U.S. Sues Wells Fargo, Alleging Mortgage Deceit

United States prosecutors sued Wells Fargo on Tuesday, accusing it of lying about the quality of the mortgages it handled under a federal housing program, the latest in a series of lawsuits related to banks' lending practices during the housing boom.

In a lawsuit filed in Federal District Court in Manhattan, the prosecutors accused Wells Fargo, the country's largest originator of home loans, of defrauding the government for more than a decade. The bank recklessly issued mortgages and then made false certifications about their condition to the Federal Housing Authority, a government agency that insured them, the complaint said.

The loans were not eligible for the government insurance, according to the lawsuit, and when they defaulted, the F.H.A. was obligated to cover the losses. The Justice Department is seeking hundreds of millions of dollars in damages. “Yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, defici ent underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance,” Preet S. Bharara, the United States attorney in Manhattan, whose office filed the lawsuit, said in a statement.

Wells Fargo denied the accusations, saying that it had acted in good faith and in compliance with the F.H.A. program.

“Wells Fargo is the leading F.H.A. lender and has acted as a prudent and responsible lender, with F.H.A. delinquency rates that have been as low as half the industry average,” the bank said in a statement. “The bank will present facts to vigorously defend itself against this action.”

The action against Wells Fargo comes after a slew of civil lawsuits filed by the government against large banks related to their lending practices. A number of the banks have settled the cases brought against them, including Deutsche Bank, which paid more than $200 million to resolve civil fraud charges; Citigroup's Citimortgage u nit, which settled claims for $158 million; and Bank of America, in a settlement connected to its Countrywide Financial business, for $1 billion.

To bring these cases, the government has used an obscure law called the Financial Institutions Reform, Recover, and Enforcement Act. The law, passed after the saving-and-loans scandals in the late 1980s, gives the government broad authority to bring civil claims and seek big financial penalties against federally insured banks.

That law also has a lower standard of proof than criminal business fraud statutes.

Despite these civil actions against the large banks, the Justice Department has been criticized for bringing too few criminal cases against banks and their executives tied to their conduct during the housing boom and financial crisis. Federal prosecutors have said these cases have been difficult to build because investigations have failed to show an intent to defraud, which is required for proving criminal act ivity.

The complaint depicts a mortgage factory inside Wells Fargo that was singularly focused on increasing the bank's loan volumes - and profits - while ignoring the quality of the loans.

“Management's actions included hiring temporary staff to churn out and approve an ever-increasing quantity of F.H.A. loans, failing to provide its inexperienced staff with proper training, paying improper bonuses to its underwriters to incentivize them to approve as many F.H.A. loans as possible, and applying pressure on loan officers and underwriters to originate and approve more and more F.H.A. loans as quickly as possible,” the lawsuit said.

Wells Fargo knew about the vast number of deficient loans but concealed them from the F.H.A., according to the government's complaint.

The case was assigned to Judge Jesse M. Furman, one of the newest federal judges in Manhattan. Mr. Furman, 40, a former federal prosecutor, assumed a seat on the bench in February 2012 .

Regulator Prepare to Appeal Dodd-Frank Court Ruling

Regulators are preparing to appeal a recent court ruling that struck down new curbs on Wall Street trading.

The Commodity Futures Trading Commission has drafted a plan to challenge the ruling handed down this month by a federal judge in Washington. The court decision, cheered by Wall Street, halted the agency's so-called position limits rule, a plan that would cap speculative commodities trading.

It is unclear when the agency will file the appeal before the United States Court of Appeals for the District of Columbia. Three of the agency's five commissioners must first sign off on the plan, which will likely happen in the coming days.

“I hope that the agency will appeal in the next few days,” said Bart Chilton, a Democratic commissioner at the agency who championed the position limits proposal. He added that, if the agency has not appealed by the end of next week, he “will be disappointed.”

But the appeals court is not necessarily the answer to the agency's problems. The court, dominated by Republican appointed judges, has been unfriendly to financial regulators in the recent past, throwing out Securities and Exchange Commission rules six times in seven years.

The position limits case stems from lawsuit brought by a pair of Wall Street trade groups. In the suit filed in December, the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association accused the agency of overstepping its authority. The groups point to the fine print of Dodd-Frank, the regulatory overhaul that created the position limits plan, saying the law leaves it to regulators to enforce position limits only “as appropriate.”

But the trading commission argued that Congress gave it no choice but to impose position limits. The “appropriate” requirement refers to setting position limits at a reasonable level, the agency argued.

The rule would limit the number of derivatives co ntracts a trader could hold on 28 commodities, including gold and energy products like oil and natural gas. The rule, supporters say, would protect consumers from speculative commodities trading that some studies have linked to inflated prices at the gas pump.

“I believe it is critically important that these position limits be established as Congress required,” the agency's chairman, Gary Gensler, said this month.

The Private Equity Wizardry Behind Realogy\'s Comeback

Realogy, the operator of Century 21 and other real estate businesses, is the Rocky Balboa of corporate America. Left for dead in the financial crisis, Realogy has not only survived but is now in a Rocky-like comeback, planning an initial public offering.

The company's recent history is also an illustration of how private equity firms - in this case, Leon Black's Apollo Global Management - can save, not destroy, companies, making money for themselves in good times and bad.

Apollo bought Realogy for some $7 billion in the spring of 2007, contributing about $2 billion of its own money and borrowing more than $6 billion to pay for the deal and to refinance debt.

Private equity may be considered smart money, but this acquisition took place at an extraordinarily bad time. Not only was the deal struck as the housing market was crashing, but Apollo saddled Realogy with too much debt. The company was left nearly bankrupt.

Net revenue plummeted to $4 billion in 2010 from about $6.5 billion in 2006. As revenue declined, the company hemorrhaged cash to pay roughly $600 million a year in interest. By 2009, the company was cash flow negative, kept alive only by additional borrowing.

Investors viewed the company as virtually insolvent - its debt traded at less than 10 cents on the dollar. At the time, Apollo's $2 billion stake seemed to be worthless. I remember having a conversation in 2009 with a hedge fund manager who couldn't believe the company was still in existence.

So Apollo tried some financial wizardry.

First, the private equity firm publicly asserted that it would provide further funds as necessary to keep Realogy's business alive. Apollo also doubled down on Realogy by buying up its debt on the cheap.

Apollo then engaged in multiple efforts to restructure the company's debt aggressively. It took on hedge funds holding Realogy's debt, leading a battle against Carl C. Icahn and other hedge fund opera tors who were opposed to Realogy's restructuring plan.

Apollo's first restructuring attempt was successfully blocked by Mr. Icahn. Forced to rejigger its refinancing, the private equity firm still succeeded in reducing Realogy's debt and, more important, in extending the maturity of most of the company's debt out to 2016 and beyond. This bought Realogy more time.

Meanwhile, Apollo also kept its word, buying more than a $1 billion in new Realogy debt, providing the company needed support.

The result was that Realogy was kept alive on the operating table, allowing it to further restructure its business. Management savagely cut costs through the downturn. Total expenses are now $4.5 billion a year, compared with almost $6 billion in 2006. The number of employees was reduced by a third and over 350 brokerage offices were closed or consolidated.

Realogy is now stable and its bonds are trading at par - a 900 percent return on the debt alone.

Still, al l is not well with Realogy. As the housing market struggles to recover, the company has had to borrow to survive. Last year, Realogy lost $190 million in cash from operations and needed to draw the difference in debt financing put in place by Apollo.

Ever willing to use the capital markets to help make a return on Realogy, Apollo is now planning the next stage in the company's restructuring, an I.P.O. The current plan is for the company to issue as many as 46 million new shares, raising $1.08 billion. The money will be used to pay down $2.8 billion in Realogy's debt. Convertible note holders led by John Paulson's hedge fund will also convert $1.9 billion in notes into shares.

