NEWS.GNOM.ES –
LOS ANGELES (NEWS.GNOM.ES) – Walt Disney Co‘s quarterly earnings rose as the company reported growth at its media networks such as sports powerhouse ESPN and its theme park business.
Disney posted net income of $1.1 billion for the fiscal second quarter, a 21 percent gain from a year earlier.
(Reporting by Lisa Richwine; Editing by Bernard Orr)
By Sinead Carew | NEWS.GNOM.ES –
NEW YORK (NEWS.GNOM.ES) – AT&T Inc is making a big investment in a nationwide wireless home monitoring service that could potentially add $1 billion to its annual revenue as part of the No. 2 U.S. mobile operator’s ongoing effort to expand beyond cell phones.
It is planning a service called “Digital Life” to monitor homes for everything from water damage to burglaries and to let customers remotely do things like adjust temperature or unlock doors, using an Internet connection.
The service, of which AT&T will start trials this year, involves sensors and cameras linked to a central home system that connects wirelessly to AT&T monitoring centers, said Glenn Lurie, the AT&T executive spearheading the project.
Lurie said, in an interview with NEWS.GNOM.ES ahead of the CTIA wireless show in New Orleans, where AT&T will announce the plan Monday, that AT&T is hiring “lots of people” to support the service.
He did not want to set a specific revenue target for the business but said he sees it as one of AT&T’s largest revenue growth opportunities, “if not the largest,” with “very significant” incremental growth” in 2013.
“When you’re a company like AT&T … you look at opportunities that are billion-dollar opportunities,” Lurie said. “Obviously to grow our business at any level, when you’re a $130 billion plus company, you have to look for significant opportunities. We view this as a significant opportunity.”
Lurie, who has already grown AT&T’s emerging-device services into a $1 billion business, said the industry is ripe for growth, as only 20 percent of U.S. homes have security systems.
AT&T is building monitoring centers and seeking state approvals to offer security services, as well as creating partnerships with new types of third-party specialists.
While home security is a departure from wireless, Recon Analytics analyst Roger Entner said it is a good step, as AT&T has already done well connecting devices as varied as pill boxes, electricity meters and e-readers.
“I don’t think they have a choice but to look for other revenue streams,” said Entner who says traditional wireless is on a “strong but predictable” trajectory. “If you want to change that, you have to add to it through additional services.”
Lurie said AT&T may expand the service to support small businesses and senior citizens who want to live in their own homes even when they need close health monitoring.
“Our goal is to bring something people have never seen before,” Lurie said.
(Reporting By Sinead Carew; Editing by Gerald E. McCormick)
By Soyoung Kim, Rick Rothacker and Paritosh Bansal | NEWS.GNOM.ES –
NEW YORK/CHARLOTTE, North Carolina (NEWS.GNOM.ES) – In the fall of 2009, the board of GMAC, one of the largest U.S. auto and home-loan companies, gathered in New York to discuss whether to put its troubled mortgage unit into bankruptcy.
GMAC, now called Ally Financial, was just about to receive the last of $17 billion in taxpayer bailouts. The board, including directors named by the government, discussed whether to use bankruptcy to get rid of toxic mortgage assets that were pulling down the rest of the company, according to people who attended the meeting.
Alvaro de Molina, GMAC‘s CEO at the time, disagreed. The move, he said, would lead to years of fights with creditors and tough treatment from regulators that would hurt the company. De Molina prevailed, but the board lost confidence in the CEO and replaced him soon after with Michael Carpenter, an Ally director and former Citigroup Inc executive, these sources said.
Today, Residential Capital (ResCap) – Ally‘s mortgage servicing and lending unit that turned from being a profit engine to a lemon – is again on the verge of being put into bankruptcy, possibly within a week, according to sources with direct knowledge of the situation.
At the same time, Ally may find that General Motors Co and Chrysler, two key sources of customers, are increasingly reluctant to steer business to it. Many GM and Chrysler dealers depend on Ally to finance their inventories, and refer customers looking for car loans to Ally. If Ally gets fewer referrals in the future, and dealers find other sources of inventory financing, the value of the government’s 74 percent Ally stake could fall.
Ally still owes the Treasury Department about $12 billion, and people close to the company and the government acknowledge there is no clarity as to how to pay that back.
The company says it remains committed to protecting its auto lending and direct banking franchises. Putting its mortgage problems behind it, Ally spokeswoman Gina Proia said, “will be key to repaying the U.S. taxpayer its remaining investment.”
The Treasury declined to comment.
Where did Ally go wrong? Interviews with more than a dozen people directly involved in the company’s restructuring at various points over the last three years reveal how missed opportunities, competing interests, lax oversight from the government and bad luck have stymied Ally, shining new light into one of the least scrutinized bailouts of the financial crisis.
