Temasek selling Merrill Lynch at a loss
-
Originally posted by jojobeach:
Hmmm ?.. that triple zero kena banned again ?
Yawnz... looks like the party's over....
Ok.. back to work again.... ZzzzZzzz.
Chat next time dudes...
JOJO, are you trying to avoid taking up my challenge because you are afraid that I could prove you wrong and you have to admit that all along you have been lying about your property investment in this forum?Actually you are right, your property investment that is beyond my imagination because I didnt expect it to be nothing.....KEKEKE.
-
question to those reading,
Actually Merrill Lynch's source of funds is quite dubious, for a company lacking liquid funds, there are afew sources of funding available to it, but the two main source would be either 1) loans (bonds) or 2) equity from investors.
Looking at their annual report for 2007, it states:
"In connection with the Temasek transaction, if Merrill Lynch sells or agrees to sell any common stock (or equity securities convertible into commonstock) within one year of closing at a purchase, conversion or reference price per share less than $48.00, then it must make a payment to Temasek to compensate Temasek for the aggregate excess amount per share paid by Temasek, which is settled in cash or common stock at Merrill Lynch’s option."
Given that bond coupon rates are fixed and tax deductible. Bonds also carry less risk to investors due to the priority of payment in cases of bankruptcy, so therefore bond rates yield less returns as compared to equity share.
Shares carry higher risk to investors, they partake in the profits and losses of the company. If there are losses, there is no need to pay dividends, whereas it is compulsory to pay bond coupons when it falls due. Failure to pay bond coupons would result in bond holders' filing claims against the company leading to bankruptcy order.
When companies make public offering, they are also required to offer the same percentage that current shareholders hold for purchase, that is to maintain the current shareholding percentages. Else there would be changes in the control of shareholding in the company. From the news, it seems like Temasek took USD 3.4 billion of the USD 8.5 billion offered to investors. The only way that Temasek could have bought in excess of their current shareholding of less than 10% is, because other current shareholders have not taken up the offer by Merrill Lynch. Why have current shareholders not taken up the offer by Merrill Lynch? (Rhetorical Question, no replies needed)
Hypothetically, say if you are the CEO of Merrill Lynch, say you know that Merrill Lynch would be profitable in the next 3 to 5 years would you:
1) raise funds using bonds, where you end up not needing to pay USD 2.5 billion to Temasek due to the clause, end up with no share dilution so shares maintain higher earnings for current shareholders, increase the risk of bankruptcy in the event that company is not profitable to pay bond coupons
or
2) raise funds using equity (shares), resulting in payment of USD 2.5 billion to Temasek, share dilution leading to less earnings per share (eps) for current shareholders, reduce the risk of bankruptcy as dividends are not compulsory
Profitable: Choose 1) or 2)?
Hypothetically, say if you are the CEO of Merrill Lynch, say you know that Merrill Lynch would be loss making in the next 3 to 5 years would you:
1) raise funds using bonds, where you end up not needing to pay USD 2.5 billion to Temasek due to the clause, end up with no share dilution so shares maintain higher earnings, increase the risk of bankruptcy in the event that company is not profitable to pay bond coupons
or
2) raise funds using equity (shares), resulting in payment of USD 2.5 billion to Temasek, share dilution leading to less earnings per share (eps) for current shareholders, reduce the risk of bankruptcy as dividends are not compulsory
Loss making: Choose 1) or 2)?
For me,
Profit making: 1) bonds to raise capital
Loss making: 2) equity shares to raise capital
-
M13
How about a combination of both approaches?
-
Originally posted by eagle:
M13
How about a combination of both approaches?
Merrill Lynch didn't take combination, or did they?
-
But we saying hypothetically mah
-
Originally posted by eagle:
But we saying hypothetically mah
Too many scenarios if want to include everything, can even raise thru convertible loan stock.Think keep it simple and stick to 2 extremes.
