The Star Online: Business
The Star Online: Business |
- Bank of America sues MBIA over bond tender interference
- Wall St Week Ahead: Holiday "on standby" as clock ticks on cliff
- Global telecom treaty without Net controls signed by 89 nations
| Bank of America sues MBIA over bond tender interference Posted: 14 Dec 2012 11:05 PM PST NEW YORK: Bank of America Corp has sued bond insurer MBIA Inc in a New York state court for allegedly interfering with the bank's offer to buy MBIA's bonds. At issue are changes MBIA sought to make to the terms of some of its bonds to eliminate the risk that it might be considered in default if a troubled unit were put into rehabilitation or liquidation by New York regulators. Bank of America countered with an offer to buy the bonds, saying it believed the changes would increase the risk of MBIA's insurance unit being placed in rehabilitation or liquidation, which could jeopardize all policyholder claims. On Thursday, Bank of America said it had purchased $136 million of senior notes in that tender and issued a default notice over the attempt to change terms. The bank claims in the lawsuit that the consent solicitation was the latest of MBIA's "premeditated and subversive actions" since 2008 to benefit executives and stockholders to the detriment of Bank of America and other policyholders. In the lawsuit, filed late on Thursday, Bank of America alleged that MBIA illegally interfered with its tender offer and asked for the consent solicitation and amendment to be declared invalid. The bank also is seeking punitive and other damages. MBIA spokesman Kevin Brown said: "Like its purported notice of default, Bank of America's latest lawsuit is meritless and we will respond to both accordingly." MBIA shares fell 6.7 percent to $7.95 Friday on the New York Stock Exchange. The legal wrangling is a major cloud hanging over both companies, which have struggled to recover from mortgage-related troubles from the financial crisis. MBIA claims that Bank of America owes it billions of dollars over soured mortgages that it wants the bank to buy back. Bank of America says the insurer will likely owe it billions over certain credit default swap transactions. MBIA and Bank of America were in court this week on pre-trial motions in a 2008 case the bond insurer brought against Bank of America's Countrywide Financial unit, accusing the lender of misrepresenting the quality of loans underlying mortgage-backed securities it insured. MBIA claims the bank should be liable for refusing to buy back defective loans. The two are also awaiting a decision by a New York judge over whether the state insurance department was right to approve MBIA's 2009 split into two units. Bank of America claims it was harmed in the restructuring when $5 billion was transferred out of the MBIA unit that insures risky mortgage debt and into a new unit that guarantees municipal bonds. The judge must rule on whether to annul that split. The newest case is Bank of America Corp. v MBIA Inc, New York State Supreme Court, 70444/2012, County of Westchester. |
| Wall St Week Ahead: Holiday "on standby" as clock ticks on cliff Posted: 14 Dec 2012 11:02 PM PST NEW YORK: The last two weeks of December are traditionally quiet for stocks, but traders accustomed to a bit of time off are staying close to their mobile devices, thanks to the "fiscal cliff." Last-minute negotiations in Washington on the so-called fiscal cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could cause a sharp slowdown in growth or even a recession - are keeping some traders and analysts from taking Christmas holidays because any deal could have a big impact on markets. "A lot of firms are saying to their trading desks, 'You can take days off for Christmas, but you are on standby to come in if anything happens.' This is certainly different from previous years, especially around this time of the year when things are supposed to be slowing down," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago. "Next week is going to be a Capitol Hill-driven market." With talks between President Barack Obama and House Speaker John Boehner at an apparent standstill, it was increasingly likely that Washington will not come up with a deal before January 1. Gordon Charlop, managing director at Rosenblatt Securities in New York, will also be on standby for the holiday season. "It's a 'Look guys, let's just rotate and be sensible" type of situation going on," Charlop said. "We are hopeful there is some resolution down there, but it seems to me they continue to walk that political tightrope... rather than coming up with something." Despite concerns that the deadline will pass without a deal, the S&P 500 has held its ground with a 12.4 percent gain for the year. For this week, though, the S&P 500 fell 0.3 percent. BEWARE OF THE WITCH This coming Friday will mark the last so-called "quadruple witching" day of the year, when contracts for stock options, single stock futures, stock index options and stock index futures all expire. This could make trading more volatile. "We could see some heavy selling as there is going to be a lot of re-establishing of positions, reallocation of assets before the year-end," Kinahan said. RETHINKING APPLE Higher tax rates on capital gains and dividends are part of the automatic tax increases that will go into effect next year, if Congress and the White House don't come up with a solution to avert the fiscal cliff. That possibility could give investors an incentive to unload certain stocks in some tax-related selling by December 31. Some market participants said tax-related selling may be behind the weaker trend in the stock price of market leader Apple On Friday, the stock fell 3.8 percent to $509.79 after the iPhone 5 got a chilly reception at its debut in China and two analysts cut shipment forecasts. But the stock is still up nearly 26 percent for the year. "If you owned Apple for a long time, you should be thinking about reallocation as there will be changes in taxes and other regulations next year, although we don't really know which rules to play by yet," Kinahan said. But one indicator of the market's reduced concern about the fiscal cliff compared with a few weeks ago, is the defense sector, which will be hit hard if the spending cuts take effect. The PHLX Defense Sector Index <.dfx> is up nearly 13 percent for the year, and sits just a few points from its 2012 high. |
