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Reuters – Capmark Financial Group Inc., the commercial real estate company created through a 2006 leveraged buyout of certain GMAC assets, is preparing to file for bankruptcy possibly by the end of next week, according to a source with direct knowledge of the situation.
The company, which owns a bank that will continue to operate while it is in court, is in negotiations with lenders, bondholders and the Federal Deposit Insurance Company that will result in a filing by the end of October at the latest, the source said.
Greenwich Time – Some hedge funds in the region are looking to sublease their office space as they downsize or shut down in the lagging economy.
John Goodkind, managing principal of Greenwich-based commercial real estate firm Newmark Knight Frank, said about 20 percent of Greenwich hedge funds are considering subleasing all or some of their office space to cut their expenses. He said he expected about half of them to do so in the next six to nine months.
"It’s the immediate wave of the future because the Greenwich hedge fund market is not immune from a meltdown," Goodkind said, adding that space is being offered at 20 percent to 30 percent less than the original lease. "Fairfield County, with Greenwich being the nexus, is in for a very difficult period of time for tenants that are subleasing space."
USA Today – Given the stock market’s wretched performance this year, your current retirement plan may involve a modest part-time job, such as woodworking or forgery.
Before you take up a life of crime, however, remember that really rotten markets sometimes uncover opportunities. In fact, the worse the market, the more bargains you can find. And right now, you can buy stocks and bonds of the nation’s best-run and most profitable businesses at astoundingly low prices. What’s more, you can collect dividends and interest while you wait for the economy to recover and for other investors to regain their senses.
First, and let’s not whitewash things here, the current market has all the appeal of a weekend in the local viper pit. The Dow Jones industrial average plunged 679 points on Thursday alone; it has shed 5,585 points, or 39%, in the past 12 months.
New York (HedgeCo.Net) – While the U.S. Treasury has done all it can to stave off rumors of a government bailout of Fannie Mae and Freddie Mac , some say the inevitable rescue is bound to take place after attempts to raise capital for the two mortgage giants have proved futile.
Preferred shares of the two companies are trading as low as 19 cents on the dollar, fueled by assumptions that their dividends will be suspended. This belief was the reason behind Moody’s recent ratings downgrade of their preferred stock to Baa3, the lowest possible investment-grade. Meanwhile, shares of both companies have experienced month after month of sharp declines, with Freddie down 93 percent and Fannie down 89 percent since November.
Together, the two companies account for over $5 trillion of outstanding U.S. mortgages. As the number of foreclosures reached record heights thanks to defaults on mortgages by subprime borrowers, Freddie Fannie have taken a beating since last summer, writing down almost $15 billion and forcing some to believe they will not be able to weather this housing crisis without the help of Uncle Sam.
Both Freddie and Fannie make money by offering mortgage-backed security bonds to investors. By selling these bonds, they assume the risk involved in the repayment of these loans. In exchange, they get to keep a guarantee fee that investors pay upon purchasing the bonds. It is easy to see, then, how the two companies that were believed to be “too big to fail,” started to experience problems. As more and more borrowers were unable to pay their mortgages, the responsibility fell on Freddie and Fannie. As they tried to stay afloat in their sea of debt, values of their securities started to plummet.
Recent attempts to try and find investors have been unsuccessful. Hedge funds like the Carlyle Group and Blackstone both expressed interest, only to rescind until further action by Treasury Secretary Henry Paulson.
"I think it starts with the constant doom and gloom, which makes investors quick to react when there is any sign of trouble ahead, and rightfully so," explains Michael Facchini, Portfolio Manager for Chicago-based Regent Global Funds. "Right now, investors are only interested in the cream of the crop when it comes to the MBS markets."
Federal Reserve Chairman Ben Bernanke has spoken several times about increased regulation of the companies, thanks to the widespread belief that Freddie and Fannie are government-backed. While both were created by Congress in an effort to increase homeownership and profits through the sale of their mortgage backed securities, they are in no way guaranteed by government funds.
In July, the Treasury and Federal Reserve outlined a plan to save Fannie and Freddie in order to prevent any chance of a Bear Stearns-like debacle. Among the suggestions, Paulson’s plan allowed for the Treasury to purchase shares of the two companies, should it prove to be necessary. That time has come, with some estimating the government may have to purchase about $60 billion worth of preferred shares.
Shares of Fannie Mae closed on Monday at $5.19, up 4 percent, while Freddie Mac rose 17 percent to close at $3.29.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Reuters- British investor The Children’s Investment Fund (TCI) said it had bought stakes in Mizuho Financial Group, Kajima Corp, and about eight other shareholders in J-Power, in order to raise pressure on the electricity wholesaler.
Mizuho, Japan’s second-largest bank, and Kajima, a construction company, are among the largest shareholders in J-Power, which TCI is pressuring to raise dividends, appoint outside directors and cut cross-shareholdings.