Time is running out for the company and its government overseers to find a solution.
The Obama administration is under pressure to show recoveries from crisis-era bailouts before the presidential election in November. Ally could become a potent weapon for Republican presidential candidate Mitt Romney, who has criticized Obama’s $81 billion auto bailout as “crony capitalism” that rewarded labor unions and other political allies of the president.
People familiar with the Treasury’s thinking say officials are getting frustrated with the lack of progress at Ally. They are loath to let Ally become a black mark on the auto industry bailout that while largely successful, still threatens to cost the government billions of dollars.
Ally’s health remains crucial to the auto industry. GM depends heavily on the lender, which like the carmaker is based in Detroit even if many of its senior executives live in New York. Nearly 75 percent of the credit that GM dealers in the United States use to finance their inventories, known as “floorplan financing,” is from Ally.
Ally has shrunk ResCap’s balance sheet by tens of billions of dollars over the last few years and written down the value of bad loans it made to people with shaky credit before the financial crisis.
But now ResCap faces litigation from private investors as well as the regulator of Fannie Mae and Freddie Mac over underwriting standards it used in making those loans, bringing a whole new set of liabilities that again threaten to take Ally down with it unless it is somehow separated. ResCap is seriously considering filing for bankruptcy by May 14 when it must repay a portion of its debt, and it is seeking to sell some assets, sources said.
Ally officials are confident that unlike in 2009, this time the company will have no trouble fending off claims from ResCap creditors. The mortgage unit has a separate board with independent directors and used independent advisers on transactions with its parent, a person close to the company said. A filing would be closely watched by Bank of America Corp, which has been dealing with huge losses due to its own mortgage imbroglio: Countrywide Financial. Bank of America declined to comment.
Sources involved in the restructuring said the decision to file for bankruptcy ultimately lies with ResCap’s board, and a final decision has not yet been made on the filing, which could still be delayed.
After the possible filing, a source close to Ally said, the company believes it will have a range of options to return taxpayer money. These include taking Ally public, bringing in private equity firms to buy out the Treasury’s stake, proving to the Federal Reserve that Ally has excess capital so it can pay Treasury a dividend, refinancing Treasury’s mandatorily convertible preferred stock in the public markets, and selling nonstrategic assets.
But the Treasury is skeptical an IPO would be possible anytime soon and has proposed the company sell itself, either as a whole or in pieces, to quickly repay taxpayers, sources familiar with the government’s thinking said.
So far, the sources said, the parties involved have been unable to agree on which course to take.
Several sources familiar with the restructuring said Ally missed opportunities to restructure over the last few years in part because of a lack of pressure from the Treasury in the early days of the bailout. Even now, after Ally has become a big focus and Treasury officials are deeply involved, the government has filled only four of the six board seats it is entitled to as a condition of the bailout.
A senior Treasury official said the government has nominated directors and let the board and management run the company – as has been the government’s approach to all other bailouts – instead of trying to make decisions for them. But behind the scenes, sources said, the pressure on Ally to show results is rising.
COMPETING INTERESTS
Restructuring Ally will not be easy since the key players have vastly different priorities.
The Treasury wants its money back as quickly as possible. But senior company executives, including Carpenter, have a large chunk of their compensation tied up in the company’s stock. That gives management an incentive to see the lender survive and grow, even though a portion of that stock pays off only if the company pays back Treasury, people involved in the process said.
Banking regulators, for their part, want to ensure that Ally Bank, an Internet bank with $39.2 billion in deposits, is safe. GM and Chrysler want to make sure financing is available for their dealers and car buyers. ResCap bondholders want to get back as much money as they can. And private equity firm Cerberus Capital Management LP – which bought a controlling stake of GMAC in 2006, but saw its share winnowed down after government bailouts – would like to recover as much of its investment as possible.
This means any decision will leave some powerful group unhappy.
Earlier this year, for example, the Treasury wanted Harry Wilson, who was part of the White House’s auto task force leading the sweeping 2009 restructuring of GM, to become a chief restructuring officer at Ally. But sources close to the Treasury said officials felt Ally’s management was not in favor. Instead, the company asked Lenard Tessler, a senior Cerberus executive and observer on Ally’s board, to advise Carpenter in thinking through different alternatives. Cerberus’ co-founder Stephen Feinberg is also an Ally director.
The role came despite a Cerberus agreement with the Fed that imposes limitations on how much influence the private equity firm can have on Ally. But people close to the company said Cerberus is not in violation of that passivity agreement and treads carefully. Late last year, for example, Cerberus withdrew from the auction for ResCap after the Fed rejected the idea, they said.
