They pitch their wares as free or going cheap, then ask for a ‘donation’
By Diana Othman , Esther Tan & Kimberly Spykerman 19 January 2009
Over the past three months, lone motorists in malls and office carparks are finding themselves pounced upon by wine sellers.
Think of scantily-clad women who hawk certain types of liquor in night spots and picture the same scene in a carpark.
The wine ‘cellar’ is in the boot of a sleek car. The peddlers are women in their 20s who work in pairs or groups of three. One would be the driver circling the area spotting lone men making their way to parked cars, even blocking the vehicles to make sure that the motorists do not get away.
The others would be out in a jiffy to make their sales pitch, except that they usually pitch their wine booty as free giveaways or going on the cheap.
They spin tales of quarrels with chefs from fancy restaurants and hotels such as The Fullerton and Swissotel. Because of these disputes, they have to find other means of selling the wine or in some cases, they say, it is their way of getting back at the unreasonable chefs.
Anyone who buys their story would be asked for sums ranging from $30 to $100, for wine that the women indicate is worth $500 or more. Deal sealed, a receipt is made out to the buyer and the women move on to their next catch.
They have been hired by Dickson Enterprise, a company which started selling liquor and soft drinks last September.
Their favourite haunts include Paragon Shopping Mall, Ngee Ann City, Suntec City, UOB Plaza and UIC building. They sometimes also trawl the heartland malls such as Northpoint in Yishun and have also been spotted at St James PowerHouse.
Graphic designer Carol Lee, 24, was at the Paragon carpark last month when she was approached by a woman who told her she had had a huge row with a chef and wanted to give away the wine to spite him.
She led Miss Lee to a car and showed her several bottles inside the boot. After placing two bottles on Miss Lee’s car seat, she asked her for any sum ranging from $50 to $100 for each bottle as a token of ‘appreciation’.
When Miss Lee said she had only $30 on her, the woman took back one bottle.
Looking back, Miss Lee felt the woman had ‘manipulated’ her into feeling guilty for taking something ‘expensive’ for free. ‘I don’t even dare drink the wine now and I’m going to throw the bottle away. Who knows what kind of drink it actually is.’
The women’s sales tactics have made it onto Internet forums, with netizens warning one another not to fall for them.
The women did not seem to have an easy time getting buyers, as The Straits Times observed over several days.
They start off just before noon from their office at Lorong Ampas in Balestier and usually hit about five shopping malls before calling it a day by 8pm. On average, only one out of 10 shoppers they approach buy the wines.
The owner of Dickson Enterprise, Mr. Victor Toh, 36, said he used to sell home theatre systems under the same company name, which was first registered in 2002.
But after receiving negative feedback from people saying they did not like being approached by his salesmen in the streets, he changed tack.
Last September, Mr. Toh re-started the company, this time selling mainly Chilean, Spanish and French red wines. ‘I’m new in the market and I don’t have the cash to jump in big time. We can’t afford a booth or a shop front, so we go direct to the consumer now,’ explained Mr. Toh.
The company sells over 500 bottles of wine a month now, he added.
When asked about his employees’ sales tactics, Mr. Toh said he had received a few complaints last October.
He said his staff had been instructed to tell such tales by their trainer, whom he has since fired. ‘I told them not to use such stories anymore,’ he said, adding that his employees were always polite and customer-oriented.
‘My girls have been briefed to give good service to the customer. I told them to provide their names and handphone numbers too,’ he said.
He told The Straits Times that unsatisfied customers are entitled to a full refund or a free replacement. ‘If there’re any problems, the customer can always contact us. We’re not doing a hit-and-run business.’
No one has called them for a refund in five months, he said.
Sales have picked up during the festive period, Mr. Toh added, and he was getting good feedback from customers. He said some of them have placed orders for wine hampers worth about $500.
‘Sales are picking up, so it can’t be that my girls are still using the same tactics which made customers unhappy.’
