Top M&A deals

RBS-98.2 billion-hinge on LaSalle, offer depend on that sale being cancelled-4.6% ABN The purchase would be the third-biggest ever behind AmericaOnline Inc.'s $186 billion acquisition of Time Warner Inc. in2000 and Vodafone AirTouch Plc's $185 billion accord withMannesmann AG in 1999.

morning call... 04 25 2007

SLM -$0.57, $16 short of the estimate. $16 -loss provision incrased 165% to 199, account for 14 cents, due to moving one of the call center from Nevada to Indiana -higher expenses accounted for the remaining 2 cents -EPS keep dropping -opearitng margin keep dropping in the past 3 years -company price dropped 53 cents Net charge off?

morning call .... 04 24 2007

Goldman Sachs Group Inc., WallStreet's most profitable securities firm, raised $20 billion for its sixth leveraged-buyout fund, rivaling Blackstone Group LP'splan to create the largest pool of private-equity capital. $11 bil from institutional clients and wealthy clients, $9 bil from GS and its employees -risk tolerance: 12% asset is tied to less liquid holdings, such as real estate, private equity, up from 8% two years ago. Barclays and ABN Amro said they plan to return an estimated12 billion euros in excess capital to shareholders following thesale of LaSalle, mainly through a stock buyback. Buying LaSalle

morning call... 04 23 2007

BOA agreed to buy LaSalle Bank for $21 billion from ABN Ambro -strategy point view: *BOA lack major presence in Chicago, 3rd largest U.S banking market *For Barclays $80 bil hard to digest *competing bid from a contortium -regulatory limit concern *approach 10% total nation's bank deposits limit *sell some assets -A consortium of three banks will meet ABN on Monday Technology -According to TPI, Global outsourcing market is slowing down in the 1QT by 1/3 to $17.6 billion. *the drop of the number of companies outsourcing their IT. *outsourcing activity is up 2/3 compared to 2006 -In line with droping U.S capital spending

Eurodollar vs FRA...quoted from CFA forum

There are two big differences between Eurodollar futures and FRA's (forget structural and credit things): 1) A Eurodollar futures contract is marked to market daily and gains in the margin account earn interest at a rate highly correlated to the underlier of the futures contract. This needs to be accounted for in the hedging or you have "imperfect tailing" 2) A Eurodollar futures contract is on an interest rate and an FRA, while it looks like a forward on an interest rate, is really a forward on a zero coupon bond. It is pretty easy to show that the Eurodollar futures rate is always higher than the forward rate. That's the "negative convexity bias".

Capital One

Facts: world largest financial services franchises. It is a diversified financial services corporations, focused primarily on consumer lending. Principal segments include U.S. card vs auto finance, buying retail installment contracts secured by autos from dealer network through out U.S -1Q 07 eps 1.62 vs 2.86 one year earlier, below 2.01 estimate -driver: underperformance in the core lending business(card vs auto loan), excluding mortgage banking, debt sale and the liquidation of Dealer Track Holdings -morgage banking segment reported net loss of $12.6 mil as a result of lower gain-on-sales margins for Ala-A loans and lower origination volumes.