A Cerberus spokesman, speaking on behalf of Tessler and Feinberg, declined to comment for this story. The Fed declined to comment.
AUTO LENDING UNDER ATTACK
GM and Chrysler are turning the screws on Ally as well.
GM, which once owned Ally, tried to buy back the company’s auto finance business in 2010, but the two firms could not reach a deal, sources said. So GM bought Americredit, a subprime lender, for $3.5 billion and started building up its own financing arm. Recently, it has also started offering floorplan financing.
At the same time, at the end of 2013 Ally faces the expiration of a key lending agreement with GM. The automaker currently subsidizes car loans made by Ally to offer cheaper financing to consumers to help sell cars, known in the industry as “subvented lending.”
GM spokesman Jim Cain said, “Ally remains an important financing partner for GM customers and dealers.
Meanwhile, Chrysler has given notice that it will not automatically renew a preferred lending agreement that will now expire in April next year. The automaker said it is in talks with a number of banks, including Ally, for better financing options.
“We are currently pursuing various ways to optimize the financial products and services available to meet the needs of our dealers and customers in the U.S. and Canada,” Chrysler spokesman Ralph Kisiel said.
Ally executives dismiss concerns about the company’s relationship with major Detroit carmakers. They have said the Chrysler move was expected and doesn’t preclude the two companies from doing business together in the future. The lender can also still do business directly with Chrysler dealers.
Carpenter has reduced the company’s dependence on GM and Chrysler. When Ally was the financing arm of GM, a huge portion of its business depended on subvented loans. These loans totaled 18 percent of Ally’s U.S. consumer business in the first quarter, down from nearly three-quarters in the same period three years ago.
During the financial crisis, Ally was one of the few lenders willing to provide financing to GM and Chrysler dealers, which it believes has given it strong relationships with car sellers, a source close to the company said.
But some auto dealers say those loyalties only go so far. They are happy to see more competition among lenders now, with more banks and GM stepping up for floorplan financing.
“Now that we’ve moved into a more normal marketplace and credit is flowing a little more freely, there definitely is a lot of competition for the dealers’ wholesale business,” said John McEleney, a GM dealer based in Iowa, referring to floorplan financing.
RESCAP BANKRUPTCY
Meanwhile, the clock is ticking on ResCap.
Ally is negotiating with Fortress Investment Group to sell loans and the right to collect loan payments as well as with bondholders for a settlement on claims, sources familiar with the situation said. Barclays Plc has also agreed to arrange a roughly $1.5 billion debtor-in-possession loan for operations in bankruptcy, sources said.
Barclays declined to comment. Fortress did not respond to requests for comment.
But Ally is not likely to be in the clear even if ResCap files for bankruptcy. The company estimates that it would incur between $400 million and $1.25 billion of losses at the time of a bankruptcy.
The process could also drag out over a long period of time. Ally and ResCap are facing a series of mortgage-related lawsuits from bondholders and insurers that could linger. There are also complex transactions between Ally and ResCap, which could spur fights with creditors.
As a result, more than three years after it was bailed out, Ally finds itself back at the same crossroads all over again.
(Editing by Dan Wilchins, Alwyn Scott, Claudia Parsons, Alix Freedman and Gary Crosse)
By Antonella Ciancio | NEWS.GNOM.ES –
WASHINGTON (NEWS.GNOM.ES) – Monica Soltes was excited 10 years ago to leave Merrill Lynch and start her own business as an independent financial planner in San Diego. After she fell off a porch at her cousin’s cottage and broke her elbow, her dreams unraveled.
Following multiple surgeries that confined her to bed, Soltes was diagnosed with a hormonal disease that is weakening her bones. She also ran out of money, signed up for disability benefits and has been unable to work again.
The 47-year-old from Michigan is among the 8.7 million American workers on the U.S. disability rolls, an important part of the social safety net. Since the recession began in 2007, she has been joined by a record number of people seeking disability benefits, raising questions about the program’s solvency and casting a pall over future prospects for U.S. economic growth.
Applicants soared to a record high of 2.94 million in 2010, and have held above 18 per 1,000 workers in the past three years – a far higher rate than in previous recessions.
“There are serious concerns that this increase in disability benefits is a type of ‘hidden unemployment,’” said Richard Burkhauser, a professor of economics at Cornell University.
Even though only 35 percent of applicants are awarded disability, those receiving disability benefits now account for 5.6 percent of the working age population, up from about 4.5 percent in 2007. At this rate of growth, Burkhauser estimates that total would reach over 7 percent by 2018.
The problem is those on disability rarely return to work, reducing the overall size of the labor force and weakening the U.S. economy’s growth prospects. Rising gross domestic product (GDP) depends upon a growing workforce and rising productivity.
