Frontrunning: September 12

Frontrunning: September 12
  • Syrian Rebels Hurt by Delay (WSJ), U.S. seeks quick proof Syria ready to abandon chemical weapons (Reuters)
  • Lavrov Brings Acerbic Pragmatism to Syria Meet With Kerry (BBG)
  • Five years after Lehman, risk moves into the shadows (Reuters)
  • U.S. shares raw intelligence data with Israel, leaked document shows  (LA Times)
  • Japan to raise sales tax, launch $50 bln stimulus (AFP) – so 1) lower debt by sales tax, then 2) raise debt through stimulus.
  • Blackstone’s Hilton Files for $1.25 Billion U.S. Initial Offer (BBG)
  • Second Life Bankers Thrive in Dubai as Boutiques Boost Fees (BBG)
  • Brussels probes multinationals’ tax deals (FT)
  • Wall Street’s Top Cop: SEC Tries to Rebuild Its Reputation (WSJ) … and fails
  • Tablet sales set to overtake PCs (FT)
  • The end of angst? Prosperous Germans in no mood for change (Reuters)
  • Mondelez strikes deal to chew into Twitter’s social media knowhow (FT)
  • Australia’s Jobs Drop Underscores Challenge for Abbott (BBG)
  • Chicago Mayor Emanuel apologizes for past police torture (Reuters)

Overnight Media Digest


* With a U.S. attack on Syria on hold, Western-backed rebels said they feared they had lost their best chance of promptly ousting President Bashar al-Assad and sidelining Islamist extremists.

* The Obama administration plans to block the construction of new coal-fired power plants unless they are built with novel and expensive technology to capture greenhouse gases.

* Verizon Communications $49 billion bond offering sparked a frenzy across Wall Street on Wednesday as investors clamored to buy a piece of the largest corporate debt sale in history.

* SEC officials will question top exchange executives on Thursday morning about the most recent computer glitch to rattle the markets, as regulators seek tougher standards for trading systems that have drawn objections from the industry. The meeting comes nearly three weeks after the latest major market failure, at the Nasdaq Stock Market, and isn’t widely expected to yield new rules for exchanges immediately.

* A U.S. appeals court suggested it might give Apple a second crack at making a case that Google’s Motorola Mobility copied iPhone patents.

* Pandora Media appointed Brian McAndrews to be its new CEO, president and chairman as the online radio company faces the threat of Apple’s new iTunes Radio service.

* MiMedx is scrambling to reassure investors after the FDA raised questions about key products it makes, all of which come from the human placenta. The company’s travails have shed light on a little known segment of the medical-products business. A few companies including MiMedx have worked up treatments using amniotic tissue, but the government appears to be taking a closer at whether their processing should force them to be regulated as drugs.

* A Dish Network Corp director who resigned in recent weeks did so amid a disagreement over the company’s handling of a bid for a telecommunications firm that could deliver hundreds of millions of dollars of personal profits to Dish Chairman Charlie Ergen, people involved in the situation said.

* Vivendi SA moved closer Wednesday to reshaping itself as a smaller media company, beginning a process to spin off its biggest telecommunications unit while simultaneously calming a simmering leadership dispute.

* Private-equity firms KKR & Co and Sycamore Partners are considering a joint bid for Jones Group Inc , the footwear and apparel maker that has put itself up for sale, people familiar with the matter said.

* Time Warner Cable Inc’s chief operating officer, Rob Marcus, said Wednesday that the cable operator lost customers as a result of the recent month-long blackout of CBS Corp programming on its systems in some major markets


Morgan Stanley is being sued by an ex-auditor, claiming that senior executives and audit officers ignored and “whitewashed” his concerns that the bank was taking on too much credit risk before the global financial crisis.

A German labour court on Wednesday ordered Deutsche Bank to rehire four traders that it wrongfully dismissed during an internal probe into the global Libor scandal.

The European Commission will next week announce that London will remain the primary authority for Libor, despite plans earlier in the year to put the lending rate under the direct control of a European supervisor in Paris.

Leading global grains exporter Cargill said on Wednesday that its Chief Executive Greg Page is set to leave more than two years ahead of his mandatory retirement age, to be replaced by David MacLennan, the agribusiness’ president and chief operating office.

A group of creditors – including hedge fund Cube Capital – on Wednesday commenced legal proceedings against the Indonesian Bakrie family in a payment dispute over a $155 million bond issued by Bakrieland Development, a property affiliate.


* Several big life insurers are going to have to set aside a total of at least $4 billion because New York regulators believe they have been manipulating new rules meant to make sure they have adequate reserves to pay out claims. The development stems from contentions by insurance companies that states’ regulations are forcing them to hold too much money in reserve.

* Facebook Inc, which has repeatedly tripped over its own feet when changing its privacy practices, has stumbled yet again. The Federal Trade Commission said on Wednesday that it had begun an inquiry into whether the social network’s proposed new privacy policies, unveiled two weeks ago, violated a 2011 agreement with regulators. Under that agreement, the social network is required to get the explicit consent of its users before exposing their private information to new audiences.