-
Maurizio13,
After failing in trying to impress us with your little fantasy of market timing and brilliant investment strategy, you are now switching your role to become the CEO of ML talking about raising funds for the company..KEKEKEKE
Since you suggest that you will issue bond instead of new shares to raise capital, I am sure you must have already taken into account of how to make your bond attractive so that it is not the underwritter who is going to end up holding them.
So
a) What do you think should be the coupon rate when you consider interest rate in US have already hit rock-bottom, depreciating US$, and global inflation is likely to interest rate around the world to rise?
b) How are you going to convince Temasek or other SWFs to subscribe to ML bonds instead since most are more interested to acquire shareholding stakes?
You can sell anything you want in your little dream and fantasy, however in the real world, the only person who will subscribe to it will be EAGLE.
-
Interesting.
a) Folks here actually talking of inflation in the US, while everybody else in the sane world is talking about recession.
US is in recession: Merrill Lynch’s David Rosenberg
By James Quinn, Wall Street CorrespondentLast Updated: 1:59am BST 08/07/2008The United States remains firmly in an economic recession in spite of economic growth figures to the contrary, a leading economist has warned.
Merrill Lynch’s David Rosenberg, the first economist from a major bank to declare a US recession was underway back in early January, argues that recent unemployment figures show yet more evidence that the US economy is a deep recession.
Pointing to last week’s news that employment has now declined for six months in a row, Mr Rosenberg, Merrill’s chief North American economist, says that “at no time in the past 50 years has this happened without the economy being in an official recession.”
The typical definition of a recession is two consecutive quarters of negative gross domestic product (GDP) growth, something which the US has yet to have.http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/08/cnusecon108.xml
b) A certain someone was talking about risk and rewards in the past. Shares more risk more rewards, bonds less risk less rewards. Whether someone buys bonds or shares is a subject of their risk appetites.
Some folks just argue for the sake of arguing, no intellect whatsoever. You sure you of sound mind?
-
You sure you know what you are talking about?
LONDON (Thomson Financial) - Investors are finally conceding that a global recession is on the horizon, if it is not here already, Merrill Lynch's January survey of fund managers revealed.
The survey showed 19 pct of respondents now believe a global recession is either likely or very likely over the next 12 months, while the percentage of those who feel a recession has already started doubled to 8 pct from 4 pct in December.
This is a marked change from recent months, where investors had expressed fears of a slowdown rather than an outright recession.
'The period of denial, by some investors, that the credit crunch could have serious repercussions for the real economy may be over,' said David Bowers, independent consultant to Merrill Lynch (nyse: MER - news - people ).
'This month's survey shows an evolution of expectations from fears of a slowdown to fears of a major recession,' he said.
Notably, whereas in previous months investors had consistently highlighted credit risk as the greatest threat to global stability, they are now perceiving business cycle risk to be equally significant.
At the same time, the vast majority of fund managers expect corporate profit margins to shrink in 2008. A net 77 pct of those polled expect profits to grow by less than 10 pct in the next 12 months, compared with a net 66 pct in December and just 39 pct in October.
Although investors remain reluctant to switch away from their overweight stance on equities and underweight stance on bonds, there are clear signs that asset allocators are starting to make significant adjustments to reflect the risks to the global economy.
The number of asset allocators who are overweight equities tumbled to a net 6 pct in January from 20 pct in December, while the number who are underweight bonds fell to a net 28 pct from 40 pct in December.
There has also been an 'aggressive shift' into cash over the past two months, with a net 32 pct of respondents overweight cash in January, compared with 26 pct in December and 20 pct in November.
Investors are particularly pessimistic about the outlook for Europe, where the strong euro and European Central Bank president Jean-Claude Trichet's persistently hawkish stance on interest rates likely to be the main factors weighing on sentiment.
A net balance of 80 pct of European fund managers expect the euro zone economy to weaken in 2008, while a net 80 pct also expect weaker earnings growth in the coming year, both the most bearish since the survey began over a decade ago. Only 4 pct are anticipating double-digit EPS growth in 2008.
