Filed under: Private equity, Merrill Lynch (MER), Washington Mutual (WM)

Back in the 1980s, David Bonderman was the chief dealmaker for Robert Bass, a Texan billionaire. He helped to structure the $550 million buyout of American Savings and Loan Association of California, which was caught in the S&L morass. It was a complex deal, requiring lots of negotiations with federal regulators. But it ultimately turned out to be a great investment. In fact, the bank became a vehicle to finance other deals.

Well, Bonderman is coming back to the future. Now, as the chief of TPG, he’s one of the top players in private equity. And he wants to do some finance deals. To this end, he’s raising $7 billion for a financial service fund. The investments will range from minority stakes to control situations.

Actually, Bonderman has already been busy with bank deals. For example, he recently assembled the $7 billion equity infusion for Washington Mutual (NYSE: WM). He also approached Merrill Lynch (NYSE: MER) to do an investment, which, so far, hasn’t gone anywhere.

Yet, there are many financial institutions that need cash. Moreover, having TPG as a partner is usually a good thing.

As should be no surprise, it looks like TPG is getting traction on the capital raise, with commitments from the New Jersey State Investment Council and even the government of Singapore.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Struggling home builder Standard Pacific got a big-time private equity bailout today by investors who will gobble up a bunch of equity in exchange for a nice cash infusion.  They’ve also been able to restructure about $13 billion worth of debt through MaitlinPatterson.

We’ve seen this with the banks taking on huge amounts of cash from sovereign wealth funds and via other channels, it will be interesting to see how many home builders are ’saved’ in the same manner.

From the Wall Street Journal on the Standard Pacific bailout:

Standard Pacific Corp., a struggling home builder which for months has been besieged by bankruptcy rumors, is getting a much-needed equity infusion from one of its creditors, the big private equity firm MatlinPatterson.

MatlinPatterson has agreed to buy about $381 million of stock at $3.05 a share. In addition, the firm will swap $128.5 million of the builder’s debt that it owns for warrants to acquire preferred stock. The builder is also planning a rights offering, which is expected to raise an additional $152 million. If shareholders reject the proposed offering, MatlinPatterson has agreed to back stop any short fall.

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Filed under: Earnings reports, Apple Inc (AAPL), Dell (DELL), Hewlett-Packard (HPQ)

I used to be a big fan of Dell (NASDAQ: DELL) years back, but I’ve since been cool on the company due to the challenges it’s faced as of late. Yet the company’s first-quarter stats, released on Thursday after the closing bell, were interesting. Revenues increased 9% to a whopping $16 billion. Net income increased 12% to $0.38 per share. Briefing.com says that Dell beat on revenues and earnings per share, the latter by a nice $0.04.

Operating income actually dropped, however, 4% on a dollar basis. Still, in the after-hours session, investors sent the shares higher by nearly 10%. One thing I liked about the quarter was that operational cash flow was much healthier this time around. Last year, Dell needed to use $99 million to fund operations; this year, Dell booked $143 million in cash from operations. Awesome improvement. And here’s something else shareholders should look positively on: management apparently wants to focus on having operational cash flow exceed net income. A laudable goal in my book.

So, this was a decent quarter. Am I buying? Well… not exactly. Personally, if I want to play personal computers, I’m probably more likely to look at either Hewlett-Packard (NYSE: HPQ) or Apple (NASDAQ: AAPL). I recently wrote about H-P’s good quarterly numbers, and as far as Apple goes, that stock is definitely the one to go with in terms of strength and excitement (if you can time the entry points properly, of course). Yeah, I’m just not feeling Dell right now, considering the alternatives; maybe at a later date…

Read the full transcript of the conference call that followed the earnings announcement.)

Disclosure: I don’t own shares in any company mentioned in this piece; positions can change at any time.

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Filed under: International markets, Newsletters, Schlumberger Limited (SLB), Commodities, Oil, Stocks to Buy

“One of my favorite indicators for the energy markets is the quarterly conference calls and earnings releases from Schlumberger (NYSE: SLB),” says energy sector expert Elliott Gue.

In his The Energy Strategist, he explains, “In this quarter’s call, Schlumberger’s management team was notably upbeat, the most positive on industry growth expectations in more than a year. This is a key shift in sentiment that has broader implications for the energy patch at large.”

“Schlumberger’s reports and conference calls have proved extraordinarily useful in the past for determining the most profitable trends and investment themes. The reason for that is simple: Schlumberger is the largest oilfield services company and has its hand in just about every imaginable market all over the world.

“In addition, the company has traditionally offered long, detailed conference calls; CEO Andrew Gould often relates far more than the outlook for Schlumberger and offers considerable color and detail concerning trends for the industry in general.

“This quarter’s conference call was no exception. Schlumberger’s outlook this quarter was far more upbeat than in its third and fourth quarter 2007 earnings calls.

