spends much of her time in court fighting over cheap assets. The 49-year-old Tilton, known for her flamboyance in stiletto heels, recently lost a contentious 16-day auction for instant photography pioneer Polaroid to rivals Hilco Consumer Capital and Gordon Brothers Brands. She’s appealing the decision. On Apr. 20 Tilton bought Stila Cosmetics, filling out a portfolio of troubled brand names that include mapmaker Rand McNally. Stila had fallen behind on its debt payments, and lenders took control of the makeup manufacturer. They called Tilton on a Friday night to make a deal. She talked with management on Sunday and by the following weekend owned the company. “I haven’t seen anything like this in 35 years,” Tilton says of the opportunities before her. “This is like a candy store for us.”
The value in Patriarch’s distressed plays isn’t always obvious. Last summer Tilton bought a paper mill in Maine, since renamed Old Town Fuel & Fiber. But she didn’t buy it just to make pulp. A main attraction for Tilton is the mill’s $30 million grant from the Energy Dept. for a research program studying how to make biofuels from wood chips. Tilton wants to produce a biofuel called butanol at the plant, which can be used as aircraft fuel. That would create another potential opportunity, because Patriarch also owns a helicopter maker and an aircraft parts manufacturer.
Few investments look as appealing as those blessed by government dollars. As part of the $787 billion federal stimulus package signed into law in February, the government has earmarked $29 billion to patch crumbling roads, bridges, and schools. Thanks to Uncle Sam, the infrastructure investing trend is picking up. The states’ cash crisis is also sparking interest. “With states facing real economic trouble, you will see further pressure on them to hand over infrastructure to private firms,” says Ben Heap, co-head of infrastructure in UBS’s (UBS) private equity group. There were 127 infrastructure funds in 2008, up from 91 in 2006, according to research firm Probitas Partners.
When Sadek Wahba, investment chief at Morgan Stanley’s (MS) $4 billion infrastructure fund, goes shopping for deals, he follows two main principles. First, invest only in public necessities. Second, make sure the concerns of local citizens are heard—to minimize political problems later. In December, Morgan Stanley and a group of investors paid $1.15 billion for 36,000 parking meters in Chicago. Wahba is converting the old coin-operated devices to electronic pay machines. “These assets are a good hedge against inflation, because you are providing a basic service,” says 43-year-old Wahba.
But the best example of private equity’s shrewdness in the downturn may be its ability to spiff up its sullied image. In Pittsburgh, Robert B. Fay and his brother Pat feared selling their 62-year-old construction business, Joseph B. Fay Co., to private equity, worried that a buyer would dismember the company and lay off staff. The family’s lawyer called New York’s FdG Associates after reading that the $300 million buyout firm had experience working with family-run businesses. In all, the Fay brothers met with six private equity firms. FdG’s team wore casual khakis to its meeting to underscore its anti-Wall Street image, while rivals sent representatives in designer suits. The Fays identified with the FdG team instantly and agreed to sell to the firm in February. Says Bob Fay: “These guys came to us as partners, not vultures.”
with Tara Kalwarski in New York and David Welch in Detroit
BUSINESS EXCHANGE: READ, SAVE, AND ADD CONTENT ON BW’S NEW WEB 2.0 TOPIC NETWORK
Old Stakes, New Value
Amid the ongoing cash crunch, some university endowments, insurers, and other big investors are looking to sell their investments in private equity funds. An Apr. 13 piece on Deal.com reports that Goldman Sachs recently launched a $5.5 billion fund to buy up those stakes on what’s known as the secondary market. “Things may be tougher than usual in the world of private equity but it just means more opportunities for Goldman,” the author writes.
To read the full article, go to http://bx.businessweek.com/private-equity/reference
Carbonara is a senior writer for BusinessWeek. Silver-Greenberg is a reporter for BusinessWeek.com.