Mr. Toh insisted that his employees do not tout. ‘I told my girls...when customers want to listen, you talk to them. If they don’t want to, you walk away.’
However, president of the Association of Small and Medium Enterprises Lawrence Leow said such sales tactics were ‘absolutely wrong’.
‘It’s misrepresentation. The value of the goods is not worth that much and yet they are asking for a premium.’
He added that consumers should stand firm and just say no. ‘You shouldn’t just purchase the goods...you never know if it could be expired or of inferior quality.’
The presence of the wine sales team in carparks is making mall managements sit up.
Shoppers and tenants at Paragon Shopping Centre complained to the management about the women two weeks ago, said the mall’s spokesman.
She said that Dickson Enterprise was not allowed to sell any products on its premises, including the carpark, as it had not approached the management for permission to do so. Its security officers have been told to watch out for cars that appear to be circling one too many times.
Ngee Ann City’s management was unaware of the women, but said they would put a stop to it immediately.
Mr. Toh said a few shopping malls had told his employees they could not hawk wines on the premises and they have stopped going to these places.
Some of the Internet chatter in forums has also raised doubts about whether the wines were really worth that much.
The Straits Times bought two bottles - which the women claimed could fetch about $150 each if sold to restaurants - and got four wine experts to try them.
The Merlot, they said, had a retail price of only $20 or less. The other bottle, which sounds like it is from Valencia in Spain but has German words on the label, would sell for about $12 at best.
Fine wine distributor Patricia Britton, 39, said: ‘There’s not a chance that these wines are worth $500!’
She said it was ‘quite likely’ the wine had been artificially sweetened. ‘The sweetness is not the natural fruitiness of a grape, even if it was an over-ripe one.’
Mr. Toh, though, put it down to a matter of opinion. ‘It’s a matter of individual taste.’
The Next Threat To The Financial System: Corporate Defaults (NYT)(CHTR)(LVLT)(SIRI)
Douglas A. McIntyre January 19, 2009
The next big threat to bank earnings may be corporate defaults on debt, much if it originally supplied by the banks themselves. The irony is that the problem could be solved by the banks, if they won't open their vaults and provide more capital to companies who are in the process of refinancing.
But, they won't. At least not without being forced to do so by the government. Banks don't want to put their earnings in greater trouble by offering more risky loans on top of the ones they already have issued. As the recession deepens, they have no reasonable way to evaluate whether they will be paid back.
For debt which is rated junk, the reluctance of the banks is understandable, but the issue reaches far beyond firms with highly risky credit profiles., The New York Times reports that "This year alone, more than $700 billion in corporate loans will come due, according to Standard & Poor’s. "
A number of large American companies are left without access to capital by the trend. These include The New York Times (NYT) itself, which has $400 million in debt due at the middle of this year. Other corporations from Sirius (SIRI) to cable giant Charter (CHTR) to large telecom firm Level 3 (LVLT) may be forced into Chapter 11 or liquidation because they cannot tap funds that would have been readily available two years ago.
When companies are able to borrow, they are paying interest rates of 10% or higher. Servicing that debt requires a large part of operating income which means that the money borrowed may solve short-term problems but it robs money from operations as time passes. High debt service costs become a boat anchor in and of themselves.
The trend makes it more likely that the US will have to do what the UK has announced that it will do. The Treasury may have to step directly into the corporate debt market and sponge up paper from private enterprises to take the credit obligations of American corporations out of the hands of financial institutions. It is a hell of a way to fix the credit crisis, and its eventual consequence is that the federal government does not just end up owning big pieces of banks. It ends up owning pieces of companies across a wide spectrum of industries.
In the final analysis, the government becomes the source of capital for the engines of private enterprise.
* Hong Kong economic growth forecast cut by Morgan Stanley
By Nerilyn Tenorio
HONG KONG, Jan 20 (Reuters) - Hong Kong shares fell 2.9 percent on Tuesday as global lender HSBC (0005.HK) tumbled for the seventh straight day on fears it will be forced to raise a huge amount of fresh capital as credit losses mount and earnings weaken.
