Thursday, May 28, 2009

Quick Notes & Articles for the Day - May 28

New GM Swap Deal Gets Major Bondholder Backing - "The Ad Hoc Committee of GM bondholders supports the revised offer from GM and believes that when contrasted with the alternative -- uncertain and costly bankruptcy court litigation -- that it represents the best alternative for bondholders in the current difficult and dire situation," the committee said in a statement. The committee (as well as most individual bondholders) continues to be troubled by the preferential treatment of the UAW over bondholders of secured debt, but in light of litigation and ongoing uncertainty, this proposal seems better than before.

"Given these factors, the allocation of 10 percent of common equity in the new GM, plus the opportunity to participate in the upside of the company through warrants to purchase 15 percent of the fully diluted equity in the new GM, gives the bondholders the opportunity to recover a greater portion of their original investment than was previously offered," the statement said. *** Note - the original offer was for 10% equity only.

Oil Moves Higher on Economic Data and Inventories - Crude-oil rose early Thursday after a pair of government reports showed the number of new layoffs declined last week and durable-goods orders rose more than predicted last month. It then extended gains after government data showed a surprise drop in last week's crude inventories. Crude inventories dropped 5.4 million barrels in the week ended May 22, declining for a third straight week, the EIA reported. Analysts surveyed by Platts had expected an increase of 1.8 million barrels. After the data, crude for July delivery rose $1 to $64.45 a barrel. It was up less than 1% before the inventory data. Gasoline inventories fell by 600,000 barrels last week and distillate stockpiles, which include heating oil and diesel, rose 300,000 barrels, the EIA said.

Home Builders Down on Housing and Foreclosure Data - Home builders were lower after a government report showed new-home sales rose less than expected in April. Additionally, a record percentage of U.S. mortgage loans entered foreclosure in the first quarter, according to a survey from the Mortgage Bankers Association.


A Single Bold Line in Banking - By David Weidner - MarketWatch - "Top administration officials are close to recommending a single regulator for the banking system. The move would combine functions of the Federal Deposit Insurance Corp., Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency, according to a report in The Wall Street Journal."

The Bond Vigilantes - The Wall Street Journal - "They're back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession."

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