JPMorgan working to sweeten Bear Stearns offer
JPMorgan Chase is negotiating to quintuple its fire-sale $2-a-share offer for investment bank Bear Stearns, The New York Times reported, in the hopes that $10 a share will mollify angry Bear Stearns shareholders. (MarketWatch) The Federal Reserve, though, is reportedly balking at the raised price—which would need its approval—as it could fuel criticism that the Fed-backed deal is a taxpayer bailout. Bear Stears is also working to sell 39.5 percent of itself to JPMorgan, which wouldn’t require shareholder approval. (The New York Times, free registration) “If you are seeing stock values overall recover,” said Jay Moghe at Opes Prime Asset Management in Singapore, it seems “Bear Stearns shareholders got a very raw deal.” (Bloomberg)
CIT seeks foreign financing
U.S. commercial finance company CIT Group Inc. is in talks with foreign banks to secure funding for its core lending business, according to The Wall Street Journal. CIT drew down an entire $7.3 billion back-up credit line last week, after ratings downgrades left it unable to finance itself. The firm also said it could raise $5 billion to $7 billion through asset sales. (Bloomberg) CIT has about $90 billion in assets, with $9 billion of those in risky subprime mortgages. (Reuters) After decades of safe investments, CIT “ventured outside of its comfortable realm and aimed into higher-profit markets,” said CreditSights analyst Richard Hofmann. “They timed that very badly.” (The Wall Street Journal, paid subscription)
Oil prices fall, gas rises
The price of crude oil was trading at about $100 a barrel early today, after falling 6.7 percent last week. Fears of a U.S. recession—which would curb demand—as well as a strengthening dollar and profit-taking from record high prices were seen behind the decline. “We have the ingredient for a pullback in prices in the next few months,” said Andy Lipow of Lipow Oil Associates. Goldman Sachs analysts see prices falling toward $90 a barrel in the spring. (Bloomberg) U.S. gas prices, meanwhile, rose 7 cents to an average of $3.26 a gallon, according to the Lundberg Survey. (AP in Yahoo! Finance)
Chrysler’s empty factories
Newly private Chrysler LLC has a potentially expensive problem in its several car factories that are running with reduced shifts. Automakers typically lose money if they have less that two shifts a day running at their plants, because fewer hours of work means more hours that hundreds of millions of dollars worth of equipment lies idle. But adding more shifts would go against Chrysler’s recent moves to reduce the number of models it sells. The effectiveness of Chrysler’s strategy is anyone’s guess, though—an advantage it holds over its publicly traded rivals. Chrysler’s “short-term results can be negative and nobody will know it,” said Tom Libby at J.D. Power and Associates. (The Wall Street Journal)
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