HSBC fell nearly 9 percent at one point after Royal Bank of Scotland (RBS.L) on Monday unveiled the biggest loss in British corporate history, fueling fears HSBC will have to issue new shares, slash its dividend or sell its prized stakes in Chinese firms to shore up its capital base amid a global recession.
HSBC ended down 7.7 percent at HK$57.50, dragging the Hang Seng index .HSI 380 points lower to 12,959.77, and dominating the day's mainboard turnover of HK$39.6 billion.
"HSBC was the focus for the day. But the market had been trading mostly down and traders would not allow it to drop so much in one day. They would not allow the market to fall 1,000 points in just one day," said Linus Yip, strategist at First Shanghai Securities Ltd.
A rebound in battered non-financial stocks such as China Mobile (0941.HK) also helped drag the Hang Seng off the day's lows, traders said. China Mobile gained 1.2 percent on the day.
HSBC said on Monday it would not turn to the UK government for help after Britain threw its troubled banks a second lifeline in three months, but it has not definitely ruled out a capital raising.
The stock is the worst performing Hong Kong blue chip this year, having lost 15.5 percent through Monday.
ECONOMIC OUTLOOK DARKENS
Worries grew about weak corporate earnings after Morgan Stanley downgraded its 2009 forecast for the Hong Kong economy, predicting it would shrink 3.9 percent this year. It had earlier expected the territory's economic to contract 1.2 percent in 2009 as global demand for Chinese goods slowed.
"Amidst severe headwinds from the rest of the world, we now see a deeper recession for the Hong Kong economy this year...," the brokerage said in a research note.
The China Enterprises Index .HSCE of top locally listed mainland firms finished 3.3 percent lower at 7,005.88.
China's biggest lender ICBC (1398.HK) closed 4.6 percent lower, clawing back some earlier losses, while China Construction Bank (0939.HK) fell 3.8 percent, widening its loss from 3.3 percent at midday.
China CITIC Bank (0998.HK), the country's seventh-largest lender, retreated 2.1 percent, largely on profit-taking after Monday's rise and after it said that its 2008 net profit probably rose 60 percent despite the global financial crisis.
Foxconn International Holdings (2038.HK) plunged 7.3 percent after the contract handset maker for brands such as Motorola, warned that its net profit would fall from the previous year as recession-wary consumers cut back spending on mobile phones and other gadgets.
Ping An Insurance (2318.HK) (601318.SS) fell 1.7 percent after China's second largest insurer reported a combined insurance premium income of 129.1 billion yuan ($18.9 billion) in 2008. It did not give comparative figures for 2007.
Like consumers and homeowners, America’s corporations binged on easy credit when times were flush, racking up huge debts. Now the bills are due, and paying them back will not be easy, or cheap.
This year alone, more than $700 billion in corporate loans will come due, according to Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt farther down the road.
But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
It is a lesson the discount carrier Southwest Airlines learned firsthand in December, when it went to the bond markets to raise $400 million, in part to cover its losses from betting that fuel costs would stay high.
Southwest, the only domestic airline with an investment-grade credit rating, put up 17 of its Boeing jets as collateral and agreed to pay interest of 10.5 percent, nearly double the rate it had paid in 2004 to raise $350 million. The company chafed at the costs, but it paid them because it needed cash and did not know what credit markets would look like in six months or a year.
“That’s the market now,” said Laura Wright, the airline’s chief financial officer. “There is not money available at the rates we were able to get a year ago.”
Southwest said it had seized the opportunity to raise cash at a time when other companies could not borrow at all. Companies with poor credit ratings are virtually locked out of credit markets or face the prospect of paying 20 percent interest. Many of them are slashing costs, canceling projects or putting assets up for sale to avoid defaulting on their debts.
