The Fabulous Fab trial goes to jury today:
A win by the SEC may demonstrate the agency has the will and resources to win cases at trial, strengthening its hand in future negotiations with Wall Street institutions and their employees.
A loss, following a defeat last year in a trial against Brian Stoker, the former head of Citigroup Inc.’s CDO structuring group, would be the second high-profile trial loss in cases tied to the 2008 financial meltdown, in the Manhattan federal courthouse just blocks from Wall Street.
“At the end of the day, this was a tremendous build-up for what amounts to a minor case involving a midlevel player whose personality essentially became the case,” said Jacob Frenkel, a former SEC lawyer not involved in the Tourre case. “What we’re seeing so far is that the government’s best shot at Goldman was a low-level figure.”
The decision not to call any additional witnesses “highlights the level of confidence the defense has in its case,” Frenkel said.
In other fallout from the Credit Crunch, Barclays has come out with a massive rights deal:
Barclays Plc (BARC), the U.K.’s second-largest bank by assets, plans to raise 5.8 billion pounds ($8.9 billion) in a rights offering to bolster capital as it booked its biggest charge to date for customer compensation.
nvestors will be able to buy one new share for every four they already own for 185 pence, 40 percent less than yesterday’s closing price, London-based Barclays said in a statement today. It will also shrink assets by as much as 80 billion pounds to 1.5 trillion pounds and sell 2 billion pounds of loss-absorbing securities to meet calls by the regulator to cut leverage.
Chief Executive Officer Antony Jenkins, 52, is selling more shares than the 4 billion pounds analysts had anticipated after the lender’s capital shortfall swelled to 12.8 billion pounds at the end of June under the stricter Basel III rules on bank capital. The Prudential Regulation Authority is imposing a 3 percent leverage ratio, forcing banks to hold 3 pounds of equity for every 100 pounds of assets to make the financial system safer. Barclays had sought to plug the deficit by using contingent convertible bonds and retaining earnings.
…
Barclays was one of only two British lenders to miss the regulator’s leverage target in June, with only 2.5 percent. Nationwide Building Society, which at 2 percent also failed, was given until the end of 2015 to make up the shortfall.Barclays said that under the full Basel III rules its ratio was only 2.2 percent at the end of June. The ratio declined after the latest version of the Basel rules added 85 billion pounds of leverage exposure, the lender said. Part of the 12.8 billion-pound gap comes from a PRA calculation of future bad loan losses and potential redress for customers, which reduces capital by 4.1 billion pounds, Barclays said.
Deutsche Bank AG (DBK), continental Europe’s biggest bank, said it will shrink its balance sheet by 250 billion euros ($332 billion), joining Barclays Plc (BARC) and UBS AG (UBSN) in seeking to comply with stricter capital rules.
Deutsche Bank will reduce leverage by changing the way it accounts for derivatives and by winding down a 73 billion-euro portfolio of assets, Chief Financial Officer Stefan Krause told investors on a conference call today. Krause announced the plan after the bank said net income slid 49 percent to 334 million euros, missing the average 767.6 million-euro estimate of nine analysts.
Meanwhile, UBS provides some insight as to why scaremongers talk about “downgrades” rather than “defaults”:
UBS needed state aid after the bankruptcy of Lehman Brothers Holdings Inc. in 2008 froze financial markets and the Swiss bank’s mistimed bet on the U.S. housing market resulted in more than $57 billion in writedowns and losses during the subprime crisis.
The company spun off $38.7 billion of risky assets into the Swiss National Bank fund, while the government provided 6 billion francs ($6.4 billion) of equity and the SNB made a loan to support the assets as they were being run down. The Swiss government sold its investment in UBS less than a year later for a profit of 1.2 billion francs.
As part of the rescue, UBS was granted an option to buy back the equity of the fund once the SNB loan was repaid. Under that arrangement, UBS would pay the central bank $1 billion plus 50 percent of the value of equity exceeding that level — amounting to about $3.25 billion based on values at the end of last year.
REITs are the key to a lot of deals. Does this tell you anything?
The high likelihood that Hudson’s Bay will spin off its real estate portfolio into a real estate investment trust (REIT) – seen by many as not only a means to cash in on the ample high-value real estate it would acquire in the Saks deal, but also a source of funds to reduce the debt burden – is also, paradoxically, a dilemma for Moody’s.
…
Still, the REIT looks like the key to solving Hudson’s Bay’s debt puzzle. Mr. Caicco estimates that Hudson’s Bay could hand nearly $1.6-billion of its debt over to the REIT, along with the assets associated with it. There, the debt would be supported by nearly $3.8-billion in properties across Hudson’s Bay, Saks and Lord & Taylor’s holdings.This is why the market needs to hear the REIT plan. Without it, an awful lot of debt questions remain unanswered.
More trouble for Canaccord?
Aggarwal, 40, of Gurgaon, India, was arrested yesterday by agents of the Federal Bureau of Investigation in San Jose, California, as part of the U.S. government’s six-year crackdown on insider trading at hedge funds, said Peter Donald, an FBI spokesman in New York.
