David Kirkpatrick

July 6, 2009

Revolving credit in a squeeze play

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 4:05 pm

The economy is tough, and banks — those beneficiaries of federal stimulus largess — aren’t making conducting daily business any easier. Putting the squeeze on revolving credit is yet another exhibit of banks keeping the purse strings tightly drawn.

From the link:

Indeed, banks are “universally adjusting” the terms on revolving lines of credit, according to a June report from CreditSights.

Banks are cutting the size of revolvers, upping interest rates, shortening maturities, and enhancing their collateral positions, regardless of where companies fall on the credit-quality spectrum, says the report, written by analyst Chris Taggert.

Revolving lines of credit are a critical capital source for payroll, buying raw materials, and paying rents, as well as a liquidity backstop for commercial paper. Higher rates and reduced capacity on such debt can mean companies have to consume more of their cash on hand in daily operations.

January 6, 2009

10 lights in dark economic times

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 2:22 pm

It’s list day! Not really, but I am doing two lists posts in a row. Here’s ten things that are good news, as far as that goes, to look forward to during the financial crisis.

From the link, number one — and a great point:

The Savings Rate Should Increase
The slowdown in consumer spending is actually a good thing. While often decried as an accelerator of the downturn — which it surely is — the pullback in consumer spending will benefit the economy in the long term. Consumers have been on a shopping spree for two decades, and household savings have suffered. In 2007, the household savings rate was 0.6 percent. In some recent quarters, the rate turned negative, indicating that people borrowed more than they saved. As a result, many families have very little cushion to protect themselves from the vagaries of life. And, even disregarding the recent damage wrought on 401(k)s, a staggering number of people have not put away enough for retirement. At the same time, their ability to invest their savings in U.S. businesses by buying bonds and stocks has dwindled. Instead, U.S. business growth has become highly dependent on foreign investors, whose willingness to send funds to these shores could fade at any time.

“Consumer spending needs to slow down,” says Matthew Slaughter, professor of international economics at the Tuck School of Business at Dartmouth. “It’s a really important long-run structural issue for the financial health of families and the economy. More savings means companies can undertake more investment to drive faster economic growth.”

October 14, 2008

Winners and losers in the bailout

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 12:44 pm

If you’re looking for a quick, dirty and dense breakdown on the Emergency Economic Stabilization Act of 2008 — the “bailout” — check out this article from CFO.com. Keep in mind the details are pretty dense and probably require some understanding of the underlying finance and tax principles.

From the link:

The Emergency Economic Stabilization Act of 2008, popularly known as the bailout legislation, contains tax provisions that will benefit some taxpayers and penalize others. Among the widely-reported authorities the new law grants, the $700-billion government bailout legislation allows the Treasury Department to buy troubled mortgage assets from banks and other financial institutions, and invest directly in sputtering banks to bolster their liquidity position. But the new law changes some of the tax rules, too.

Here’s a rundown of those provisions and the affected tax law.

August 7, 2008

Ernst & Young hit with almost $3M SEC fine

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 5:43 pm

The firm violated auditor independence rules.

From the CFO.com link:

Ernst & Young LLP agreed to pay more than $2.9 million to the Securities and Exchange Commission to settle charges that it violated auditor independence rules by co-producing a series of audio CDs with a man who was also a director at three of E&Y’s audit clients.

According to the SEC, Ernst & Young collaborated with Mark C. Thompson between 2002 and 2004 to produce a series of audio CDs called The Ernst & Young Thought Leaders Series. The CDs featured E&Y partners interviewing CEOs and CFOs in various different industry sectors, which the SEC says was part of an effort by E&Y to promote its partners as experts in specific industries.

That relationship, said the SEC, violated independence rules because Thompson was serving on the boards at several of E&Y’s clients during the period when the CDs were produced. The SEC censured Ernst & Young and fined the firm $2,918,987. It also censured partner John F. Ferraro for setting up the relationship, and partner Michael G. Lutze for failing to alert one of his audit clients — apparently Best Buy — after learning of the relationship. Lutze was also suspended from practicing before the commission for one year. The SEC also issued a cease and desist order against Thompson. E&Y, Thompson, Ferraro, and Lutze settled with the SEC without admitting or denying its findings in the case.