Despite huge government rescue programs and drastic reductions in the Federal Reserve’s benchmark interest rate, borrowing costs for companies have remained stubbornly high. Investors are wary of anything riskier than ultrasafe Treasury bills, and banks, which lost billions of dollars making bad loans, have tightened their lending.
“This is going to be a very challenging year for corporate treasurers,” said Roger Lister, chief credit officer at the financial institutions unit of DBRS, the credit rating firm.
Still, borrowing costs have fallen from record levels in October and November, especially for investment-grade bonds, and more companies have sold new debt in recent weeks. Investors who are getting scant returns — or none at all — from Treasuries are starting to gamble again on relatively safe corporate debt.
“You are getting a very nice return in real terms,” said Jim T. Swanson, chief investment strategist at MFS Investments, a mutual fund firm in Boston. “Companies are willing to pay the price, and the market is willing to take on new issuance.”
Despite this, capital markets are still shaky. Even companies with strong credit ratings are paying about 5 percentage points more than the federal government to borrow money, according to Standard & Poor’s. That is more than double the premium they paid last January. Companies with so-called junk credit ratings are paying a 15 percent premium.
“That’s an extraordinary spread,” said Diane Vazza, head of global fixed-income research at Standard & Poor’s. “That’s unprecedented in the speculative-grade market.”
On top of this, corporate bonds are at risk of being crowded out of the market as the government issues piles of new Treasury notes to combat the financial crisis. And another flood of government bonds is likely if Congress passes an $825 billion economic stimulus measure.
What is more, the government guaranteed nearly $108 billion in cheap debt for financial companies in the last two months of 2008 as part of the rescue package.
By contrast, relatively few nonfinancial companies have been able to raise money in recent months. And those doing so have paid dearly for it.
For example, Nabors Industries, an oil services company, issued $1.1 billion in 10-year bonds two weeks ago, agreeing to a 9.25 percent interest rate. A year earlier, when oil prices were shooting up, the company had to pay just 6.15 percent to borrow $975 million. Taking out a $1.1 billion at last year’s rates, could have cut annual interest payments by about $34 million.
The higher interest bill may be too much to bear for some companies. “Can existing business models support the significantly higher cost of debt that exists now?” asked Max Bublitz, chief strategist at SCM Advisors, an investment firm in San Francisco. “That’s a real issue.”
In all, corporations in the United States borrowed about $172.7 billion in the fourth quarter, down slightly from $179.1 billion issued in the last three months of 2007, according to DeaLogic.
Some businesses planned well for the refinancing crisis, having socked away cash or set up lines of credit with banks that allow them to refinance debt at predetermined rates, said Ed Liebert, chairman of the National Association of Corporate Treasurers. Others that need to bring new debt to market could sell shorter-term notes at lower interest rates or turn to institutional investors like pension funds or insurance companies and issue debt privately, in hopes of negotiating better rates.
Companies with shaky credit are especially vulnerable as their debts come due and are likely to be among the earliest of many expected defaults this year if they cannot find more cash.
Good morning, yesterday You wake up and time has slipped away And suddenly it's hard to find The memories you left behind Remember, do you remember?
The laughter and the tears The shadows of misty yesteryears The good times and the bad you've seen And all the others in between Remember, do you remember The times of your life? (do you remember?)
Reach out for the joy and the sorrow Put them away in your mind The mem'ries are time that you borrow To spend when you get to tomorrow
Here comes the setting sun (the setting sun) The seasons are passing one by one So gather moments while you may Collect the dreams you dream today Remember, will you remember The times of your life?
Gather moments while you may Collect the dreams you dream today Remember, will you remember The times of your life?
Of your life Of your life Do you remember, baby Do you remember the times of your life?
FADE
Do you remember, baby Do you remember the times of your life?
5 comments:
‘Free Booty’ in Carparks
They pitch their wares as free or going cheap, then ask for a ‘donation’
By Diana Othman , Esther Tan & Kimberly Spykerman
19 January 2009
Over the past three months, lone motorists in malls and office carparks are finding themselves pounced upon by wine sellers.