The Impact of the Chrysler Bankruptcy
RGE Analyst Team | May 8, 2009
On April 30, Chrysler filed for Chapter 11 Bankruptcy protection from its current creditors.  As such, Chrysler will be able to operate as a going concern, while the company renegotiates its debt structure and other obligations.  The U.S. government has described Chrysler’s action as a ‘prepackaged surgical bankruptcy’, in which it hopes that the company will be able to exit the bankruptcy process within 30-60 days.  If Chrysler achieves this, then it will emerge with a new global partnership with the Italian based Fiat. Instead of cash, Fiat will provide the equivalent of billions of dollars in R&D related investments for a 35% stake in the new Chrysler.  However, many experts think that a quick trip into bankruptcy might be unrealistic.
In the administration’s view, cost cuts, implemented by Cerberus and the new management brought in by Bob Nardelli, who cut into Chrysler’s R&D budget and new product development, left Chrysler, the smallest of the Detroit automakers, with a very thin line up of new vehicles.  The Obama administration set partnering with Fiat as a precondition for any further government assistance.  Nevertheless, Chrysler was unable to avoid the bankruptcy process, because some creditors balked at the terms being offered in the proposed debt to equity swap by the government.
Fiat is vying to get a 35% stake in Chrysler, without paying anything for it.  What it brings to the table is billions of dollars in R&D that have positioned it well to produce new cars in the future.  Fiat exited the U.S. market decades ago.   The marriage between Fiat and Chrysler is based on harsh realities, as evidenced by continuing layoffs in Chrysler’s bloated U.S. and Canadian operations, but it seems to be a symbiotic relationship, aimed to help both car makers survive the new realities of an even more competitive landscape.  Moreover it is a reflection of the considerable overcapacities in the global auto sector which may require further consolidation both in several national and international markets.
The short term outcome of Chrysler’s bankruptcy filing may come to determine the path for General Motors, if not the entire U.S. auto industry. If bankruptcy proceedings for Chrysler go as the company and the U.S. government have planned, then Chrysler’s filing may very well turn out to be just a test case before the bankruptcy filing of GM itself.  GM has until the end of May to convince the government that it has a viable business plan to restructureoutside of an official bankruptcy filing for Chapter 11 reorganization.  If it fails to renegotiate its debt and convince its current creditors to undergo a debt for equity swap, as Chrysler failed to do, then GM will have no option but to file for Chapter 11 protection.  GM’s new CEO, Fritz Henderson has vowed to do whatever is reasonably necessary to prevent the automaker from going under including seeking loan packages from U.S., Canadian and European governments (especially Germany). However, GM can no longer afford its extensive European operations and is in the process of looking for bidders.
The significant role the auto sector plays in employment, exports and industrial production have heightened the political importance of responding to their vulnerabilities, which have been exacerbated by the credit crunch, prompting rescue packages including bridge loans, incentives to purchase domestic vehicles and increases in tariffs on imported cars and auto parts.  In the face of rising unemployment in other sectors, governments hope to avoid any disorderly bankruptcy proceedings.
Furthermore, the Chrysler-Fiat merger could set off a chain of consolidations within the auto sector which continues to have significant production overcapacities. Even emerging economies are likely to contribute slower auto demand growth in coming years. In Russia, automakers including Toyota have repeatedly shuttered production and domestic automakers are now increasing car loans in order to encourage purchases. Other countries like China also face the near-term challenge of consolidating its many automakers into several companies large enough to take advantage of economies of scale, increasing their share of the domestic market and possibly expand abroad.
Fiat is also trying to position itself to obtain an ownership stake in GM’s European affiliate Opel. The plan, which includes the other GM subsidiaries in Europe – Vauxhall in Britain and Saab in Sweden, would create a new global auto company with annual sales of up to 7 million cars and €80 billion ($106 billion) in revenues, which would secure Fiat a winning position in the post-crisis market.  The move however is likely to face political hurdles, as neither the German nor Italian governments would like to deal with the job losses (an estimated 8,000-9,000 jobs) likely from such a merger, particularly not in an election year (Germans vote this fall).
According to press reports, Berlin issued a list of conditions for Fiat, which includes stating where the headquarters would be located, where the taxes would be paid, the number of expected job losses and the future of Opel plants in Germany. GM though has the final say in assessing Fiat’s offer. Yet, the German economic minister suggested that Fiat needs German state credits in lieu of adequate financing, which might increase the German government leverage. However, supporting the formation of a global car maker with the German government’s credit guarantees may enrage other German carmakers such as the VW Group, BMW and Mercedes-Benz.
The pressure on domestic jobs has increased the political importance of responding to the automakers woes in many countries. In February, France raised protectionist fearsafter introducing state aid for the domestic car makers in return for an unwritten pledge to keep jobs and production at home. It posed a test for the EU’s single market rules and triggered an angry response from the Eastern European countries that would be hurt the most by the measure. Other countries like Argentina and Russia have increased restrictions on auto or parts imports in an attempt to support domestic industries. These might actually have the opposite effect; those in Russia hurt the business of used car sellers.
However, some government attempts to stoke auto demand may well erode future demand. So-called ‘cash for clunkers’ deals in which governments provide incentives for consumers to trade in their old cars for new (and often more fuel efficient) ones, have had the desired effect, boosting auto sales in countries like Germany and China for the types of cars targeted. These measures are helping to erode the inventory of manufacturers in a relatively orderly manner, but may be deferring the adjustment process that the automakers face. Moreover, rising unemployment is likely to weigh on consumption especially of large credit-dependent purchases like cars.
The bankruptcy also has significant repercussions on the corporate bond market. Chrysler’s bankruptcy filing was preceded by tough negotiations among creditors and the government to conclude an out of court restructuring in which lenders would receive 29 cents on the dollar in cash in exchange for wiping out about $6.9 billion of Chrysler’s debt. A group of about 20 secured creditors refused to sign off on the deal, arguing that their stake was worth more and demanding that their seniority rights be observed. However, recent empirical evidence shows that as default rates increase, recovery rates are falling fast in this cycle. Moody’s reported that in the past seven months, completed CDS auctions resulted in a recovery rate of 30 cents on the dollar for loans and about 15 cents on the dollar for bonds compared to 85 and 70 cents on the dollar, respectively, for all of 2008. The latest research by Edward Altman yields similar results stressing that distressed exchanges to avoid bankruptcy have surged since 2008 and that they usually yield significantly higher recovery rates to participating bondholders. In fact, S&P warns that due to loose covenants and missing early warning triggers, the losses even for secured creditors in this cycle might turn out to be substantial if a company cannot reorganize and liquidate.
Henry Hu from Texas University points to the ‘empty creditor’ phenomenon to explain why some lenders prefer to hold out and force a bankruptcy seemingly against the company’s and thus their own best interest. In short, creditors with enough credit default swaps may simultaneously have control rights and incentives to cause the debtor firm’s value to fall. And if bankruptcy occurs, the empty creditor may undermine proper reorganization, especially if his interests (or non-interests) are not fully disclosed to the bankruptcy court. See: Distressed Debt Investors Dictate The Terms: How Big An Issue Are ‘Empty Creditors’ With CDS Hedges? Another example is the case of the Kazakh bank BTA. Gillian Tett reports that Morgan Stanley in mid-April called for repayment of a loan thus forcing the already troubled lender into partial default. The fact that just after calling the loan, Morgan Stanley demanded ISDA to initiate a CDS settlement of contracts written on BTA, exposing Morgan Stanley to the ‘empty creditor’ criticism even if many details are missing. Dynamics of this kind make defaults more likely and need to be taken into account when forecasting the severity of the current corporate default cycle.
But are credit markets finally thawing? Indeed, corporate bond issuance has picked up substantially since December especially in the high-yield segment amid tighter spreads since the immediate Lehman aftermath. On a more cautious note, the IMF notes that given shortening credit lines and still tight bank lending standards (confirmed in the April Bank Loan Officer Survey), corporations are taking advantage of this window of opportunity to refinance themselves in the bond market despite substantially higher costs. An additional factor fueling this frontloaded corporate bond activity is the likely future crowding-out by sovereign and government guaranteed debt. While the high-yield segment has returned 17.4% YTD in 2009, the fate of Chrysler and GM shows that the default rate may not yet have reached its peak.
RGE Monitor

