AbitibiBowater, Inc. (fka ABWTQ)

[Pitt77]

Tading surprising. I was not here today and delighted to see what happens. I also wonder what scenario can occur following the judge's decision. 1) Mr. Paterson wants, perhaps, to rally his former Shareholders, by a sort of right? I doubt it. 2) Offer to Purchase possible? I doubt it too. 3) The SEC could intervene and force an amendment following an investigation revealing a trading illegal? That would be to reinstate the shares. I can not think that this organization has close eye on what happens with the handling of shortnaked in this case. Moreover, the past has proven that the SEC is not indifferent to what happens after the crisis. Here are two excerpts from articles dealing with its mandate. Surely if that agency has a role to play, now it's his turn.
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The credit crisis may be a new victim: the credit rating agencies, which are in the crosshairs of the Securities and Exchange Commission (SEC) for a month......................Is it really the fault of the agencies? asks Alan White. Banks create complex financial products and they want to get good credit ratings. They evaluate their products and make changes until they get the credit you want. Banks and agencies were playing cat and mouse. It's tiring, but it's like that and I'm not sure that will change. Basically, the credit crisis has demonstrated one thing above all: that all participants thought only to make money ... "

Whether or not the sole responsibility of the credit crisis, rating agencies may well happen in the crosshairs of the SEC - as well as accountants after the financial scandals of Enron and WorldCom. The SEC is considering including mentoring consulting services offered by rating agencies.

"The primary role of agencies is to grant credit ratings," said Vincent Delisle. If you're there to give you a note and sell the game plan to get this note, it can seem like a conflict (of interest). It is therefore not surprising that the U.S. wants to act gendarme. "

Moody's and Standard & Poor's did not return The Press Business yesterday to comment on new initiatives by the SEC.

The more understandable financial info

Even with your statements under the eyes, you do not understand your investments? The SEC wants to help you. Yesterday the U.S. stock market Constable has launched a broad debate on the understanding of the financial information disclosed to investors.

The agency commissioned the University William Lutz, both securities lawyer and professor of English at Rutgers University in New Jersey, to provide a report on the issue before the end of the year. "This could mean fewer forms causing confusion and, finally, useful financial information that investors can understand," told reporters the SEC Chairman Christopher Cox.
http://lapresseaffaires.cyberpresse.ca/economie/200901/06/01-683765-les-agences-de-notation-dans-le-collimateur-de-la-sec.php
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Fairfax to the rescue





On the same subject

* The "mini-Madoff Florida went to the police
* Arrest of New York financier suspected of fraud




Sophie Cousineau

Press

There was the pulp producer SKF Pulp last year. There was the newsprint giant AbitibiBowater spring. And this week was the turn of the toy maker Mega Brands clinging to the lifeline of $ 64 million launched by Fairfax Financial.

The "magnanimity" of Fairfax Financial is well known in Ontario, where we spied the smallest gestures of this Toronto-based company and its boss, Prem Watsa. But in Quebec, this champion of companies in distress remains unknown.

That's the trick of Fairfax, whose leaders fled the cameras and microphones.

It was not too long, leaders in Fairfax did not grant an interview. That is why Prem Watsa is invariably presented in the Toronto press as a secretive man and even reclusive - a falsehood, according to his colleague Paul Rivett, who described him as very sociable.

But the only way for an investor to have the hour was to attend the annual meeting of Fairfax. Even today, the company listed on the Toronto Stock Exchange and NYSE makes no financial target, just as it organizes the promotional tour for institutional investors.

However, Fairfax has changed her mind two years ago after a series of setbacks. Indeed, as Fairfax was trying to be discreet, as it hit the headlines.

Fairfax collects insurers and reinsurers in Canada, the United States and elsewhere, as in India and Jordan. Since this is essential for commercial insurers, these firms are little known to the general public.

In 2007, record year, Fairfax has cashed a net profit of $ 1.1 billion on a turnover of 7.5 billion.

In 2005 and 2006, however, we do not give money to Fairfax. The company that invests in companies in distress felt herself problems and had to resort to selling some furniture.

The Securities & Exchange Commission (SEC), the stock market watchdog in the United States, also assigned Fairfax and Prem Watsa to appear as part of an investigation into reinsurance products non-traditional (the Finite Reinsurance in English) that are as easy to understand Chinese characters. This survey aimed thirty insurers in the U.S. - is the one that led to the departure of Hank Greenberg of AIG - still prevails. But already, Fairfax had to restate its financial results.