Think of scantily-clad women who hawk certain types of liquor in night spots and picture the same scene in a carpark.
The wine ‘cellar’ is in the boot of a sleek car. The peddlers are women in their 20s who work in pairs or groups of three. One would be the driver circling the area spotting lone men making their way to parked cars, even blocking the vehicles to make sure that the motorists do not get away.
The others would be out in a jiffy to make their sales pitch, except that they usually pitch their wine booty as free giveaways or going on the cheap.
They spin tales of quarrels with chefs from fancy restaurants and hotels such as The Fullerton and Swissotel. Because of these disputes, they have to find other means of selling the wine or in some cases, they say, it is their way of getting back at the unreasonable chefs.
Anyone who buys their story would be asked for sums ranging from $30 to $100, for wine that the women indicate is worth $500 or more. Deal sealed, a receipt is made out to the buyer and the women move on to their next catch.
They have been hired by Dickson Enterprise, a company which started selling liquor and soft drinks last September.
Their favourite haunts include Paragon Shopping Mall, Ngee Ann City, Suntec City, UOB Plaza and UIC building. They sometimes also trawl the heartland malls such as Northpoint in Yishun and have also been spotted at St James PowerHouse.
Graphic designer Carol Lee, 24, was at the Paragon carpark last month when she was approached by a woman who told her she had had a huge row with a chef and wanted to give away the wine to spite him.
She led Miss Lee to a car and showed her several bottles inside the boot. After placing two bottles on Miss Lee’s car seat, she asked her for any sum ranging from $50 to $100 for each bottle as a token of ‘appreciation’.
When Miss Lee said she had only $30 on her, the woman took back one bottle.
Looking back, Miss Lee felt the woman had ‘manipulated’ her into feeling guilty for taking something ‘expensive’ for free. ‘I don’t even dare drink the wine now and I’m going to throw the bottle away. Who knows what kind of drink it actually is.’
The women’s sales tactics have made it onto Internet forums, with netizens warning one another not to fall for them.
The women did not seem to have an easy time getting buyers, as The Straits Times observed over several days.
They start off just before noon from their office at Lorong Ampas in Balestier and usually hit about five shopping malls before calling it a day by 8pm. On average, only one out of 10 shoppers they approach buy the wines.
The owner of Dickson Enterprise, Mr. Victor Toh, 36, said he used to sell home theatre systems under the same company name, which was first registered in 2002.
But after receiving negative feedback from people saying they did not like being approached by his salesmen in the streets, he changed tack.
Last September, Mr. Toh re-started the company, this time selling mainly Chilean, Spanish and French red wines. ‘I’m new in the market and I don’t have the cash to jump in big time. We can’t afford a booth or a shop front, so we go direct to the consumer now,’ explained Mr. Toh.
The company sells over 500 bottles of wine a month now, he added.
When asked about his employees’ sales tactics, Mr. Toh said he had received a few complaints last October.
He said his staff had been instructed to tell such tales by their trainer, whom he has since fired. ‘I told them not to use such stories anymore,’ he said, adding that his employees were always polite and customer-oriented.
‘My girls have been briefed to give good service to the customer. I told them to provide their names and handphone numbers too,’ he said.
He told The Straits Times that unsatisfied customers are entitled to a full refund or a free replacement. ‘If there’re any problems, the customer can always contact us. We’re not doing a hit-and-run business.’
No one has called them for a refund in five months, he said.
Sales have picked up during the festive period, Mr. Toh added, and he was getting good feedback from customers. He said some of them have placed orders for wine hampers worth about $500.
‘Sales are picking up, so it can’t be that my girls are still using the same tactics which made customers unhappy.’
Mr. Toh insisted that his employees do not tout. ‘I told my girls...when customers want to listen, you talk to them. If they don’t want to, you walk away.’