Notably, investors do not concur with Trichet's apparent conclusion that the risks of higher inflation outweigh the downside risks to the economy. Three months ago, Merrill's survey showed a net 36 pct of investors expected higher inflation in Europe in the coming year, but this has now fallen to zero. As a result, a net 28 pct believe monetary policy is too restrictive.
'While arguments to be bullish on European equities persist, it is clear that investors are bracing themselves for a raft of earnings downgrades,' said Karen Olney, chief European equities strategist at Merrill Lynch.
She noted, however, that the downside is limited, given that European markets have priced in earnings 'falling 57 pct of the way to the trough'.
Accordingly, the survey showed investors have slashed their holdings in industrials to underweight and 'to levels consistent with the May 2006 period of panic', instead moving back into healthcare and oil and gas. They continue to be overweight on banks, which are still seen as a 'value trap', Merrill said.
Financials and consumer discretionary (such as retail) are the only sectors recording a net underweight position in January, while the most overvalued sector is seen as global materials and the most undervalued is the pharmaceutical sector.
Meanwhile, on a regional basis, global emerging markets remain firmly in favour, with a net 17 pct of investors expecting to be overweight on the region over the coming 12 months. Emerging markets are also seen as the area where corporate profits are most favourable, with a net 47 pct of investors expressing this view.
http://www.forbes.com/afxnewslimited/feeds/afx/2008/01/16/afx4537560.html
-
Maurizio, instead of quoting article after article, like you truly understand them, why dont you just cut the chase and answer some of my questions in your own words.
1) If you claim that selling bonds will be better for ML, please tell us what coupon rate do you think will be good enough to attract SWF?
2) Care to explain to us why you say that, while you are beting on ML share price to fall, you are also hoping that inflation level maintain at current level? Especially when we know that rising inflation will create more havoc to the economy and banks.
3) You were claiming that Temasek will be better of today if they pass the opportunity to buy ML share in Dec07. However according to today's paper, Temasek is actually seating on a US$600m profit, which is a absolute slap on your face isnt it?
-
Originally posted by O o O o:
Maurizio, instead of quoting article after article, like you truly understand them, why dont you just cut the chase and answer some of my questions in your own words.
1) If you claim that selling bonds will be better for ML, please tell us what coupon rate do you think will be good enough to attract SWF?
2) Care to explain to us why you say that, while you are beting on ML share price to fall, you are also hoping that inflation level maintain at current level? Especially when we know that rising inflation will create more havoc to the economy and banks.
3) You were claiming that Temasek will be better of today if they pass the opportunity to buy ML share in Dec07. However according to today's paper, Temasek is actually seating on a US$600m profit, which is a absolute slap on your face isnt it?
1) Look up the latest bond rates2) Read up on your monetary economics
3) So right now an option to purchase is considered a profit? If I give you an option or purchase my house for $200,000, it is considered profits?
Do you know what are options?Temasek will also have the option to purchase an additional 600 million dollars of Merrill Lynch stock by March 28 under the deal's terms.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/318995/1/.html
You must be suffering from some kind of comprehension disability.
-
Originally posted by maurizio13:
1) Look up the latest bond rates2) Read up on your monetary expansion
3) So right now an option to purchase is considered a profit? If I give you an option or purchase my house for $200,000, it is considered profits?
Do you know what are options?Temasek will also have the option to purchase an additional 600 million dollars of Merrill Lynch stock by March 28 under the deal's terms.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/318995/1/.html
Maurzio,
1) The problem about buying US$ bond is that for an investor, the income or interest is fixed, however you run a risk of losing that to desprciating US$, which for SWF like Temasek will be too risky unless the coupon rate is very attractive.
So Mr. CEO of ML, what coupon rate do you think ML shoud offer for the bonds to ensure they will be fully subscribed?
