Replies to post #324025 on $Stock*Shop*Charts*News*Option$

[Tuff-Stuff]

$AOS: Maxim Group starts at Buy

[Tuff-Stuff]

Wall Street Breakfast: Must-Know News
by: SA Editor Rachael Granby June 16, 2010 | about: AAPL / BP / DIA / DVN / GLD / LEHMQ.PK / MYL / QQQQ / SPY / T / USO / WMT


* Lightning-struck BP faces higher spill estimate. BP (BP) restarted its oil-capture system yesterday after lightning struck a crude-collecting ship earlier in the morning, causing a small fire. In more bad news for the company, scientists once again raised their estimate of how much oil is flowing into the Gulf of Mexico, this time forecasting 35,000-60,000 barrels per day, up from last week's revision of 20,000-40,000 bpd. BP Chairman Carl-Henric Svanberg and CEO Tony Hayward will meet with Obama at the White House today, following a speech by Obama last night in which he said BP will be forced to pay for its "recklessness." Meanwhile, sources say discussions on an escrow account to cover spill-related costs have stalled following disagreements on the size of the fund and how it would be administered. Premarket: BP -2.5% (7:00 ET).

* BP's Devon deal under regulatory review. In light of the Gulf of Mexico spill, Brazilian regulators are taking another look at BP's (BP) $7B deal with Devon Energy (DVN) to buy Brazilian assets. Officials from Brazil's oil industry regulator plan to fly to BP's Houston headquarters next week to discuss the April 20 explosion and the subsequent spill. A BP spokeswoman dismissed concerns, saying "as far as we're concerned the deal is going ahead."

* Mylan probed over earnings disclosures. The SEC is reportedly investigating whether generic-drug maker Mylan (MYL) improperly disclosed confidential earnings data to select investors. Last September, Mylan hosted a meeting with several investment bank analysts and investors, and reportedly shared information about its upcoming earnings release. Shares of Mylan rose 7% the next day on three times as much volume as usual. Mylan said it's "confident the communications made during the conference were entirely appropriate."

* Rumored EU/IMF credit line for Spain. Rumors continue about a possible rescue package for Spain, with a Spanish newspaper reporting that the EU, IMF and U.S. Treasury are drawing up a liquidity plan involving a €250B ($335B) credit line. The IMF and the Spanish government both deny that any rescue package is in the offing. The persistent rumors are further hurting Spanish banks, which are borrowing record amounts from the ECB as they find themselves increasingly shut out of international capital markets.

* Russia to diversify reserves. Russia is considering diversifying its international reserves, following fluctuations in the U.S. dollar and the euro, which represent 47% and 41% respectively of Russia's holdings. Alexei Ulyukayev, first deputy chairman of Russia's central bank, said the addition of the Australian dollar is being discussed, and suggested the Canadian dollar has already been added to the list of approved currencies. Russia has the world's third largest stockpile of international reserves at $458.2B.

* EU debt crisis may dent U.S. growth. Federal Reserve officials may trim their growth forecasts next week as Europe's developing debt crisis lowers demand for U.S. goods and keeps financial markets uneasy. The Fed could potentially lower its 2011 growth forecast by as much as 0.75%, while the debt crisis will likely reinforce the Fed's decision to keep interest rates very low for an "extended period."

* Wal-Mart extends financial links. Wal-Mart (WMT) bought a small minority stake in Green Dot, a prepaid debit card seller, giving the retail giant indirect access to the U.S. financial market. Wal-Mart had previously tried to open its own bank but abandoned the attempt in 2007 following intense lobbying pressure from the banking sector.

* Credit raters get a break on reform. Lawmakers crafting a combined House and Senate version of the financial reform bill scrapped a controversial measure to have the government match rating agencies with debt issuers. The move was designed to reduce the conflict of interest created when debt issuers pay their raters. Instead, lawmakers want the SEC to further study the issue. Rating agencies rose in yesterday's trading: MCO +6.6%, MHP +5.7%.

* New protection for credit card holders. The Federal Reserve unveiled new credit card rules that cap most late fines at $25; ban inactivity fees; prevent cascading penalties; and require issuers to consider a roll back of recent rate hikes. Analysts suggested that issuers, in classic form, may boost minimum payments in order to capture more penalties and make up for the loss of the typical $39 late fee.

* Corporate defaults may start to climb. In a newly released report, S&P expressed growing concern that many U.S. companies may find it difficult to refinance their heavy debt loads in coming years, leading to a possible surge in corporate bankruptcies. Around $300B of debt comes due in 2011, of which 41% is considered speculative; by 2014, the debt will climb to $550B, of which 72% is speculative.