Since the recession began, the share of Americans actively looking for work, known as the labor participation rate, has fallen to 63.6 percent from 66 percent in 2007.
Some people give up looking for work temporarily, but the size of the decline has perplexed economists and disability is clearly a factor.
JP Morgan estimates it accounts for half a percentage point of the drop. With jobs scarce, it causes little drag on growth.
But Chris Low, chief economist at FTN Financial, said over time, disability will rob roughly $250 billion – or 1.6 percent – from total output each year once the economy returns to full employment, probably within the next five to seven years. This will also widen the budget deficit.
“There is no loss of GDP right away, as long as there is an ample surplus of employment. Think about it, would it really make a difference to us if there were two or three fewer people applying for our job opening?” he said.
“But when the economy finally starts getting close to full employment, the Federal Reserve will have to tap the brakes sooner. GDP will have to slow to 2 percent to 2.5 percent a year or two sooner than would otherwise be the case,” Low added.
LOST SKILLS, LOST LABOR
The longer someone is out of the workforce, the more their skills grow outdated and the harder it is to return to work.
They may also lose healthcare coverage. Not all employees are offered health insurance, while disability recipients are covered by the federal Medicare healthcare program. The result is that only 3 percent of people who claim disability ever get another job within 10 years.
Soltes is keenly aware of the difficulties. Since her diagnosis, she has moved in with her uncle in Michigan. After receiving her first disability benefits in 2006, she tried to sell Medicare healthcare plans. The business did not succeed and she now wants to work as a business adviser for the disabled.
“Whatever I do, it will be self-employment. It would be impossible for me to become someone’s employee. I must go at my own pace – not someone else’s – and do what my heart says must be done,” Soltes said.
The declining share of working age people in the workforce and the high level of unemployment has caught the attention of Federal Reserve Chairman Ben Bernanke.
“Although most spells of unemployment are disruptive or costly, the persistently high rate of long-term unemployment we have seen over the past three years or so is especially concerning,” the U.S. central bank chief said in a speech on labor in March.
Not only is there a personal cost ranging from lost skills to stress-related illnesses and worsening health, it strains public finances, he said. Payroll tax revenue is lost and benefit payouts rise to support the unemployed and their families.
Bernanke has made it clear that he is ready to provide further monetary support to help the economy if the U.S. labor market fails to improve. The April payrolls report was far from encouraging, showing only 115,000 new jobs created – about half the pace needed for healthy growth – and the labor participation rate hitting a 30-year low 63.6 percent of the population.
REFORM NEEDED
Economists say part of the rise in disability claims may be due to people nearing retirement who ignored a health problem when the job market was strong, but then seek benefits when they lose their job as a bridge until they qualify for Social Security pension plans.
Yet it is not the only reason. An aging population accounted for two-thirds of the rise in claims from 2000-07 as so-called baby boomers entered their 50s and 60s, when disabilities are more common, but they have only accounted for 10 percent of growth from 2007-10.
“If you look at the people on disability, around 40 percent are in their 60s. But younger people in their 30s and in their 40s have grown a lot. That is part of what has been driving the program,” said Mark Duggan, an economist at the Wharton School of the University of Pennsylvania.
Duggan and other economists say the major change in the growth rate stems from a series of reforms in the mid-1980s, which changed the focus of screening from medical criteria to working ability. Almost half of disability claims are for problems such as back pain and anxiety, which are more difficult to verify. This has led to thousands of new appeals filed every month before the U.S. administrative courts.
Soltes also said there are very few incentives for getting off the disability rolls, which pay an average cash benefit of $1,100 per month. While that is less than in most advanced economies, those in the United States are also provided Medicare health insurance.
“They are not encouraged to go back to work. I have gone to multiple meetings on a program called ‘Ticket to Work’ and there were only five people who showed up,” she said.
If people do return to work, they could lose benefits such as health insurance, which further discourages some from looking, said Richard Johnson, Director of the Program on Retirement Policy at The Urban Institute in Washington.
Economists said these issues would need to be addressed to reverse the advance.
“If you provide incentives to people to go back to work, they do that,” Barry Lundquist, President of The Council for Disability Awareness, a non-profit organization which advises disabled workers.
There is a pressing reason for change. At the current rate, disability rolls will run out of funds in 2016, adding to strains on the country’s debt load, already at $15 trillion. In December 2011 alone, the program paid out $4.3 billion more than it collected in tax revenue and it paid a total of $128.9 billion last year.
The disability program is funded mainly by payroll taxes, with additional revenue from interest on the assets in the trust fund, and income from the tax levied on those who receive Social Security retirement benefits.
“To keep the combined system afloat, we’re going to have to raise taxes, cut benefits, or probably do both,” said The Urban Institute’s Johnson.