Pass Through Certificate... Finance knowledge

Pass Through Certificates are corporate bonds widely issued by high risky business, such as Airline and Auto. They are different from traditional bonds. They are issued in a series by a company "pass through trusts", which use the proceeds of certificates series to buy equipment notes that are collaterialized with company equipments. The payments of equipment notes will be collected by Trusts and funnel to certificates holder. Ratings of series range from AAA to CCC, depending on the rank. Lower certificates with rank junior in right to distributions to the other certificates. Usually, these certificates are credit enhanced by insurance companies, dubbed liquidity facilities, who will make sure sufficient amount of distibutions to certificate holders. ---- example ---- Filed Pursuant to Rule 424(b)(2) Prospectus supplement Registration No. 333-65218 (To Prospectus dated July 23, 2001) $1,125,861,000 (DELTA AIR LINES LOGO) PASS THROUGH CERTIFICATES, SERIES 2002-1 Delta Air Lines, Inc. is issuing, through four separate pass through trusts, Class G-1, Class G-2, Class C and Class D Pass Through Certificates, Series 2002-1. Only the Class G-1, Class G-2 and Class C Certificates are being offered pursuant to this prospectus supplement. The Class D Certificates will be privately placed concurrently with the issuance of the Class G-1, Class G-2 and Class C Certificates. The Class D Certificates are not being offered pursuant to this prospectus supplement. Each Certificate will represent an interest in a pass through trust. The proceeds from the sale of Certificates will be used by the trusts to acquire equipment notes to be issued by Delta on a full recourse basis. Payments on the equipment notes held in each trust will be passed through to the holders of Certificates of such trust. The Certificates do not represent interests in or obligations of Delta or any of its affiliates. The Certificates will not be listed on any national securities exchange. The equipment notes to be held by the Class G-1, Class G-2 and Class C Trusts will be issued for each of thirty-two Boeing aircraft delivered new to Delta from May 1995 through April 2002 consisting of seventeen Boeing 737-832 aircraft, one Boeing 757-232 aircraft, eight Boeing 767-332ER aircraft and six Boeing 767-432ER aircraft. The equipment notes to be held for the Class D Trust will be issued for each of such aircraft except the seventeen Boeing 737-832 aircraft. The equipment notes issued for each aircraft will be secured by a security interest in such aircraft. Interest on the equipment notes will be payable semiannually on each January 2 and July 2, beginning January 2, 2003. The principal of the equipment notes to be held by the Class G-1 and Class C Trusts is scheduled for payment on January 2 and July 2 in certain years, beginning on January 2, 2003 and ending on January 2, 2023 and January 2, 2012, respectively. The entire principal amount of the equipment notes to be held by the Class G-2 Trust is scheduled for payment on July 2, 2012. The entire principal amount of the equipment notes to be held by the Class D Trust is scheduled for payment on July 2, 2007. Delta will have the ability to enter into sale/leaseback transactions involving any Boeing 737-832 aircraft which secures the equipment notes. If such a transaction is entered into, the related aircraft will be subject to a lease and a related amended and restated indenture and Delta's obligations on the Equipment Notes will be assumed by the related owner trustee on a non-recourse basis. The Class G-1 and Class G-2 Certificates will rank equally in right to distributions and rank senior in right to distributions to the other Certificates. The Class C Certificates will rank junior in right to distributions to the Class G-1 and Class G-2 Certificates and will rank senior in right to distributions to the Class D Certificates. The Class D Certificates will rank junior in right to distributions to the other Certificates. Westdeutsche Landesbank Girozentrale, New York branch will provide a separate liquidity facility for each of the Class G-1, Class G-2 and Class C Certificates. Each liquidity facility will be in an amount sufficient to make three semiannual interest distributions on the related class of Certificates. There will be no liquidity facility for the Class D Certificates. MBIA Insurance Corporation will issue financial guaranty insurance policies to support the payment of interest on the Class G-1 and Class G-2 Certificates when due and the payment of the outstanding balance on the Class G-1 and Class G-2 Certificates on the Final Legal Distribution Date for such certificates and under certain other circumstances as described herein.

morning call .. 04 20 2007

BoA Facts: largest bank with deposits, second largeset bank with earnings. top segments: mortgage banking and card services. -underprovisioned 3 cents. -earnings dropped yoy, increased sequential basis -50% revenue from consumer and small business banking, yield curve, NIM drop 2.98% to 2.6%, its consumer banking revenue dropped *credit card loss due to higher deliquency *mortgage origination -strategy: 10% regulatory limit, Sallie Mae, MA advisored deals increased from 15.2 bil to 27.8 -CFO Joe Price, might grow less than 2% in the 1st half of 2007