* Lehman to expedite return of assets. Lehman Brothers' (LEHMQ.PK) European administrators plan to unveil a proposal today for the expedited return of $22B in assets to the failed bank's unsecured creditors. The "consensual approach" being taken would see most claims agreed by the end of the year and cash distributed in 2011, shaving years off the timeline of a traditional bilateral approach.

* AT&T privacy blunder, part II. In AT&T's (T) second privacy lapse in the space of a week, several customers logged into AT&T's website as themselves ended up in other users' accounts yesterday, as the site struggled to keep up with heavy demand for Apple's (AAPL) new iPhone. The website also had difficulty processing orders, with AT&T calling it the busiest day for online sales in the company's history.

Today's Markets

* In Asia, Japan +1.8% to 10067. Hong Kong +0.1% to 20062. China +0.3% to 2570. India +0.3% to 17463.
* In Europe, at midday, London +0.3%. Paris +0.2%. Frankfurt +0.3%.
* Futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.2%. Crude -0.4% to $76.66. Gold +0.2% to $1236.60.

Wednesday's Economic Calendar

* 7:00 MBA Mortgage Applications
8:30 Housing Starts
8:30 Producer Price Index
9:15 Industrial Production
10:30 EIA Petroleum Inventories
2:15 PM Fed's Plosser: 'Improved Resolution of Financial Firms'
5:45 PM Bernanke: 'Financial Reform'
* Notable earnings before Wednesday's open: FDX

Seeking Alpha's Market Currents team contributed to this post.


Get Wall Street Breakfast by email

[Stock Lobster]

>>BP Dividend ‘Off the Table’ as Obama Demands Gulf Spill Fund

By Brian Swint

June 16 (Bloomberg) -- BP Plc will suspend its $10 billion dividend as President Barack Obama’s demand to set aside cash for the Gulf of Mexico spill stretches the company’s finances, analysts said.

“The dividend is off the table,” said Alastair Syme, an oil and gas analyst at Nomura Holdings Inc. in London. “Until they have some clarity on the costs of the spill, they can’t do anything.”

BP Chairman Carl-Henric Svanberg will meet Obama at the White House today to discuss how to compensate victims of the spill after Obama in an Oval Office address yesterday called for creation of a fund. Lawmakers, who will question Chief Executive Officer Tony Hayward tomorrow, have said the company should suspend the dividend and put $20 billion in an independently administered escrow account to pay claims.

Bloomberg forecasts show that BP is unlikely to pay a cash dividend in the second and third quarters. BP’s payments accounted for about 14 percent of all dividends in the U.K.’s benchmark FTSE 100 stock index last year. Fitch Ratings yesterday lowered BP’s credit score by six grades to BBB, two levels above junk, on concern costs will escalate.

“Hayward’s response to the president is very important, and the dividend could be fairly easy to give,” said Gudmund Halle Isfeld, an analyst at DnB NOR ASA in Oslo. “If I were an investor, I would say it’s okay to suspend the dividend for a quarter or two to ensure the company gets through the storm.”

BP spokeswoman Sheila Williams said no decision on the second-quarter dividend has been made.

Fitch said it would be “surprised” if BP didn’t suspend the quarterly payout until the full costs are known. Cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week.

‘Lack of Access’

“It’s not financially obvious how they could set up an escrow, given their credit rating and lack of access to credit markets,” Nomura’s Syme said. “It’s in the interest of BP to do something rather than nothing but they’re constrained by liquidity.”

Credit investors are pricing in a more than 39 percent chance BP will default within five years. The rising risk implied by credit-default swaps is up from 7 percent a month ago, according to CMA DataVision.

BP had $5 billion of cash available, $5.25 billion of credit lines it hadn’t used and another $5.25 billion of stand- by bank facilities, BP said in an investor conference call June 4. Fitch said yesterday it expects BP’s lenders to allow the company to use the credit lines if needed.

BP generated $27.7 billion in cash flow from operations last year and posted profit of $6 billion in the first quarter. Capital spending will total about $20 billion the company said in this year’s strategy presentation.

Cleaning Up

The company has spent about $1.6 billion on containing and cleaning up the spill so far.

If BP maintains its dividend this year at the 2009 level the dividend yield, or annual payout as a percentage of the current share price, will be more than 10 percent. That compares to 2.8 percent for Exxon Mobil Corp. and 5.9 percent for Royal Dutch Shell Plc.

“BP has the strength of balance sheet and free cash flow to sustain dividends at existing levels for now,” Collins Stewart analyst Gordon Gray wrote in a note today. “However, the rising level of public anger in the U.S., including pressure for BP to establish an escrow account for spill compensation, now point to the likelihood that BP will not pay a cash dividend for the second quarter.”

To contact the reporter on this story: Brian Swint in London at [e-mail].

Last Updated: June 16, 2010 06:36 EDT