Manhattan U.S. Attorney Preet Bharara’s office said Aggarwal is charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud for passing along an inside tip about a pending deal between Yahoo! Inc. (YHOO) and Microsoft Corp. (MSFT)
“Sandeep Aggarwal leveraged his contacts in the technology industry to obtain an illegal edge in the form of inside information about a highly anticipated development, then lied about his criminal conduct,” Bharara said in a statement.
Aggarwal formerly worked at Collins Stewart LLC in San Francisco, said a person familiar with the situation, who requested anonymity because the matter wasn’t public. Andrea Sergautis, a spokeswoman for Canaccord Genuity in Toronto, which acquired Collins Stewart, didn’t return a call seeking comment on Aggarwal’s case.
Aggarwal provided material nonpublic information about a strategic partnership in Internet search and advertising between Microsoft and Yahoo to two different hedge funds, including SAC, the U.S. alleged in a criminal complaint unsealed today.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 1bp, FixedResets up 10bp and DeemedRetractibles gaining 8bp. There was again a surprisingly lengthy Performance Highlights table. Volume was above average.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5876 % | 2,601.0 |
| FixedFloater | 4.10 % | 3.40 % | 34,837 | 18.58 | 1 | 0.0000 % | 4,046.5 |
| Floater | 2.70 % | 2.87 % | 85,020 | 20.05 | 4 | -0.5876 % | 2,808.4 |
| OpRet | 4.59 % | 1.87 % | 85,736 | 0.08 | 3 | 0.1532 % | 2,628.5 |
| SplitShare | 4.70 % | 4.85 % | 61,197 | 4.16 | 6 | 0.3011 % | 2,950.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1532 % | 2,403.5 |
| Perpetual-Premium | 5.62 % | 4.67 % | 105,726 | 0.09 | 12 | -0.0166 % | 2,285.2 |
| Perpetual-Discount | 5.38 % | 5.45 % | 138,621 | 14.71 | 26 | -0.0122 % | 2,392.8 |
| FixedReset | 4.99 % | 3.66 % | 233,811 | 3.96 | 84 | 0.0973 % | 2,466.8 |
| Deemed-Retractible | 5.09 % | 4.65 % | 197,274 | 6.84 | 43 | 0.0835 % | 2,374.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.F | FixedReset | -1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.56 Bid-YTW : 4.15 % |
| BAM.PR.K | Floater | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-30 Maturity Price : 18.06 Evaluated at bid price : 18.06 Bid-YTW : 2.92 % |
| BAM.PR.C | Floater | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-30 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 2.91 % |
| GWO.PR.N | FixedReset | -1.18 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.52 Bid-YTW : 3.89 % |
| SLF.PR.H | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.64 Bid-YTW : 4.12 % |
| POW.PR.D | Perpetual-Discount | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-30 Maturity Price : 23.17 Evaluated at bid price : 23.43 Bid-YTW : 5.37 % |
| BAM.PF.D | Perpetual-Discount | 1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-30 Maturity Price : 22.54 Evaluated at bid price : 22.86 Bid-YTW : 5.42 % |
| BAM.PR.N | Perpetual-Discount | 1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-30 Maturity Price : 21.86 Evaluated at bid price : 21.86 Bid-YTW : 5.50 % |
| BAM.PR.X | FixedReset | 1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-30 Maturity Price : 22.65 Evaluated at bid price : 23.55 Bid-YTW : 3.95 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.L | Deemed-Retractible | 67,381 | National crossed 47,400 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.93 Bid-YTW : 4.56 % |
| BNS.PR.A | FixedReset | 66,120 | National crossed blocks of 49,100 and 10,400, both at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-29 Maturity Price : 25.50 Evaluated at bid price : 26.10 Bid-YTW : -26.40 % |
| CM.PR.D | Perpetual-Premium | 59,972 | Nesbitt crossed 40,000 at 25.16. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-29 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : -1.54 % |
| BMO.PR.M | FixedReset | 57,130 | Will reset to 3.39% coupon. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.57 % |
| CM.PR.G | Perpetual-Premium | 52,000 | Nesbitt crossed 42,300 at 25.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-01 Maturity Price : 25.00 Evaluated at bid price : 25.03 Bid-YTW : 5.27 % |
| BMO.PR.L | Deemed-Retractible | 39,304 | Nesbitt crossed 35,000 at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-29 Maturity Price : 26.00 Evaluated at bid price : 26.04 Bid-YTW : -1.12 % |
| There were 39 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.F | FixedReset | Quote: 23.56 – 24.49 Spot Rate : 0.9300 Average : 0.7145 YTW SCENARIO |
| FTS.PR.G | FixedReset | Quote: 24.10 – 24.55 Spot Rate : 0.4500 Average : 0.3213 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 25.20 – 25.55 Spot Rate : 0.3500 Average : 0.2294 YTW SCENARIO |
| BAM.PF.D | Perpetual-Discount | Quote: 22.86 – 23.15 Spot Rate : 0.2900 Average : 0.1873 YTW SCENARIO |
| TD.PR.C | FixedReset | Quote: 25.26 – 25.50 Spot Rate : 0.2400 Average : 0.1538 YTW SCENARIO |
| ELF.PR.H | Perpetual-Premium | Quote: 24.47 – 24.84 Spot Rate : 0.3700 Average : 0.2840 YTW SCENARIO |