{"id":13472,"date":"2010-12-21T23:08:29","date_gmt":"2010-12-22T03:08:29","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=13472"},"modified":"2010-12-21T23:08:29","modified_gmt":"2010-12-22T03:08:29","slug":"december-21-2010","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=13472","title":{"rendered":"December 21, 2010"},"content":{"rendered":"

The TD \/ Chrysler deal got done<\/a>:<\/p>\n

Toronto-Dominion Bank agreed to buy Chrysler Financial Corp. from Cerberus Capital Management LP for $6.3 billion in cash, adding an auto-finance company in its second-largest acquisition.<\/p>\n

The purchase includes $5.9 billion in assets and about $400 million in goodwill, Canada\u2019s second-biggest bank said today in a statement. Toronto-Dominion doesn\u2019t intend to issue stock.<\/p><\/blockquote>\n

and Cerberus investors are relieved<\/a>:<\/p>\n

Cerberus Capital Management LP will recoup about 90 percent of its initial investment in Chrysler after the sale of the automaker\u2019s former lending unit to Toronto-Dominion Bank, according to two people with knowledge of the transaction.<\/p>\n

Cerberus will get about 75 cents on the dollar in cash when the sale of Chrysler Financial Corp. closes, said the people, asking not to be identified because the New York-based firm is private. Including about $900 million of assets Cerberus is retaining as part of the deal, the company will be left with a loss of 10 percent on the initial investment in the automaker and its finance arm.<\/p><\/blockquote>\n

So basically, Chrysler was a finance company with a captive manufacturing arm. I love it.<\/p>\n

DBRS commented<\/a>:<\/p>\n

that TD Bank US Holding Company\u2019s (TD Bank US or the Company) ratings, including its Issuer & Senior Debt rating of AA (low), are unaffected by its announced acquisition of Chrysler Financial\u2019s U.S. operations. The trend on all ratings is Stable.<\/p>\n

DBRS believes the acquisition of Chrysler Financial will not have a material impact on the earnings and only a modest impact on the capital of the Company\u2019s parent, The Toronto-Dominion Bank (TD; Deposits & Senior Debt rated AA with a Stable trend). Specifically, TD\u2019s Tier 1 capital ratio is expected to decline by 55 to 60 basis points on a pro forma basis from the 12.2% TD reported at October 31, 2010. Consequently, the risk profile for TD remains solid, notwithstanding the execution risk concerns of growing in the auto finance business. DBRS notes that TD continues to have the resources, motivation and ability to support the Company, if needed. As such, there are no rating implications at this time.<\/p><\/blockquote>\n

Ernst & Young’s in trouble over Repo 105<\/a>:<\/p>\n

New York Attorney General Andrew Cuomo sued Ernst & Young LLP, accusing the firm of facilitating a \u201cmajor accounting fraud\u201d by helping Lehman Brothers Holdings Inc. deceive the public about its financial condition.
…<\/b>
The state seeks to recover more than $150 million in fees collected by Ernst & Young for work performed for Lehman from 2001 to 2008, plus investor damages and equitable relief, Cuomo said. He will be sworn in as New York governor on Jan. 1. His successor will be New York Democratic state Senator Eric T. Schneiderman.
…<\/b>
Lehman, once the fourth-largest investment bank, failed in September 2008 because of risky real estate bets and too much debt, which it tried to hide from investors, partly by using so- called Repo 105 trades, according to bankruptcy examiner Anton Valukas\u2019s report.
…<\/b>
Responding to the Valukas report in March, Ernst & Young said leverage ratios reported in Lehman\u2019s management discussion and analysis \u201cwere the responsibility of management, not the auditor. They are not part of the audited financial statements.\u201d
…<\/b>
Responding to one suit, filed in April on behalf of retirement funds including the Alameda County Employees\u2019 Retirement Association in Oakland, California, Ernst & Young said in court papers that even Valukas \u201cdid not find that Lehman\u2019s accounting for the Repo 105 transactions was wrong.\u201d<\/p>\n

In his report, Valukas faulted the accounting firm because it \u201cdid not evaluate the possibility that Repo 105 transactions were accounting-motivated transactions that lacked a business purpose,\u201d and didn\u2019t take a stand on whether Lehman\u2019s extensive use of the device was \u201cmaterial\u201d and should be reported.<\/p>\n

\u201cFinancial statements may be materially misleading even when they do not violate GAAP,\u201d he wrote in his report.
…<\/b>
Cuomo, who has powers to bring criminal charges, brought a civil suit against Ernst & Young. Arthur Andersen LLP, the accounting firm that was accused of destroying Enron Corp. documents, was convicted of obstructing justice in 2002 and is now largely defunct.<\/p>\n

\u201cRegulators are concerned there will be no competitors left\u201d to audit U.S. companies, [accountant Barry] Epstein said.<\/p><\/blockquote>\n