If the I.P.O. is successful, the company's debt load will go to $330 million from $672 million, making it cash flow positive and also profitable. And as a plus, Realogy has $2.1 billion in tax credits from prior losses that it can use to offset any future profits.

There is no guarantee that Apollo can pull this I.P.O. off. For investors, Realogy is really a bet on an upturn in housing. In its prospectus, the company says that its earnings will increase as housing sales go up. But if there is no housing recovery, a post-I.P.O. Realogy will still have significant debt and historically flat revenues - not the makings of a great investment.

Still, even if the I.P.O. does not happen, Apollo has accomplished the extraordinary. If not for its efforts, Realogy would be bankrupt. The private equity firm had the knowledge and wherewithal to keep working the capital markets and continuously restructure Realogy's debt to ensure its survival. Apollo also stepped up and was willing to risk even more money to support the company.

Being private also probably provided room for Realogy to act quickly and make necessary cuts, something which would have been harder for a public company to do.

Of course, Apollo had no one to blame but itself for Realogy's pr ecarious situation, having loaded it up with debt in the first place. Nevertheless, the story of Realogy shows how private equity firms can use financial wizardry to save a company, not pillage it. Private equity firms can also lend their excess cash and expertise.

Realogy's survival jibes with at least one study that found that companies owned by private equity firms default on their debt less often than public companies. The authors attribute the reason to the presence of a sophisticated owner with the wherewithal to help, certainly the case here.

This leads to the second remarkable thing about the Realogy deal. Apollo is probably in the black on its investment. If the I.P.O. succeeds, Apollo will still own about 48 percent of the company with a stake valued at about $1.6 billion. There are also the big gains on the bonds Apollo bought.

Then there is the management fee of $15 million a year that Realogy has been paying to Apollo and the $40 million that R ealogy is paying Apollo to terminate that agreement in connection with the public offering.

Combined, this means that Apollo is not making a huge return but has very likely profited on its $2 billion investment. That the equity alone here is worth so much only a few years after Realogy almost went bankrupt - and on an investment made at the height of the real estate bubble - is miraculous.

Realogy's Hollywood-like comeback shows how private equity firms can succeed even when they make the wrong call. The firms can use financial engineering to create Rube Goldbergesque financing structures that frankly appear to create their own money. Realogy has more than 15 different types of debt instruments alone. The case of Realogy shows private equity can be a company's savior during even the worst of times.

The Private Equity Wizardry Behind Realogy\'s Comeback

Realogy, the operator of Century 21 and other real estate businesses, is the Rocky Balboa of corporate America. Left for dead in the financial crisis, Realogy has not only survived but is now in a Rocky-like comeback, planning an initial public offering.

The company's recent history is also an illustration of how private equity firms - in this case, Leon Black's Apollo Global Management - can save, not destroy, companies, making money for themselves in good times and bad.

Apollo bought Realogy for some $7 billion in the spring of 2007, contributing about $2 billion of its own money and borrowing more than $6 billion to pay for the deal and to refinance debt.

Private equity may be considered smart money, but this acquisition took place at an extraordinarily bad time. Not only was the deal struck as the housing market was crashing, but Apollo saddled Realogy with too much debt. The company was left nearly bankrupt.

Net revenue plummeted to $4 billion in 2010 from about $6.5 billion in 2006. As revenue declined, the company hemorrhaged cash to pay roughly $600 million a year in interest. By 2009, the company was cash flow negative, kept alive only by additional borrowing.

Investors viewed the company as virtually insolvent - its debt traded at less than 10 cents on the dollar. At the time, Apollo's $2 billion stake seemed to be worthless. I remember having a conversation in 2009 with a hedge fund manager who couldn't believe the company was still in existence.

So Apollo tried some financial wizardry.

First, the private equity firm publicly asserted that it would provide further funds as necessary to keep Realogy's business alive. Apollo also doubled down on Realogy by buying up its debt on the cheap.

Apollo then engaged in multiple efforts to restructure the company's debt aggressively. It took on hedge funds holding Realogy's debt, leading a battle against Carl C. Icahn and other hedge fund opera tors who were opposed to Realogy's restructuring plan.

Apollo's first restructuring attempt was successfully blocked by Mr. Icahn. Forced to rejigger its refinancing, the private equity firm still succeeded in reducing Realogy's debt and, more important, in extending the maturity of most of the company's debt out to 2016 and beyond. This bought Realogy more time.

Meanwhile, Apollo also kept its word, buying more than a $1 billion in new Realogy debt, providing the company needed support.

The result was that Realogy was kept alive on the operating table, allowing it to further restructure its business. Management savagely cut costs through the downturn. Total expenses are now $4.5 billion a year, compared with almost $6 billion in 2006. The number of employees was reduced by a third and over 350 brokerage offices were closed or consolidated.

Realogy is now stable and its bonds are trading at par - a 900 percent return on the debt alone.

Still, al l is not well with Realogy. As the housing market struggles to recover, the company has had to borrow to survive. Last year, Realogy lost $190 million in cash from operations and needed to draw the difference in debt financing put in place by Apollo.

Ever willing to use the capital markets to help make a return on Realogy, Apollo is now planning the next stage in the company's restructuring, an I.P.O. The current plan is for the company to issue as many as 46 million new shares, raising $1.08 billion. The money will be used to pay down $2.8 billion in Realogy's debt. Convertible note holders led by John Paulson's hedge fund will also convert $1.9 billion in notes into shares.

If the I.P.O. is successful, the company's debt load will go to $330 million from $672 million, making it cash flow positive and also profitable. And as a plus, Realogy has $2.1 billion in tax credits from prior losses that it can use to offset any future profits.

There is no guarantee that Apollo can pull this I.P.O. off. For investors, Realogy is really a bet on an upturn in housing. In its prospectus, the company says that its earnings will increase as housing sales go up. But if there is no housing recovery, a post-I.P.O. Realogy will still have significant debt and historically flat revenues - not the makings of a great investment.

Still, even if the I.P.O. does not happen, Apollo has accomplished the extraordinary. If not for its efforts, Realogy would be bankrupt. The private equity firm had the knowledge and wherewithal to keep working the capital markets and continuously restructure Realogy's debt to ensure its survival. Apollo also stepped up and was willing to risk even more money to support the company.

Being private also probably provided room for Realogy to act quickly and make necessary cuts, something which would have been harder for a public company to do.

Of course, Apollo had no one to blame but itself for Realogy's pr ecarious situation, having loaded it up with debt in the first place. Nevertheless, the story of Realogy shows how private equity firms can use financial wizardry to save a company, not pillage it. Private equity firms can also lend their excess cash and expertise.

Realogy's survival jibes with at least one study that found that companies owned by private equity firms default on their debt less often than public companies. The authors attribute the reason to the presence of a sophisticated owner with the wherewithal to help, certainly the case here.

This leads to the second remarkable thing about the Realogy deal. Apollo is probably in the black on its investment. If the I.P.O. succeeds, Apollo will still own about 48 percent of the company with a stake valued at about $1.6 billion. There are also the big gains on the bonds Apollo bought.

Then there is the management fee of $15 million a year that Realogy has been paying to Apollo and the $40 million that R ealogy is paying Apollo to terminate that agreement in connection with the public offering.

Combined, this means that Apollo is not making a huge return but has very likely profited on its $2 billion investment. That the equity alone here is worth so much only a few years after Realogy almost went bankrupt - and on an investment made at the height of the real estate bubble - is miraculous.

Realogy's Hollywood-like comeback shows how private equity firms can succeed even when they make the wrong call. The firms can use financial engineering to create Rube Goldbergesque financing structures that frankly appear to create their own money. Realogy has more than 15 different types of debt instruments alone. The case of Realogy shows private equity can be a company's savior during even the worst of times.