(Additional reporting by Jason Lange; Editing by Stella Dawson, G Crosse)
By Stella Dawson and Nick Edwards | NEWS.GNOM.ES –
(NEWS.GNOM.ES) – With the United States struggling through a soft patch and Europe battling recession, China may come to the rescue by demonstrating a resilience that would provide comfort in a sea of economic uncertainty.
China, the world’s second largest economy, is looking ever more vital to maintaining global economic momentum, and a raft of data to be released this week is expected to provide fresh evidence that its economy bottomed in the first quarter and is starting a gradual turn upwards.
China posted its weakest growth in nearly three years in the first quarter, with gross domestic product expanding 8.1 percent. The slowdown in growth coincided with deteriorating economies in the euro zone and the United States, China’s two largest trading partners.
That combination stoked concern that China, too, could weaken, frustrating a shift away from export-driven growth toward domestic consumption, which economists view as essential to putting the global economy back on a solid growth path.
China’s growth has from China is even more important after mixed data from the United States in recent weeks, highlighted by a disappointing jobs report for April. Job growth slowed to 115,000, the third straight month of deceleration.
In Europe, business activity took a turn for the worse last month and the elections in France and Greece and Spain’s struggles to resolve its banking problems have driven up political uncertainty over the direction of the euro zone.
In contrast, manufacturing data for China perked up in April, suggesting China’s slowdown could be easing.
Justin Lin, chief economist of the World Bank, remains confident Beijing can engineer a soft landing thanks to a high level of technology investment, which should raise labor productivity, lift incomes and shift growth toward consumption.
“I think China can maintain 8 percent growth,” Lin said on Friday.
The view is widely shared by investment bank economists. “We believe China’s economy is showing modest signs of recovery,” said Standard Chartered in a client note.
Kenneth Rogoff, an economics professor at Harvard University, is more cautious, saying that China relies excessively on investment to drive growth.
Investment constitutes almost half of China’s GDP, twice the global average, driven by huge intervention in the financial system, which lowers borrowing costs while depressing returns for savers, Rogoff said in a paper on the Project Syndicate website.
Fixed asset investment has underpinned China’s economy as export growth has wilted, though government action to crimp the speculative real estate bubble it has fueled is beginning to bite. As a result, April data is likely to show a further easing of activity when the numbers are published on Friday.
Analysts at Citibank estimate 20.4 percent growth over year-ago levels, below the 20.9 percent rate in the first quarter, and they say it could be the third quarter before China’s economic rebound gains real traction.
Rogoff argues the investment drive is unstable and that allowing its currency to float more freely would help smooth China’s rebalancing. “China’s economy is still plagued by massive imbalances and moving to a more flexible exchange rate would serve as a safety valve and shock absorber,” he said.
But Beijing is showing little sign of heeding calls to move any faster on its currency after economic talks last week with the United States, when U.S. Treasury Secretary Geithner repeated his bid for a more flexible exchange rate. In an article in the country’s official newspaper, a leading China research agency said the yuan was well valued right now.
TRADE DATA
China’s trade numbers due for release on Thursday could further support its argument that the yuan’s value no longer gives it an unfair advantage on world markets. The report is expected to show a modest trade surplus of about $10 billion, according to China’s commerce minister, Chen Deming.
That would be roughly double March’s $5.35 billion, but down dramatically from a year ago and insufficiently strong to indicate a rebound in foreign demand for its exports is propelling China forward.
“Chen’s comment indicates that exports will be weaker than normal in April, which augurs poorly for second quarter sequential growth, typically the year’s fastest growth quarter,” said Tim Condon, ING’s head of Asia research, in a client note.
Still, analysts in a NEWS.GNOM.ES poll forecast that China can achieve 8.3 percent GDP growth year-on-year in the second quarter and 8.4 percent for 2012 as a whole.
The United States releases March trade data on the same day. The U.S. trade gap is forecast to widen to $50 billion from $46 billion as a pick-up in retail sales lifted imports and oil prices rose.
China’s retail sales, due on Friday, also may have ticked higher to 15.5 percent year-on-year from March’s 15.2 percent level, continuing a gentle upward trend.
“Urban and rural per capita income has been increasing faster than GDP so far in the year, which would support consumption growth in a low inflation environment,” Citi said.
Consumer and producer price inflation data the same day are expected to show a further softening of price pressures, with food costs likely declining month on month to help cap the annual CPI rate at 3.4 percent, according to UBS.
This would provide further room for Beijing to support growth by lowering its reserve ratio requirements for banks, already cut by 100 basis points in recent months.
“We continue to expect two 50 basis point RRR cuts before year end including one in the second quarter to stabilize liquidity,” Bank of America/Merrill Lynch said in a client note.