* With the introduction of a cheaper iPhone on Tuesday, Apple Inc took a step toward catering to China, the world’s largest smartphone market and one that is crucial to the company’s future. But the cost of the phone – more than $700 in China – will still keep Apple’s phones beyond the reach of most Chinese consumers.

* Pandora Media Inc on Wednesday named Brian McAndrews, a technology and digital advertising executive, its chief executive and chairman. He succeeds Joseph Kennedy, who announced his resignation in March after nine years with Pandora, a leading Internet radio service.

* On Wednesday, the three largest record companies – Sony, Universal and Warner, along with ABKCO, an independent that controls many of the Rolling Stones’ early music rights – sued Sirius XM Radio Inc in a California court, saying that the satellite service used recordings from before 1972 without permission.

* California’s top lawmakers on Wednesday pledged their support for a plan to raise the minimum wage in the state to $10 an hour, which could soon give California workers the highest minimum pay rate in the country.

* William Ackman expanded his campaign against Herbalife Ltd on Wednesday, questioning the independence of its auditor, PricewaterhouseCoopers, and warning of “serious accounting” issues at the company. Ackman, the hedge fund billionaire who runs Pershing Square Capital Management, questioned whether PricewaterhouseCoopers has a conflict of interest because of nonauditing work it performed for Herbalife, the nutritional supplement company.



* The Parti Québécois is pushing the private sector to adopt its proposed charter of values as a model to create a more secular workplace. The charter, which would regulate religious-based clothing for public employees, has been met with mixed reactions, including concerns in the private sector that it sends a negative signal to would-be immigrants.

* Russian President Vladimir Putin warned on Wednesday against a U.S. strike on Syria, saying such action risked escalating the conflict beyond that country and unleashing terrorist attacks. Writing in the New York Times, Putin said there were “few champions of democracy” in the 2-1/2-year-old civil war in Syria, “but there are more than enough Qaeda fighters and extremists of all types battling the government.”

* An armored car guard who gunned down four crewmates on the job has been handed the toughest sentence in Canada since the country’s last execution, but it is not enough for some family members of his victims. An Edmonton judge agreed on Wednesday to a plea deal that gives 22-year-old Travis Baumgartner a life sentence with no chance of parole for 40 years.

Reports in the business section:

* BlackBerry Ltd is stepping up its lobbying efforts in Ottawa in a bid to smooth regulatory hurdles if the company can find a foreign buyer for its struggling business. The Waterloo, Ontario-based smartphone maker recently added the Investment Canada Act to its discussion topics with government officials under the lobbying registry, which previously included a number of topics ranging from intellectual property legislation to tax policy, law enforcement and other subjects.

* Alberta natural gas prices, already under pressure after recent changes to pipeline transport rates, have weakened against a backdrop of mild weather and bulging inventories, a potential hit on the province’s finances even as oil markets look brighter.

* Bombardier Inc’s rail division continues to expand its signaling business by winning its first major contract in the Eastern European country of Azerbaijan. The Berlin-based division of the train and plane maker is part of a consortium awarded a $288 million contract to supply signaling equipment for a 503-kilometre line to Azerbaijan Railways.


* It could be called a storm in a coffee cup, but New Brunswick’s Green Party leader wants Quebec-style sign legislation requiring all businesses to post signs in French as well as English. David Coon was spurred into action after Seattle, Washington-based Starbucks Corp opened a coffee shop in the city and provided customers with menus in English only.

* The wrangling over transit in Scarborough shows no sign of abating, with Mayor Rob Ford disputing whether the city should pay for any subway cost overruns, and the Toronto Transit Commission chairwoman delivering her strongest rebuke yet of the route favored by the province.


* Canada’s largest oil company has added its voice to those playing down the importance of Keystone XL, as the U.S. government weighs approval of the contentious pipeline. “The belief is that the industry will get access to markets” with or without the pipeline, Suncor Energy Inc chief executive Steve Williams said on Wednesday.

* Irving Oil Co could be facing some hefty fines after it was determined the crude oil involved in the Lac-Mégantic disaster had been improperly labeled. The Transportation Safety Board said on Wednesday its investigation into the July 6 Lac-Mégantic derailment, in which 47 people died, determined the oil contained in the railcars was mislabeled and more flammable than previously thought.

* Low interest rates are helping to boost property markets across the globe and Canada is no exception, says a new report from the Bank of Nova Scotia. However, future gains in Canada are no guarantee, the report from economist Adrienne Warren says.



— China built 3.6 million units of low-cost apartments in the first eight month of this year. The government plans to build 4.7 million units of such apartments in 2013.

— China will soon approve license of 4G mobile communication, said Zhang Xiaoqiang, deputy director of the National Development and Reform Commission.


— Unilever Plc plans to build a fourth factory in China, Zeng Xiwen, the firm’s vice president for North Asia, said.


— China needs to make greater efforts to ensure migrant workers’ social inequalities are rectified so they can enjoy the same services as urban residents, the paper said in an editorial.