Regulator Prepare to Appeal Dodd-Frank Court Ruling

Regulators are preparing to appeal a recent court ruling that struck down new curbs on Wall Street trading.

The Commodity Futures Trading Commission has drafted a plan to challenge the ruling handed down this month by a federal judge in Washington. The court decision, cheered by Wall Street, halted the agency's so-called position limits rule, a plan that would cap speculative commodities trading.

It is unclear when the agency will file the appeal before the United States Court of Appeals for the District of Columbia. Three of the agency's five commissioners must first sign off on the plan, which will likely happen in the coming days.

“I hope that the agency will appeal in the next few days,” said Bart Chilton, a Democratic commissioner at the agency who championed the position limits proposal. He added that, if the agency has not appealed by the end of next week, he “will be disappointed.”

But the appeals court is not necessarily the answer to the agency's problems. The court, dominated by Republican appointed judges, has been unfriendly to financial regulators in the recent past, throwing out Securities and Exchange Commission rules six times in seven years.

The position limits case stems from lawsuit brought by a pair of Wall Street trade groups. In the suit filed in December, the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association accused the agency of overstepping its authority. The groups point to the fine print of Dodd-Frank, the regulatory overhaul that created the position limits plan, saying the law leaves it to regulators to enforce position limits only “as appropriate.”

But the trading commission argued that Congress gave it no choice but to impose position limits. The “appropriate” requirement refers to setting position limits at a reasonable level, the agency argued.

The rule would limit the number of derivatives co ntracts a trader could hold on 28 commodities, including gold and energy products like oil and natural gas. The rule, supporters say, would protect consumers from speculative commodities trading that some studies have linked to inflated prices at the gas pump.

“I believe it is critically important that these position limits be established as Congress required,” the agency's chairman, Gary Gensler, said this month.

Wall Street Pay Remains High Even as Jobs Shrink

It still pays to be on Wall Street.

Even as the financial industry in New York has slashed jobs by the thousands, the average worker who remains is collecting a near-record paycheck.

In a report released on Tuesday, the New York State Comptroller, Thomas P. DiNapoli, said that the average pay package of securities industry employees grew slightly last year and was up 16.5 percent over the past two years, to $362,950. Wall Street's total compensation rose 4 percent last year to more than $60 billion.

That tally is the third highest in Wall Street history, trailing only the total amounts in the years 2007 and 2008, when the financial crisis was gathering force. The results are sure to raise eyebrows on Main Street and in Washington, where lavish pay packages have come under attack since the crisis.

But the report provides only a limited snapshot into Wall Street's finances. The wage data, which largely covers 2011, is somewhat outdated and other jo bs figures in the report do not account for the remaining months of 2012. Nearly half of all revenue on Wall Street is earmarked for compensation, and employees typically learn the size of their bonus at the end of the year.

Expectations for this year appear to be high, according to another study out today on pay. Nearly half, 48 percent, of 911 Wall Street employees surveyed by eFinancialCareers.com said they felt their bonuses this year will higher than in 2011. This is a marked rise from 2011, when 41 percent of survey respondents believed their annual bonus would increase.

The comptroller's annual report also depicted a cloudy outlook for the broader industry and its thousands of employees. In the face of new regulation and a lethargic economic recovery, the report notes, Wall Street has undergone a series of layoffs and lagging returns.

“The securities industry remains in transition and volatility in profits and employment show that we have no t yet reached the new normal,” Mr. DiNapoli said in a statement.

After posting a “disappointing” $7.7 billion in earnings last year, Wall Street in the first half of 2012 earned $10.5 billion, he said. The industry “is on pace” to earn more than $15 billion by the end of the year.

But even with signs of improvement, Wall Street is rapidly shedding jobs. The austerity efforts have claimed 1,200 positions so far this year, according to the report. Mr. DiNapoli estimated that the industry lost more than 20,000 jobs since late 2007.

Banks have also taken aim at lavish cash bonuses. The comptroller in February estimated that cash bonuses declined 13.5 percent, to $19.7 billion. In his latest report, Mr. DiNapoli said he expects that trend to continue.

As Wall Street reins in cash payouts to top executives, the banks have been encouraged to give more compensation in stock and other long-term compensation to reward employees. Such a move discourag es outsize risk taking and ties an employee's interest to the long-term health of the bank.

While pay remains high across the board, senior executive has fallen since the financial crisis. In 2007, the year before the financial crisis, Goldman chief executive Lloyd C. Blankfein made $68.5 million. In 2011 he took home $12 million.

For an executive like Mr. Blankfein, $12 million may be a pay cut, but it is still a princely sum compared with other industries. Between 2009 and 2011, compensation in the securities industry grew at an average annual rate of 8.7 percent, outpacing 5.3 percent for the rest of the private sector.

In 2011, financial jobs accounted for nearly a quarter of all private sector wages paid in NewYork City, even though it accounted for just a fraction, 5.3 percent, of city's private sector jobs.

Variety Magazine Sold for About $25 Million

By BROOKS BARNES

LOS ANGELES â€" In a show of new media force, the owner of a collection of entertainment news blogs said on Tuesday that it had completed a deal to buy the venerable Variety for about $25 million.

Penske Media, which owns sites like Deadline.com, a ferocious breaker of movie and television news, teamed with the hedge fund Third Point to make the purchase from Variety's British owner, Reed Elsevier.

The deal was essentially a fire sale. Peter Bart, who remade Variety as its editor and remains a vice- resident and editorial director, noted that the paper at one point “was doing so well that Reed turned down a couple of offers of between $300 million and $350 million.”

This time around, bidders included the billionaire Ron Burkle and Avenue Capital, which controls the National Enquirer.

Penske intends to continue to operate Variety, which has a staff of about 120, and Deadline, with fewer than a dozen, as distinct publications, although some staff members, including the Deadline founder Nikki Finke, may contribute to both. Variety has about 28,000 daily subscribers, according to the research firm BPA Worldwide.

Variety.com has about 320,000 monthly unique visitors, according to ComScore; Deadline has about 2.4 million.

Variety, with its tongue-twister headlines and florid green masthead, was once Hollywood's bible, a must read every morning for the lowliest of agency assistants and the mightiest of moguls. Studios, campaigning for Oscars or Emmys, spent lavishly on ads. For generations, Variety's critics had a clout that far outweighed their number of readers, providing early readings on films and Broadway shows to powerful industry insiders.

But the trade newspaper has been dying a slow death for at least a decade, bleeding from layoffs, vanishing advertisers and sharply diminished relevance in a media hierarchy now dominated b y Deadline and a rejuvenated Hollywood Reporter. Variety still lands scoops, but even some major producers no longer subscribe to the newspaper's daily print edition. Variety.com operates behind a pay wall known for infuriating log-in glitches.

To some degree, Variety's problems are the same as any newspaper these days: digital delivery is becoming more vital but doesn't generate enough money to pay the bills. But Variety has deeper problems. Movie and television companies - making fewer films, battling a sharp decline in DVD sales, watching digital video recorders erode ad sales - have been slashing trade ads.

Moreover, there is a nettlesome big picture question: Does Variety's style of classic trade publishing still serve a need? The newspaper's bread-and-butter news (casting decisions, ratings and box office analysis, agent comings and goings) has become ubiquitous and free across the Web, offered by sites like Deadline, Hollywood.com, TMZ.com, theWrap.com and IndieWire.com.

Variety has also retained a benign quality in its coverage - it is reliant on studios for its livelihood, after all - that Web rivals have exploited.