UBS forecasts that lending data due out this week will decline to 780 billion yuan ($124 billion) in April versus the 1.01 trillion yuan in loans extended in March, which would add to the argument for a further easing of rates.
(Editing by Leslie Adler)
By Sinead Carew and Matthew Goldstein | NEWS.GNOM.ES –
NEW YORK (NEWS.GNOM.ES) – Billionaire investor Carl Icahn has sold his $250 million debt holdings in Philip Falcone‘s telecom start-up LightSquared
News of Icahn’s debt sale comes as remaining creditors agreed to a second week long extension until May 14 of their talks with Falcone about reducing his firm, Harbinger Capital Partners‘ 96 percent equity stake in LightSquared.
One hedge fund representative said some constructive progress has been made in talks that began in earnest between LightSquared and its creditors two weeks ago over a potential default on $1.6 billion of LightSquared debt.
Meanwhile Icahn, who was seen as one of the leaders in pushing for Falcone to reduce his role in LightSquared, appears to have made a big profit on the sale, according to sources familiar with the matter.
The investor on Thursday sold his debt for about 60 cents on the dollar after buying the position when it was trading in the low 40 cents range only months before, several people familiar with the matter said.
Two sources familiar with the matter said that the buyer of Icahn’s debt was Sound Point Capital, a small investment firm led by Stephen Ketchum, who formed the company in 2009.
Ketchum, who was previously head of media investment banking at Banc of America, was not immediately available for comment. Nor was a representative for Icahn. A spokesman for Harbinger was not immediately available to comment on the extension.
UNCERTAIN FUTURE
LightSquared’s future was thrown into doubt in February after the U.S. Federal Communications Commission said it would revoke the start-up’s permission to use its spectrum licenses to build a high-speed wireless network because tests had shown that it would risk interfering with Global Positioning Systems.
These systems support crucial services such as aviation safety and military systems as well as devices used in industries such as construction and agriculture.
The fate of LightSquared, whose business model was dependent on being able to build a wireless network, is an important concern for investors in Falcone’s $3.8 billion hedge fund Harbinger, which has sunk some 60 percent of its money into the telecom startup.
After the FCC action, LightSquared debt holders, including Icahn and hedge fund manager David Tepper, had initially threatened to declare a default on the $1.6 billion in loans if they could not reach an agreement by April 30.
Last week, the creditors already extended that deadline once until May 7 before extending it again.
Last year, Harbinger posted a 47 percent decline in value, largely because of a write-down on the value of the LightSquared investment.
LightSquared’s predicament is also being closely watched by the telecommunications industry, which says it is crying out for access to additional wireless airwaves to support high-speed data services.
(Editing by Maureen Bavdek and Marguerita Choy)
NEWS.GNOM.ES –
ZURICH (NEWS.GNOM.ES) – Swiss bank Pictet said on Sunday it handed over bank account details to U.S. authorities probing cases of tax evasion, as a newspaper reported it had accepted funds from two former UBS
Pictet said in a statement the data handover took place in November 2010 via the Swiss tax office, which had received a request for assistance from its U.S. counterparts.
This is the latest episode in an ongoing dispute between the United States and Switzerland over wealthy Americans accused of avoiding taxes by hiding money in secret Swiss accounts.
Eleven Swiss banks – including Credit Suisse
Banking secrecy has helped the Swiss build up a $2 trillion offshore wealth management industry.
Citing 130 pages of court documents, the SonntagsZeitung said that two U.S. citizens transferred more than $2 million to accounts at the private bank Pictet, registered under the names of two front companies in Switzerland, at a time when UBS was under scrutiny by U.S. authorities investigating tax evasion.
The article, which was also carried in the French-language Le Matin Dimanche, did not say whether the U.S. authorities might take action against Pictet.
In its statement, Pictet did not say from which bank it had received a money transfer or how much it was. The Geneva-based bank said it closed the accounts in 2010.
Pictet said it was not being accused of breaking U.S. law.
“Moreover, we vigorously refute any allegation that Pictet is being targeted by the U.S. tax authorities,” it said, adding there had been no subsequent data handovers after November 2010.
“The affair referred to in the Sunday newspapers was handled in full compliance with US and Swiss legal requirements,” it said.
Finance Ministry spokesman Roland Meier declined to comment on the report.
The investigation into the 11 Swiss banks was fed by data culled in a crackdown on UBS, which that bank settled in 2009 by handing over thousands of client data, paying a fine and admitting wrong-doing.
In a related interview with the SonntagsZeitung, Patrick Odier, president of the Swiss Bankers Association, said another case like that of Wegelin & Co. could not be ruled out.