The Valukas report and Repo 105 was discussed on PrefBlog on March 12, 2010<\/a>.<\/p>\n

Patrick Jenkins of the Financial Times points out a rather obvious knock-on effect about the obsession with bonuses<\/a> … obvious, that is, to all but politicians:<\/p>\n

Many US and Swiss banks are considering paying higher salaries and lower bonuses to top bankers based in the European Union, mostly in London, to ensure they comply with new instructions from the Committee of European Banking Supervisors (CEBS), the pan-EU regulator, limiting cash pay-outs.<\/p>\n

Some European politicians had expected that non-EU banks would apply their rules globally on a voluntary basis.<\/p>\n

But one senior European banker said: \u201cPoliticians are na\u00efve if they think we will impose EU rules on a global basis. The ironic effect will be another hike in salaries, which is a fixed cost, which rather makes a nonsense of the idea of pay for performance.\u201d<\/p><\/blockquote>\n

Speaking of banks, there is some thought that Deutsche is playing a moral hazard game<\/a>:<\/p>\n

Deutsche Bank\u2019s core capital ratio, a buffer against possible losses, may fall to the lowest level among eight competitors under new Basel III rules in 2012, even after it raised 10.2 billion euros ($13.4 billion) in a share sale in October, according to Christopher Wheeler, an analyst at Mediobanca SpA.<\/p>\n

[CEO Josef] Ackermann, who shunned German government aid during the credit crisis, warned at a Frankfurt conference in September against a \u201cdangerous race to the top\u201d among banks seeking to lift reserves above Basel III requirements years before the rules kick in. Deutsche Bank, the largest German bank, may be able to hold less capital than peers, and borrow more to enhance returns, because its clients are convinced the government would never let it fail, analysts and investors said.
…<\/b>
Deutsche Bank also relies more than competitors on borrowed funds, or leverage, to increase returns. Its assets amounted to 51 times shareholders\u2019 equity on Sept. 30, up from 48 times at the end of 2006, based on International Financial Reporting Standards. Only Brussels-based Dexia SA has higher leverage among Europe\u2019s 15 biggest listed banks. Investment banks\u2019 extensive use of borrowed funds, which can exaggerate risks, was blamed by Federal Reserve Chairman Ben S. Bernanke for contributing to the financial crisis.
…<\/b>
Deutsche Bank prefers to use U.S. Generally Accepted Accounting Principles, which net out derivatives positions, to measure its leverage. By that standard, its assets at the end of September matched its goal of 25 times equity, up from 23 times a year earlier and down from 38 times in mid-2008, company reports show. By comparison, Goldman Sachs assets were 12 times capital at the end of September.<\/p><\/blockquote>\n