The Hollywood Reporter, once an also-ran competitor, almost vanished a few years ago but found a way to survive by transforming itself into a glossy weekly magazine. The revamped Reporter, owned by e5 Global Media and edited by Janice Min, is a hit with readers and not only because it looks pretty. Ms. Min has delivered a more relevant, provocative style of journalism, albeit one heavily reliant on anonymous sources.

Variety, founded 107 years ago, has been owned by Reed Elsevier, a Dutch and British conglomerate, since 1987. Reed previously sought to sell Variety and a cluster of other trade publications in 2008, but was unable to find a buyer, in part because of that year's financial crisis.

Neil Stiles, Variety's president, has successfully buttressed the newspaper with side businesses like databases and conferences. But Mr. Stiles, a British import, has also made questionable decisions that were unpopular in Hollywood and resulted in a deeply demoralized staff, like the 2010 cost-cutting move to lay off two of Variety's most prominent critics. Both started writing for Ms. Min in short order.

Mr. Stiles, who oversaw the sale, will leave the paper.

Billionaire Financier Leon Black Buys Art Publisher Phaidon

The billionaire financier Leon Black has recently made as many headlines for his art patronage as for his business deals. On Tuesday, he combined the two, announcing an acquisition of Phaidon Press, a leading publisher of fine art books.

Mr. Black, the chief executive of the private equity giant Apollo Global Management, is paying an undisclosed amount for the London-based Phaidon. He acquired the publisher from Richard Schlagman, a British businessman. It is a personal investment for Mr. Black and has nothing to do with Apollo. (That said, Phaidon is named after a Greek philosopher, and Apollo, the Greek god.)

Phaidon is one of several high-end art-book publishers, a group that includes Assouline and Taschen. While best known for its art titles, the company publishes big, beautiful books on everything from children's books to cookbooks. Titles range from a collector's edition of Nan Goldin photographs ($4,000) to Paushpesh Pant's India Cookbook ($49.95).

In a statement, Mr. Black said that he and his family “look forward to supporting the future growth of the company, including through the ongoing development of its publishing program, further geographic expansion, and the launch of digital products.”

Greenhill & Company advised Phaidon on the sale. Mr. Black's purchase of Phaidon was earlier reported by The Wall Street Journal.

Mr. Black is one of the country's foremost art collectors. Though he nor any of his representatives will confirm it, Mr. Black is said to have paid nearly $120 million for Edvard Munch's 1995 version of “The Scream” earlier this year. Sold in May by Sotheby's, “The Scream” became the most expensive artwork ever sold at auction. Later this month the pastel will go on view at the Museum of Modern Art, on whose board Mr. Black sits.

In May, Mr. Black and his wife announced a $48 million contribution to a new visual arts center at Dartmouth College, Mr. Black's alma mater. As part of the gift, Mr. Black and his family have a sculpture commissioned by the abstract artist Ellsworth Kelly. The piece will adorn a wall facing the center.

As Mr. Black buys assets, his company, Apollo, is looking to unload them. Last week, it sold shares of Berry Plastics Group, a company it acquired in 2006, in an initial public offering that is trading below its offering price. There are several other Apollo-owned companies that are trying to go public, including the real estate company Realogy Holdings, which is expected to hit the market on Wednesday.

Mr. Black is not the only Apollo billionaire making purchases out of his own pocket. Josh Harris, a co-founder of Apollo, led a group that last October paid $280 million for the Philadelphia 76ers professional basketball team.

A Better Solution Is Needed for Failed Financial Giants

Harvey R. Miller is a partner of the law firm Weil, Gotshal & Manges, where he created and developed the firm's business finance and restructuring department that specializes in reorganizing distressed business entities. Maurice Horwitz is an associate in that department.

More than four years after the collapse of Lehman Brothers, Congress has failed to adequately resolve how to deal with the collapse of financial institutions.

Legislators and regulators seemingly cannot overcome the powerful lobbyists employed by the financial industry. And, to some extent, it appears that federal regulators seem to suffer from parochial bureaucratic views that limit their objectives.

The Dodd-Frank Act, while a good faith effort, does not solve the problem of a distressed global financial institution facing failure. The attempt to put into effect the most important provision of Dodd-Frank, known as Title II - which gives the government “orderly liquidation aut hority” over systemically important institutions - is inadequate and, to some extent, ill-conceived.

How do we know? As the bankruptcy attorneys in the Chapter 11 cases of Lehman Brothers Holdings, we have first-hand knowledge of the tremendous difficulties in dealing with the failure of global integrated financial institutions. The collapse of Lehman, which resulted in more than 100 separate insolvency proceedings around the world, highlighted the inadequacy of the existing regulatory, bankruptcy and insolvency regimes.

Dodd-Frank has failed to fill the gap because of the complex and unique organizational and operational structures of big financial institutions. While global financial institutions generally operate as a single enterprise, typically with consolidated management, an integrated technology base, and â€" most significantly â€" a common capital and liquidity pool, they typically consist of thousands of legal entities incorporated in multiple ju risdictions (Lehman comprised some 8,000 legal entities in 40 countries).

Most clients transact business with the prime brokerage operations of the global firm without generally knowing - or caring - which subsidiary with which they transacted business. Behind these subsidiaries, however, firms manage risk and capital on a global scale through a web of interconnected subsidiaries. As a result, no single subsidiary has the ability to stand (or be resolved) alone.

The Federal Deposit Insurance Corporation initially urged global financial institutions to hive off their systemically important businesses into stand-alone subsidiaries, each with its own capital base. Financial institutions uniformly resisted, arguing that such “subsidiarization” would be inefficient and uneconomical.

While the banks' arguments may hold true in good times, in bad times, these interconnected subsidiaries make it impossible to prevent systemic consequences.

Fiduciaries a nd receivers in each jurisdiction will typically be appointed by local courts or regulators to liquidate the entities within their jurisdiction and maximize recoveries for the creditors of those particular entities. These liquidators may need to take actions that are not in the best interests of the enterprise resolution and are not conducive to preserving or winding-down the systemically important functions of the enterprise.

To circumvent that potential result, the F.D.I.C., under Dodd-Frank, is proposing the concept of a “single receivership” strategy. The agency states in a recently proposed rule that the orderly liquidation of a failed financial institution “may best be accomplished by establishing a single receivership of a parent holding company and transferring valuable operations and assets to a solvent bridge financial company, including the stock or other equity interests of the company's various subsidiaries.”

The bridge financial company wo uld then borrow from an “orderly liquidation fund” established by the Treasury Department and recapitalize systemically important operating subsidiaries through intercompany loans. The group would thus stay intact and under the control of a single receiver: the F.D.I.C.

The proposed solution is fraught with problems. How much would the Treasury be willing (or able) to lend to keep struggling subsidiaries afloat? What would be the consequences of protecting the creditors of subsidiaries with funds (probably best described as a bailout) provided by the Treasury, while creditors of the holding company are left with unsecured claims in the F.D.I.C. receivership with a high probability of no return?

The proposal does not take into account that creditors of the holding company may hold guarantees of subsidiaries as well as be cross-guarantees among entities, with the result that the proposed resolution would require the Treasury to satisfy the claims of essenti ally all the creditors of the failed financial institution. Surely, if the proposal is adopted, any creditor with leverage would require guarantees of subsidiaries, and cross-guarantees could become standard operating procedure.

But the most glaring defect of a “single receivership” proposal is that it works only for purely domestic institutions. If the institution has systemically important subsidiaries in foreign jurisdictions, the onset of an F.D.I.C. receivership would precipitate the commencement of foreign insolvency proceedings for all foreign operating subsidiaries, as occurred with Lehman.

Foreign regulators might well balk at the F.D.I.C. unilaterally taking charge and trying to impose its receivership rules in such foreign jurisdictions. As such, the F.D.I.C. proposal and Dodd-Frank do not deal with the critical consequences of cross-border failure.

