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Nov 18, 2011

DealBooK | DealB%K Today's Top Headlines: Investigators Zero in on Suspect Borrowing at MF Global


Friday, November 18, 2011
TODAY'S TOP HEADLINES

M & A NYSE and Deutsche Borse Offer Deal Concessions

INVESTMENT BANKING UBS Outlines How It Plans to Carry Out Turnaround

PRIVATE EQUITY Lone Star to Sell Korean Bank Stake

HEDGE FUNDS H.P. Gives Relational's Whitworth a Board Seat

OFFERINGS Yelp Files for I.P.O.

VENTURE CAPITAL Venture Capitalist Blogs His Pain

LEGAL/REGULATORY Manager Who Claimed to Own Facebook Shares Charged With Fraud 

Top Story
Investigators Zero in on Suspect Borrowing at MF Global With $600 million in customer funds still missing, investigators have discovered hundreds of millions of dollars in suspect borrowing at MF Global, people briefed on the investigation say.

The commodities and derivatives brokerage firm improperly diverted customers' cash for its own use in the days before its bankruptcy, and at least some of that money was used to cover trading losses, regulators suspect, meaning the money may no longer be simply missing. It may be gone.

MF Global, like other brokers, can use customer cash if it puts up sufficient collateral. But the firm did not provide enough backing in late October, essentially taking free loans, said the people briefed on the investigation, who spoke on the condition of anonymity because the inquiry was continuing.
An Ill-Fated Firm Is Ready to Move On Bedeviled in the past by a clutch of troubled owners, including MF Global, the Washington Research Group, whose 20 employees were fired last Friday, has been on a desperate search for a 10th owner.

It looks as if it has found one. The firm is in talks to be acquired by Guggenheim Partners, the fast-growing financial services firm, said two people with knowledge of the talks who requested anonymity. There are several other interested parties, including Royal Bank of Canada and Macquarie of Australia. A deal could be announced as soon as Friday, though it might still fall apart.
Day 2: Inside MF Global's Bankruptcy Hearing A proposal to make cash distributions to MF Global customers was the focus of a hearing on Thursday at the federal bankruptcy court in Manhattan. DealBook provided live coverage of the proceedings.

 

DEAL NOTES
Protesters Re-Occupy Zuccotti Park As protesters around the country marked the two-month birthday of Occupy Wall Street with a surge of demonstrations, the effort in Manhattan to shut down the New York Stock Exchange fell short, The New York Times reports. But amid arrests and violence, protesters achieved a separate goal.

"We failed to close the stock exchange, but we took back our park," Adam Farooqui, of Queens, told The Times. "That was a real victory."
We May or May Not Be the 99 Percent The Occupy protests have spawned demonstrations in posh locales, such as Martha's Vineyard, Santa Barbara and Jackson Hole, Bloomberg Businessweek writes.

"To be on the street with a sign is so unheard of out here," Ty Batirbek-Wenzel, 46, told Businessweek, of a protest in the Hamptons.
  • BLOOMBERG BUSINESSWEEK 
  •  
    MERGERS & ACQUISITIONS »
    NYSE and Deutsche Borse Offer Deal Concessions
    NYSE and Deutsche Borse Offer Deal Concessions Deutsche Borse and NYSE Euronext announced plans to divest businesses in Europe and open up certain operations to rivals in an effort to win regulatory approval for their proposed $9 billion merger.
    Motorola Shareholders Give Google Their Blessing Motorola Mobility said its shareholders were overwhelmingly in favor of the company's $12.5 billion sale to Google, with 99 percent of voters giving a thumbs up, The Associated Press reports.
    Kodak Is Said to Put Online Photo Service on the Block The struggling film company Eastman Kodak is looking to sell its online photo-sharing business, and is said to seek "hundreds of millions of dollars" for the site that recently has been losing users, The Wall Street Journal reports.
    Petrobras Has No Shortage of Offers for Assets The Brazilian oil company Petrobras has received "many, many, many" offers for $13.6 billion of assets it aims to sell to help finance a five-year investment plan, chief executive Jose Sergio Gabrielli told Bloomberg News.