Saiu o resultado do teste de estresse. Dez bancos dos EUA requerem mais US$ 74,6 bilhões para continuar viáveis.
Quase ao mesmo tempo, o Citi anunciou que vai incorporar a seu capital boa parte dos US$ 45 bilhões em dinheiro estatal que recebeu. Com isso, o governo pode se tornar seu maior acionista.
De longe, quem necessita de mais capital é o Bank of America: R$ 33,9 bilhões, além dos US$ 45 bilhões que já recebeu do TARP (Programa de Resgate do Setor Financeiro do governo Bush).
Não chega a ser uma situação inquietante, como afirma o Valor em seu editorial desta sexta-feira.
Mas, claro, há dados preocupantes no documento. O RGE Monitor, boletim diário da consultoria do sempre sombrio Nouriel Roubini, ressalta por exemplo que a taxa total de calotes nos empréstimos bancários americanos chegou a 9,1%, um nível que excede o visto nos anos 30. Destaca, também, que ainda há perdas estimadas no setor de US$ 600 milhões para o biênio 2009-2010.
Roubini afirmara – três dias atrás, antes portanto de conhecer a situação real dos bancos – que os resultados do teste de estresse não iriam marcar o princípio do fim da crise financeira. Ele e Matthew Richardson publicaram um artigo no Wall Street Journal com um título que o resume bem: “Não podemos subsidiar os bancos para sempre: o governo tem que mostrar que pode lidar com grandes insolvências”.
A esta altura, você pode estar cansado dos resmungos de Roubini. Mas não o descarte. A revista Time incluiu o “Doutor Apocalipse” na sua lista das 100 pessoas mais influentes do mundo, e o texto que o exalta é assinado por ninguém menos que Paul Krugman. “Roubini às vezes erra? Claro. Todo mundo erra”, escreve o mais pop dos Nobel de Economia. Mas “seus alertas são baseados em sofisticadas modelagens e cuidadosa análise de dados e têm frequentemente se provado certos – não só no geral, mas nos detalhes.”
Por ora, no entanto, vamos nos concentrar nos fatos. Os reguladores americanos disseram a 10 dos maiores bancos dos EUA que eles devem levantar mais US$ 75 bilhões em capital extra, uma avaliação mais otimista do que o setor inicialmente temia, como explica o New York Times.
Outra reportagem do mesmo jornal sustenta que o teste de estresse desenha uma linha divisória através do cenário financeiro, entre as instituições mais fortes e as mais fracas. É a primeira vez que a diferença fica clara. E isso significa transparência para que governo e investidores privados possam separar o joio do trigo e, em última instância, decidir quem vai e quem não vai sobreviver.
Na madrugada desta sexta-feira, os mercados asiáticos se moveram para cima em resposta aos resultados do teste. Toquio subiu 0,5%, Hong Kong, 1%; Xangai, 1,09%, e Seul, 0,79%.
Vamos ver o que acontece nas próximas horas em Wall Street.

General Motors – Distressed Debt Exchange Offer ($27b)
General Motors has announced it is commencing public exchange offers for $27 billion of its unsecured public notes. General Motors Nova Scotia Finance Company, a subsidiary of GM, is jointly making the exchange offers with GM with respect to its pound sterling denominated notes. The exchange offers are a vital component of GM’s overall restructuring plan to achieve and sustain long-term viability and the successful consummation of the exchange offers will allow GM to restructure out of bankruptcy court.