In contrast, a recently published European Union directive on bank resolution and recovery recognizes that in the interest of minimizing systemic impact, regulators should be charged with devising “an efficient resolution for the group as a whole with the protection of financial stability in both the member states where the group operates and the Union.” The proposed framework would establish a “group level resolution authority” and “resolution colleges,” consisting of resolution authorities from other E.U. member states, to deal with the resolution of the group.

Although limited to the E.U., this “hub and spoke” model would represent a considerable step forward in providing a framework for dealing with cross-border resolution of systematically important financial institutions. A similar model has been proposed recently by the International Institute of Finance. It is a proposal that deserves the attention of legislators and regulators.

Crucially, as these proposed frameworks demonstrate, the key to solving the cross-border conundrum is not legal harmonization â€" a universal law to deal with the universal bank â€" but rather, mandated coordination among regulators, and a shift in fiduciary obligations from individual entities or jurisdictions to the group and the global financial system.

If the objective of resolution authority is to prevent or mitigate systemic impact, it cannot be achieved through a solely domestic regime. To preserve systemically important functions of a failed financial enterprise, regulators must be able (and mandated) to deal with the enterprise as a whole across national borders, while balancing a respect for sovereign interests. This would be a dramatic change in the well-settled norms of applicable laws in most jurisdictions, but necessary and appropriate if systemic impact is to be avoided.

The danger of another Lehman exists. Failure to be prepared would result in another and, maybe, greater and more enduring catastrophe than Lehman.

China Gets Back to Work

A slumping economy did not deter Chinese from their travels.

China is back to work after the Golden Week holiday. The vacation week brought decent economic news as retail sales grew 15 percent over the 2011 period. The government abolished road tolls during the holiday week and tens of millions of travelers got into their cars and hit the roads, leading to massive traffic jams. China may have much underutilized transportation infrastructure most of the time, but it is never enough during peak travel periods when tens or hundreds of millions of people are on the move.

The tourists slogged through huge crowds at popular sites, then left behind piles of trash and, in Western China, two camels dead from overwork. I had a “staycation” in Beijing with the family, having learned from experience that over these holidays it is best to stay in or go overseas. Traveling abroad is now crowded too, as this vacation Chinese travelers booked 50 percent more foreign trips than they did during the 2011 holiday week.

The holiday spending is a positive sign for consumer confidence, and while the economy is still struggling there was more good news on Monday. An HSBC/Markit survey claims that China's services sector, which Bloomberg says accounts for 43 percent of China's economy, expanded the most in four months. But people hoping for a huge new stimulus package to bolster the economy will likely be disappointed, as Caixin explains in some detail that there are insufficient funding sources for many of the mooted infrastructure projects.

Uncertainty about China's political transition has hurt foreign confidence in its economy and may have led to policy inertia in the face of a slowing economy. Some but not all of that uncertainty disappeared the Friday before the Golden Week holiday with the twin announcements that the Communist Party of China would convene the 18th National Party Congress on Nov. 8 and that Bo Xilai had been expelled from the Communist Party and public office and would be handed over to the judiciary.

Credible rumors of an October date for the 18th Party Congress had been circulating but something looks to have pushed back the opening. Very few people know the truth though many will speculate. Officially, there is no delay, as the party's only prior public statement about the timing of the 18th congress said it would be in the second half of 2012.

The leadership found consensus, at least publicly, about the incredibly complex and difficult case of Mr. Bo, which China scholars like Cheng Li view as a very positive sign. Some observers are guessing that Mr. Bo will go on trial before the party meets in November, though if the cases of Chen Xitong and Chen Liangyu, the last two politicians of Mr. Bo's rank to go on trial, are precedents then it could be many months or even more than a year before Mr. Bo gets his day in court.

Mr. Bo's family could probably keep a New York psychiatrist booked for years. A recent New York Times article tells us that Mr. Bo and his second wife, Gu Kailai, were so paranoid that they thought Mr. Bo's son from his first marriage might have tried to poison Ms. Gu.

Xi Jinping, Hu Jintao's expected successor, will be stepping into one of the most difficult jobs in the world. China is in desperate need of change, as just about everyone agrees. But so far there is no apparent consensus on the types of reforms. Entrenched special interest groups, including re-energized state-owned enterprises, are defending their positions, there is a growing expectations gap between citizens and the government, and Mr. Xi will have to govern while keeping two predecessors - Mr. Hu and Jiang Zemin - happy.

The Chinese government is very aware of all the problems in the economy, and Chinese experts are at least as critical as foreigners - and probably better informed - about the challenges and possible solutions, as two recen t essays demonstrate.

Li Zuojun, deputy director of the Institute of Resources and Environmental Policy Research at the Development Research Center of the State Council, wrote about the Chinese economy's nine major challenges:

According to Li, the nine problems are: declining economic growth, inflation, economic bubbles, the changing economic growth engines, adjustments in industries and regional business structures, environmental constraints, the social costs of development, the deteriorating international environment and resistance to reform.

Deng Yuwen, an editor with an influential Communist Party journal, published “The Ten Grave Problems Facing China”:

Although the author echoes the formal party line and extols the peerless achievements of the Hu-Wen decade, Deng goes on to deliver an accusatory accounting of China's underlying social, economic, regional, political and ideological problems. He frames them as monumentally important issues that have grown in scale and gravity as a result of a stability obsessed government that, under the cover of consensual politics, has allowed pressing concerns to fester. They are issues of critical importance not only for China's ruling party, but by extension for the world as a whole. An indictment of political lassitude, “The Ten Grave Problems” is also framed as an agenda that demands the immediate attention of the party-state's incoming leaders.

China's Communist Party has been through worse crises than the Bo scandal and the current economic slowdown. It survived the man-made famine of the Great Leap Forward that killed tens of millions, the chaos of the Cultural Revolution, the attempted coup and death of Mao Zedong's successor, Lin Biao, and the protests and crackdown of 1989.

Betting against the party's staying power has proved to be a poor wager, but one wild card may be that in previous crises the part y had an almost total monopoly on information flow and so had time to perfect a propaganda response. China is now in the microblogging-era of instantaneous information dissemination and discussion, making the party's job more difficult, though far from impossible. Expect Mr. Xi to move quickly to project confidence and commitment to reform.

Business Day Live: Ireland Plans Bold Measures to Lift Housing

Ireland plans a bold move to help struggling homeowners. | The I.M.F. cuts its global growth forecast. | How Wal-Mart found a banking partner in American Express.

Workday Raises I.P.O. Range to $24 to $26

Initial public offerings have largely sputtered over the past few weeks. But that dismal environment has done little to dent investors' enthusiasm for Workday, a maker of human resources software.

The company disclosed on Tuesday that it wa raising the price range for its forthcoming stock sale to $24 to $26 a share, up from $21 to $24. At the midpoint of the revised range, Workday would raise $568.75 million through the offering, and would be valued at about $4 billion.

Last week was especially rough for companies going public, with Dave & Buster's being forced to scrap its I.P.O. altogether.

But Workday benefits from some of the trends that have buoyed a number of the most successful offerings this year. Among them is that its software taps into the much-ballyhooed cloud computing phenomenon, using faraway servers to help provide more complex analyses for customers as they plan business operations.

One of Workday's co-founders, Aneel Bhusri, told The New York Times' Bits blog earlier this year that the company plans to use its public stock as currency for acquisitions that will help it expand.

Workday is scheduled to price its offering on Thursday night and begin trading on the New York Stock Exchange on Friday, under the ticker “WDAY.”

The offering is being led by Morgan Stanley and Goldman Sachs, with additional underwriters including Allen & Company and JPMorgan Chase.