Continue reading Schlumberger (SLB): A ‘deepwater’ buy

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With permission, I’ve done some number crunching on an actual deal that actually closed.  These borrowers were not risky, AAA+ borrowers, low LTV on  great house here in central Ohio.  Over the summer, they chose to refinance.  Since they were strong borrowers, the loan was clear to close before locking.  We chose to close their 15 year fixed loan at 6.375, which was a decent rate at the time.   Our price was 102.8 on a $270,000 loan.  We used our some of this to pay closing costs, and the rest was profit.

This means that the lender we used paid us $7,560 in real money to close this loan for the clients.   They had the original 6.375 loan for 138 days.  This means that ALL the interest that was collected was $6507.  They paid me to do this loan, and lost $1,053 for the privilege of having this loan for a while. 

Right now, I can offer these people a similar deal at 5.75.  This is paying 2.69% from one of my carriers, or another $7263.00.    The second I saw an opportunity to improve their situation (and make a good fee), I told them I can do a no closing costs deal for them at this price.  They are closing next week. 

I am paying all of their closing costs, ALL of them…on the new loan. I’m fronting for the appraisal.  I’ll still wind up with 1.5% after all costs and fees are paid, and we’re not increasing the loan amount.  There’s still good money for negligible work (60% LTV 819 credit score 14% back end ratios).  The first bank paid $1000, never made a profit on the loan and it was paid off because it benefited the customer.

The very best customers, the lowest risks, don’t stay with their banks long enough to make a return.  There’s no upside for a big Midwest bank to fund someone (in this case, the bank was Tom’s employer), because I took them away. I feel like I have an obligation to watch my customers portfolio, and that outweighs any obligation I may have to the Bank.

Now, there is nothing in our agreements that recapture any of our money past 120 days.  So, Bank A has lost money because of this "great" transaction. Bank "B" will lose money if the rates improve because I will have my eye on the ball and ensure that my clients are always in the best interest rate that makes sense.  Banks are–to me–fungible.  So, my question is what incentive do they have to stay in the game when they have massive downside, limited upside, and no relationship with their customers?

 Chris Johnson closes loans for Realtors in ten days or less at Tendayteam.com. 

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Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), XM Satellite Radio (XMSR)

News emerged late yesterday that the Microsoft (NASDAQ: MSFT) proposal to Yahoo! (NASDAQ: YHOO) would be to buy its search business and have the portal keep its content operations and sell its foreign investments.

According to The Wall Street Journal, “Microsoft didn’t indicate how much it would pay under the plan, which was initially presented by Microsoft representatives to Yahoo.” One school of thought is that the money could be used for a share buyback to raise Yahoo!’s stock price.

It would require some perverse logic to see how the deal would benefit Yahoo! beyond an initial infusion of cash. Search is at the core of Yahoo!’s long-term plans to revive its business, even though it runs a distant second to Google (NASDAQ: GOOG) in the category. If Yahoo! is left with nothing more than a content business, Wall Street would have to wonder whether the company could generate any meaningful operating income at all.

Microsoft is playing a game by making an odd and, in many ways, unattractive offer. The only question is why?

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

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I’m about to reveal an extraordinary secret, one that rivals the coordinates for the lost city of Atlantis. As experts and government officials are now in their second year of scrambling for housing solutions it appears that we have found one that works. Here it goes; when you lower prices you actually move […]
Related Posts:
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.
■About
■Putting Home Sellers on the Couch: The Psychology of why Sellers Refuse to Lower Prices.
■Consulting
■Riding in the Short Bus of Housing: Southern California Short Sale Numbers. 1 in 10 Homes is a Distress Sale.

I’m about to reveal an extraordinary secret, one that rivals the coordinates for the lost city of Atlantis. As experts and government officials are now in their second year of scrambling for housing solutions it appears that we have found one that works. Here it goes; when you lower prices you actually move sales! Astounding! This is one of the most basic points you learn in economics:
Take a look at the graph. Inventory is still very high so the supply curve even with current sales is holding steady simply because of the increase in distressed properties. This has maintained a very high amount of inventory on the market. Prices for a very long time held steady so demand did not move adding further fuel to the growing inventory numbers. Now, we are seeing major price reductions and sales are increasing. Well of course! The demand curve is now budging because the supply and demand of most any economic item is sensitive to price especially one with elastic demand. For example, if prices become too expensive to buy people will simply rent (i.e., Los Angeles). That is a perfect substitute. Items such as insulin have inelastic demand curves since prices can double and people would still pay that price simply because there are no good alternatives.

Today’s news perfectly illustrates the point that housing will move with price changes. Keep in mind these are headlines for the same day:

“(MarketWatch) Decline in home prices accelerates in March

Case Shiller index down 14.4% in March from year earlier

Home prices in 20 major U.S. metropolitan areas have dropped a record 14.4% in the past year, Standard & Poor’s said Tuesday.

The 20-city Case-Shiller home price index fell 2.2% from February to March. This is the 16th consecutive decline in prices.

And for 10 major cities, prices fell by 2.4% in March and by 15.3% for the past 12 months.

S&P’s Case-Shiller index tracks sales of the same homes over time, so it’s not influenced by the mix of homes sold in a period. However, it closely tracks only 20 cities, many of which had participated in the housing bubble earlier in the decade.”