However, president of the Association of Small and Medium Enterprises Lawrence Leow said such sales tactics were ‘absolutely wrong’.
‘It’s misrepresentation. The value of the goods is not worth that much and yet they are asking for a premium.’
He added that consumers should stand firm and just say no. ‘You shouldn’t just purchase the goods...you never know if it could be expired or of inferior quality.’
The presence of the wine sales team in carparks is making mall managements sit up.
Shoppers and tenants at Paragon Shopping Centre complained to the management about the women two weeks ago, said the mall’s spokesman.
She said that Dickson Enterprise was not allowed to sell any products on its premises, including the carpark, as it had not approached the management for permission to do so. Its security officers have been told to watch out for cars that appear to be circling one too many times.
Ngee Ann City’s management was unaware of the women, but said they would put a stop to it immediately.
Mr. Toh said a few shopping malls had told his employees they could not hawk wines on the premises and they have stopped going to these places.
Some of the Internet chatter in forums has also raised doubts about whether the wines were really worth that much.
The Straits Times bought two bottles - which the women claimed could fetch about $150 each if sold to restaurants - and got four wine experts to try them.
The Merlot, they said, had a retail price of only $20 or less. The other bottle, which sounds like it is from Valencia in Spain but has German words on the label, would sell for about $12 at best.
Fine wine distributor Patricia Britton, 39, said: ‘There’s not a chance that these wines are worth $500!’
She said it was ‘quite likely’ the wine had been artificially sweetened. ‘The sweetness is not the natural fruitiness of a grape, even if it was an over-ripe one.’
Mr. Toh, though, put it down to a matter of opinion. ‘It’s a matter of individual taste.’
The Next Threat To The Financial System: Corporate Defaults (NYT)(CHTR)(LVLT)(SIRI)
Douglas A. McIntyre
January 19, 2009
The next big threat to bank earnings may be corporate defaults on debt, much if it originally supplied by the banks themselves. The irony is that the problem could be solved by the banks, if they won't open their vaults and provide more capital to companies who are in the process of refinancing.
But, they won't. At least not without being forced to do so by the government. Banks don't want to put their earnings in greater trouble by offering more risky loans on top of the ones they already have issued. As the recession deepens, they have no reasonable way to evaluate whether they will be paid back.
For debt which is rated junk, the reluctance of the banks is understandable, but the issue reaches far beyond firms with highly risky credit profiles., The New York Times reports that "This year alone, more than $700 billion in corporate loans will come due, according to Standard & Poor’s. "
A number of large American companies are left without access to capital by the trend. These include The New York Times (NYT) itself, which has $400 million in debt due at the middle of this year. Other corporations from Sirius (SIRI) to cable giant Charter (CHTR) to large telecom firm Level 3 (LVLT) may be forced into Chapter 11 or liquidation because they cannot tap funds that would have been readily available two years ago.
When companies are able to borrow, they are paying interest rates of 10% or higher. Servicing that debt requires a large part of operating income which means that the money borrowed may solve short-term problems but it robs money from operations as time passes. High debt service costs become a boat anchor in and of themselves.
The trend makes it more likely that the US will have to do what the UK has announced that it will do. The Treasury may have to step directly into the corporate debt market and sponge up paper from private enterprises to take the credit obligations of American corporations out of the hands of financial institutions. It is a hell of a way to fix the credit crisis, and its eventual consequence is that the federal government does not just end up owning big pieces of banks. It ends up owning pieces of companies across a wide spectrum of industries.
In the final analysis, the government becomes the source of capital for the engines of private enterprise.
HK shares sag as HSBC tumbles for 7th day
* HSBC slides 7.7 percent after RBS's losses
* China Mobile gains averts deeper market losses
* Hong Kong economic growth forecast cut by Morgan Stanley
By Nerilyn Tenorio
HONG KONG, Jan 20 (Reuters) - Hong Kong shares fell 2.9 percent on Tuesday as global lender HSBC (0005.HK) tumbled for the seventh straight day on fears it will be forced to raise a huge amount of fresh capital as credit losses mount and earnings weaken.
