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BHP Billiton Limited Message Board

  • captzorro_2000 captzorro_2000 Mar 12, 2007 5:42 PM Flag


    NEW YORK (Dow Jones)--... The admission likely will edge the company closer to bankruptcy court or an outright liquidation...default from its big bank lenders, including Bank of America Corp. (BAC), Citigroup Inc. (C), Credit Suisse Group (CS), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS). The disclosure is ominous. The New York Stock Exchange halted trading of New Century shares Monday, which amid disclosures of a criminal inquiry as well as worsening financial conditions. In addition, New Century said Monday that some of its bank lenders are "accelerating" requests for it to buy back from them all outstanding mortgage loans financed under their respective funding agreements after the lender defaulted on those loans. If all the company's lenders demand repurchases, the obligation could come to $8.4 billion, a burden the company said it can't meet. The result could be a forced liquidation of the loans and other assets. "The company and its subsidiaries do not have sufficient liquidity to satisfy their outstanding repurchase obligations," New Century said in the SEC filing. A failure to meet the obligations could lead one or more of its lenders to "seek to liquidate the mortgage loans or other assets financed under the applicable financing arrangement with the company," the filing said. Morgan Stanley, which last week extended an emergency $265 million financing to New Century, discontinued the funding. The New York investment bank has the largest exposure to the lender, with $2.5 billion in total repurchase claims. In addition, as of Friday, New Century's repurchase obligation to Bank of America was $600 million. It also was supposed to buy back $900 million of loans financed by Credit Suisse and $100 million of loans from Goldman. It has used the proceeds of the additional financing from Morgan Stanley to meet the repurchase obligation of $717 million to Citigroup. Analyst Robert Napoli at Piper Jaffray said assuming a 20% loss rate on the repurchase requests, New Century "would have to absorb $1.6 billion of losses, essentially wiping out shareholders equity." As of Sept. 30, the company listed $25 billion in assets, about $23 billion in liabilities and $2 billion in shareholders' equity. Another worry involves the potential negative impact of the company's financial stress on its business of collecting monthly payments from borrowers. Weaker servicing quality could hurt the performance of the bonds backed by loans managed by New Century. New Century said some of its bank lenders, such as Barclays PLC (BCS), have terminated its right to service certain loans. Meanwhile, all of New Century's financing arrangements with its bank lenders contain so-called cross-default and cross-acceleration provisions. As a result, the company said, the lenders that have not yet delivered notices of default or loan-repurchase demand to New Century will be permitted to do so. New Century's liquidity problems come at a time when subprime mortgage lenders' need for cash has grown dramatically as investment banks that pool mortgages into securities have become more aggressive in kicking back dud loans stemming from poor underwriting practices. A disruption in liquidity has already forced more than two dozen thinly capitalized lenders to shutter operations over the past two months. "At the end of the day their liquidation will be a great thing," Eric Sieracki, chief financial officer of Countrywide Financial Corp. (CFC), recently told an audience at a Raymond James Financial conference. "There is simply too much supply." Countrywide, the largest U.S. home mortgage lender, said Monday that loans at least 30 days past due accounted for 4.71% of total loans serviced by the Calabasas, Calif.

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    • Retail sales ahead
      Retail sales are expected to be soft in February for the second straight month after a strong increase in the fourth quarter. The average forecast of economists surveyed by MarketWatch calls for retail sales to rise 0.2% in February. Sales excluding autos are expected to also increase 0.2%. The government will release the report Tuesday morning at 8:30 a.m. Eastern.
      Sophia Drossos, currency strategist at Morgan Stanley, said after the weaker than expected chain store sales report last week, economists at her bank have revised down their expectations for retail sales.
      "Given the fickle nature of participants, a worse than expected print may have an asymmetric impact on risky assets, as the U.S. growth picture may be called back into question," she said, in a note.
      Reports on producer prices, consumer prices and the U.S. current account deficit are due out later in the week.

      • 1 Reply to captzorro_2000
      • Retail sales were soft in Feb for one reason. It was "freaking" cold everywhere for the entire month. What do you expect? It's not like Feb is a great month for retail anyway but the weather was the real killer. The lower sales expectations should have already been "baked in the cake" as they say, knowing how bitter cold the weather was. Geeez people. This isn't rocket science. Has nothing to do with "soft vs hard landing, slowing economy, or any other bullshit these people talk about incessantly.

34.87+0.220(+0.63%)Oct 28 4:02 PMEDT