    "In the ultra-deep waters, we have several exploratory activities going on right now," Mr. Gabrielli told Bloomberg. "And some companies are interested in buying things from us."
    Statoil Buys Into South American Unit The Norwegian oil company Statoil agreed to buy a 30 percent stake in a South American oil production unit, from the London-based Tullow Oil, Reuters reports.
    Britain After EMI Despite the symbolic loss that comes with the sale of EMI's recorded music division to Universal Music, The Economist writes that the British music scene is doing just fine without the big label, thank you very much.
    INVESTMENT BANKING »
    UBS Outlines How It Plans to Carry Out Turnaround
    UBS Outlines How It Plans to Carry Out Turnaround Sergio P. Ermotti, the chief executive of the bank, said his efforts would include shrinking business units and raising capital levels.
    Banks in Italy Find an Unusual Liquidity Lifeline Short-term lending by a London Stock Exchange-owned clearinghouse is increasingly in demand amid turmoil in the Italian financial market.
    Bank of America's New Strategy Chief Takes the Stage After Mike Lyons left last month from his post as Bank of America's strategy chief, Thong Nguyen, who once worked in the bank's wealth management division, has taken that role, The Wall Street Journal reports.
    Jefferies Tries to Instill Calm The chief executive of the Jefferies Group sought to assure investors that the brokerage would be fine, even as its debt traded at distressed levels, Bloomberg News reports. "Some bond investors sell first and ask questions later," chief executive Richard B. Handler told Bloomberg.
    Relatively Speaking, Jefferies Isn't So Bad The Wall Street Journal's Heard on the Street writes that despite potential pitfalls, Jefferies isn't in the dire straits that some are suggesting, and its market valuation as a percentage of book value is about in line with Goldman Sachs's.
    Commercial Mortgage Delinquencies Rise Hit by defaults, the market for commercial mortgage-backed securities is showing signs of strain, even after it appeared to be recovering, The New York Times writes.
    Spanish Banks Seen as Entering Consolidation Period As small banks in Spain try to unload real estate assets, some of that debt may simply be "unsellable," Pablo Cantos, managing partner of the Madrid-based MaC Group, told Bloomberg News. "I foresee Spain will be left with just four large banks," he said.
    European Banks Still Counting Pre-Crisis Goodwill After paying premiums for acquisitions in good times, European banks may now need to write off a portion of their combined $270 billion in goodwill, Bloomberg News reports.
    • BLOOMBERG NEWS 
    • PRIVATE EQUITY »
      Lone Star to Sell Korean Bank Stake Lone Star Funds, the private equity firm that was found guilty of stock price manipulation, was told by South Korean authorities to reduce its stake in the Korea Exchange Bank to 10 percent or lower, so that the lender can be acquired by the Hana Financial Group, Reuters reports.
      Silver Lake Aims Big Even as some of its rivals struggle, the private equity firm Silver Lake Partners, which is eyeing Yahoo, continues to set its sights on big targets after its recent $8.5 billion sale of Skype to Microsoft, The Wall Street Journal reports.
      Korea's Kumho to Sell Assets Kumho Industrial, the South Korean construction and transportation company, plans to sell about $884.5 billion of assets to 10 private equity firms, a local newspaper reported, according to Reuters.
      San Diego Newspaper Sold The private equity firm Platinum Equity sold The San Diego Union-Tribune to the chairman of the hotel development firm Manchester Financial Group, for a sum said to be at least $110 million, The New York Times reports.
      HEDGE FUNDS »
      H.P. Gives Relational's Whitworth a Board Seat Hewlett-Packard said named Ralph V. Whitworth, the head of the hedge fund Relational Investors, to its board as the computer giant seeks to head off potential campaigns by activist shareholders.
      Legg Mason's Miller to Hand Over the Reins Bill Miller, the legendary Legg Mason mutual fund manager who beat the S&P 500 index for 15 years in a row, said on Thursday that he was stepping down, after admitting that his stock-picking strategy slipped in the wake of the financial crisis, The New York Times reports.
      'Most Impressive' Manager Lags Behind Greg Coffey, a fund manager at Moore Capital Management, seems to have fallen short of proving himself to be, in the words of the firm's founder, "one of the most impressive traders in the world," as his average returns have trailed the industry, Bloomberg News reports.
      Galleon Claims to Be Victim of Crimes The Galleon Group, the defunct hedge fund once run by the convicted insider trader Raj Rajaratnam, says it lost more than $1.5 million from crimes committed at another hedge fund, FrontPoint Partners, and is seeking restitution, Bloomberg News reports.
      I.P.O./OFFERINGS »
      Yelp Files for I.P.O. The filing shows that while revenue at the reviews site rose 79.9 percent, to $58.4 million for the first nine months of this year, the company lost $7.4 million.
      Is Yelp a Dud? MarketWatch writes that Yelp appears to be just another mediocre tech offering trying to take advantage of investor demand, as the company is still losing money.
      Zynga Shakes Up Ranks
      Zynga Shakes Up Ranks As the gaming company prepares for its I.P.O., the chief business officer, Owen Van Natta, and Brad Feld, a director, have stepped down.
      Angie's List Soars, But Delphi Disappoints Some glitter and some coal in the I.P.O. market: Angie's List soars 39 percent in its debut, but Delphi Automotive falls below its offering price.
      Canadian Oil Trust Is Said to Plan Offering The North American Oil Trust, based in Calgary, plans to raise $365 million in an initial offering, in what would be Canada's second biggest I.P.O. this year, Bloomberg News reports.
      • BLOOMBERG NEWS 
      •  
        VENTURE CAPITAL »
        Venture Capitalist Blogs His Pain James Altucher, the venture capitalist who has suffered personal and financial hardship, shares his anxieties on Twitter and on his blog, and has attracted a following, Bloomberg Businessweek writes.