2) We are talking about inflation level not your "aggressive monetary expansion" (aka insurance to protect yourself from proven wrong).
So can you explain to us, why while betting on ML share price to fall, you are hoping the inflation will maintain at the same time? Even to me (an average singaporean) it does sound contradicting and obvious that you might not even know what you are talking about. Am I right?
3) The deal has already been signed, sealed and delivered, what option are you talking about? Somehow it is funny that you claim you could predict the market, while at the same time, you cant even get yourself update with latest news.
-
Originally posted by maurizio13:
1) Given the set of economic circumstances in current US economy, I would say that Merrill Lynch would be trading in the AVERAGE share price of around USD 27 to USD 20 for the month of October. Provided the US economy does not promote aggressive monetary expansion to stimulate the economy and inflation levels are maintained.Now my question. Do you have the guts to put your money where your mouth is and bet against me?
Maurizio, I am not sure if I should feel proud of you for taking up the challenge or should I be sad to see you making a fool out of yourself again by setting chidlish and unrealistic conditions just to show people that you CAN predict the market.
1) You are giving yourself a US$7 trading band, which is about 26% margin based on yesterday trading price of US$26. On top of that you are using AVERAGING to measure your prediction, which means that potentially even if ML stock price trade as high as US$30.50 to as low as US$16.50, you will still have a good chance of being mathematically correct. That my friend is a trading margin which is WIDER than what STI, DJIA, Nikkei, FTSE, KOSPI, HANGSENG have flunctuated over the past 12 months. Are you trying to be kiasu si boh?
2) Beside protecting yourself with averaging and wide trading margin, you also included unrealistic condition that there must be no aggressive monetary expansion to stimulate the economy and inflation levels are maintained.
Can I know is this is a new feature that you can select when you are short selling stocks over the X-change? And what is your meaning of AGGRESSIVE? e.g?
As an investor, I really dont see a point in talking about stock price without making a decision to buy or sell, so my question to you is, if you are an investor like Temasek, can you tell us what is your target price to buy into ML from now to Oct08? Can I say it is US$20, since that is in the lower end of your prediction?
As for your condition you stated in blue, I am very curious on why do you want to insist that inflation level be maintained? AFAIK, ML share price was trading at US$26 yesterday, (thats after they annouced they are getting rid of their TOXIC CDOs,) and you are betting that it will go to as low as US$20, which is a whopping 23%, down from yesterday closing price. Hence common sense will tell us that it should be in your interest to see inflation rising instead of maintaining, so that it will create more problem in the CDOs market which will result to more writedown for banks.
So Maurizio, can you explain to us the purpose behind maintaining inflation level?
-
Originally posted by O o O o:
Maurzio,
1) The problem about buying US$ bond is that for an investor, the income or interest is fixed, however you run a risk of losing that to desprciating US$, which for SWF like Temasek will be too risky unless the coupon rate is very attractive.
So Mr. CEO of ML, what coupon rate do you think ML shoud offer for the bonds to ensure they will be fully subscribed?
2) We are talking about inflation level not your "aggressive monetary expansion" (aka insurance to protect yourself from proven wrong).
So can you explain to us, why while betting on ML share price to fall, you are hoping the inflation will maintain at the same time? Even to me (an average singaporean) it does sound contradicting and obvious that you might not even know what you are talking about. Am I right?
3) The deal has already been signed, sealed and delivered, what option are you talking about? Somehow it is funny that you claim you could predict the market, while at the same time, you cant even get yourself update with latest news.
1) Shares are not risky but bonds are risky?2) Sighs.
3) Obviously you don't know what are options. The 600 million shares already purchased? Please show us.
-
Originally posted by O o O o:
Maurizio, I am not sure if I should feel proud of you for taking up the challenge or should I be sad to see you making a fool out of yourself again by setting chidlish and unrealistic conditions just to show people that you CAN predict the market.
