Thursday PM August 9th, 2007
by: Ed Mayberry, August 9, 2007 5:08:00 am
A major French bank says it is suspending three of its asset-backed securities funds. BNP Paribas says it can no longer value them accurately because of problems in the U.S. subprime mortgage market. The three funds are worth a total of $2.75 billion. Defaults on subprime loans--those made to people with poor credit--have climbed sharply in recent months and have triggered concern about the impact on credit markets worldwide. BNP's announcement sent European stock markets lower and stirred concerns that problems among subprime borrowers would cause further turmoil in the markets.
The Dow Jones Industrials closed down more than 360 points, prompted by concerns about the U.S. credit market. This follows the French bank freezing three investment funds that had put money into U.S. subprime mortgages, because it couldn't tell how much their assets were worth. The announcement from the French bank raised fears of a widening impact from the U.S. credit market problems. A move by the European Central Bank to provide more cash to money markets was seen on Wall Street as confirmation of those fears.
Light sweet crude oil for September delivery was down below $71 after the French banking group suspended three funds with exposure to the U.S. credit markets. That raised fears that reduced availability of credit could slow growth in the world's biggest energy consumer, and reduce oil demand. The rebound came when the National Oceanic and Atmospheric Administration said it still expects a more active than normal 2007 Atlantic hurricane season.
Federal investigators say they've found similarities between a fire this week at a suburban Houston manufacturing plant and the blasts last month at a Dallas gas plant. The Dallas explosions shot fiery debris onto nearby expressways and buildings near the city's downtown area. The U.S. Chemical Safety and Hazard Investigation Board says it'll probe Tuesday's acetylene fire at Hughes Christensen Company in The Woodlands. The agency says the fire at the oil drilling bit maker caused the evacuation of 800 employees. Three people were hurt at Southwest Industrial Gases in Dallas on July 25th. That's after a chain reaction of exploding acetylene tanks rattled buildings several blocks away and shot cylinders shooting like missiles into the sky. In both fires, the CSB says a delivery trailer from Western International Gas and Cylinders appeared to be involved. The Beeville-based company didn't immediately return a message seeking comment. The agency, which has no regulatory authority, has said that its investigation into the Southwest fire could take up to a year to complete.
Landry's Restaurants says it has amended its credit agreement and found back-up financing to replace its existing debt structure. The bank loan would be used to repay bondholders demanding early repayment on a $400 million debt structure. Last week, Landry's obtained a temporary restraining order against bondholders who called for immediate repayment because the Houston restaurant chain failed to file timely financial statements, violating the debt agreement. A hearing is set for August 16th to determine whether the injunction should continue. Landry's says it is prepared to pay off the debt if it is determined that the unsecured deal is immediately accelerated and payable, although early repayment would result in higher borrowing costs from the stand-by financing it has arranged. Landry's is late on filing its 2006 annual report and quarterly reports in 2007 because of an internal investigation into its stock-option practices.
Shareholders of Birmingham, Alabama-based Compass Bancshares have approved its $9.6 billion acquisition by Spain's Banco Bilbao Vizcaya Argentia. Compass will become a subsidiary of BBVA USA, which has headquarters in The Woodlands. The Spanish company's shareholders approved the deal in June.
Video rental chain Blockbuster says it's buying the digital movie download service Movielink. Dallas-based Blockbuster says the deal will give it the online foothold it's long sought to compete with rival Netflix. Terms of the deal were not disclosed. Blockbuster says it'll continue to operate Movielink as a stand-alone service and eventually make elements of the service available through blockbuster.com. Santa Monica, California-based Movielink was launched by five studios in 2002, marking the first time that a large supply of recent, popular films was available for rental on the Internet.
The back-to-school shopping season is shaping up as a disappointing one. Consumers stayed away from stores and malls in July. And the stores that performed the weakest were the apparel chains based in malls--especially teen merchants like Pacific Sunwear and Wet Seal. Wal-Mart posted a slim gain, but it's warning that increased discounting is hurting its profit margin. The few standouts include J.C. Penney and Costco. Consumers may have been rattled by the weakening housing market and by other financial pressures, including the widening credit crunch. An analyst says high gas prices are continuing to have an impact. In fact, retailers have seen a slowing sales trend for most of the year, as consumers pay more for food and gas.