Yahoo, Alibaba Working on New, Taxable Deal

BY ANUPREETA DAS AND GINA CHON

Yahoo Inc. has been working on a new deal to sell a portion of its stake in Alibaba Group Holding Ltd. back to the Asian company, and a transaction could be completed within weeks, people familiar with the matter said.

At the same time, they cautioned, the two parties have failed to strike a deal numerous times in the past, and there is no guarantee a deal will be reached this time.

Still, they said, the current plan, under which Yahoo would pay taxes on its gains from the sale, is considered simpler and more doable than a previous effort ...

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Yahoo, Alibaba Working on New, Taxable Deal

BY ANUPREETA DAS AND GINA CHON

Yahoo Inc. has been working on a new deal to sell a portion of its stake in Alibaba Group Holding Ltd. back to the Asian company, and a transaction could be completed within weeks, people familiar with the matter said.

At the same time, they cautioned, the two parties have failed to strike a deal numerous times in the past, and there is no guarantee a deal will be reached this time.

Still, they said, the current plan, under which Yahoo would pay taxes on its gains from the sale, is considered simpler and more doable than a previous effort ...

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Two-Notch Debt Downgrade For Citi Could Require $4.7B In Extra Collateral

--Potential additional collateral needed for a two-notch downgrade declined $700 million from three months ago

--Value of Citi's Smith Barney brokerage joint venture with Morgan Stanley (MS) no longer impaired

--A one-notch downgrade for banking subsidiary might now require $2.6 billion, from $3.2 billion

(Adds details about the decrease in collateral requirements in case of a debt downgrade throughout.)

NEW YORK (Dow Jones)--Citigroup Inc. (C), stung by a very public setback in its recovery when regulators vetoed its share buyback, is preparing investors for the worst when it comes to a downgrade of its debt rating.

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Two-Notch Debt Downgrade For Citi Could Require $4.7B In Extra Collateral

--Potential additional collateral needed for a two-notch downgrade declined $700 million from three months ago

--Value of Citi's Smith Barney brokerage joint venture with Morgan Stanley (MS) no longer impaired

--A one-notch downgrade for banking subsidiary might now require $2.6 billion, from $3.2 billion

(Adds details about the decrease in collateral requirements in case of a debt downgrade throughout.)

NEW YORK (Dow Jones)--Citigroup Inc. (C), stung by a very public setback in its recovery when regulators vetoed its share buyback, is preparing investors for the worst when it comes to a downgrade of its debt rating.

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Hitting Argentina for Oil Seizure Can Hurt US Interests

Argentina’s Lower House voted on Thursday to approve the expropriation of 51 percent of YPF SA, the country’s largest oil company. Expect more international outrage in weeks to come, when President Cristina Fernandez de Kirchner announces how little she plans to pay Spain’s Repsol YPF SA, the previous owner, for its stake, which it values at more than $10 billion.

Then take a deep breath and move on, because most efforts by other nations to punish Argentina promise to be ineffectual and counterproductive. That’s a job best left to the markets.

The YPF takeover is just the latest snook that Argentina has cocked at investors, creditors and policy makers around the globe: In 2007, Fernandez’s predecessor (and husband) Nestor Kirchner began skewing the country’s official inflation rate, prompting censure by the International Monetary Fund. In 2008, Fernandez nationalized $24 billion of private pension funds. In 2009, she did the same to Aerolineas Argentinas SA.

In 2010, Fernandez forced out the central bank’s governor and began tapping its reserves to pay off debt. Yet Argentina still owes the members of the Paris Club $9 billion from its infamous 2001 default, has not settled with several private debt holders, and has more cases pending with the International Center for Settlement of Investment Disputes than any other nation.
High Dudgeon

Argentina’s trading partners and investors have responded to its wayward behavior with high dudgeon. Spain has threatened to cut imports of Argentinian biofuels. The European Union has delayed economic talks. The IMF has closed its office in Buenos Aires and given Argentina until September to rectify its statistics on inflation and gross domestic product. The U.S. announced in September it would vote against multilateral loans for Argentina until further notice, and last month it revoked trade preferences for Argentina because of its failure to pay arbitration awards to two U.S. companies.

Fernandez, however, has Argentine public opinion on her side. Her takeover of YPF was backed by more than 60 percent of those polled. Mixing high drama with low politics, she has repeatedly wrong-footed her weak and disorganized domestic opponents and successfully played on public resentment over the rushed privatizations of the 1990s (which included Aerolineas and the pension funds) and the huge privations that followed after the 2001 default.