Thompson is chairman of his own private business, Executive Powertools, a training firm dealing with executive leadership. Although the SEC did not name the audit clients on whose board Thompson served, SEC filings and Thompson’s biography on his own website show that he served as a director for E&Y clients Best Buy, Korn/Ferry, and Teletech Holdings during the period detailed by the SEC, and served on Best Buy’s audit committee from March 2000 to August 2003.

July 24, 2008

Fair-value financial reporting rewards deadbeats

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 3:48 pm

This is a CFO.com story from earlier this month with a distressing bit of news about fair-value reporting:

Panelists of a Securities and Exchange Commission roundtable on fair-value financial reporting on Wednesday clashed over an accounting provision under which a company can boost its reported earnings by becoming less creditworthy.

In the provision, paragraph 15 of standard number 157, the Financial Accounting Standards Board’s controversial new stricture on fair-value accounting, FASB states that the fair value of a company’s liability must reflect the risk that the company won’t pay it back. Thus, as the risk that companies won’t pay back their debts rises, their reported liabilities actually decrease–and may even provide an earnings boost.

Illogical as the provision sounds—and it sounds illogical to many—quite a few companies are already making hay by using it. The rewards for potential deadbeats can be large, according to a Credit Suisse report on the first-quarter 2008 10-Qs of the 380 members of the S&P 500 that have either a November or December year-end close, the first big companies to adopt FAS 157. For the 25 companies with the biggest amounts of liabilities on their balance sheets measured at fair value, widening credit spreads—an indication of a lack of creditworthiness—spawned first-quarter earnings gains ranging from $11 million to $3.6 billion, according to the study.

July 23, 2008

Sarbox is a joke

Filed under: Business — Tags: , , , — David Kirkpatrick @ 5:07 pm

Can’t we all agree the Sarbanes-Oxley Act is a complete failure?

From the link:

As if business needed one more reason to dislike the Sarbanes-Oxley Act, here’s a doozy: It may actually worsen the impact of financial statement fraud, the very problem it was created to address.

A new report from the Association of Certified Fraud Examiners found that companies that had the controls mandated by Sarbanes-Oxley actually suffered greater losses from financial statement fraud than those that did not have the controls. What’s more, the study found, companies whose management certified financial statements and had independent audit committees actually took longer to detect financial misstatements than companies without those controls.

July 17, 2008

C-level finance execs not optimistic

Filed under: Business — Tags: , , , — David Kirkpatrick @ 12:19 am

The Duke University/CFO magazine Global Business Outlook Survey finds finance executives looking for a prolonged downturn.

Here’s some of the numbers from the survey:

The fact that 53 percent of finance executives responding to this quarter’s Duke University/CFO magazine Global Business Outlook Survey are less optimistic than they were three months ago can be seen as good news only when compared with the whopping 72 percent who said last quarter that they were less optimistic than they were at the start of the year. But even though CFOs are not quite as down as they were in April, they’re hardly thrilled with the economic picture. In fact, many are taking significant steps to control costs as they prepare for a lengthy downturn.

Seventy-one percent of finance executives say the U.S. economy will not begin to recover until 2009 or later, and 30 percent say they don’t expect a rebound until at least the second half of next year. CFOs are forecasting minimal growth in earnings and capital spending over the next 12 months. About 40 percent of them plan to delay or cancel expansion plans, and roughly the same number have initiated cost-cutting programs.

And here’s a link to a one-page PDF charting the results.

July 15, 2008

A meaner, tougher IRS?

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 1:13 pm

Looks that way. The IRS is heavily litigating tax shelter schemes and winning regularly in court. This aggressive stance toward taking disputes to court has been growing over the last several years and looks to be what will become the standard modus operandi of the IRS for all manner of disputes.

From the CFO.com link:

LILOs and SILOs haven’t been the only shelters in the IRS’s crosshairs. Last April, in a case involving a so-called intermediary transaction, a Texas federal court judge decided that Enbridge Energy was liable for more than $155 million in past and future taxes, plus penalties. Enbridge had bought stock in a pipeline company in 2001 through what was eventually deemed a sham company, thus gaining tax deductions.