HSBC fell nearly 9 percent at one point after Royal Bank of Scotland (RBS.L) on Monday unveiled the biggest loss in British corporate history, fueling fears HSBC will have to issue new shares, slash its dividend or sell its prized stakes in Chinese firms to shore up its capital base amid a global recession.
HSBC ended down 7.7 percent at HK$57.50, dragging the Hang Seng index .HSI 380 points lower to 12,959.77, and dominating the day's mainboard turnover of HK$39.6 billion.
"HSBC was the focus for the day. But the market had been trading mostly down and traders would not allow it to drop so much in one day. They would not allow the market to fall 1,000 points in just one day," said Linus Yip, strategist at First Shanghai Securities Ltd.
A rebound in battered non-financial stocks such as China Mobile (0941.HK) also helped drag the Hang Seng off the day's lows, traders said. China Mobile gained 1.2 percent on the day.
HSBC said on Monday it would not turn to the UK government for help after Britain threw its troubled banks a second lifeline in three months, but it has not definitely ruled out a capital raising.
The stock is the worst performing Hong Kong blue chip this year, having lost 15.5 percent through Monday.
ECONOMIC OUTLOOK DARKENS
Worries grew about weak corporate earnings after Morgan Stanley downgraded its 2009 forecast for the Hong Kong economy, predicting it would shrink 3.9 percent this year. It had earlier expected the territory's economic to contract 1.2 percent in 2009 as global demand for Chinese goods slowed.
"Amidst severe headwinds from the rest of the world, we now see a deeper recession for the Hong Kong economy this year...," the brokerage said in a research note.
The China Enterprises Index .HSCE of top locally listed mainland firms finished 3.3 percent lower at 7,005.88.
China's biggest lender ICBC (1398.HK) closed 4.6 percent lower, clawing back some earlier losses, while China Construction Bank (0939.HK) fell 3.8 percent, widening its loss from 3.3 percent at midday.
China CITIC Bank (0998.HK), the country's seventh-largest lender, retreated 2.1 percent, largely on profit-taking after Monday's rise and after it said that its 2008 net profit probably rose 60 percent despite the global financial crisis.
Foxconn International Holdings (2038.HK) plunged 7.3 percent after the contract handset maker for brands such as Motorola, warned that its net profit would fall from the previous year as recession-wary consumers cut back spending on mobile phones and other gadgets.
Ping An Insurance (2318.HK) (601318.SS) fell 1.7 percent after China's second largest insurer reported a combined insurance premium income of 129.1 billion yuan ($18.9 billion) in 2008. It did not give comparative figures for 2007.
Cost of Borrowing Zooms Up for Corporations
By JACK HEALY and VIKAS BAJAJ
January 18, 2009
Like consumers and homeowners, America’s corporations binged on easy credit when times were flush, racking up huge debts. Now the bills are due, and paying them back will not be easy, or cheap.
This year alone, more than $700 billion in corporate loans will come due, according to Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt farther down the road.
But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
It is a lesson the discount carrier Southwest Airlines learned firsthand in December, when it went to the bond markets to raise $400 million, in part to cover its losses from betting that fuel costs would stay high.
Southwest, the only domestic airline with an investment-grade credit rating, put up 17 of its Boeing jets as collateral and agreed to pay interest of 10.5 percent, nearly double the rate it had paid in 2004 to raise $350 million. The company chafed at the costs, but it paid them because it needed cash and did not know what credit markets would look like in six months or a year.
“That’s the market now,” said Laura Wright, the airline’s chief financial officer. “There is not money available at the rates we were able to get a year ago.”
Southwest said it had seized the opportunity to raise cash at a time when other companies could not borrow at all. Companies with poor credit ratings are virtually locked out of credit markets or face the prospect of paying 20 percent interest. Many of them are slashing costs, canceling projects or putting assets up for sale to avoid defaulting on their debts.