Advent to Buy Cytec\'s Coating Resin Business for $1.15 Billion

Cytec Announces Agreement to Divest Coating Resins Business
Transaction values Coating Resins at $1,150 million

Woodland Park, New Jersey, October 9, 2012 - Cytec Industries Inc. (NYSE:CYT) announced today a definitive agreement to divest its Coating Resins business to Advent International, a global private equity firm for $1,032 million plus assumed liabilities of $118 million bringing the total value to $1,150 million.  The sale is expected to close in the first quarter 2013, following the satisfaction of regulatory requirements and other customary closing conditions. 

"I am extremely pleased with the evolution of Cytec over the last 18 months and this transaction is another significant step in our portfolio transformation," said Shane Fleming, Chairman, President, and Chief Executive Officer of Cytec.  "The sale enables us to focus on our industry-leading portfolio of growth platforms comprised of advanced materials and separation technologies to drive long-term growth and deliver greater returns to our shareholders."

"The transaction with Advent International creates an opportunity for the Coating Resins segment to fully leverage its breadth of environmentally-friendly resin technologies.   I want to thank the employees in Coating Resins for their focus and perseverance during the divestiture process and for their good work that has led to improvement in the business performance," said Mr. Fleming.  Included in the transaction are the Radiation-Cured Resins, Liquid Coating Resins, Powder Coating Resins and Amino Crosslinkers product lines.

J.P. Morgan acted as Cytec's financial advisor.

Investor Conference Call to be held on October 9 at 2:00pm US Eastern Time

Cytec will host a live conference call for investors today, October 9 at 2:00pm Eastern Standard Time to review the transaction.  Investors can listen to the call by dialing (888) 894-3692
(US & Canada) or (706) 902-4297 (International) and using access code 39651541.   A live webcast of the call may also be accessed through the Investor Relations section of Cytec's web site at www.cytec.com.  Presentation materials will be available on the web site prior to the call.

About Cytec
Cytec's vision is to deliver specialty material and chemical technologies beyond our customers' imagination. Our focus on innovation, advanced technology and application expertise enables us to develop, manufacture and sell products that change the way our customers do business. Our pioneering products perform specific and important functions for our customers, enabling them to offer innovative solutions to the industries that they serve. Our products serve a diverse range of end markets including aerospace and industrial materials , mining and plastics.

About Advent

Founded in 1984, Advent is one of the world's leading global buyout firms, with offices in 16 countries on four continents. A driving force in international private equity for 28 years, Advent has built an unparalleled global platform of over 170 investment professionals across Western and Central Europe, North America, Latin America and Asia. The firm focuses on international buyouts, strategic repositioning opportunities and growth buyouts in five core sectors, working actively with management teams to drive revenue growth and earnings improvements in portfolio companies. Since its inception, Advent has raised $26 billion in private equity capital and, through its buyout programs, has completed over 270 transactions in 35 countries. For more information, please visit www.adventinternational.com.

Contact:
Jodi Allen
Investor Relations
(973) 357-3283

 

HUG#1647509

MegaFon of Russia Moves Ahead on I.P.O.

MOSCOW â€" One of Russia's largest cellphone companies, MegaFon, announced plans to go public later this year on London Stock Exchange.

The initial public offering, which could be one of the largest for a Russian company in recent years, would be the second big debut for Alisher Usmanov, MegaFon's majority owner. Mr. Usmanov, who is Russia's richest man, was an early investor in Facebook, the American social networking company that went public this spring.

But MegaFon could face a rocky reception to the public markets.

The stock markets have not been kind to newly public companies. Facebook is trading more than 40 percent below its offering price.

MegaFon faces its own challenges as well. While its competitors have expanded more broadly in former Soviet states and other emerging markets, MegaFon is narrowly focused on Russia at a time when the country's economic growth is projected to be slowing.

The I.P.O. also comes on the trailing edge of a cellphone boom in the emerging markets. After experiencing explosive growth, the market is largely saturated. Even in remote parts of the former Soviet Union, everybody who wants a cellphone has one.

With dwindling opportunities for customer growth, MegaFon, which is the second-largest operator by number of subscribers, has been adjusting its strategy to bolster profits. The company is now focused on extracting more income from each customer, becoming the largest provider of wireless data services in Russia.

The company had intended to put about 20 percent of its shares on the market. But Kommersant, a Russian business newspaper, reported
on Tuesday that it might scale back because of the lackluster performance of the Russian stock exchange lately.

More than half the shares that will come onto the market are from a strategic investor, TeliaSonera of Sweden. The investor could sell as much as 10.6 percent of its stake, but plans to retain a blocking sh are of more than a quarter.

The company said the offering on the London Stock Exchange would be completed in the fourth quarter.

Mr. Usmanov, a native of Uzbekistan who got his start in post-Soviet business selling plastic bags, made a fortune in metals and mining
during the commodity boom of the past decade. He has since branched into high technology industries, following a strategy endorsed by the Russian government of using profits from natural resources to help diversify the economy away from dependence on fickle commodity prices.

After a series of successful investments in Russian Internet companies, Mr. Usmanov was among a consortium that plowed money into Facebook. At one point, the group owned nearly 10 percent of the social networking site.

A Tax Too High

A Tax Too High  |  Wall Street doesn't exactly love the idea of higher taxes. But a proposal in France looks much scarier than anything being discussed in this country: a 75 percent marginal tax rate on all income over $1.3 million, with capital gains taxes as high as 60 percent.

This was not what French executives were expecting when they signed a petition asking for higher taxes (yes, higher taxes), and now many are “crying foul,” writes Andrew Ross Sorkin in the DealBook column. “The idea of soaking the rich is often a popular one. But if there is lesson in the French experience, despite the economic models, it is that there are limits.”

 

Another Gloomy Forecast for Banks  |  It's already bad, and it could get worse. So predicts the latest report on the global banking industry, this one by McKinsey & Company. In it, the consulting firm calls for cost-cutting and changes in culture. It also suggests that some lenders may be forced to put themselves up for sale. “You will see significant consolidation, particularly among banks with less diversified income streams,” Toos Daruvala, a McKinsey director and co-author of the report, told Reuters.

The sluggish economy doesn't help. The International Monetary Fund is lowering its forecast for global economic growth to 3.3 percent this year and 3.6 percent in 2013, predicting a 15 percent chance of a recession in the United States next year. The I.M.F.'s Global Financial Stability report is due out this evening.

With the economy potentially slowing, regulators are paying close attention to the banks' capital levels. But the banks are not necessarily happy. Some are clashing with the Federal Reserve over its stress tests, demanding more information on the Fed's calcula tions, The Wall Street Journal reports. Sallie Krawcheck, former head of Bank of America's wealth management division, said in a Twitter message on Monday that the discord was “not a bad thing,” adding that she would “worry if they agree.”

 

Ireland's Bold Move  |  Ireland is going where no country has gone before. The government is close to passing a law that could encourage banks to reduce the amount that borrowers owe on their mortgages, “a step that no major country has been willing to take on a broad scale,” DealBook's Peter Eavis reports. “The initiative, which would lower a borrower's monthly payment, could prevent a tide of foreclosures, an uncertainty that has been hanging over the Irish housing market for years.” In other words, it could help Ireland's troubled economy.

 

Billion-Dollar Frau d Fighter  |  Max W. Berger, the plaintiffs lawyer, won six major securities class-action settlements, including the recent $2.43 billion deal with Bank of America, DealBook's Peter Lattman reports. But Mr. Berger, of Bernstein Litowitz Berger & Grossmann, is not celebrating.” It makes me sad that in all of these scandals, no matter how good a job we do of getting results and inflicting pain, the government doesn't seem to follow suit, and nobody learns, and it's business as usual,” Mr. Berger laments.