And the Canadian preferred share market was on wheels … again! PerpetualDiscounts were up 34bp and FixedResets gained 26bp. Volume eased off a little, but remains elevated.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.3615 %<\/td>\n2,292.7<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.77 %<\/td>\n3.47 %<\/td>\n32,068<\/td>\n19.05<\/td>\n1<\/td>\n0.0000 %<\/td>\n3,526.6<\/td>\n<\/tr>\n
Floater<\/td>\n2.61 %<\/td>\n2.39 %<\/td>\n52,926<\/td>\n21.23<\/td>\n4<\/td>\n0.3615 %<\/td>\n2,475.5<\/td>\n<\/tr>\n
OpRet<\/td>\n4.79 %<\/td>\n3.22 %<\/td>\n71,304<\/td>\n2.37<\/td>\n8<\/td>\n0.0816 %<\/td>\n2,393.7<\/td>\n<\/tr>\n
SplitShare<\/td>\n5.36 %<\/td>\n1.24 %<\/td>\n954,424<\/td>\n0.96<\/td>\n4<\/td>\n-0.3778 %<\/td>\n2,437.9<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.0816 %<\/td>\n2,188.9<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.71 %<\/td>\n5.57 %<\/td>\n156,568<\/td>\n5.41<\/td>\n27<\/td>\n0.2662 %<\/td>\n2,007.5<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.42 %<\/td>\n5.45 %<\/td>\n288,596<\/td>\n14.72<\/td>\n51<\/td>\n0.3374 %<\/td>\n2,014.4<\/td>\n<\/tr>\n
FixedReset<\/td>\n5.24 %<\/td>\n3.49 %<\/td>\n338,426<\/td>\n3.09<\/td>\n52<\/td>\n0.2580 %<\/td>\n2,259.1<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
IAG.PR.A<\/td>\nPerpetual-Discount<\/td>\n-2.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 21.25
\nEvaluated at bid price : 21.25
\nBid-YTW : 5.44 %<\/td>\n<\/tr>\n
ELF.PR.G<\/td>\nPerpetual-Discount<\/td>\n-1.45 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 19.71
\nEvaluated at bid price : 19.71
\nBid-YTW : 6.15 %<\/td>\n<\/tr>\n
FTS.PR.F<\/td>\nPerpetual-Discount<\/td>\n-1.13 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 22.50
\nEvaluated at bid price : 22.66
\nBid-YTW : 5.45 %<\/td>\n<\/tr>\n
POW.PR.D<\/td>\nPerpetual-Discount<\/td>\n-1.08 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 22.19
\nEvaluated at bid price : 22.35
\nBid-YTW : 5.60 %<\/td>\n<\/tr>\n
FTS.PR.G<\/td>\nFixedReset<\/td>\n1.15 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-10-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.35
\nBid-YTW : 3.26 %<\/td>\n<\/tr>\n
TD.PR.C<\/td>\nFixedReset<\/td>\n1.16 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-03-02
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.94
\nBid-YTW : 3.25 %<\/td>\n<\/tr>\n
BAM.PR.B<\/td>\nFloater<\/td>\n1.28 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 18.23
\nEvaluated at bid price : 18.23
\nBid-YTW : 2.87 %<\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetual-Discount<\/td>\n1.36 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 23.38
\nEvaluated at bid price : 24.59
\nBid-YTW : 5.62 %<\/td>\n<\/tr>\n
SLF.PR.E<\/td>\nPerpetual-Discount<\/td>\n1.46 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 20.19
\nEvaluated at bid price : 20.19
\nBid-YTW : 5.60 %<\/td>\n<\/tr>\n
BAM.PR.J<\/td>\nOpRet<\/td>\n1.51 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-04-30
\nMaturity Price : 26.00
\nEvaluated at bid price : 26.85
\nBid-YTW : 4.12 %<\/td>\n<\/tr>\n
SLF.PR.C<\/td>\nPerpetual-Discount<\/td>\n1.57 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 20.02
\nEvaluated at bid price : 20.02
\nBid-YTW : 5.59 %<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetual-Discount<\/td>\n1.64 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 21.13
\nEvaluated at bid price : 21.13
\nBid-YTW : 5.35 %<\/td>\n<\/tr>\n
SLF.PR.D<\/td>\nPerpetual-Discount<\/td>\n1.78 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 20.05
\nEvaluated at bid price : 20.05
\nBid-YTW : 5.58 %<\/td>\n<\/tr>\n
NA.PR.L<\/td>\nPerpetual-Discount<\/td>\n2.67 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 23.53
\nEvaluated at bid price : 23.80
\nBid-YTW : 5.14 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
FTS.PR.E<\/td>\nOpRet<\/td>\n232,500<\/td>\nNesbitt bought three blocks from TD, two of 10,000 and one of 20,000, all at 26.80. TD crossed 21,900 at 26.75. Nesbitt bought two more blocks from TD, 25,000 at 26.80 and 15,000 at 26.75. TD crossed 81,200 at 26.76. Desjardins bought three blocks from TD, each of 15,000 shares, all at 26.80.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-07-01
\nMaturity Price : 25.75
\nEvaluated at bid price : 26.78
\nBid-YTW : 3.22 %<\/td>\n<\/tr>\n
SLF.PR.D<\/td>\nPerpetual-Discount<\/td>\n124,072<\/td>\nRBC crossed 116,200 at 19.93.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 20.05
\nEvaluated at bid price : 20.05
\nBid-YTW : 5.58 %<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nPerpetual-Discount<\/td>\n94,565<\/td>\nRBC crossed 67,800 at 20.35.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-21
\nMaturity Price : 20.21
\nEvaluated at bid price : 20.21
\nBid-YTW : 5.61 %<\/td>\n<\/tr>\n
IGM.PR.B<\/td>\nPerpetual-Premium<\/td>\n64,410<\/td>\nNesbitt crossed 50,000 at 25.20.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2019-01-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.29
\nBid-YTW : 5.89 %<\/td>\n<\/tr>\n
BMO.PR.H<\/td>\nPerpetual-Premium<\/td>\n62,278<\/td>\nNesbitt crossed 50,000 at 25.25.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-03-27
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.21
\nBid-YTW : 5.11 %<\/td>\n<\/tr>\n
CM.PR.D<\/td>\nPerpetual-Premium<\/td>\n59,382<\/td>\nNesbitt crossed 50,000 at 25.50.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2012-05-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.54
\nBid-YTW : 4.80 %<\/td>\n<\/tr>\n
There were 44 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The TD \/ Chrysler deal got done: Toronto-Dominion Bank agreed to buy Chrysler Financial Corp. from Cerberus Capital Management LP for $6.3 billion in cash, adding an auto-finance company in its second-largest acquisition. The purchase …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-13472","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/13472","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13472"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/13472\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13472"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13472"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13472"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}