A UBS Beating, an SIV Sheltered
December 10, 2007
NEWS AT A GLANCE
UBS takes $10 billion subprime hit
Swiss bank UBS said it’s writing down $10 billion in U.S. subprime mortgage investments and getting an $11.5 billion capital infusion from Singapore and the Middle East. UBS also said it will now take a loss this quarter and replaced its 2007 cash dividend with a stock dividend. (Bloomberg) The state-owned Government of Singapore Investment Corp. is investing $9.4 billion in UBS, giving it a 9 percent stake in the bank, and an unidentified Middle Eastern investor is supplying the other $2.1 billion. That’s consistent with “a developing trend,” said ABN Amro analyst Omar Fall. “Asian and Middle Eastern sovereign investors are cash rich and have a longer time horizon than the average market investor.” (Reuters)
Societe Generale bails out SIV
France’s No. 2 bank, Societe Generale, is bailing out its sole structured investment vehicle by taking the SIV’s $4.3 billion of assets onto its own balance sheets. The SIV, called PACE, is close to hitting a level of capital that would trigger the appointment of a special trustee to oversee the shrinking assets. Societe Generale blamed “market conditions” for the move. (Bloomberg) HSBC, Standard Chartered, and Rabobank have also taken on their SIVs to avert fire sales. SocGen’s “bad news” shows that the credit crisis “is not over yet, contrary to what some people thought,” said Pierre Chedeville at CM-CIC Securities. (Dow Jones in CNNMoney.com)
Universal joins social site Imeem
Universal Music Group reached a deal with social networking site Imeem that will let Imeem members freely stream audio and music videos from Universal artists. Universal will get an undisclosed cut of the ad revenue generated while its songs are playing, with a minimum amount guaranteed. The other three major labels have already signed on with Imeem. (Los Angeles Times, free registration required) The deal is among the largest tests of an ad-supported music distribution model. “2008 is going to be the year of music labels trying to put themselves in front of everyone, no matter what business model it takes,” said Forrester Research analyst McQuivey. (CNNMoney.com)
Hands out, stars in their eyes
Plenty of rocket entrepreneurs attended the Space Investment Summit in San Jose, Calif., last week, seeking investors for their space-based ideas—electrically propelled rockets, consumer space suits, inflatable launch vehicles. But the handful of venture capitalists who showed up to the event, one of the first in the young field of private space travel, were less than optimist about the commercial potential for many of the pitches. “They’re smoking crack,” said investor Shubber Ali, a director of Dallas-based George Group Consulting. “I don’t know why they invite me to these things.” (Los Angeles Times, free registration required)
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