It's not just about the billion-dollar cases. DealBook's Peter J. Henning, the White Collar Watch columnist, highlights a recent case in which the Justice Department accused two brokers of secretly adding pennies to the cost of securities trades to generate $18.7 million in gains. Mr. Henning writes that “conduct involving relatively small amounts can add up to millions of dollars if allowed to go on long enough.”

 

Buyouts Lift Carlyle  |  The Carlyle Group's bread-and-butter private equity business generated most of the growth among its funds in the third quarter. The value of the firm's leveraged buyout funds increased about 5 percent, while its global market strategies platform rose 2 percent.

Business has been good to David M. Rubenstein, the firm's co-founder, who appeared on CBS News on Monday to talk about the Giving Pledge, the effort by Warren E. Buffett and Bill Gates to encourage philanthropy.

 

On the Agenda  |  A court in Ghana is set to rule Tuesday on Argentina's battle with Elliott Management, whose affiliate recently seized an Argentine naval ship. Procter & Gamble has an annual shareholder meeting Tuesday after the hedge fund manager William A. Ackman was said to call for the chief executive to resign. The jury trial begins Tuesday in the Securities and Exchange Commission's case against the co-founder of the Reserve Primary money market fund, which “broke the buck” in the financial crisis. Alcoa and Chevron report earnings after the market closes. Chancellor Angela Merkel of Germany is visiting Greece. Sallie Krawcheck is on Bloomberg TV at 10 a.m.
Aaron Levie, the C.E.O. of Box, is on CNBC at 1:30 p.m. and Bloomberg TV at 6 p.m. Glenn Hutchins, co-chief executive of Silver Lake, is on CNBC at 4:10 p.m.

 

Aerospace Deal on the Rocks  |  The European aerospace companies EADS and BAE, which face an Oct. 10 deadline to submit a merger plan, are moving “toward filing an extension,” Bloomberg News reports. Negotiations among leaders in Britain, France and Germany became more heated as Britain opposed a plan for France to increase its stake in the combined company, Reuters reports. And there may be further trouble from shareholders, as Invesco, the biggest investor in BAE, said it had “significant reservations” about the deal.

 

Silicon Valley's Reality Show  |  A new trailer for Bravo's “Start-Ups: Silicon Valley,” features lots of partying and insightful lines like “geeks are definitely the new rock stars.”

 

 

 

Mergers & Acquisitions '

Barclays Picks Up ING Unit in Britain  |  Barclays said it was buying the mortgages and deposits of ING Direct in Britain, in a transaction that leaves the Dutch firm with a $415 million after-tax loss. WALL STREET JOURNAL  |  REUTERS

 

Auction Begins for Anschutz Entertainment  |  The Anschutz Entertainment Group is expected to “draw bids in the $10 billion range,” Reuters reports, citing unidentified people familiar with the situation. REUTERS

 

BP's Russian Partners Look to Sell Stake in Joint Venture  |  The move by the Russian billionaires sets up a “race” with BP to exit TNK-BP first, Reuters writes. REUTERS

 

BP to Sell Texas City Refinery to Marathon Petroleum  |  BP said that it would sell its Texas City refinery and other assets to Marathon Petroleum for $2.5 billi on, as the British oil company nearly finishes up an aggressive plan to pare back assets. DealBook '

 

Principal Financial to Buy AFP Cuprum of Chile for $1.5 Billion  | 
BLOOMBERG NEWS

 

Russian Consumer Lender Says It May Sell Itself  |  Tinkoff Credit Systems is considering an I.P.O., but it also said it could put itself up for sale to a company like Google, Bloomberg News reports. BLOOMBERG NEWS

 

TPC Group Receives Higher Offer  |  The chemicals maker TPC Group said it had received a buyout offer of $721 million from Innospec, beating an earlier offer from two private equity fir ms, Reuters reports. REUTERS

 

 

INVESTMENT BANKING '

Julius Baer to Cut 1,000 Jobs After Deal for Bank of America Unit  |  The Swiss bank plans to eliminate up to 18 percent of its work force to cut costs after it struck a deal in August with Bank of America to buy the American bank's private banking operations outside the United States and Japan. DealBook '

 

Wal-Mart Partners With American Express for Prepaid Card  |  American Express, which previously had been focused on high-end consumers, is offering a prepaid card with Wal-Mart Stores that is being pitched as “an option for people turned off by bank fees,” The New York Times reports. NEW YORK TIMES

 

Goldman Sachs Staff Turns Against Obama  |  The firm's employees are now “top sources of money” for Mitt Romney and the Republican party, The Wall Street Journal reports. WALL STREET JOURNAL

 

Ex-S.E.C. Official Heads to Goldman Asset Management  |  Andrew Donohue, a former head of the investment management division of the Securities and Exchange Commission, is becoming the deputy general counsel of Goldman Sachs Asset Management, Reuters reports. REUTERS

 

PRIVATE EQUITY '

Allied World Assurance Buys Stake in MatlinPatterson  |  Along with the stake, Allied World will invest $500 million in MatlinPatterson's funds, a pattern seen in recent acquisitions by other institutional investors. DealBook '

 

Black's Latest Purchase  |  The chief executive of Apollo Global Management, Leon Black, is buying Phaidon Press, the art book publisher, according to The Wall Street Journal. Mr. Black was identified earlier this year as the buyer who paid almost $120 million for an edition of Edvard Munch's “The Scream.” WALL STREET JOURNAL

 

Nine Entertainment Proposes New Restructuring Plan  | 
REUTERS

 

Florida Newspaper Sold to Private Equity Firm  |  The Revolution Capital Group, based in Los Angeles, is buying The Tampa Tribune for $9.5 million. ASSOCIATED PRESS

 

HEDGE FUNDS '

Navistar Strikes a Deal With Icahn  |  Navistar International agreed to add three directors chosen by Carl C. Icahn and Mark Rachesky to its board, The Wall Street Journal reports. WALL STREET JOURNAL

 

Hedge Funds to Cut Trading Costs  |  A survey of hedge funds by Greenwich Associates found that 44 percent planned to spend less on their trading desks than in 2011, Bloomberg News reports. BLOOMBERG NEWS

 

New Hedg e Fund Focuses on Asian M.&A.  |  Ardon Maroon Fund Management has started a new hedge fund run by former executives of Morgan Stanley and Lehman Brothers, Reuters reports. REUTERS

 

I.P.O./OFFERINGS '

Facebook Offers to Sweeten a Settlement Over Advertising  |  Facebook is trying to reach a deal over Sponsored Stories, a form of advertising that may help the company make money on mobile devices, the Bits blog writes. NEW YORK TIMES BITS

 

MegaFon Files for I.P.O. in Russia  | 
BLOOMBERG NEWS

 

Questions Over Where Huawei Might List  |  The Chinese telecommunications company was said to be looking to go public in the United States, but after a government investigation, it may head to Hong Kong or London, The Wall Street Journal writes. WALL STREET JOURNAL

 

VENTURE CAPITAL '

Calxeda, Computer Chip Start-Up, Raises $55 Million  | 
WALL STREET JOURNAL

 

Another Finnish Start-Up Has a Hit Game  |  Finland, the country that is home to the company behind Angry Birds, has also produced the hit game Clash of Clans, made by the games start-up Supercell, the Bits blog writes. NEW YORK TIMES BITS

 

LEGAL/REGULATORY '

Fewer Banks Setting Libor  |  Though 18 banks contribute to setting Libor, submissions from a smaller number of those lenders are increasingly the ones with the most sway, as they “have been used in setting the rate on an almost daily basis in the past four months,” according to Bloomberg News. BLOOMBERG NEWS

 

European Officials Tell Greece to Accelerate Economic Reform  | 
NEW YORK TIMES

 

Goldman Agrees to Settle Claims Over Options Trades  |  The firm is paying $6.75 million to eight United States exchanges. BLOOMBERG NEWS

 

China's Central Bank Begins Monetary Stimulus  |  The People's Bank of China offered $42.14 billion of reverse repurchase agreements, The Wall Street Journal reports. WALL STREET JOURNAL

 

Stanley Black & Decker to Sell Hardware and Home Unit for $1.4 Billion

Stanley Black & Decker agreed on Tuesday to sell its hardware and home improvement unit to Spectrum Brands Holdings for $1.4 billion in cash, as the company seeks to whittle down its product portfolio.