Wegelin, Switzerland’s oldest bank, buckled under the pressure of a long-running campaign by U.S. tax authorities and broke itself up in January. Wegelin had accepted money from UBS clients suspected of dodging tax.
“U.S. authorities could have enough material to weigh on banks other than those on the 11-bank list,” Odier said.
Switzerland is trying to get investigations into 11 banks dropped in return for the payment of fines and the transfer of U.S. client names. It is also seeking a deal to shield the remainder of its 300 or so banks from U.S. prosecution.
Swiss Finance Minister Eveline Widmer-Schlumpf has said she hoped for a deal before the end of the year.
“We need to draw a line under it, so there are no more charges,” Odier said.
Odier also said he did not know how high any fines would be, but that any money due would be divided up amongst the Swiss banks based on the size of their U.S. client base.
Switzerland has also been locked in a similar tax dispute with Germany. The two countries last year agreed to tax secret offshore accounts but are still arguing over whether the deal is too lenient or not.
“Switzerland has made many concessions to Germany,” Odier was quoted as saying. “More is not possible.”
(Reporting by Catherine Bosley; Editing by Hans-Juergen Peters)
NEWS.GNOM.ES –
NEW YORK (NEWS.GNOM.ES) – Comcast Corp‘s NBCUniversal business exercised an option to sell “a substantial portion” of its stake in A&E Television Networks to joint-venture partners, a filing from the media company showed.
Comcast, which owns almost 16 percent of A&E, exercised the option on March 26 and expects the deal to close in the second half of 2012, the company said in a filing with the Securities and Exchange Commission earlier this week.
“The parties are still discussing how much of the stake will be sold,” The Wall Street Journal reported, citing a person familiar with the matter.
Citigroup analyst Jason Bazinet estimated the stake’s value at about $2 billion, the newspaper said citing a research report.
A&E, home to channels such as The History Channel and Lifetime, fell into Comcast’s hands when it bought NBCUniversal from General Electric last year.
(Reporting By Dhanya Skariachan; Editing by Maureen Bavdek)
By Kathy Finn | NEWS.GNOM.ES –
NEW ORLEANS (NEWS.GNOM.ES) – It took decades for music delivery to evolve from vinyl records to CDs and years to go from CDs to MP3 players.
Now Internet radio is shaping up as competition for digital audio players by providing free online music streaming from websites such as Pandora and Spotify.
Singer-songwriter Theresa Andersson had just wrapped up a set at the New Orleans Jazz and Heritage Festival, and new fan Dana Spanierman was already planning how she could hear similar bluesy harmonies.
“I’m going to put her into Pandora and see who else I’ve been missing,” the Santa Cruz, California resident said.
Spanierman is one of 125 million registered users of Pandora Media Inc, a service that lets listeners create their own playlists, or “stations.”
Using a single genre, artist or song title that users type into an app downloaded to their computer or smart phone, it compiles and streams songs by a variety of artists who share musical attributes with the one requested.
“It’s a great way of putting in a genre that I like and hearing other bands that I’m not that familiar with,” Spanierman said.
Pandora produces these customized playlists by using technology from the Music Genome Project, an intensive analysis and cataloging of music based on some 450 distinct markers related to tonal quality, rhythm, instruments and style.
The publicly traded company has close to a million songs in its database and streams the music free of charge to listeners, which for Spanierman – who hates paying for music – is a big plus. “It really works for me. I don’t even really mind the commercials,” she said, touching on Pandora’s primary revenue stream.
NEW REVENUE
Founded in 2000, Pandora racked up $274 million in revenue last year, largely from the 10- to 30-second advertising spots the company sprinkles into its radio streams and advertising partnerships with platforms such as Google.
But financial pressures have risen in tandem with advertising sales, because the firm operates under a license that requires paying royalties to the artists played by its listeners.
Last year, it paid almost $150 million in royalties, according to information from the company. Most are funneled through Sound Exchange, a firm which pays half the rights to the artist and half to the label.
At a royalty rate of 0.1 to 0.2 cents per track per listener, most artists receive less than $5,000 annually, Sound Exchange communications manager Marie Knowles told NEWS.GNOM.ES.
While Pandora is not making musicians rich, Knowles said many are happy to receive the money. “This is not a revenue stream that artists had before,” she said.
Kevin Wortis, director of label services for Girlie Action Media in New York, which provides management services to Andersson and more than 130 other musicians, said it also helps promote artists.
“It’s all about momentum and multiple impressions,” he said.
“I think Pandora has had a positive impact. People can get turned on to new music with that format, and a lot of people love it.”