1) You are giving yourself a US$7 trading band, which is about 26% margin based on yesterday trading price of US$26. On top of that you are using AVERAGING to measure your prediction, which means that potentially even if ML stock price trade as high as US$30.50 to as low as US$16.50, you will still have a good chance of being mathematically correct. That my friend is a trading margin which is WIDER than what STI, DJIA, Nikkei, FTSE, KOSPI, HANGSENG have flunctuated over the past 12 months. Are you trying to be kiasu si boh?
2) Beside protecting yourself with averaging and wide trading margin, you also included unrealistic condition that there must be no aggressive monetary expansion to stimulate the economy and inflation levels are maintained.
Can I know is this is a new feature that you can select when you are short selling stocks over the X-change? And what is your meaning of AGGRESSIVE? e.g?
As an investor, I really dont see a point in talking about stock price without making a decision to buy or sell, so my question to you is, if you are an investor like Temasek, can you tell us what is your target price to buy into ML from now to Oct08? Can I say it is US$20, since that is in the lower end of your prediction?
As for your condition you stated in blue, I am very curious on why do you want to insist that inflation level be maintained? AFAIK, ML share price was trading at US$26 yesterday, (thats after they annouced they are getting rid of their TOXIC CDOs,) and you are betting that it will go to as low as US$20, which is a whopping 23%, down from yesterday closing price. Hence common sense will tell us that it should be in your interest to see inflation rising instead of maintaining, so that it will create more problem in the CDOs market which will result to more writedown for banks.
So Maurizio, can you explain to us the purpose behind maintaining inflation level?
1) Like I said before, if you think I am wrong and you have the balls, then take me up on the challenge and place a bet. If you have a better prediction, I would like to see it and if it's ludicrous I am willing to bet against it. But the thing is. Do you have the balls to put your money where your mouth is?2) Go do some basic degree in economics then talk.
-
Originally posted by maurizio13:
1) Shares are not risky but bonds are risky?2) Sighs.
3) Obviously you don't know what are options. The 600 million shares already purchased? Please show us.
1) Since you have already insisted that issuing bonds will be better for ML, so I am asking you Mr. CEO, what coupon rate will you propose to ensure that your bonds will be fully subscribe by SWF?(OFF TOPIC ALERT)
2) Sighing at yourself for making such a stupid blunder?
3) You have been telling others that I dont know many things, but somehow by whatever reasons, I always end up being the one that prove that you are the empty vessel in this forum.
So instead of using the same old trick to impress your blind and dumb supporters here, why dont you go ahead and tell us exactly what you know about Temasek 's current shareholding at ML.
-
Originally posted by O o O o:
1) Since you have already insisted that issuing bonds will be better for ML, so I am asking you Mr. CEO, what coupon rate will you propose to ensure that your bonds will be fully subscribe by SWF?(OFF TOPIC ALERT)
2) Sighing at yourself for making such a stupid blunder?
3) You have been telling others that I dont know many things, but somehow by whatever reasons, I always end up being the one that prove that you are the empty vessel in this forum.
So instead of using the same old trick to impress your blind and dumb supporters here, why dont you go ahead and tell us exactly what you know about Temasek 's current shareholding at ML.
1) Only SWF can invest in Merrill Lynch?
Bond rates are available from financial websites in the US.2) No. Actually laughing at your ignorance.
3) You said Temasek reap a profit of USD 600 million from an option to purchase from Merrill Lynch, I merely asked to cite your source. You don't understand how options work do you?
-
Originally posted by maurizio13:
1) Like I said before, if you think I am wrong and you have the balls, then take me up on the challenge and place a bet. If you have a better prediction, I would like to see it and if it's ludicrous I am willing to bet against it. But the thing is. Do you have the balls to put your money where your mouth is?2) Go do some basic degree in economics then talk.
Maurizio13,I believe there are many question which is left being unanswered,
1) Are you being KIASU by setting yourself such a trading margin which is WIDER than what STI, DJIA, Nikkei, FTSE, KOSPI, HANGSENG have flunctuated over the past 12 months?
