Wall $treet Folly

WSF Headline Roundup - 2/29/08 - Wilbur Ross injecting $$$ into Assured Guaranty; Financial Firms face $600B losses?; Rogue trader socks MF Global for $141M; Thornburg margin calls, Swiss Re hurt by CDS losses; Dell earnings suck; WPP upbeat;....

• Assured Guaranty Ltd. Announces Commitment by Wilbur Ross to Purchase Up to $1 Billion of Common Equity
• Financial Firms Face $600 Billion of Losses, UBS Says
• MF Global takes $141m hit trading wheat
• Thornburg Hit With Margin Calls
• Credit Default Swap Losses Hurt Swiss Re's Net Income
• Dell's Profit Drop Dogs Turnaround Push
• WPP paints upbeat picture for 2008
• EBay Agrees to Settle `Buy It Now' Patent Lawsuit

Renaissance Technologies' Jim Simons makes $60 Million gift to SUNY

Billionaire hedge fund guru James Simons and his wife Marilyn are donating $60 million to SUNY Stony Brook for a new Physics center at the school.  Simons was the former chairman of SUNY Stony Brook's math department and has made significant  gifts to the school in the past...

James and Marilyn Simons announced the gift, the largest ever to a school within the SUNY system, at a press conference yesterday with Governor Spitzer in Manhattan. The donation will go toward the creation of the Simons Center for Geometry and Physics, where scholars will study subjects at the cutting edge of physics, including string theory, which scientists believe could yield valuable insights into the properties of the universe.

"We believe there is a chance that work accomplished at the center will significantly change and deepen our understanding of the physical universe and of its basic mathematical structure," Mr. Simons said.

Private equity seeking to fill the financing gap with sovereign wealth fund cash

Not only is Blackstone lookiing for other than traditional bank financing, but so too are Carlyle's David Rubenstein and Terra Firma's Guy Hands. And unsurprisingly, sovereign wealth funds are among the deep pocketed firms being approached.

Private equity firms are now approaching sovereign wealth funds for loans for big leveraged acquisitions, filling the gap left by investment banks struggling with the credit squeeze, leading buy-out bosses said on Wednesday.

Guy Hands, head of Terra Firma, and David Rubenstein, head of the Carlyle Group, told the Super Return conference in Munich that private-equity firms were already talking to wealthy state-backed funds in the Middle East and Asia about raising debt

Major barfage at UK hedge fund Richmond Capital -- it was down over 50% in January

January was not kind to many hedge funds.  It was especially unkind to UK based Richmond Capital LLC which ended December with around $524 million in assets -- The fund cratered over 50% in January.  That's a pretty devastating result:

That makes Richmond, launched by Luca Bechis, an experienced trader with a track record of posting strong gains, among the biggest losers in a year that is already proving challenging for a number of funds.

Richmond fell more than 50% in January, according to data compiled by Banque Syz & Co., a Swiss private bank, and other investors with access to details of the fund's performance. The fund had €350 million ($524 million) in assets as of December 2007, according to Syz. It was flat last year, but returned gains of about 24% and 18% in 2006 and 2005, respectively.

WSF Headline Roundup - 2/28/08 - More rate cuts coming?; Cerberus investing in Ambac?; UBS holder OK injection; JPM cut by Goldman, Merrill; Euro over $1.50; New risk officer at Citigroup; RBS earnings; $21B IPOs pulled; Apple on track; Sears lower profit

• Bernanke Hints at More Rate Cuts Amid Multiple Economic Risks
• Cerberus in talks to invest in Ambac-source
• UBS shareholders agree huge cash injection during stormy meeting
• JPMorgan Earnings Estimate Cut by Goldman, Merrill
• Euro Ends Above $1.50 for First Time
• Citigroup appoints new chief risk officer
• RBS Second-Half Net Rises 16%, Helped by Asset Sale
• IPOs worth $21bn pulled from market
• Apple on track to sell 10 million iPhones in 2008-COO
• Sears Fourth-Quarter Profit Declines on Lower Sales

Carlyle's David Rubenstein: "Private equity has not seen the high water mark..." "The industry will come back stronger" (but banks won't be big lenders again for awhile)

Carlyle Group's David Rubenstein made optimistic comments on the leveraged buyout market at the Super Return Conference in Germany.  The "golden age" will return and come back even stronger.   But he noted that owing to the $200 million debt overhang on their balance sheets that banks won't be lending again in a major way for maybe three years.  But while they're waiting for business to pick up, they'll still be busy -- with all of the bankruptcies and restructurings that are on the way.  So it's all good.....