Even companies that aren’t harboring any tax shelters on their books may not be safe. Experts say the IRS’s treatment of all types of tax disputes is changing as the agency applies the tough tactics it used in shelter cases to more-ordinary transactions. Gerald Kafka, global chair of Latham & Watkins LLP’s tax-controversy practice group, calls this “the trickledown effect,” which includes more national coordination on issues, a greater involvement of attorneys, and more requests for information from corporate advisers and other third parties. This new approach, coupled with an unprecedented amount of new disclosure required from companies, has made the IRS a fundamentally tougher opponent, both in court and out. “The odds are overwhelmingly in our favor,” says Donald Korb, chief counsel for the IRS since 2004.

July 11, 2008

New 10-K “executive summary” requirement coming

As the title to this link puts it, “Is There an “Elevator Speech” in Your 10-K’s Future?”

Here’s the lede:

The Securities and Exchange Commission’s advisory Committee on Improvements to Financial Reporting (CIFR) voted unanimously on Friday to move forward with its proposal to require a new “executive summary” in annual and quarterly reports filed with the SEC.

As proposed, the executive summary would be a plain-English description of a reporting company’s business, financial condition, and operations. It would take a “layered approach” that stresses the most important information but then cross-references the location of fuller discussions elsewhere in a 10-Q or 10-K.

Global accounting gets high level support

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 12:08 pm

The merging of US and international accounting standards is coming. Global companies welcome this because this integration eases the need to keep separate books to meet two sets of standards.

The looming reality of one world-one standard recently received support from a couple of heavy hitters

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both defended the Securities and Exchange Commission’s plans for converging American accounting standards with international bookkeeping rules.

Their comments on Thursday came in response to criticism over the rapid progression of the project that is being pushed aggressively by SEC Chairman Christopher Cox. Michael Capuano, a congressman from Massachusetts and a member of the House Financial Services Committee, questioned the Treasury and Fed chiefs on the wisdom of outsourcing, in a manner of speaking, the rules that affect how companies report their most crucial information — including earnings — at a time when the U.S. is in the midst of a regulatory overhaul. Paulson and Bernanke were testifying at hearing about how to overhaul the regulation system.

July 8, 2008

Hostile takeover strategy? Replace the board!

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 1:27 am

Interesting CFO.com story on the hostile takeover strategy of replacing the board of directors that rebuffed the original effort to buy the company. Looks like this is going on with both Microsoft/Yahoo and InBev/Anheuser-Busch

From the link:

The hostile-acquisition strategy of getting a target’s shareholders to replace a resistant board came into sharp focus with announcements today in two of the biggest bids of the year: InBev’s offer for Anheuser-Busch, and Microsoft’s earlier-withdrawn bid for Yahoo.

In a filing with the Securities and Exchange Commission, Belgian brewer InBev NV asked St. Louis-based Anheuser-Busch Cos. to set a record date for the $46.3-billion InBev solicitation, which Anheuser rejected last month as insufficient. InBev proposed replacing Anheuser CEO August Busch IV, along with other directors, in favor of a board containing Busch’s uncle, Adolphus Busch IV. The uncle, a great-grandson of the company’s founder, is described as supportive of the bid in a Bloomberg News report on the filing. August Busch, of course, is leading the opposition.

Bloomberg also quoted Wim Hoste, a KBC Securities analyst based in Brussels, as saying that it is “getting less likely that InBev will increase its offer.” He called the InBev bid to replace the board as “a way of keeping up pressure,” so that either the current board talks to InBev, of “a renewed board could be more positive.” He also said, however, that the approach “slows down the pace of the takeover project.”

July 1, 2008

Vermont pushing to become the “virtual” Delaware

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 12:15 am

Vermont hopes to become the home of choice for virtual corporations.

From the link:

A bill signed into law earlier this month positions it as a leader in incorporating so-called virtual firms — those without a physical headquarters, actual paper filings, and directors’ meetings (they’re all online.) If it succeeds, it could emerge with the nation’s first virtual tech corridor.