Here is an executive summary from the press release:
(1) Commencing exchange for $27B of unsecured notes
(2) Exchange is vital to restructuring out of court
(3) 225 shares per $1,000 of bond principal.
(4) Cash will be paid out for accrued interest. According to the press release, USD interest accruals range anywhere from $7.5 per $1000 bonds (less than a 1 point) to $43 per $1000 bonds (4.3 points)
(5) If GM does not receive enough exchange by June 1, 2009, will file for bankruptcy
(6) Exchange expires 11:59PM, Tuesday May 26th
(7) Inserting a call option on non-USD notes
(8) Consummation is conditioned upon: Treasury approval (they believe they need 90% of principal to tender to get approval), U.S. Treasury issued 50% of pro forma common stock in exchange for cancellation of at least 50% of GM’s outstanding treasury debt and cancellation of the Treasury Warrants, evidence that the Treasury will provide an additional $11.6B of funding that GM believe it will need after May 1st, 2009, VEBA modification, U.S. Treasury and VEBA ownership not more than 89% of Pro Forma stock, binding labor modifications.

For more information see -http://www.gm.com/corporate/investor_information/exchange-offer/

01

maio

2009

Bretton Woods III ?

Bretton Woods III ?
Nouriel Roubini
A few years back, before this crisis erupted, several economists were concerned about the sustainability of the large global imbalances fueled by the so-called Bretton Woods II system. These economists recognized, in the tendency of export-led economies to manage their exchange-rate systems, the origin of large trade and current account surpluses that, via large foreign reserve accumulation, were financing the mirror image of those surpluses, namely the large U.S. trade and current account deficits.
These surpluses, primarily in several export-led Asian economies and also in oil-producing countries, ballooned to extensive proportions in 2007 and 2008. The purchases of U.S. government bonds by these investors helped keep long-term interest rates low and led many investors to seek high-yielding investments, especially in some emerging markets.
Although we are not (yet) witnessing a U.S. dollar crisis, the Bretton Woods II system is still at the center of the debates on the origins of this crisis. Understanding the nature of this crisis is fundamental in order to understand what reforms need to be undertaken for this not to happen again–and to understand what the global economy will look like after this crisis.
Although other factors have played a part, it is hard to argue that the large global imbalances that arose a few years ago had no role whatsoever in the current, synchronized global recession. However, so far, global imbalances do not seem to be on even the long-term agenda of most of those trying to remake the global financial system.
Global imbalances are now starting to narrow, though, and the current crisis is likely playing a role. As saving rates rise in the U.S., trade volumes fall on lower demand, expensive credit and weak commodity prices. The current U.S. account deficit has fallen from 6.6% at the end of 2005 to 3.7% at the end of 2008, and the IMF estimates it will fall further, to 2.8% of GDP, in 2009.
Many of the emerging economies that easily financed wide deficits are now being forced into consuming less, given the lack of credit and, in some cases, currency devaluation that boosts the costs of imports. Meanwhile, the fall in the price of oil and other commodities is shifting many oil exporters–some of the larger surplus nations–into deficit territory.
Is this the death of Bretton Woods II? Can export-led growth countries increase consumption, or are we going to see large imbalances in the global economy return when the recovery will be in full swing? And would a permanent correction of global imbalances be contractionary? If surplus economies continue along a business-as-usual path, trying to stoke export demand rather than increasing domestic spending to boost consumption, it could increase deflationary pressures.
Fiscal and current account surpluses and foreign exchange reserves can be used to increase government spending on infrastructure and public services and boost consumption and investment, which might help unwind the global imbalances. In fact, fiscal stimulus spending underway during the current downturn by surplus countries like China and the Middle East will help increase their own domestic demand and also boost the exports of deficit countries.
Governments with comfortable fiscal/external surpluses, commodity revenues or foreign exchange reserves, such Asia-Pacific, the Gulf Cooperation Council, Canada, Norway, Germany and Russia, have rightly increased stimulus spending in spite of easing exports and commodity prices recently. However, there are criticisms that such spending still falls short and is steered toward export firms rather than domestic demand, which will only exacerbate global deflationary pressures. On the other hand, stimulus spending by deficit countries such as the U.S. and U.K. will only accentuate pressure on global fiscal deficits and imbalances.
Some are still concerned that the unwinding of imbalances might be disorderly, leading to swift exchange-rate moves. However, it is also possible that this might be a gradual process, aided by a beefed-up IMF and other multilateral institutions which will avert balance of payments crises–if not sharp contractions–in many emerging economies, especially in Eastern Europe.
Some imbalances seem to be persistent though. China’s surplus does not seem to be shrinking very much, largely because the import contraction, including goods for re-export and cheaper commodities, is more severe than that of exports. And those of Germany and Japan are expected to continue to be quite large also.
The consumption share of China’s GDP has fallen since the year 2000, although Chinese government investment could provide a boost in 2009. The IMF suggests China’s current account surplus will continue to rise, albeit at a slower pace, in 2009, nearing $500 billion from almost $430 billion in 2008. Such a large current account surplus implies still large reciprocal deficits in some of China’s trading partners, likely the U.S. and several European countries.
There is a risk that China’s fiscal stimulus might exacerbate production overcapacities, creating further deflationary pressures, unless China is able to stimulate domestic demand, especially private consumption. Moreover, there is related risk that China’s extension of investment and credit expansion could defer China’s transition to a global economy in which the U.S. consumer consumes less.
As it currently stands, China’s almost $600 billion fiscal stimulus has less than 10% dedicated to social welfare programs. Expanding this expenditure through increasing government outlay on health care, pension payments and unemployment benefits, could have a significant effect on boosting consumption, particularly as it could reduce some of the households’ structural pressures to save.
In the longer term, some tax policy changes, including the requirement of state-owned enterprises to pay dividends and the introduction of a value-added tax, might also be supportive of consumption-based growth. Chinese leaders are cognizant of the need to rebalance growth, meaning China may be better placed to do so than some of the export- and investment-led advanced economies, or the Asian tigers whose growth models are in question amid of the global export collapse.