Of the banks and their debt overhang he said:

"It's now on their books at 95 cents on the dollar and if they had to sell it they would get even less. So they don't want to sell it and it stays on their balance sheets.

"But this will change - eventually the banks will conclude they are better using their balance sheets for other things. When it begins to happen you will see leverage coming back into the industry."

In the meantime, he predicted there would be some bankruptcies of private equity run companies, but he countered the pessimism of Alchemy boss Jon Moulton by claiming default ratios would be small.

"I don't think defaults will be as large as they were during previous periods of distress. Banks are much more flexible and there is much more expertise in buyout firms than there as before."

Blackstone: We don't need no stinking bank debt financing

Screw the banks.  Blackstone thinks they don't need them. According to Blackstone President Hamilton James, they'll find their own sources of cash to fund their LBOs.  That's gonna mean lower fees to Wall Street banks..

The firm is contacting hedge funds and mutual funds to provide loans for takeovers, James said after a panel discussion today at the Super Return conference in Munich. Other firms may follow New York-based Blackstone's lead, he added.

``We're bypassing the banks,'' James said. ``There's still ultimately demand for this paper out there if you can go directly to the buyers.''

WSF Headline Roundup - 2/27/08 - Wheat, Oil, Gold flying; Issuers want SEC help with failed auctions; Blackstone gets OK to buy GSO capital; Barney Frank's $20B subprime plan; Microsoft gets record EU fine; Ethanol concerns; Toll Brothers losses

• Markets on Tear: Wheat, Oil, Euro
• Oil Rises Above $102 as Weak Dollar Boosts Commodities Prices
• Issuers Ask SEC for Break Amid Auction-Rate Woes
• U.S. gives Blackstone OK to acquire GSO Capital
• Democrat urges $20bn subprime plan
• Microsoft Is Fined Record 899 Million Euros in Antitrust Case
• Ethanol Fuels Fire Concerns
• Toll Reports Second Straight Loss as Demand Slumps

Harbinger's Phil Falcone's new Penthouse pad

Well it's not exactly a penthouse.  It's a town house (with a pool -- pictured below).  But hedge fund honcho Phil Falcone is the proud buyer of the Milbank Mansion, one time home of former Penthouse Magazine publisher Bob Guccione.  The asking price was $59 million, but Falcone, the bargain hunter that he is, talked it down to somewhere below a meager $50 million....

The saga of the impressive 27-room, 22,000-square-foot, double-wide vintage home began when Guccione's financial problems first surfaced, prompting him to list the East 67th Street digs for $40 million in 2002.

At the time, Guccione reportedly had a full-time staff of 20, including four armed guards, a butler, numerous maids and three dog walkers. As we noted last week, Guccione eventually vacated the premises in 2006, after the present owners, now listed as P.H. Realty Associates, called in his loan.

The sale is expected to close by mid-March.

Coming Up Short - NY Post

'Penthouse' Pad - NY Post

Credit Suisse: A big write-down, then a fire. With disasters seeming to happen in threes, what's next?

Simon Goodley of the Daily Telegraph asks: "Is Credit Suisse suddenly cursed?":  First the firm revealed a huge loss due to a small group of traders inflating their trading results by mismarking bond positions.  And yesterday, there was a fire in the CS Canary Wharf offices, forcing 5,000 to evacuate the building for about an hour. Fortunately, no one was reported hurt.   We note that disasters tend to happen in threes.  So what's next?

From Reuters: 

Fire marshals told the crowd outside,   which included a few people in sportswear with towels around their shoulders   for warmth, it would take another hour before everyone could return to the   building.
 
The spokesman said the cause of the fire was not yet clear and added there was   no damage to the building.