The bid to attract companies with infrastructures as diaphanous as Vermont’s moonlight aims to offer far-flung groups working on collaborative projects the benefits of working with a corporation — without the costs that come with commuting and using centralized office space. Officials hope the law will replicate the success that Vermont has had as an “offshore” haven for captive insurance arrangements. That effort has drawn more than 500 companies to set up entities in the state.

“Like with captive insurance, we’re changing with the times,” Mike Quinn, commissioner of Vermont’s Department of Economic Development, tells CFO.com. “We expect to see some activity from this.”

June 27, 2008

Is the SEC growing instead?

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 12:22 pm

This post is a follow-up to one earlier this week about a Wall Street Journal article stating the SEC is on its way out and the way the Bear Stearns debacle was handled is a symptom of the disease within the commission.

Christoper Cox, current chairman of the SEC, has vehemently fired back (albeit internally) in response to Monday’s WSJ story.

From the second link:

Rarely in its 74-year history has the Securities and Exchange Commission been so squarely on the griddle, with new reforms seeming to target its very existence and Chairman Christopher Cox personally being criticized as “peripheral,” in the words of a critical Monday profile on the Wall Street Journal’s front page.

Cox has said little publicly about the criticism, much of which relates to his and the SEC’s role in dealing with the collapse of Bear Stearns and its later bailout managed by the Fed. But in internal memos made available to CFO.com, the chairman clearly seems to be simmering close to the boiling point.

In a 17-paragraph memo to the entire SEC staff that started with a note that he was “very disappointed” by the Journal story, Cox defended the SEC’s role in dealing with Bear as “one of a high degree of inter-agency cooperation.” And he noted that the SEC’s position in the case of the bailout was legally limited because the agency could not be “cast in the role of regulator of the merger and also potentially enforcer of the laws against fraud in connection with the transaction.”

June 25, 2008

Is the SEC on its last legs?

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 5:45 pm

According to one former commissioner, no.

From the link:

Some suggest that the Securities and Exchange Commission is hurtling toward extinction. On Monday, for example, a Wall Street Journalfront-page analysis of Chairman Christopher Cox’s “low key leadership” — especially during the Bear Stearns crisis — described Treasury Secretary Henry Paulson’s recent blueprint for regulatory reform as containing a proposal “to eliminate the SEC and shift responsibility for Wall Street to the Fed.”

Not likely, says former SEC Commissioner Arthur Levitt, now a senior advisor in New York for The Carlyle Group. In a telephone interview with CFO.com, Levitt noted that there have been a range of interpretations of the Treasury secretary’s comments about the future of the SEC. “Rest assured. Congress will have the last word, and the SEC is not likely to go away,” said Levitt, who served as commissioner from July 1993 to Februrary 2001.

June 19, 2008

Federal accounting report card? F-plus

Filed under: Business, Politics — Tags: , , — David Kirkpatrick @ 6:12 pm

The latest Government Accountability Office report on federal agency internal controls finds the situation a bit lacking.

From the link:

A new Government Accountability Office report on material weaknesses in federal-agency internal controls notes such persistent deficiencies as failure to use proper accounting standards, although the GAO acknowledges some improvement since the last in a series of criticisms the watchdog group has issued on government reporting.

The report, titled “Material Weaknesses in Internal Control over the Processes Used to Prepare the Consolidated Financial Statements of the U.S. Government,” highlighted control deficiencies corrected and uncorrected since a GAO report on the subject issued last July. Deficiencies such as poor documentation and the inability to assess the effectiveness of internal controls are among those that have yet to be resolved, according to the latest study. It adds 10 new recommendations that the agencies may use to improve their process for consolidating.

June 17, 2008

Global M&A down 30 percent

Filed under: Business — Tags: , , , — David Kirkpatrick @ 2:52 pm

Globally mergers and acquisitions are down almost 30 percent, although activity is strong in emerging markets.

From the link:

Given the current wave of economic uncertainty and the instability of stock markets in wealthy nations, it’s not too surprising that merger-and-acquisitions activity is down so far this year.

Total global deal volume weighed in at $1 trillion during the first 19 weeks of 2008, down nearly 30 percent from $1.4 trillion during the same time last year, according to a new analysis by Ernst & Young LLP’s Transaction Advisory Services group.