— China will increase investment in education sectors to raise the standard of education of financially stricken students, the State Council of China said.

Fly On The Wall 7:00 AM Market Snapshot



Allstate (ALL) upgraded to Outperform from Market Perform at Wells Fargo
Cardinal Financial (CFNL) upgraded to Outperform from Market Perform at Keefe Bruyette
Cash America (CSH) upgraded to Outperform from Market Perform at JMP Securities
Constant Contact (CTCT) upgraded to Buy from Neutral at Janney Capital
Encana (ECA) upgraded to Outperform from Sector Perform at RBC Capital
Mobile Mini (MINI) upgraded to Outperform from Neutral at RW Baird
Polycom (PLCM) upgraded to Outperform from Market Perform at Raymond James
Portland General Electric (POR) upgraded to Buy from Hold at KeyBanc
Umpqua Holdings (UMPQ) upgraded to Outperform from Sector Perform at RBC Capital
Zynga (ZNGA) upgraded to Equal Weight from Underweight at Evercore


AB InBev (BUD) downgraded to Reduce from Neutral at Nomura
Arch Capital (ACGL) downgraded to Market Perform from Outperform at Wells Fargo
Associated Banc-Corp (ASBC) downgraded to Underperform at Raymond James
Cliffs Natural (CLF) downgraded to Market Perform from Outperform at FBR Capital
Netflix (NFLX) downgraded to Equal Weight from Overweight at Morgan Stanley
Symantec (SYMC) downgraded to Equal Weight from Overweight at Morgan Stanley
Travelers (TRV) downgraded to Market Perform from Outperform at Wells Fargo
Weatherford (WFT) downgraded to Market Perform from Outperform at Raymond James
Weatherford (WFT) downgraded to Market Perform from Outperform at Wells Fargo


Barnes Group (B) initiated with a Buy at Deutsche Bank
CNA Financial (CNA) initiated with an Outperform at William Blair
Expedia (EXPE) initiated with a Neutral at Janney Capital
NeoStem (NBS) initiated with a Buy at MLV & Co.
Packaging Corp. (PKG) initiated with a Market Perform at Wells Fargo
RockTenn (RKT) initiated with an Outperform at Wells Fargo (TREE) initiated with a Buy at Needham


America Movil (AMX) said discussions continue with KPN (KKPNY)
Carl Icahn told CNBC he bought more Apple (AAPL) stock yesterday as price fell
SAIC (SAI) sees $25B in new market opportunities following spin-off
Qualcomm (QCOM) announced new $5B share repurchase program
Philip Morris (PM), others (MO) prevail in settlement payment dispute
HP (HPQ) announced HP Chromebook14 (GOOG) powered by Intel (INTC) processor
Facebook CEO Zuckerberg: ‘Home’ service takeoff proceeding slower than expected
Dunkin’ Brands (DNKN) to enter U.K. market
Weatherford (WFT) selling 38.5% Borets JV stake to partner
IAC (IACI) said to be considering Daily Beast sale after Tina Brown’s departure, Bloomberg reports
DTE Energy (DTE) said cable failure occurred on electric system that serves Detroit


Companies that beat consensus earnings expectations last night and today include:
ChinaEdu (CEDU), Vera Bradley (VRA)

Companies that missed consensus earnings expectations include:
Evolution Petroleum (EPM), Men’s Wearhouse (MW)


  • Bank executives (C, JPM, BBT) have been hoping they could dull the pain of a plummeting mortgage-refinance market by shifting focus to loans for home purchases. That’s not working out. The Mortgage Bankers Association said mortgage applications fell 13.5% in the week ended Sept. 6 from the previous week. The data reflect a 20% drop in refinancing and a 3% decline in purchase loans, the Wall Street Journal reports
  • Michael Dell is set to win a bruising, year long battle for control of his company. His next task—getting Dell Inc. (DELL) growing again—may be even tougher, the Wall Street Journal reports
  • Societe Generale (SCGLY) is exploring the sale of its Asia private banking arm, sources say, seeking to exit a market where small managers are getting hit by rising costs and competition. The Singapore-based division could bring about $600M, Reuters reports
  • Sharp Corp. (SHCAY)  plans to raise up to $1.7B as it seeks to pay down debt after a rescue last year and shore up its tattered finances, sources say, Reuters reports
  • While the cheaper of Apple’s (AAPL) new iPhones disappointed critics who say it’s not priced low enough, in Europe it may still help carriers achieve what’s become rare in a region where wireless devices outnumber people: finding new customers, Bloomberg reports
  • California Governor Brown said he’ll approve regulations for hydraulic fracturing criticized by environmental groups as the state prepares for development of the largest shale-oil reserves in the U.S., Bloomberg reports


Chemical Financial (CHFC) files to sell $50M of common stock
Global Brass & Copper (BRSS) files to sell 5M shares for holders
Glu Mobile (GLUU) files to sell common stock
Golub Capital (GBDC) files to sell 3M shares of common stock
Kilroy Realty (KRC) files to sell 4.5M shares of common stock

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