        "I think the role James fulfills in the post-crash world is beacon of hope," Joshua Brown, a financial adviser who blogs as the Reformed Broker, told Businessweek. "I know it sounds corny, but no one has been more forthcoming about how the torn economic fabric of this country has affected him personally."
        Security Company Raises $50 Million Rapid7, which provides cyber security services to companies, raised $50 million in a funding round, bringing its total funding to $60 million, TechCrunch reports.
        3-D Printing Company Scores $5.1 Million Firms including Union Square Ventures and Index Ventures invested $5.1 million in Shapeways, which offers a 3-D printing service, TechCrunch reports.
      LEGAL/REGULATORY »
      Manager Who Claimed to Own Facebook Shares Charged With Fraud
      Manager Who Claimed to Own Facebook Shares Charged With Fraud John A. Mattera, 50, a Florida-based investment manager, was arrested Thursday on charges of running an $11 million, two-year fraud that falsely promised investors access to coveted shares of Groupon, Facebook and other private companies.
      Missing $4.9 Billion at Olympus May Be Linked to Criminal Groups In what could become one of the biggest scandals in Japanese corporate history, law enforcement officials say there is at least $4.9 billion unaccounted for at Olympus, and are investigating whether some of it went to groups with ties to organized crime, The New York Times reports.
      Critic of Big Banks Poised for F.D.I.C. Spot Thomas M. Hoenig, recently the president of the Federal Reserve Bank of Kansas City, seems likely to receive Senate confirmation for a six-year term as vice chairman of the Federal Deposit Insurance Corporation, The Wall Street Journal reports. Mr. Hoenig, an outspoken critic of "too big to fail" firms, said in a speech this year that regulators "must break up the largest banks."
      Lake Shore Head Sentenced to Prison Philip J. Baker, who formerly ran the defunct hedge fund Lake Shore Asset Management, was sentenced to 20 years for participating a fraud scheme that prosecutors said cost nearly 1,000 investors $154.8 million over five years, Bloomberg News reports.
      S.&P. Issues Another Questionable Release A week after mistakenly sending an alert that suggested it had cut France's credit rating, Standard & Poor's again provoked head-scratching with a release announcing it had upgraded Brazil, to the rating the country already held, Bloomberg News reports.

      "I have some people calling and asking what's going on. Everyone is lost," Mauricio Junqueira, a money manager at Squanto Investimentos in Sao Paulo, told Bloomberg. "S.&P. has to be careful."
       

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