Nevertheless, deal activity remains strong in emerging markets. So far in 2008, total transaction volume surged more than 14 percent, to $90.7 billion in the so-called BRIC countries (Brazil, Russia, India, and China). “Transactions in emerging markets tend to be smaller, minority investments that are less reliant on the credit markets,” explained Steve Krouskos, Leader of Americas Accounts for Ernst & Young’s M&A advice unit. “This has helped sustain deal activity in these markets through the current market cycle.”

June 16, 2008

FAS 141(R) cools dealmaking

Here’s a CFO.com article covering a Deloitte survey that found a six-month-old FASB rule is having a negative effect on mergers and acquisitions.

From the link:

Just six months after the Financial Accounting Standards Board issued its revised rule on business combinations, corporate executives are saying the technical pronouncement will change the way they do business.

In a recent survey, 40 percent of 1,850 executives said FAS 141(R), Business Combinations, would cause them to “rethink” deal strategy and affect planned deal activity, according to Deloitte Financial Advisory Services, which conducted the online poll.

Only 4 percent of the respondents said their companies have already finished assessing the valuation impact of the new rule.

“The finance and accounting, business development, tax and legal departments of companies are working to understand the implications of Statement 141(R), as the process for how a deal is consummated and reported will require significant preliminary and ongoing analyses,” noted Stamos Nicholas, Deloitte’s national business valuation leader.

FAS 141(R) is the first global standard to be issued since FASB and its overseas counterpart, the International Accounting Standards Board, began their joint rulemaking convergence project in 2002. One aim of the project is to harmonize international standards with U.S. generally accepted accounting principles to better meet the demands of global investors. It’s also intended to cut complexity and costs from the financial reporting process, particularly for multinationals that are forced to record results using several different local standards

May 1, 2008

Those dirty hippies …

Filed under: Business, et.al. — Tags: , , , , — David Kirkpatrick @ 3:02 pm

are at it again.

Actually it’s trendy to rail against hippies, and on the other hand the “love generation” of the 60s is still idealized and glamorized as a time of peace, love and happiness.

Too bad most people don’t understand the realities of those days. A lot of peaceful “hippies” were nothing more than predators working over a bunch of naive, and somewhat affluent, kids. And don’t get me started with the ridiculous sense of entitlement to goods and services “hippies” of yore and today hold dear.

“You have two blenders? Wow, you don’t need two and I don’t have one. I’m taking one with me, okay?” — actual paraphrased statement from a neo-hippie.

The response (from a friend of mine) to this less-than-casaul aquaintance who had the nerve assume they were walking out with my friend’s blender was something along the lines of, “Maybe you should get off the smack so you can stay employed for more than a week at a pop. And stay out of my kitchen.”

The anti-hippie rant doesn’t really have much application to the link, but it sure felt good.

From the linked CFO.com article:

A former CFO of the Haight Ashbury Free Clinics — established in the 1960s to serve the population of Hippie “flower children” migrating to San Francisco — was sentenced to seven years in prison for embezzlement.

The former finance chief, Carl Gill, pleaded guilty to stealing $773,000 from the citywide health care provider for the poor, which has evolved from those roots in San Francisco’s famous “summer of love.” The plea included two felony counts of grand theft and six counts of tax evasion, the San Francisco Chronicle reported.

 

April 2, 2008

Follow the money …

Filed under: Politics — Tags: , , , , , , — David Kirkpatrick @ 4:20 pm

to the Democratic Party. Even though all the news right now is focused on the Democratic presidential primary, the larger story for this election cycle is the big money donations flowing to both parties.

In a clear hedging of bets, corporate America is giving to the Democrats in record numbers. This has profound implications on all the races, particularly the downticket races that will fill Senate and House seats. And don’t discount state and local contests, either.

To my mind the GOP completely squandered an opportunity to showcase limited government and fiscal responsibility over the first six years of the Bush 43 regime while holding the White House, Senate and House of Representatives. Instead the GOP somehow became the party of extreme deficit spending, cronyism and incompetence.