Through the deal, Spectrum, which owns Rayovac batteries and George Foreman grills, will acquire a maker of locksets and residential faucets. The division, with brands like Kwikset and Baldwin, reported about $895 million in net sales and $188 million in adjusted earnings in the year ended June 30.

Stanley Black & Decker is moving is to jettison a business that is aimed primarily at the domestic market, while searching for ways to grow internationally. The company plans to maintain exposure to the improving housing market through its construction and do-it-yourself division. The company will use the proceeds from the sale to help pay for its own $850 million acquisition of Infastech, a specialty fastener company with a promising market position in Asia.

“ While HHI is a healthy and profitable business, its characteristics are inconsistent with Stanley Black & Decker's strategic objectives of diversifying our revenue base through further expansion into targeted end markets with higher growth and margin profiles, including emerging markets,” John F. Lundgren, the company's chief executive, said in a statement.

Spectrum has been focused on building out the company's existing portfolio. The latest purchase is expected to add to Spectrum's pro forma earnings per share by 75 cents to 80 cents in its 2013 fiscal year, excluding integration costs. Spectrum also said the deal will add to free cash flow, helping to pay down the company's $1.8 billion in long-term debt.

“The scale and expanded product offering we gain will further balance our sales profile and provide exciting cross-selling opportunities from expanding sales of Spectrum Brands' products to major U.S. home improvement centers and increasing HHI sales to l eading global mass merchants and other Spectrum Brands' retailers,” David Lumley, the company's chief executive, said in a statement.

The hardware and home improvement division will operate as a separate subsidiary within Spectrum. Its president, Greg Gluchowski, will report to Mr. Lumley.

The deal is expected to close by the end of March. Spectrum was advised by Deutsche Bank, Barclays and the law firm Paul, Weiss, Rifkind, Wharton & Garrison.

Stanley Black & Decker to Sell Hardware and Home Unit for $1.4 Billion

Stanley Black & Decker agreed on Tuesday to sell its hardware and home improvement unit to Spectrum Brands Holdings for $1.4 billion in cash, as the company seeks to whittle down its product portfolio.

Through the deal, Spectrum, which owns Rayovac batteries and George Foreman grills, will acquire a maker of locksets and residential faucets. The division, with brands like Kwikset and Baldwin, reported about $895 million in net sales and $188 million in adjusted earnings in the year ended June 30.

Stanley Black & Decker is moving is to jettison a business that is aimed primarily at the domestic market, while searching for ways to grow internationally. The company plans to maintain exposure to the improving housing market through its construction and do-it-yourself division. The company will use the proceeds from the sale to help pay for its own $850 million acquisition of Infastech, a specialty fastener company with a promising market position in Asia.

“ While HHI is a healthy and profitable business, its characteristics are inconsistent with Stanley Black & Decker's strategic objectives of diversifying our revenue base through further expansion into targeted end markets with higher growth and margin profiles, including emerging markets,” John F. Lundgren, the company's chief executive, said in a statement.

Spectrum has been focused on building out the company's existing portfolio. The latest purchase is expected to add to Spectrum's pro forma earnings per share by 75 cents to 80 cents in its 2013 fiscal year, excluding integration costs. Spectrum also said the deal will add to free cash flow, helping to pay down the company's $1.8 billion in long-term debt.

“The scale and expanded product offering we gain will further balance our sales profile and provide exciting cross-selling opportunities from expanding sales of Spectrum Brands' products to major U.S. home improvement centers and increasing HHI sales to l eading global mass merchants and other Spectrum Brands' retailers,” David Lumley, the company's chief executive, said in a statement.

The hardware and home improvement division will operate as a separate subsidiary within Spectrum. Its president, Greg Gluchowski, will report to Mr. Lumley.

The deal is expected to close by the end of March. Spectrum was advised by Deutsche Bank, Barclays and the law firm Paul, Weiss, Rifkind, Wharton & Garrison.

Barclays to Buy British Retail Unit from ING

LONDON â€" Barclays agreed on Tuesday to buy the British savings and loan business of the Dutch firm ING Group.

The deal reflects Barclays shifting focus towards retail banking following the recent rate-rigging scandal led to the resignation of Barclays' former chief executive, Robert E. Diamond Jr. The firm's new chief, Antony Jenkins, previously ran Barclays' retail banking operations, and has said he will stop business activities that pose a “reputational risk” to the British bank.

Last week, Barclays announced a broad reorganization of its investment banking unit, the group at the center of the rate-rigging case. Hugh E. McGee III, one of the firm's top deal makers, became its most senior corporate and investment banker in the Americas, while Eric Bommensath will run a combined fixed-income and equities sales and trading division.

Under the terms of the deal announced on Tuesday, the British bank will acquire deposits of £10.9 billion ($17.5 billion) and mortgages worth a combined £5.6 billion from ING Direct U.K. The acquisition also will add 1.5 million customers to Barclays' existing 15 million client base, according to a company statement.

The British bank will acquire ING Direct U.K.'s mortgage book at a three percent discount, while the deposits will be acquired at par value, the firms said in separate statements.

“The acquisition of ING Direct U.K. is a good fit with Barclays' existing U.K. retail banking business,” Ashok Vaswani, head of Barclays' British retail and business banking unit, said in a statement.

The deal, which is expected to close in the second quarter of next year, will result in a 260 million euro ($336 million) net loss for ING. The Dutch bank added the loss would be offset by 330 million euros of extra capital that would be freed up when the deal is completed.

The Dutch firm has been forced to dispose of assets around the world as part of a bailout fr om its local government during the financial crisis. Last month, ING sold its 9 percent stake in Capital One though a public offering worth around $3 billion.

Julius Baer to Cut 1,000 Jobs After Deal for Bank of America Unit

LONDON - The Swiss bank Julius Baer announced on Tuesday that it would cut up to 1,000 jobs in an effort to reduce costs.

The announcement follows the Swiss bank's agreement in August to buy the private banking operations outside the United States and Japan of Bank of America Merrill Lynch for around $880 million.

As part of its plan to integrate the business, Julius Baer said it now expected to reduce the bank's combined 5,700 workforce by between 15 percent and 18 percent.

The layoffs, which could total 1,026 staff, are expected to begin after the deal closes early next year.

The deal for the Bank of America unit is part of Julius Baer's expansion into new markets as it looks to keep pace with Swiss rivals like UBS and Credit Suisse.

The acquisition would give Julius Baer up to an additional $74 billion of assets, which primarily come from wealthy clients in developing economies.

“This acquisition brings us a major step forward in ou r growth strategy and will considerably strengthen Julius Baer's leading position in global private banking by adding a new dimension not only to growth markets but also to Europe,” the company's chief executive, Boris Collardi, said in August.

The expected job cuts, however, are an effort to reduce costs at the new unit, which reported a $30 million net loss in the first half of the year, according to a investor presentation released on Tuesday.

Julius Baer also said on Tuesday that its total assets under management as of Aug. 31 rose 8 percent, to 184 billion Swiss francs, or $196 billion, since the end of 2011.

In morning trading in Zurich, shares in Julius Baer had fallen less than 1 percent.