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Debt jitters: This could be just a temporary thing, but underwriters on a few big deals are having a tough time this week arranging debt financing. It came up most noticeably with U.S. Foodservice Inc., which pulled its bond offering on Wednesday. That's very unusual and speaks volumes about the growing concerns that the buyout boom was reaching a peak. (Kohlberg Kravis Roberts and Clayton Dubilier & Rice wound up financing the buyout with a bridge loan). Need more proof? Blackstone Group, last week’s must-have IPO, fell 2.7 percent on Wednesday and is now trading below its offering price. None of which bodes well for Tribune Co., which is struggling to find suckers… er, investors, to finance its debt load. From the WSJ:
Taken together, the setbacks are stoking unease across Wall Street. "The biggest risk we face -- and there are a lot of things that contribute to this risk -- would be a very big crisis in the credit markets," Lloyd Blankfein, chief executive of Goldman Sachs Group Inc., told an audience at The Wall Street Journal's Deals & Deal Makers conference in New York. A "sentiment shift," he said, "could unravel very quickly" the vast wealth that has been created by the takeover boom. At the same conference, Treasury Secretary Henry Paulson called the market jitters "a wake-up call to focus on excesses" that have developed in recent years in the debt markets.
KB Home posts huge loss: The numbers aren't that surprising and help explain why Wall Street is still freaking out over the housing market. This morning, the L.A.-based homebuilder reported a second-quarter loss of $148.7 million, compared with net income of $205.4 million a year earlier. You want bad? Try a 36 percent drop in homes delivered. Plus, the average sale price of a delivered home fell to $271,600 from $295,300 a year ago. "We can't predict when market conditions will improve," said CEO Jeffrey Mezger, who noted that tighter credit conditions in the subprime and near-prime mortgage market have made things worse. (The Street)
Careful about brushing: Now it turns out that roughly 900,000 tubes of toothpaste made in China and brought into the U.S. contain a poison used in some antifreeze products. Oh. The NYT reports that they're showing up in hospitals for the mentally ill, prisons, juvenile detention centers and even some hospitals serving the general population. The FDA says you should toss all Chinese-made toothpaste, regardless of the brand (the NYT Web site has a photo of something called Pacific).
NBA goes digital: Never mind that nobody watched the finals (who was playing again?). The league has a new $7.4 billion contract with Disney's ABC and ESPN and Time Warner Inc.'s TNT – and part of the deal involves streaming on the Internet and mobile devices. Under the eight-year package, Disney and TW can spin off feeds to any of their digital platforms on about 200 games each season. The $7.4 million contract is a 22 percent increase, which shows the continued pull of sports broadcasting, no matter which team is playing. (LAT)
New chief at Wells: He's John Stumpf, who has been Wells Fargo’s COO. He succeeds Richard M. Kovacevich, who remains chairman. The move suggests that the bank will keep focusing on its core markets in California and the rest of the West rather than merging with an Eastern-based bank. One of his big challenges, of course, will be the housing market. Stumpf is a big Bridge buddy of Warren Buffett, which sounds like worthless trivia were it not for the fact that Buffett is Wells's largest shareholder. (NYT)
Yet another GDP revision?: Well yeah, the government goes through several adjustments in the gross domestic product, and the latest first-quarter numbers are still quite weak, showing growth of just 0.7 percent. That's a touch better than the previous revision a few weeks back. And while growth was sputtering, inflation was picking up. Lots of economists still say that growth will pick up later this year. (AP)
More money to Hollywood: This time the focus is on modestly budgeted movies - say, in the $10 million to $35 million range. Mark Gill, the former president of Warner Independent Pictures (among many other things) is behind the venture, called the Film Department. Among the backers: General Electric's media business group and Sheik Waleed Ibrahim of Saudi Arabia. (LAT)
Cellphone tracking: That's what Nielsen is after with its purchase of SF-based Telephia, which has become a respected source for measuring consumers’ phone calling, mobile Web surfing and video viewing (the company even holds some patents on tracking). From the NYT:
Nielsen intends to build a fuller picture of media consumption, including mobile phone use. The company embarked on an initiative last year to track how people spend their time with video and other media, wherever it occurs. NetRatings, a division of Nielsen, tracks online consumption, and Nielsen is tracking more viewing outside of the home and even on the television screens that are popping up in big-box stores. Nielsen created a new service called Nielsen Wireless last October that has been developing tools to track cellphone use. This month, it announced its first mobile product, Mobile Vector, which will begin releasing information next month about cellphone users.
Dog bites man story: Californians have the nation's worst traffic jams and the seventh-worst roads, according to the Reason Foundation's annual report. How bad is bad? Well, 83.3 percent of the state's urban interstates are overcrowded. In second place was Minnesota (who knew?) and New Jersey was third. Drivers in Montana, North Dakota, South Dakota and Wyoming had zero congestion. Trouble is, Montana also is the deadliest state, with 2.256 fatalities per 100 million vehicle miles. (Reuters)
Stretching the holiday: The Auto Club expects nearly 3.6 million Southern Californians to take Fourth of July trips. Because the holiday falls on a Wednesday, lots of folks are getting out tomorrow - 42 percent by the Auto Club's estimate - and not going back to work until Thursday (and don’t expect Thursday and Friday to be the most productive days of the year). The top destinations: Vegas, San Diego, Hawaii, SF and the Grand Canyon.
Fast-growing cities: A bunch of California communities made the Census Bureau's top 25 list, including Lancaster (up 5 percent from the previous reporting period), Bakersfield (up 4.3 percent), Irvine (3.5 percent), Fontana (3.4 percent), and Palmdale (3.1 percent). The numbers are based on residential construction in cities with populations of 100,000 or more from July 1, 2005, to July 1, 2006. (LAT)
No iPhone lines in the Valley: Yeah, but that's because all the Apple stores are in malls and malls won't let folks camp out. They will be opening extra early tomorrow (the phones go on sale at 6 p.m.). The Glendale Galleria opens 8 a.m. and Northridge Fashion Center is allowing people to line up at 6 a.m. for the 10 a.m. opening. At some NY locations, they started lining up on Monday, so things might be getting a touch ripe back there. (Daily News)
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.