Most likely this November the GOP will get a major slap-down. Count me among those who hope it happens, and is a major wake-up call to get the GOP back on the track of fiscal conservatism. Without that, I have little to no reason to pull a GOP lever. And I’d sit out before ever pulling a straight Democratic ticket.

From the CFO.com link covering the “big four” accounting firm’s donations this cycle:

For the first time in more than a decade political campaign contributions from the accounting industry are starting to shift toward Democratic candidates.

Political action committees (PACs) for the Big Four accounting firms and the American Institute of Certified Public Accountants have favored Republicans in doling out corporate campaign contributions since the late ’90s. But the 2006 election seems to have instigated a shift.

According to recent Federal Election Commission data, PACs for KPMG, Deloitte & Touche LLP and PricewaterhouseCoopers have noticeably increased their contributions to Democrats since the party took control of Congress in the midterm elections.

For example, according to FEC filings, Deloitte still gives more of its total contribution (61.6 percent) to Republicans than to Democrats. But the percentage going to Republicans has fallen. In 2007 and the first two months of 2008, Deloitte increased the percent of its total contributions going to Democrats by 13 percent over the 2006 election season.

PwC, too, upped contributions to Democrats 12.8 percent over 2006. KPMG started increasing donations to Democrats even earlier. In 2006, KPMG gave ten percent more to Democrats than it did in the 2004 election season and has given 7 percent more in the current election season than it gave in 2006.

PACs for Ernst & Young and the AICPA have increased the percent of their contributions going to Democrats as well, although the increases are smaller. Each has contributed 7 percent more to Democrats this election season than they did in 2006.

Contributions typically increase during presidential election years because of the expensive race to the White House. But while most of the country is watching the presidential race play out, accounting firms have so far focused their largesse on legislators in Congress and the Senate.

April 1, 2008

M&A at lowest point in four years

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 2:03 am

First quarter merger-and-acquisitions are at the lowest point since 2004. The economic downturn is blamed for the low level of activity.

From the link:

It’s been clear for a while that merger-and-acquisition activity has been weak in the U.S. But volume in the first quarter has now fallen to the lowest level in four years.

“The slowdown’s key drivers are the credit market’s problems and the economic downturn in the U.S., and potentially global, economies,” Mark Shafir, chairman and global co-head of M&A at Lehman Brothers, told the Financial Times, which reported on the level of inactivity. Private equity firms, for example, seem to have nearly evaporated in the market due to the credit crunch. In fact, many seem busier trying to rework or walk away from previously agreed upon deals. Indeed, the FT pointed out that deals announced by financial buyers plunged 71 percent, to $52.6 billion, the lowest volume since the first quarter of 2004.

With the credit markets all but shut down, PE firms are unable to obtain financing to do deals.

March 31, 2008

New FASB rule on derivatives

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 12:31 am

Little heard about before recently, and still pretty arcane, derivatives reporting must now meet a Financial Accounting Standards Board disclosure rule.

From the CFO.com link:

Under the new rule, issuers must disclose the fair values of derivatives they use, as well as their gains and losses from the instruments, in tables accompanying their financial statements. Perhaps with a nod to the current credit crunch — FASB was in the last stages of hatching the standard as the subprime crisis deepened — the standard requires companies to reveal features of their derivatives that are related to credit risk.

To be sure, the standard changes nothing about the accounting for derivatives. But it does make the often-cloudy reporting of them much more transparent to the users of financial statements, Mulford thinks. “With these tables, derivatives can’t be hidden from view in a way they were on, say, Enron’s balance sheet and income statement,” he told CFO.com. “Investors will be better able to assess the contribution of derivatives to earnings and financial risk, and in the process, they’ll be better able to judge earnings sustainability.”

The new standard requires employers to reveal where they put the results of their derivatives investments on their financial statements and spell out how much they are; how derivatives are accounted for; and how derivatives affect their balance sheet, income statement, and future cash flows. (While 161 requires companies to disclose where they report derivatives’ effects on their income statements and balance sheets, it doesn’t require such reporting in cash-flow statements. FASB plans to address disclosures of derivatives’ location on cash-flow statements in the context of its ongoing project on financial-statement presentation.)

March 27, 2008

Finance exec predicts long and deep recession

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 6:22 pm

More bad omens for the US economy.