So far, despite several months of hot money capital outflows, China seems to have increased its share of the safest U.S. assets, especially Treasury bills. Given the global export weakness, China may be forced to maintain its quasi dollar peg, which will likely involve a resumption of U.S. dollar asset purchases. Yet Chinese concerns about the long-term value of its U.S. assets have increased. China has been diversifying its assets on the margins, increasing the share of gold (from a very low share of total assets) and loaning its foreign exchange to resource exporters. The Chinese Central Bank governor has suggested that, over time, the IMF’s SDR has a certain attraction as a reserve currency, given the instabilities that have stemmed from the U.S. dollar’s reserve currency role.
The severe effects of the global recession and export contraction on Asia’s growth, manufacturing output and employment loss might pave way for Asia to rethink its export-led growth model and move its source of growth away from exports and toward domestic consumption. However, this might require a lot more political will, since the existing growth model has helped Asia attain higher per-capita income and significant poverty reduction.
Moreover, the structural changes required to change the growth model–to move production from low-end manufacturing to high-end labor-intensive manufacturing and services to boost employment and incomes; improve the social safety net, and pension and health care systems; invest in skills training and R&D; and enhance intermediation of savings and credit access for firms by developing financial markets–all involve short-term costs with results only in the long term, something that political leaders might be unwilling to trade.
On the other hand, it could be argued that Asia might continue to follow an export-led model even in the future to sustain growth and poverty reduction, and at the same time use the presently available vast resources to boost safety nets and cushion the economy and workers from any future global export downturn.
While policies to increase domestic demand might boost Asian imports and reduce current account surpluses, shrinking exports recently have, in fact, led imports to shrink at a faster pace than exports (given the high import content of exports), thus keeping up the trade and current account surpluses in many Asian countries. Letting the exchange rate appreciate will also be challenging for Asia and will largely depend on China’s currency stance. In fact, many Asian countries started favoring an undervalued currency recently–or at least have stopped allowing appreciation–given weakened exports and a need to maintain competitiveness with China.
Asia’s stance will also be governed by the losses that the central banks will have to realize on their U.S. Treasury holdings by letting their currencies appreciate. Moreover, any change in Asia’s growth model will be governed by the mid- to long-term factors such as the pace of rise in the U.S. savings rate and whether it’s structural or cyclical in nature, and also the trends in global commodity, shipping and Asian labor costs going forward.
It is a different story with commodity exporters who, as a whole, are set to shift from surplus to deficit territory in 2009, given robust spending and much lower revenues. Unlike China, oil exporters were already contributing more to rebalancing in the last few years, with much of the incremental increase in revenues being spent–or rather, absorbed–at home by massive projects and increased consumption. In fact, rather than generating surpluses, the current risks are that the economies of many oil exporters in the CIS, Africa and even some in the GCC could contract in 2009, given the weaker hydrocarbon and non-hydrocarbon sector outlook.
Facilitated by past savings, many of these countries, including Saudi Arabia, the United Arab Emirates and Russia, are conducting expansionary fiscal policies this year and will run significant fiscal deficits at an oil price below $50 a barrel. Moreover, countries like the UAE, Saudi Arabia and others are expected to run current account deficits, financed by the sale of past savings. Meanwhile, with many sovereign wealth funds and other government capital being deployed domestically, there may be fewer foreign purchases.
The eurozone’s largely balanced external position covers ample intra-EMU imbalances among eurozone countries. Current account dispersion reached from 8.4% in the Netherlands and 7% in Germany to -13.4% in Cyprus as of 2008. The European Commission notes that, while large current account balances by themselves could merely be the expression of rational private sector choices, a comparison of real exchange rates with their benchmark “equilibrium” current accounts shows the existence of sizable real exchange rate misalignments.
Decompositions of this kind gave rise to claims that Germany in particular, in its role as EMU’s “center” economy, is engaging in beggar-thy-neighbor behavior by setting in motion a real competitive devaluation of its currency through falling unit labor costs. This makes a rebalancing of high-deficit countries all the more challenging. Since a nominal devaluation is not an option within the EMU, high-deficit countries have no option but to deflate in real terms, either through relatively higher productivity or consumption restraint against an already ambitious German benchmark.
Germany is not exposed to overindebted households and non-financial corporates to the extent that Spain, Ireland or France are. However, as the current downturn makes painfully clear, balanced financial accounts provide no shield against an over-reliance on external conditions or undiversified specialization patterns. Bundesbank President Axel Weber recently made clear that Germany should try to break its dependence on exports as the mainstay of its economic growth, whereas Chancellor Angela Merkel argues a strong industrial base and external competitiveness are valuable assets, especially for an aging and shrinking population: In fact, Merkel says, “[export reliance] is not something we even want to change.”
Ultimately, the Bretton Woods II system of global imbalances has had effects reaching far beyond the U.S. and Asia. Like the U.S., emerging markets in Eastern Europe were able to fund large current-account deficits in the recent era of cheap financing. In May 2007, I wrote: “The currency and economic policies of China and East Asia have contributed–among many other factors–to unsustainable global current account imbalances whose rebalancing now risks becoming disorderly rather than orderly.” This is certainly the case in Central and Eastern Europe, where current account deficits have been the norm and where the unwinding of such imbalances is raising concern that it could contribute to a regional financial crisis along the lines of 1997 in Asia.
The drying up of capital inflows amid the global financial turmoil is necessitating a sharp adjustment in Eastern Europe’s external imbalances. These imbalances rival, and in some cases exceed, those in pre-crisis Asia: Current-account deficits in Southeast Asia from 1995 to 1997 fell within the range of 3% to 8.5% of GDP, while those in Central and Eastern Europe were well over 10% of GDP in Romania, Bulgaria and the Baltics in 2008.
A correction in the region’s imbalances is already underway via currency depreciation (in countries with flexible exchange rates) and via a sharp drop in domestic demand. Thus far, the IMF has stepped in with financial assistance for three E.U. newcomers–Hungary, Latvia and Romania–to smooth the sharp drop-off in capital inflows and to avert a disorderly unwinding of external imbalances. These countries are unlikely to be the last to knock on the IMF’s door.
Nouriel Roubini, a professor at New York University’s Stern Business School and chairman of Roubini Global Economics, is a weekly columnist for Forbes. Analysts at Roubini Global Economics assisted in the research and writing of this piece.