| Global telecom treaty without Net controls signed by 89 nations Posted: 14 Dec 2012 10:59 PM PST DUBAI: An international telecommunications treaty signed by 89 countries out of a possible 144 on Friday will have little impact on how carriers operate or how consumers surf the web or make calls around the world when it comes into effect in 2015. But the acrimonious debate over the treaty - and refusal of so many countries, including the United States and much of Europe, to sign up immediately - have exposed a deep split in the international community. A U.S.-led bloc advocated a hands-off approach to the Internet, while Russia, China and much of Africa and the Middle East sought greater governmental oversight of cyberspace. About 150 nations met in Dubai, under the auspices of the International Telecommunication Union (ITU), to update a set of telecom rules dating back to 1988, before the Internet and mobile phones transformed communications. Their failure to find a consensus may herald a new fight over cyberspace. "The world will still be around and countries will still cooperate along the lines they have done for decades," said Paul Budde, managing director of Sydney-based consultancy BuddeCom. "However, they have clearly drawn a line under how far they believe the ITU can go in relation to regulations that include the Internet." As in a prior version, the International Telecom Regulations spell out guidelines on technical issues such as how carriers charge each other for incoming international phone calls, as well as taxation and accounting. Countries that sign the treaty are supposed to be guided by its principles, although these have no force of law. Users in countries that block certain content will still experience the same version of the Internet, while telecom operators will feel little impact because international call charges are decided via commercial contracts between them. The new version added passages that became flash points: for example, four lines pushed by Russia and China on how governments should protect the security of networks. The United States took a no-compromise position throughout negotiations, refusing to consider any references to the Internet in the treaty. Other countries instead agreed to restrict any explicit Internet provisions to a non-binding resolution that accompanies the treaty. In the end, the debate over the Internet overshadowed all else at the summit, despite the ITU insisting that regulating cyberspace was not on the agenda. As a result, some countries in Africa and the Middle East felt the controversy overshadowed important reforms, such as provisions to improve broadband access to landlocked and island nations, which may be weakened by fewer countries signing the treaty. Other measures include a call for greater transparency in roaming charges, which the ITU hopes will end "bill shock", plus commitments to improve disabled access to telecom services and for governments to reduce telecom equipment waste. A clause calling for countries to stop "unsolicited bulk electronic communications" - spam - drew the ire of the U.S. bloc, which said it could be interpreted by governments to block emails, an accusation the ITU vehemently denied. "Whatever is in place now doesn't seem to be working and this treaty calls on governments - it's a dirty word for some, but somebody has to do it - to cooperate to see what we can do better in that area," said Richard Hill, chief counselor for International Telecommunication Union's Dubai summit. These issues are more vital in developing countries, with other countries having already addressed them to a large extent, so richer nations had less incentive to sign the treaty. "That's certainly the case, but it's no secret they're not signing for political reasons," added Hill. After 12 days of rancorous, largely private negotiations, the bad feeling between the two opposing camps may take some time to ease. Delegates from the pro-treaty group accused the United States and Europe of reneging on a compromise agreement that fell apart on Thursday. ITU officials on Friday gave an upbeat interpretation of the summit, predicting many of the countries that had yet to sign the treaty would do so once they have consulted with their respective legislatures. But the failed attempts by some member states to significantly extend the ITU's remit into the Internet have weakened the 147-year-old organisation. "The ITU won't become irrelevant but it tried to claim some of the Internet without having the mandate to do so," said a European delegate who declined to be identified. "It saw an opportunity, but both the triumph and the curse of the ITU is that it can't instigate anything, it depends on member states - some said let's expand the mandate and others said let's not." |
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