morning call ... 04 19 2007

JPMorgan Chase, 3rd largest U.S bank, investment banker/borkerage -EPS $1.36, to the estimate of $1 -investment banking *fixed income, improved credit *equity trading increased 60% on a sequential qter basis in Europea -reduced subprime mortgage portfolio from $15 bil to $9 bil -mortgage origination volume dropped a lot -SFAS 157 again, $0.11 eps and -only weakness advisory SFAS 159 This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. -unrealized gains or losses will flow to income statements, mitigating volativility caused by realized gains or losses -give companies more leeway to play with data -most financial companies will top estimate -implication: no big positive surprise, but sharp negative surprise -implication 2: divergence between earning and cash flow Fannie Mae and Fredie Mac -buy tens of billions of subprime mortgage, $1.3 trillion, next few years, to help troubled borrower -political move to recover the image caused by accounting scandal

financial vs tech sector

These two sectors are economy sensitive. IBM showed U.S corporate spending is slowing, but Wells Fargo and other commercial banks showed that corporate lending is growing strong? In the late cycle, more companies cust capital spending while levering up their balance sheet.

earning ... 04 18 2007

Intel, 1Q 2007 -gross profit was much better than expected(51% > 49% est), but revenue was below analyst forecast -drivers: higher selling price and lower cost IBM, 1Q 2007 -capital spending is slowing, sign of weakness in economy -strong Asian and global performance (Germany and east Europe) offset the weakness in U.S -The numbers were in line with expectations Yahoo, 1Q 2007 -Revenue growth continued to decline at Yahoo, 7% vs 13% - SunTrust -Profit was below estimate (1.42 eps est), but droped compared one year ago -Accounting trick, Adaption of new accounting standards SFAS 157 vs 159 -positively impact net interest income, trading income, and mortgage income -16.1 available for sale classified to trading securities -without changing accounting standards, 1.28 instead 1.44 -revenue growth remain soft -NIM 3.02% -Alt-A mortgage book shows weakness April 17 (Bloomberg) -- U.S. regional banks including WellsFargo & Co., Regions Financial Corp. and KeyCorp reported higherfirst-quarter earnings as acquisitions, corporate-loan demand andasset sales countered a decline in credit quality. Profit fell at SunTrust Inc., U.S. Bancorp, M&T Bank Corp.and Comerica Inc., hurt by the squeeze on lending margins andrising mortgage defaults. Wells Fargo -top estimate -first-quarter profit rose 11 percent -commercial lending increase due to services such as electronic payroll -write down subprime assets and increase provision, but no spillover effect to prime mortgages

Citi and Wachovia... 04 17 2007

Wachovia-profit ($1.2) beat estimate($1.16), first-quarter net income jumped 33% -driver: Golden West Financial Corp. revenue at the financial-services company climbed 17% amid last year's acquisitions. -subprime exposure little more than 0.5% of the consumer mortgage portfiolio. money set aside to cover credit losses down. -equity:up 2% -Bond, CDS 27 bps Citigroup, the nation's largest financial institution -Revenue rose 15% . but slowest growth in 3yr. -drivers: underwriting (investmetn banking) and trading, consumer banking. -laggard segments: consumer banking declined due to credit loss, loss in private equity funds -Citi posted an 11% drop in first-quarter profit, as costs associated with a plan to cut 17,000 jobs hurt its bottom line. -Citi's shares rose 2.6% to $52.93 -10y bond, fair, YS 85 bps -CDS: 13 bps Sallie Mae went private Flowers, together with Friedman Fleischer & Lowe LLC,JPMorgan Chase & Co. and Bank of America Corp., -CDS, increased from 86 to 136 bps -10y bond, 100 to 200 bps

Consortium bid for ABN

RBS, Santander, Fortis makde a joint bid for ABN. -higher price -ABN disparate business can be shared equally and logically

GE 1Q 2007

GE showed stronger growth overseas. But GE results was dogged by weak performance in its health care, industrial, and NBC units, as well as GE money which makes loans to people with less than stellar credit.

