(Reuters) - Getty Images Inc (GYI.N: Quote, Profile, Research) said on Monday it agreed to be bought by Hellman & Friedman affiliates for $34 per share in cash, in a deal it said was worth $2.4 billion, including the assumption of debt.
Monday, February 25, 2008
Auction-Rate Bonds Force `Predatory' Yields on Cities
(Bloomberg) -- U.S. municipal borrowers from Camden, New Jersey, to Sacramento, California, may face a third week of higher interest costs as failures in the auction-rate bond market persist.
Auctions run by banks to determine the rate on more than $45 billion of bonds didn't attract enough buyers last week, according to JPMorgan Chase & Co. research. Even some successful auctions resulted in rates that were twice what borrowers paid in January, as investors who submitted bids demanded higher yields.
``The market right now is very predatory,'' said Marcia Maurer, chief financial officer of the Sacramento Regional County Sanitation District. The agency's weekly expense on $250 million of debt more than doubled to $343,000 from last month.
Investors enticed by rates that jumped as high as 20 percent are seeking opportunities in the $330 billion market no longer supported by dealers from Goldman Sachs Group Inc. to Citigroup Inc. and UBS AG that for years committed their capital to prevent failures. Thousands of unsuccessful auctions have driven up taxpayers' borrowing costs and left investors in the securities unable to get their money.
``Aggressive institutional investors have moved in to pick up auction-rate issues at short-term rates ranging from 5 percent to as much as 15 percent or more,'' George Friedlander, a municipal strategist at Citigroup in New York, said in a report at the end of last week.
Failure Rate
Four of the biggest agents that collect orders from bond dealers and determine winning rates reported failures on 258, or 67 percent, of 386 auctions Feb 22. That's in line with the average since Feb. 15, according to data compiled by Bank of America Corp. and Bloomberg.
Auction bonds, created in 1984, had until recent months allowed municipalities, hospitals, student lenders and funds to borrow long-term at money-market costs by adjusting interest rates through bidding every seven, 28 or 35 days.
When an auction fails, the rate reverts to a ``maximum'' specified in bond documents, or one pegged to money-market benchmarks. Holders of the bonds are stuck with the securities until a later auction attracts enough demand.
Hedge funds and other non-traditional investors showed ``strong interest'' last week in tax-exempt deals with high rates, Alex Roever, a JPMorgan fixed-income analyst, said in an e-mail. The average rate for seven-day municipal auction bonds rose to a record 6.59 percent on Feb. 13 from 4.03 percent the previous week, according to a Securities Industry and Financial Markets Association index.
Closed-End Funds
Many of last week's failures occurred at auctions of debt issued by closed-end funds with penalty rates ranging from 3 percent to 6 percent, data compiled by Deutsche Bank AG, Bank of New York Mellon Corp., Wells Fargo & Co. and Wilmington Trust Corp. show. Closed-end funds have about $60 billion in auction securities outstanding. Municipalities have $166 billion.
The auction-rate market began unraveling late last year as investor confidence in the health of bond insurers backing many of the securities waned. A bank bailout of New York-based Ambac Financial Group Inc. might come as soon as this week, according to a person familiar with rescue talks.
The collapse accelerated as banks including Citigroup and UBS, which have taken losses of about $162 billion from securities related to the collapse of subprime mortgages, grew unwilling to commit capital to support the auctions.
Citigroup May Post First-Quarter Loss, Whitney Says
(Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, may post its second-straight quarterly loss because of writedowns on home-equity loans and junk-grade corporate loans, Oppenheimer & Co.'s Meredith Whitney said.
The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Whitney wrote today in a note to clients. The prediction compares with the 63-cents per share average of 12 analyst estimates surveyed by Bloomberg.
The rate of loan losses is ``grossly underestimated by consensus estimates'' at Citigroup and other U.S. banks, Whitney wrote. ``Core fundamentals are rapidly deteriorating.'' She cut her per-share estimate for 2008 earnings by more than 70 percent to 75 cents. The New York-based company's shares could fall more than 36 percent to less than $16, she wrote. They've declined about 15 percent this year.
Citigroup posted a $9.8 billion loss for the fourth quarter, the widest in its 196-year history, after writing down subprime mortgage-linked collateralized debt obligations whose value plummeted last year as investors shunned securities linked to the least creditworthy borrowers. Vikram Pandit stepped in as chief executive officer in December, after Charles O. ``Chuck'' Prince was forced to resign.
Whitney was among the first analysts to gauge the depth of Citigroup's losses, writing in a note last October that the bank may have to cut dividend payments to shareholders for the first time since the 1990s. In January, the bank slashed its dividend by 41 percent, reversing a pledge made by its executive- committee chairman, former U.S. Treasury Secretary Robert Rubin, to preserve the shareholder payout.
Visa May Raise as Much as $17 Billion in Initial Sale
(Bloomberg) -- Visa Inc. may raise as much as $17 billion in what would be the biggest U.S. initial public stock offering.
Visa, the world's largest payment-card network, plans to sell 406 million Class A shares for $37 to $42 each, the San Francisco-based company said in a regulatory filing today. Banks have the option of selling an additional 40.6 million shares, pushing the potential size of the deal to $18.8 billion.
The company is trying to replicate the success of its smaller rival, MasterCard Inc., whose shares have surged more than fivefold since a May 2006 IPO. Demand for initial public offerings has waned this year, with 97 companies raising $12 billion, or 43 percent less than in the same period last year, according to data compiled by Bloomberg.
At the high end of the projected range, Visa's transaction would be the world's second-biggest IPO, after the $22 billion raised by Industrial & Commercial Bank of China Ltd. in 2006.
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