This has made many analysts say that Prem Watsa no longer deserved its old nickname of "Warren Buffet of the North".

57 years old, Prem Watsa is a self-made man. Born in Hyderabad, India, the businessman who immigrated to Canada in 1972 at the suggestion of his father, a schoolteacher who encouraged him to join his brother in London. This chemical-engineering graduate of the prestigious Indian Institute of Technology undertook an MBA at the University of Western Ontario. He financed his studies with jobs menu, including the sale of air conditioners.

Prem Watsa began working in 1974 to Confederation Life Insurance Co., and he never left the world of insurance and investment since.

In 1985 he bought Markel Financial, a small insurer in trucking who lacked cash to stand on its own. Two years later, he renamed Fairfax (for fair and friendly acquisitions). The small insurer yesterday today over $ 19 billion in its coffers.

That is why Prem Watsa leaves no one indifferent. For some it is a financial genius who was able to reinvest with spiraling premiums insurers in Fairfax. For others, his reputation as a great financier is overrated.

These have almost been right in Fairfax betting on the fall of his title. But Prem Watsa has cons-attacked in the summer of 2006 with continued spectacular $ 6 billion in New Jersey against SAC Capital Management and other hedge funds. Fairfax alleges that these funds have orchestrated a campaign to undermine the financial community in Fairfax. According to the company, these funds would have intimidated the leaders, even to harass the woman, the secretary and the Anglican minister Prem Watsa. This case preposterous - one respondent claimed to be acting under the orders of the FBI! - Has not yet been heard.

Fan club of Prem Watsa has expanded considerably over the last year. That's because Fairfax, who likes to go in the opposite direction of the market, felt the credit crisis coming.

In his annual letter to shareholders in 2003, Prem Watsa warned investors against the unbridled use of unregulated derivatives. "We are seeing losses for insurers in North America who seek higher returns by buying or guaranteeing commercial paper backed by auto loans, home loans and credit cards, loans that may be in default if the economy is deteriorating, "he wrote.

Fairfax, he added, avoided investing in companies highly exposed to these chemicals. "It's a disaster in the making!" He wrote five years ago!

From words to action, the company acquired default swaps, derivatives that increase in value over the underlying business is in financial distress. When the credit crisis erupted, their value has skyrocketed.

Fairfax has sold $ 1.4 billion swaps acquired at a cost of 436 million for a net profit of nearly $ 1 billion. However, it still remains for 679 million (market value at July 25).

The other reason why Fairfax is admired, it is the returns on its investments.

For 15 years, the equity portfolio of Fairfax shows an average annual return of 19.5% compared to 10.4% for the S & P 500. Fairfax has also distinguished itself with its bond investments, with an average annual return of 10.1% over the last 15 years, compared to the annual yield of 6.5% of the index of U.S. corporate bonds from Merrill Lynch.

With returns like these, Prem Watsa could claim a huge severance payments, similar to those in the financial sector. But her salary rose to $ 600 000 last year, and that everything he touched.

Since 2000, Prem Watsa was going to a performance bonus and a pension plan. For this businessman, the controlling shareholder should only be rewarded by the appreciation of its shares. Prem Watsa has a 9.7% stake in Fairfax, but controls 47.6% of its voting rights.

That may be why we forgive Fairfax certain investments that are wincing even finished his fans. The lot are 350 million investment in AbitibiBowater, a producer of newsprint still crumbling under the weight of its debt.

Fairfax advocates an approach based on the value and claims to the U.S. investor Benjamin Graham. "If newspapers are declining in North America, it is different in Asia. And then, the company's assets were worth more than the price we pay, "explains the vice-president Paul Rivett. (We could join Prem Watsa, who was on vacation.)

Anyway, Fairfax remains very cautious because Prem Watsa is convinced that the North American economy is not out of the woods, about 80% of funds in Fairfax are placed in safe money market securities.

"Like all investors who favor the approach value, they are easily seduced by junk (junk), says financial analyst Tom MacKinnon of Scotia Capital. But in the grand scheme of things, when it was over 18 billion to invest, these investments are almost a trifle. "
http://lapresseaffaires.cyberpresse.ca/opinions/chroniques/200901/09/01-692321-fairfax-a-la-rescousse.php