Jerry York, a man with strong finance credentials in the business world, is predicting a “very ugly recession.” He adds it will be lengthy and deep. In a speech he specifically mentions the derivatives market, the problems private equity firms are enduring because of lack of leverage, and says more bank failures are not, “off the chart at all, especially for smaller banks.”

From the CFO.com link:

Speaking at the CFO Rising conference in Orlando, former IBM and Chrysler Corp. finance chief Jerry York predicted a lengthy and deep recession for the American economy.

Addressing the topic of what boards are demanding from CFOs, York said if he had only five minutes to give his speech, he would tell finance chiefs that: “CEOs and boards are just going to expect you to get these companies through the mess,” emphasizing that, “I think this is going to be a very ugly recession, I think it is going to be lengthy, I think it is going to be deep.”

York, who is currently CEO of Harwinton Capital, a private equity firm he founded in 2000, is also a corporate director at Tyco International and Apple Inc. During the conference, which has run annually for the last 15 years, York told CFO.com: “It’s going to be a very bad recession, perhaps the worst I’ve seen in the 46 years I’ve been working.”

He described a “perfect storm” of economic calamity, including rising energy prices, rising commodity prices, credit markets in turmoil, credit losses in which “no one knows where the bottom is,” and a housing market in crisis. “We have too many sectors going south all at once, he told the website. What’s more, York can’t find a silver lining: “I frankly don’t see many positive signs right now, we are looking at a really nasty economic situation.”

March 14, 2008

Bear Stearns reaches for bailout

Filed under: Business, Media — Tags: , , , , , — David Kirkpatrick @ 9:52 am

The media may be reporting mixed signals, but the US economic crisis is going nowhere.

From the linked NYT article:

Bear Stearns, facing a grave liquidity crisis, reached out to JPMorgan on Friday for a short-term financial lifeline and now faces the prospect of the end of its 85-year run as an independent investment bank.

With the support of the Federal Reserve Bank of New York, JPMorgan said in a statement that it had “agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days.”

Update — Here’s a CFO.com article with more on this issue and about government financial regulation in general.

From the CFO.com link:

Treasury Secretary Henry Paulson, now dealing with his very own horror show in the melting credit markets, can probably relate.

Paulson, the former chairman and CEO of Goldman Sachs, has strived to regulate the financial markets with a light touch. Yet the most recent report of the President’s Working Group on Financial Markets, which Paulson chairs, shows financial regulators are being pulled inexorably by the worsening credit crisis to use a heavier regulatory hand, or even to intervene directly in the market.

Indeed, today, just one day after the report was released, the Federal Reserve was forced to back a bailout of Bear Stearns. And earlier in the week, the Fed poured some $200 billion of liquidity into the market. The report of the President’s Working Group itself contains recommendations that translate into increased regulatory oversight of everything from credit rating agencies to banks to institutional investors to mortgage brokers. The report also recommends that regulators intervene with other standard-setting bodies, notably the Financial Accounting Standards Board and the Basel Committee on Banking Supervision.

March 7, 2008

Ziff Davis files Chapter 11

Filed under: Business, Media, Technology — Tags: , , , — David Kirkpatrick @ 3:19 pm

The B2B publisher filed for Chapter 11 bankruptcy protection after a losses in its subscriber base and a decline in print ads.

This is yet another example of how difficult the print side of the publishing industry has always been. Even more so now in the rapidly expanding digital age since there’s reason to segment the industry into traditional- and new-media

From the linked CFO.com article:

Ziff Davis Media Inc. filed for Chapter 11 bankruptcy, but pledged to emerge by this summer.

The indirect wholly-owned subsidiary of Ziff Davis Holdings Inc. — publisher of technology and video game magazines, including PC Magazine,— said it simultaneously reached a restructuring agreement with an ad hoc group of holders of more than 80 percent of its senior secured floating rate notes. That move substantially reduces the company’s funded indebtedness.

Under the restructuring, $225 million principal amount of senior secured indebtedness (including the senior secured notes) will be exchanged for a new $57.5 million senior secured note and at least 88.8 percent of the common stock in the reorganized company.