capital spending slowdown

U.S no longer depends on the capital spending at home...capital spending is slowing domestically, maybe increasing globablly. weak link between the location of capital spending and job opportunities under global economy. the structure of economy has changed weakened the correlation between the amount of cpaital spending and the health of capital-goods maker. imported has increased from 16% twenty years ago to 66% currently.

morning update ... 04 10 07

Further signs taht subprime issues is spreading to other higher rated assets. -American Home Mortgage Investment, a real estate investment trsuts or REIT, said that its 1Q profit would be lower, half of what analysts estmated, $1.06 per share. Earning will be $3.75, instead of $5. -The company had to write down around $500 million of high quality securtities. -Few interest for its Alt-A loans. It is not alone. A week earlier, M&T bank Corp, partly owned by Buffet's Berkshire Hathaway, cut its forecast too because of weak demand and higher default on Alt-A mortgages. AMD cust its prediction for first quarter revenue again. It had acknowleded taht the company would miss the revenue target, but the magnitude of the shortshall was more severe than Wall Street had anticipated. -expects revenue of $1.23 billion, well below analysts' average forecast of $1.55 billion, as reported by Thomson Financial. AMD had originally expected revenue of $1.6 billion to $1.7 billion, but warned in early March it wouldn't meet that forecast. -restucture its operations to cut costs and reduce spending ( on a new manufacturing capacity) by $500 million. -reasons: a.competition driving down the price b.demand is a.most problems can be traced to improvements in Intel's product lines.

TMT - media...

Advertisers are not big believers in Youtbue or Myspace because they cannot control the context in which their messages appear. But user-generated content is heavily trafficked, so advertisers would be able to find the appropriate fit on user pages.

morning update .... 04 05 2007

Norinchukin Bank Ltd., a central bankfor Japan's farm and fishery cooperatives, is seeking to co-invest with KKR to expand its oversea private equity investment. -the bond yields is low and leading margin is tight GS's CEO plans to meet Russian president to strength the tie's of its business in Russia -the largest underiter of equty offering, late comer, ranked 12th, 7.8% economy last year, more room to grow Oracle is upgraded by S&P from A- to A -Diversified business and its acquistion has helped increas sales, Peoplesoft and Siebel SAP, 3rd quarter sales beat estimate. -10 y bond is at 5.5%, fair value for industry companies LG.Philips LCD Co and other LCD makers have been raised by some analysts from Macquarie Securities Ltd. and Nomura Securities. Citigroup and UBS industry is turnning around -Their prices has dropped too much when profits peaked in2005 -because the the reduced production and higher demand will drive the recovery -cheap price of LCD will be attractive for customers.

Tech sector

Selling volume is as usual but profits decreases, why? Cyclical woes The inventory hangover since the 2006 4st quarter is the culprit. PC makers usually stock up on chips to meet the high demand during holiday season. So they ordering fewer chips on First quarter. This cause demand to drop and price right along with it. What made this year special? Transition into Windows Vista and the rollout of new machines and new OS from Apples. It might increase the demand of 2nd or 3rd of the year. Today information technology companies, MSF and Cisco, lead the advance. They are early mover.

morning update ... 04 04 2007

Moody's ugrade and downgrades banks 6 weeks after Moody's upgraded 145 banks, it downgraded 45 of them. (including Iceland's Kaupthing Bank hf) Majority of rating adjustment will be one notch, and some Eurapeen banks will face a cut as much as 3 notchs.

morning updte ... 04 03 2007

New Century Financial Corp is filing for bankruptcy. Even worse, there are signs that Alt-A loans begin to suffer too. Lenders like Southstar... KKR acquired First Data for about $29 billion -detailes: $34 cash S&P downgraded First Data corporate credit rating from A to BB+, junk bonds, because of the debt used to finance buyout. But its existing debt's price increased because the company planned to buy them back. CDS almost doubled in price from 106 to 213 bps. Based on FirstData's comments, Fitch expects the company to tender for all ofits outstanding senior unsecured bonds in conjunction withclosing. However, the indenture which governs all outstanding. KKR's buying spree: TXU $34 with TPG