Despite huge government rescue programs and drastic reductions in the Federal Reserve’s benchmark interest rate, borrowing costs for companies have remained stubbornly high. Investors are wary of anything riskier than ultrasafe Treasury bills, and banks, which lost billions of dollars making bad loans, have tightened their lending.
“This is going to be a very challenging year for corporate treasurers,” said Roger Lister, chief credit officer at the financial institutions unit of DBRS, the credit rating firm.
Still, borrowing costs have fallen from record levels in October and November, especially for investment-grade bonds, and more companies have sold new debt in recent weeks. Investors who are getting scant returns — or none at all — from Treasuries are starting to gamble again on relatively safe corporate debt.
“You are getting a very nice return in real terms,” said Jim T. Swanson, chief investment strategist at MFS Investments, a mutual fund firm in Boston. “Companies are willing to pay the price, and the market is willing to take on new issuance.”
Despite this, capital markets are still shaky. Even companies with strong credit ratings are paying about 5 percentage points more than the federal government to borrow money, according to Standard & Poor’s. That is more than double the premium they paid last January. Companies with so-called junk credit ratings are paying a 15 percent premium.
“That’s an extraordinary spread,” said Diane Vazza, head of global fixed-income research at Standard & Poor’s. “That’s unprecedented in the speculative-grade market.”
On top of this, corporate bonds are at risk of being crowded out of the market as the government issues piles of new Treasury notes to combat the financial crisis. And another flood of government bonds is likely if Congress passes an $825 billion economic stimulus measure.
What is more, the government guaranteed nearly $108 billion in cheap debt for financial companies in the last two months of 2008 as part of the rescue package.
By contrast, relatively few nonfinancial companies have been able to raise money in recent months. And those doing so have paid dearly for it.
For example, Nabors Industries, an oil services company, issued $1.1 billion in 10-year bonds two weeks ago, agreeing to a 9.25 percent interest rate. A year earlier, when oil prices were shooting up, the company had to pay just 6.15 percent to borrow $975 million. Taking out a $1.1 billion at last year’s rates, could have cut annual interest payments by about $34 million.
The higher interest bill may be too much to bear for some companies. “Can existing business models support the significantly higher cost of debt that exists now?” asked Max Bublitz, chief strategist at SCM Advisors, an investment firm in San Francisco. “That’s a real issue.”
In all, corporations in the United States borrowed about $172.7 billion in the fourth quarter, down slightly from $179.1 billion issued in the last three months of 2007, according to DeaLogic.
Some businesses planned well for the refinancing crisis, having socked away cash or set up lines of credit with banks that allow them to refinance debt at predetermined rates, said Ed Liebert, chairman of the National Association of Corporate Treasurers. Others that need to bring new debt to market could sell shorter-term notes at lower interest rates or turn to institutional investors like pension funds or insurance companies and issue debt privately, in hopes of negotiating better rates.
Companies with shaky credit are especially vulnerable as their debts come due and are likely to be among the earliest of many expected defaults this year if they cannot find more cash.
Times of your life - Paul Anka
Good morning, yesterday
You wake up and time has slipped away
And suddenly it's hard to find
The memories you left behind
Remember, do you remember?
The laughter and the tears
The shadows of misty yesteryears
The good times and the bad you've seen
And all the others in between
Remember, do you remember
The times of your life? (do you remember?)
Reach out for the joy and the sorrow
Put them away in your mind
The mem'ries are time that you borrow
To spend when you get to tomorrow
Here comes the setting sun (the setting sun)
The seasons are passing one by one
So gather moments while you may
Collect the dreams you dream today
Remember, will you remember
The times of your life?
Gather moments while you may
Collect the dreams you dream today
Remember, will you remember
The times of your life?
Of your life
Of your life
Do you remember, baby
Do you remember the times of your life?
FADE
Do you remember, baby
Do you remember the times of your life?
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