2) Can I know if there is indeed an option that you can select when you are short selling stocks over the X-change. ie. you can indicated what are the condition to your trade e.g. no aggressive monetary expansion to stimulate the economy and inflation levels are maintained.
3) What is your definition of aggressive monetary expansion?
4) How can you insist that inflation level is maintained when we all know that it will not because inflation is a moving target?
Since in the real world there is not such thing as setting economic conditions for your investment, will you allow me to take you on without those silly conditions?
-
As an addendum to item 1)
U.S. corporate bond issuance sets April record
Fri Apr 18, 2008 10:31pm BST
NEW YORK, April 18 (Reuters) - U.S. high-grade corporate bond issuance hit a record in April as companies took advantage of improving market sentiment and strong investor demand for new deals.
U.S. investment-grade corporate bond volume totaled $50.7 billion through April 18, according to research firm Dealogic. The previous record for this month was in April 2001, when companies sold $47.35 billion of high-quality debt.
This week's issuance alone included a few marquee deals from a finance subsidiary of General Electric Co (GE.N: Quote, Profile, Research), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), XTO Energy (XTO.N: Quote, Profile, Research) and Lehman Brothers (LEH.N: Quote, Profile, Research).
General Electric Capital Corp's $8.5 billion transaction was the fifth-largest U.S. corporate bond sale since 1995.
Despite its jumbo size, the deal was oversubscribed and bonds traded up in the secondary market, prompting other issuers to follow suit, said Jim Merli, managing director and global head of fixed income syndicate at Lehman Brothers, the lead bookrunner on GE Capital's deal.
"The market has a way of being self-fulfilling," Merli said. "The market felt better, therefore GE decided to do their transaction. The GE deal went so well that the market continued to improve and more clients decided to move forward with their deals. It feeds on itself."
The credit market sentiment has been improving since late March after the Federal Reserve helped JPMorgan buy Bear Stearns & Co BSC.N to save it from collapsing.
The Fed's decision to give brokers the same access to liquidity that it provides commercial banks added weight to investors' viewpoint that the worst part of the credit crisis is over. Continued...
http://uk.reuters.com/article/marketsNewsUS/idUKN1822235520080418
-
Originally posted by maurizio13:
1) Only SWF can invest in Merrill Lynch?
Bond rates are available from financial
websites in the US.2) No. Actually laughing at your ignorance.
3) You said Temasek reap a profit of USD 600 million from an option to purchase from Merrill Lynch, I merely asked to cite your source. You don't understand how options work do you?
Soon, he will tell you that he wants you to explain what is an option just to confirm you know what an option is
-
Originally posted by eagle:
Soon, he will tell you that he wants you to explain what is an option just to confirm you know what an option is
Took me 6 months for a subject, if I teach him everything in here, I will die, not from the typing but from his comprehension ability. What an average person takes an hour to learn will take him forever.I'd rather jump from Singapore Flyer than to suffer the anguish of teaching him.
-
Originally posted by maurizio13:
Took me 6 months for a subject, if I teach him everything in here, I will die, not from the typing but from his comprehension ability. What an average person takes an hour to learn will take him forever.I'd rather jump from Singapore Flyer than to suffer the anguish of teaching him.
Are you currently trading options?
Don't bother teaching Gazelle. He will just ask you to prove it even when all facts and details are placed in front of him, then tell you he can walk on air and ask you to do it too.
-
I think he is busy researching to oppose just for the sake of opposing now.
Actually he would make a good opposition candidate, just that he won't end up a credible one.
-
Originally posted by eagle:
Are you currently trading options?
Nope.My module had elements of options in it.
Options tend to be very lucrative if the markets are very volatile.
-
Originally posted by maurizio13:
I think he is busy researching to oppose just for the sake of opposing now.
Actually he would make a good opposition candidate, just that he won't end up a credible one.
His behaviour is like CSJ.