Forbes – April 30, 2009

Lenders Appear To Be Driving Chrysler To Bankruptcy
Joann Muller April
DETROIT -Just hours after President Barack Obama told the nation he was hopeful Chrysler would become viable and that it might be able to avoid bankruptcy, talks between his automotive task force and lenders reportedly broke down, raising the likelihood of a Chapter 11 filing as early as Thursday.
The Wall Street Journal reported that talks broke down after the president’s task force was unable to persuade hedge funds and other lenders to accept a sweetened offer of $2.25 billion in cash in exchange for forgiving $6.9 billion in Chrysler debt. Treasury officials were unavailable for comment.
“As we get down to the wire, there will be much speculation but we will refrain from commenting,” said a Chrysler spokeswoman.
An expedited court process could be a test run of the government’s plan for General Motors, which has until the end of May to try to avoid bankruptcy, industry analysts say.
The plan would be for Chrysler’s best assets to be sold to a new company that would emerge quickly from bankruptcy proceedings, perhaps in a matter of days or weeks. The new Chrysler would be owned 55% by a retiree health care trust fund and 20% initially by Fiat, with the remainder held by the government and creditors. Eventually, if Chrysler met certain performance objectives, Fiat would get 35%. Then, years from now, once the taxpayer loans are paid off, Fiat would be entitled to take a controlling interest.
Such a bankruptcy for Chrysler would test the administration’s theory that a major carmaker could undergo a “quick rinse” in court, shedding unwanted liabilities, and emerge as a smaller but healthier company.
Yet David Cole, president of the Center for Automotive Research, cautions that the complexities of car making doesn’t lend itself to simplistic approaches. “If this industry goes down in a catastrophic collapse, it will be more expensive than a bridge loan, and with the state of the economy it will drive us into a depression,” he said. “The last thing this administration wants is to be known as the 21st-century Herbert Hoover administration. The risk is very, very real.”
The government’s intervention in the auto industry is unprecedented, with many of the rules being made up on the fly. Industry experts are hard-pressed to predict what will happen. “I think there will be a short bankruptcy to see if it works,” said Sean McAlinden, chief economist for the Center for Automotive Research. “If it doesn’t, they’ll need a new plan for GM.”
Although the government is clearly in command of the troubled industry for now, Obama said Wednesday night that he doesn’t want that to last forever. “I don’t think taxpayers should simply attach an umbilical cord between the U.S. Treasury and the auto companies so they are constantly getting subsidies.”
But he does believe it’s his role to push the automakers to make tough decisions and be competitive. “I’m not an auto engineer. I don’t know how to create an affordable, well-designed plug-in hybrid. But I do know if the Japanese can design an affordable plug-in hybrid, then doggone it, the American people ought to be able to do it, too.”
Long term, he thinks Detroit automakers will be very successful. “Those companies that emerge from this crisis, when you see pent-up demand coming back, they’re going to do really well, not just in the United States, but globally. I want to help them get there.”
During a Town Hall meeting near St. Louis earlier Wednesday, Obama addressed the Chrysler situation specifically.
“We don’t know yet whether the deal is going to get done,” he said. “I will tell you that the workers at Chrysler have made enormous sacrifices–enormous sacrifices–to try to keep the company going. One of the key questions now is: Are the bondholders, the lenders, the money people, are they willing to make sacrifices, as well? We don’t know yet, so there’s still a series of negotiations that are taking place.”
But Obama made clear what he hopes will result.
“We’re hoping that you can get a merger where the taxpayers will put in some money to sweeten the deal, but ultimately the goal is we get out of the business of building cars, and Chrysler goes and starts creating the cars that consumers want. And one of the potential advantages of a merger is new technologies where Chrysler starts making fuel-efficient, clean-energy cars that will meet the needs of the future market.”
He also promised that despite the expense to taxpayers, the government would protect health care and pensions for autoworkers, who helped get him elected. “My attitude is we got here not because our workers didn’t do a great job trying to build a great product; it was because management decisions betrayed workers.”