U.S Banks - key drivers of net interet income dynamics

bank sector's asset/liability management focus on net interet income. The dynamics has a large impact on company performance as U.S Treasury curve has flattened. Banks can to some extent go after balance sheet growth (volume effect) to partly offset the negative pressure on net interet margin (rate effect). - Volume make up the lower margin 2007 Outlook still face ongoing pressure on core deposit growth. loans may not be a strong driver of interest income Overall, majority of banks were able to increase net interest income for 2006 compared to 2005. In the 3 out of 5 cases, the increased was due to large acquisitions Use leverage when top line growth is not there Banks posing lower net interest income for 2006 included U.S. Bankcorp, Washington Mutual. These banks' top line growth is low but acted aggressively in capital strategy. All of these banks engaged in large scale share repurchase in the year. Drivers of net interest income -rate and volume Interest income drivers: -Loans lead the way Especiall commerical loans (Wells Fargo, SunTrust,...), Commercial mortgages, construction, HEL and loans -loans repricing schdule, interest rates change in tandem with short-term rates. Interest expense drivers: -Felt the most pressure from rate impacts on interest expense from money market accounts and long term debt -Bigget increase in interest expense was from purchased funds including jumbo CDs, time deposites So banks walked a tight rope between satisfying their consumer depositers with higher rates, but attempting to be selective to those with larger balances or more banking relationships.

Mergers hit record in 2007 1st quarter... 04 02 2007

Globally, $1.1 trillion of companies deals traded hands in the first quarter in 2007, 27% higher than the same period in 2006. In U.S the volume of deals surged 32% to $439 billion. Globally, the value of announced buyout surged 40% to $199 billion in the first quarterly. Beneath the frenzied pace of deals is a sense of urgency. Both corporations and advisers are trying to get deals done before the slowdown of economy cycle and M&A cycle.

2007 Tech sector

maturing outlook tougher competition and lower entry barriers. Nowhere can this been seen than the rivalry between Intel and AMD on the semiconductor front and the battle between HP and Dell The earnings of IBM, apple, and Intel has posted disapointing news. nearly each major company in 2005 has embarked on cost cutting program with personnel reduction as a major objective. IBM will eliminate 14,500 at a cost of $1.7. Demand IT spending remains tepid. IDC predicts that global IT spending increas at a compound annual growth rate of 6% to $1.48 tril in 2010. US. spending will be below 6% as weakness in corporate profits impact IT budget, than lower than 2005 and 2006. Bonds Non investment grade underperformed overall non investment grade corporate universe. Individual bond's performance is volatile too. the whole sector will remain underperform. Event risk, like M&A will be high as the sector matures.

morning update .... 04 02 2007

More M&A news Globally, the value of announced buyout surged 40% to $199 billion in the first quarterly. KKR is close to a deal to buy First Data Corp, for about $20 bil. ML buyout fund and Pacific Equity Partners agree to buy Veda Advantage, the largest credit checking company in Australia and New Zealand, for $659 million. Veda has monoploy power and provides government and banks for consumer credit checking... AT&T is expanding aggresively on international front. With Mexcina affiliate America Moviil SA, it tried t otake a combined owenrship of 66.6% stake in the holding company that control Telecom Italia SpA. It has made investments in Vienam and South Africa, winning license to provide both national and international long distance calling in India. It is speculated to acquire a satellite company to compete against cable rivals.

First Data

An information processing companyhandling billions of credit-crd and other gtransactions for third parties. The company has struggled in recent yeras to organize itsinternationl, commercial, retail-processing units in a compelling way, amid turmoil in the hte CEO suite. It has been streamlining its business lines. In Feb, it annouced that it would exit official-checking and money order business. It bought Polcard, the largest Poland credit processor, for about $300 million. KKR is in late stage talks to buy First Data due to its good cash flows...