FAMISHED FOR GREAT MUSIC
Pandora founder and Chief Strategy Officer Tim Westergren is a musician and composer. He was in New Orleans for the Sync Up industry conference held in conjunction with the Jazz Fest – an event which he said puts Pandora in “perfect context.”
The seven-day bash presents hundreds of bands, “some well-known, and some young, new bands that people haven’t heard so much,” he said. “You have hundreds of thousands of people who are just famished for great music.”
Like the festival, Pandora puts those lesser-known artists on equal footing with big names and gives the audience broad choices in genre, Westergren says.
As Pandora grows its music database, its costs have increased. While the firm posted a $16 million loss in its latest fiscal year, which ended January 31, Westergren believes the growing number of users will boost revenue.
“As we’ve started to reach scale, that’s really fueled advertising sales,” he said, adding that “we’re absolutely confident” they can sell enough advertising to afford the music.
Pandora estimates it will take in $410 million in revenue during the coming year, according to filings with the Securities and Exchange Commission, but losses likely will continue while the it pursues new advertising, particularly in the mobile device market.
INCREASED COMPETITION
The firm also faces ongoing competition from other online music providers, including the increasingly popular Spotify, a digital music service that holds streaming rights to some 18 million tracks.
Unlike Pandora, Spotify makes music available to listeners on demand, meaning users can select the artist or album they want to hear. To do this, the company must conclude licensing arrangements with each artist it offers.
Also, while Pandora’s license currently limits it to U.S. operation, Spotify is available in 13 countries. Both services are mostly free, but both offer a service upgrade to paying subscribers.
Spotify, which now claims 10 million active users and about 3 million paying subscribers, has partially hooked its star to Facebook, now requiring users to register for the music service using their Facebook accounts.
The social network posts Spotify listeners’ music choices on their personal pages for friends to see.
While the Facebook partnership has increased Spotify’s exposure, not everyone appreciates it.
“What I don’t like about Spotify is, what you listen to shows up on Facebook, and I don’t need everyone knowing what I’m listening to, so I don’t use it,” festival-goer Spanierman said.
Despite the differences in their formats and services, Spotify likely will continue nipping at Pandora’s heels. The company is rumored to be developing a Pandora-like music discovery service that could launch later this year.
Pandora shares, which debuted at $16 when it made its initial public offering in June 2011, closed at $8.75 on Friday.
(Editing by Tim Gaynor and Todd Eastham)
By Robin Paxton | NEWS.GNOM.ES –
ALMATY (NEWS.GNOM.ES) – Around 300 Kazakh copper miners continued their underground strike on Sunday, demanding higher wages from their employer Kazakhmys
London-listed Kazakhmys, the world’s 11th-largest copper producer, sent senior managers to the Annensky mine in central Kazakhstan and said it would not punish striking workers if they agreed to enter constructive talks.
“The Kazakhmys representatives guaranteed that no sanctions would be taken against workers in the event that they adopt a constructive approach to the labor dispute,” the company, which is in the FTSE 100 index <.ftse>, said in a statement.
Authorities in Kazakhstan, a former Soviet republic of 16.7 million people, are especially wary of labor unrest in single-industry towns after a months-long dispute by sacked oil workers last year erupted into the country’s worst violence in decades.
At least 14 people were killed in clashes in December when police used live rounds against protesters in the remote oil town of Zhanaozen. The unrest posed the most serious challenge to President Nursultan Nazarbayev in his more than 20-year rule.
That violence was preceded by months of protests by nearly 2,000 oil workers sacked by KazMunaiGas Exploration Production
After talks with representatives of the striking miners, Eduard Ogai, chief executive of Kazakhmys Copper, read a letter to local prosecutors and officials in which management requested the sit-in be treated as a labor dispute, Kazakhmys said.
Ogai was joined at the mine by Oleg Novachuk, chief executive of Kazakhmys group, as well as chief operating officer Sergei Dyachenko, it said.
The miners failed to emerge from the Annensky mine, near the town of Satpayev in central Kazakhstan, after their Friday shift came to an end. Kazakhmys had tightened security around the mine’s explosives warehouses, a company source said on Saturday.
“The situation on the territory of the mine is generally calm,” the company said on Sunday. “According to the latest information, around 300 people remain in the underground part of the mine.”
Annensky is one of six underground mines operated by Kazakhmys near the city of Zhezkazgan, a region that contributes about 70 percent of the company’s mined ore. It also operates one open-pit mine nearby.
Kazakhmys said it had increased salaries across the entire group, including miners’ salaries, by an average of 20 percent in 2010. Since February 2011, it had offered performance-related bonuses of up to 15 percent, it said.
The average monthly salary for Kazakhmys miners was around 240,000 tenge ($1,622), nearly three times the national average, the company source said.
(Additional reporting by Mariya Gordeyeva)