Forbes – April 30, 2009

M&A: A Smart Strategy in a Down Economy
The general thinking is to hunker down and avoid acquisitions in a recession. But economic gray days offer golden opportunities
By Frank Aquila
 
 
Not surprisingly, the pace of merger activity in 2008-09 has slowed dramatically as compared with recent years. Excluding a few mega deals, the M&A world has indeed been quiet. With a weak economy and an ongoing liquidity squeeze, most pundits expect that few significant deals will happen this year—and many think that is exactly the way it should be.
 
The prevailing view is that acquisitions are a luxury, to be pursued in good times and forsaken in the bad. The prevailing view is completely wrong. Deals are always risky, but doing nothing in a downtown may be the riskiest move of all.
 
Acquisitions and divestitures are key tools in the implementation of corporate strategy. Since corporate strategy needs to be implemented throughout the business cycle, in good economic times and bad, so must M&A. In fact, many of the most value-creating deals are done during economic downturns.
 
As the most successful buyers recognize, acquisitions made during periods when most firms are shunning deals actually provide the best long-term returns for shareholders. Studies by Bain, Boston Consulting, McKinsey, and others all confirm that acquisitions made during a downturn outperform deals made during more robust economic climates on almost all relevant metrics.
 
PAST SUCCESSFUL DOWNTURN DEALS
Want some examples? Diageo’s (DEO) acquisition of Seagram Wine & Spirits from Vivendi Universal during the 2001 recession unalterably changed the beverage alcohol sector and made Diageo its global leader in volumes and profitability. (My firm, Sullivan & Cromwell, represented Diageo in the deal.) Also in 2001, Danaher (DHR) acquired Marconi’s Commerce Systems and Videojet units. Those two businesses are at the core of two of Danaher’s fastest growing, most profitable businesses.
 
Smart downturn acquisitions have not been limited to this decade. Bank of America’s (BAC) acquisition of Security Pacific in 1991 and IBM’s (IBM) acquisition of Lotus in 1995 were among the most successful deals of that decade. Looking further back, Johnson & Johnson’s (JNJ) 1981 acquisition of Frontier Contact Lenses created the platform for what is today their industry leading Acuvue contact lens business.
 
Hallmarks of a great deal are the same no matter what the economic environment. For any acquisition to work it must be strategic, the due diligence must be thorough, there must be price discipline, and the integration strategy needs to be thought through clearly. Thinking that you are getting a bargain, simply because the price is lower in a downturn, does not mean that you can relax your criteria or change your approach. While prices, which are generally tied to EBITDA or some other measure of profitability, do fall in an economic downturn, the true value of the acquired business is its potential for future growth and profitability. Even sellers can benefit from deals done in a downturn since they obtain precious cash and gain the ability to focus on their core business at a time when it is most needed.
 
SEIZING THE MOMENT
Successful companies recognize that recessions, or any crises, provide as many opportunities as they do dangers. These firms will also recognize that well-timed downturn deals present opportunities that are unlikely to be found in better economies. Tough times present openings to pick up businesses and assets that may be overleveraged or undermanaged, or that are simply no longer core operations for the seller. It is a chance to change the competitive dynamic in the acquirer’s favor.
 
It is clear to me that the winners and losers for the next decade will be determined over the next six to nine months. In some cases, a firm’s fate will be out of its control. But for the most part, companies will make the strategic decisions that will have long-term impact on them and their competitors. Those that choose to hunker down and hoard their cash may very well survive the current downturn. But the companies that aren’t afraid to seize the M&A moment are likely to be the real winners in the years ahead.
 
Aquila is a partner in the Mergers & Acquisitions Group of Sullivan & Cromwell LLP.
 