Okay, not much of a surprise there with that news. We all expected that prices would continue on their downward trend simply because the amount of distressed properties on the market is going to bring the overall aggregate price measures down. The year over year drop of 14.4% is rather astounding given that prior to this housing bubble, we have never witnessed a year over year median price decline since the Great Depression.

The sharpest declines of course are happening in major bubble areas such as Las Vegas (down a stunning 25.9%), Phoenix, and Miami. In the same day news cycle we get that home sales actually went up last month:

“NEW YORK (CNNMoney.com) — New home sales rose unexpectedly in April but remained near historically low levels, according to a key government report on the battered housing market.

April sales came in at a seasonally adjusted annual rate of 526,000, a Census Bureau report showed, up 3.3% from a revised 509,000 in March. The reading was above the consensus forecast of 520,000, according to economists surveyed by Briefing.com.

But home sales were down 42% from a year earlier. April’s reading was the second-lowest annual rate since October 1991, behind March of this year.

“The momentum is still downward, and that April number is still weak,” said National Association of Home Builders chief economist David Seiders. “April marks only a partial reversal of that steep March decline.”

Clearly the market is gravitating to the massive price drop more than the meager rise in sales which is still at a historical low. But make no mistake about this; home sales will increase if the price is right. These two reports although contradictory on the surface make perfect economic sense. Lower prices are bringing more people into the market to purchase homes.

Calculated Risk as usual has an excellent piece discussing the current sales numbers:

*Source: Calculated Risk

So even though there was a slight movement up in sales as you can see from the graph, we are still at historical highs and months of supply which really is the true barometer of market health is still very high as well. Most historical trends show a healthy market having about 6 months of supply. To highlight this trend let us look at Los Angeles and Phoenix from the latest report:

You can already see that Los Angeles at least according to the Case-Shiller Index is back to early 2004 prices and Phoenix is now back to early 2005 prices. Los Angeles from its peak in September of 2007 is now down 24.3% and Phoenix is now down from its peak in June of 2006 a whopping 36.2%. Keep in mind that for Los Angeles, we should expect as we get closer to the yearly anniversary of the peak should prices stay low, to see a 30 to 40 percent yearly price drop.

The logic is simple here folks. Prices need to drop substantially for sales to increase. The two reports simply reaffirm this age old economic wisdom.

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Related Posts:
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.
■About
■Putting Home Sellers on the Couch: The Psychology of why Sellers Refuse to Lower Prices.
■Consulting
■Riding in the Short Bus of Housing: Southern California Short Sale Numbers. 1 in 10 Homes is a Distress Sale.

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Filed under: Trump Entertainment Resorts (TRMP)

Trump Entertainment Resorts, Inc. (NASDAQ: TRMP) has sold its Trump Marina Hotel to New York-based Coastal Marina for $316 million. In a self-congratulatory press release, Trump chairman “Donald J. Trump” said that the hotel “has been an important part of our company with a loyal customer base and a dedicated team.”

Well then it’s good news that they sold it. In the past year, shares of Trump Entertainment Resorts have gone from $16 to as low as $2.29. The stock is up more than 20% today, but it’s still a tiny fraction of its former high. Who knows: maybe if they sell all the important parts of the company the stock will go back over $5. Trump Entertainment Resorts really is that bad, having reported a pre-tax loss of $249 million last year.

But good news for my fellow Donald Trump haters: Coastal Marina is planning to rename the hotel “Margaritaville.” Trump Entertainment CEO Mark Juliano commented that “The execution of this transaction will provide us with additional financial flexibility to effectively master-plan the future path of our company in the midst of an overall transformation which has already been marked by many successes.”

Reality check: the company has lost $252 million since inception. Whatever its “many successes” are, they have been heavily outweighed by failures.

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Filed under: Deals, Industry, Consumer experience, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Sony Corp ADR (SNE)

Anyone who did not think a Microsoft (NASDAQ:MSFT) buyout of Yahoo! (NASDAQ:YHOO) has become less likely should have stopped by the All Things Digital conference. According to Reuters, “Yahoo Inc Chief Executive Jerry Yang said on Wednesday a potential deal with Microsoft has tremendous power, but the software giant appears no longer interested in a full merger.”

The leaves Yahoo! management, its board, and takeover artist Carl Icahn in a tough spot. Many analysts believe that without a deal, the Yahoo! shares could drop back near $20, where they traded before the offer from Redmond. Yahoo! currently changes hands at $27.

The news is a sign that Microsoft thinks it can do almost anything on its own, including challenging Google (NASDAQ:GOOG) in the search business. Gates, Ballmer & Co. have the money to get the engineering hands on board to push better search tech, but user loyalty to Google may be so great that even a much better product from Microsoft will not break its rival’s hold on the market.

Microsoft has had success exceeding the market’s expectations before. No one believed that the company’s Xbox could challenge the Sony (NYSE:SNE) PlayStation franchise.

But, search engines are not game consoles and the rules in one game do not necessarily apply in another.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

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