Business Week – April 6, 2009

Marco Aurélio Mello: É preciso virar essa página
(Marcela Rocha Especial para Terra Magazine)
A discussão entre o presidente do Supremo Tribunal Federal (STF), Gilmar Mendes, e ministro Joaquim Barbosa, evidenciou divergências pessoais e de idéias na mais alta Corte do país. Muitos saíram publicamente para classificar os culpados na briga. Mas o ministro já busca colocar panos quentes. Magistrado do Supremo desde 1990, ele fala a Terra Magazine de cara: “Eu não procuro um culpado pelo episódio”.
– O que ocorreu foi um extravasamento dos dois, do que é esperado de um colegiado julgador, os quais devem discutir idéias, sem descambar, como o ocorrido, para o campo pessoal – avalia o ministro.
Marco Aurélio explica que o descompasso entre eles “vem de discussões outras”. E acredita que, daqui para frente, “tomaremos mais cuidado na veiculação de nossos pensamentos e convencimentos sem buscar desqualificar o colega”.
Para o magistrado, o bate-boca entre os ministros é proveniente de “discussões da segunda turma de habeas corpus envolvendo o antigo controlador do Banco Santos, discussão também envolvendo a operação Anaconda”. Segundo aconselha o ministro que já presidiu a Casa de 1996 a 1997, é preciso “virar esta página”.
Cauteloso, Marco Aurélio Mello tece sua avaliação sobre o atual presidente do STF. Afirma que se pronunciar sobre problemas em setores diversos “acaba expondo a imagem do Supremo”. Mas contemporiza: “Hoje, talvez, ele esteja mais convicto de que é preciso se resguardar um pouco mais”.
Bastante crítico à postura dos integrantes do STF, Marco Aurélio recomenda, “autocrítica para todos os integrantes do Supremo, inclusive Mendes e Barbosa”.
– É hora de nós buscarmos uma austeridade maior e pronunciamentos, principalmente o presidente do Supremo, sobre questões em que o pronunciamento seja necessário.
Questionado se já teria falado com um dos ministros, Marco Aurélio revela:
– Falei com o ministro Gilmar Mendes pelo telefone no dia seguinte e disse para ele que a sensação era de ter bebido todas na noite anterior.
Leia na íntegra a entrevista com o ministro Marco Aurélio Mello:
Terra Magazine – O senhor acredita que o episódio tenha sido reflexo da postura adotada pelo presidente do Supremo?
Marco Aurélio Mello – Eu não procuro um culpado pelo episódio. O que ocorreu foi um extravasamento dos dois, do que é esperado de um colegiado julgador, os quais devem discutir idéias, sem descambar, como o ocorrido, para o campo pessoal. Na verdade, o descompasso entre eles vem de discussões outras. Acredito que, daqui para frente, tomaremos mais cuidado na veiculação de nossos pensamentos e convencimentos sem buscar desqualificar o colega. Cheguei a ouvir manifestações do ex-presidente Maurício Corrêa em que sugeria a edição das sessões antes que fossem veiculadas pela TV Justiça. Isto seria um retrocesso, em minha opinião. A TV Justiça funciona como um controle externo indireto. Veja o caso. Por isso os ministros tiveram que buscar o equilíbrio e enfrentar a problemática.
Quais “discussões outras”?
Discussões da segunda turma de habeas corpus envolvendo o antigo controlador do Banco Santos, discussão também envolvendo a operação Anaconda, que não foi comigo como o ministro Joaquim Barbosa afirmou pois não integro a segunda turma. Foi com o ministro Gilmar Mendes. Precisamos virar esta página. Esquecer certas desavenças e buscar a melhor atuação possível para atender à sociedade.
Os críticos do presidente do STF afirmam que muitas vezes ele faz declarações na mídia sobre o mérito de processos ainda em andamento no Supremo. Acredita que isto seja um fator que atrapalhe o bem estar entre os magistrados?
Ele não se pronuncia sobre questões em andamento. O que ele tem feito de uma forma geral é se pronunciar sobre problemas em setores diversos. Hoje, talvez, ele esteja mais convicto de que é preciso se resguardar um pouco mais. Porque, toda vez uma pessoa que se pronuncia, ela vai para uma vitrine e fica sujeita aos segmentos incomodados com o dito. Não acredito que este seja um fator que cause mal estar entre magistrados, contudo acaba expondo a imagem do Supremo. É hora de nós buscarmos uma austeridade maior e pronunciamentos, principalmente o presidente do Supremo, sobre questões em que o pronunciamento seja necessário.
A discordância explicitada é reflexo do embate profundo também no campo pessoal. Na opinião do senhor qual a austeridade possível de se buscar depois de uma briga destas? Ela será natural, quais os efeitos?
É preciso que haja o que eu chamo de tratamento cerimonioso entre os ministros. E também discutir de forma elevada os temas que se apresentem ao Supremo. Discutindo sempre nas sessões do plenário e das turmas. Deve vingar principalmente um princípio básico na administração pública: a impessoalidade. Isto, porque estamos em cargos que deixaremos. Já as instituições, elas permanecerão. Isto é fundamental para o fortalecimento da democracia.
Algumas pessoas, assim como o ministro Joaquim Barbosa, afirmam que o presidente do STF tem “arranhado” a imagem do Supremo. Gilmar Mendes nega. O que o senhor pensa sobre a imagem do STF, como melhorar?
Não é hora de buscar culpado, mas a correção de rumos. Para isto, é preciso autocrítica, para todos os integrantes do Supremo, inclusive Mendes e Barbosa.
Como arrumar esta imagem do Supremo?
Precisamos otimizar o tempo. Sou um inconformado com os atrasos das sessões. Como se nós não tivéssemos um resíduo de processos. Muito pelo contrário, temos em torno de 600 processos aguardando pregão no plenário. Precisamos realmente observar o espaço de intervalo e evitar discussões paralelas que não dizem respeito ao caso concreto. Com isto, estaremos atendendo aos anseios da sociedade e jurisdicionados.
A nota de apoio emitida em favor do presidente do STF foi uma maneira de demonstrar que não existe crise no Supremo?
A nota de apoio visou demonstrar que continuamos confiando no desempenho institucional do ministro Gilmar Mendes, porque o ministro Joaquim Barbosa afirmou que o presidente estaria levando o Judiciário ao descrédito. Nós não chegamos a pensar assim. Sim, entendemos que ele deva retirar o pé do acelerador, para usar uma gíria carioca, mas nós não chegamos à crítica de que ele esteja afundando o judiciário. A nota não conteve qualquer censura ao ministro Barbosa, ao contrário do que uma ala do tribunal queria. Se fizéssemos uma crítica, abriríamos margem para qualquer cidadão representar ao Senado da República, objetivando impeachment do ministro Joaquim Barbosa.
Chegou a conversar com algum dos dois depois do ocorrido?
Com o ministro Joaquim só mantenho relações funcionais nas sessões porque já tivemos desavenças e eu esperei por uma retratação da parte dele, o que não aconteceu. Falei com o ministro Gilmar Mendes pelo telefone no dia seguinte e disse para ele que a sensação era de ter bebido todas na noite anterior.

24.04.09