Moreover, thanks partly to a commodity boom, Fernandez has kept Argentina’s economy growing and unemployment low, even as she has manipulated economic policies. She has demonstrated time and again that she doesn’t care what the outside world thinks.

That doesn’t mean Argentina should be allowed to violate international agreements and obligations with impunity. Members of the World Trade Organization should vigorously pursue their complaints about Argentina’s rising wall of import restrictions. The IMF and its members should push Argentina to bring its statistics up to snuff. Companies and their national governments should keep the pressure on Argentina to make good on damages that have been awarded.

But if such pressure is not carefully targeted, it can backfire. Consider the U.S. decision to vote against almost all multilateral loans for Argentina. The U.S. lacks the clout to make the ban stick -- at the Inter-American Development Bank, for example, no other country has followed its lead. To the extent that the move sends a signal, it is an unfortunate one: the familiar heavy hand of Uncle Sam, albeit one now holding a rather diminished stick. Moreover, some of these loans -- like one approved last November to buttress Argentina’s finance ministry -- are intended to strengthen the administrative sinews of Argentina’s public sector, whose weakness has been exploited by Fernandez. The U.S. should reconsider what seems a largely self-defeating strategy.
Argentine Borgia

The U.S. should also keep in mind that Fernandez’s political maneuvers have more in common with the Borgias than with Fidel Castro of Cuba or Hugo Chavez of Venezuela. In 1993, she and her husband supported YPF’s privatization. Now she has reversed it. At the same time, she’s also soliciting offers from foreign oil companies to operate some of YPF’s fields. She would doubtless welcome foreign investors willing to develop Argentina’s shale gas reserves -- and, given that they are the world’s third largest, inevitably they will come, regardless of Repsol’s unhappy experience and whatever outlandish terms she sets.

Eventually, her misguided economic policies may cause her government’s undoing. Argentina’s refusal to settle with its holdout creditors has cut it off from global credit markets, and left it reliant on increasingly dubious mechanisms to service its rescheduled debts. Foreign investment is shrinking. Capital flight is growing. Subsidies on utilities and transportation are increasing government deficits, and caps on rates have made it less profitable for energy companies to invest. Private economists put Argentina’s inflation at more than double the government’s stated figure of around 9 percent.

Rather than play the role of outside oppressor in Fernandez’s well-scripted narrative, the U.S. and other countries should let Argentina’s house of cards collapse of its own accord. Don’t restrict visas for Argentinian officials or try to throw it out of the Group of 20, as some have recommended; instead, rely on countries like Mexico and Brazil to apply suasion at June’s G-20 meeting, and otherwise do what can be done to strengthen Argentina’s democratic institutions.

From regional power politics and United Nations peacekeeping to nonproliferation, the U.S. has interests with Argentina that go beyond just collecting unpaid bills. The best way to advance them is to take the high road and the long view.

Read More

Hitting Argentina for Oil Seizure Can Hurt US Interests

Argentina’s Lower House voted on Thursday to approve the expropriation of 51 percent of YPF SA, the country’s largest oil company. Expect more international outrage in weeks to come, when President Cristina Fernandez de Kirchner announces how little she plans to pay Spain’s Repsol YPF SA, the previous owner, for its stake, which it values at more than $10 billion.

Then take a deep breath and move on, because most efforts by other nations to punish Argentina promise to be ineffectual and counterproductive. That’s a job best left to the markets.

The YPF takeover is just the latest snook that Argentina has cocked at investors, creditors and policy makers around the globe: In 2007, Fernandez’s predecessor (and husband) Nestor Kirchner began skewing the country’s official inflation rate, prompting censure by the International Monetary Fund. In 2008, Fernandez nationalized $24 billion of private pension funds. In 2009, she did the same to Aerolineas Argentinas SA.

In 2010, Fernandez forced out the central bank’s governor and began tapping its reserves to pay off debt. Yet Argentina still owes the members of the Paris Club $9 billion from its infamous 2001 default, has not settled with several private debt holders, and has more cases pending with the International Center for Settlement of Investment Disputes than any other nation.
High Dudgeon

Argentina’s trading partners and investors have responded to its wayward behavior with high dudgeon. Spain has threatened to cut imports of Argentinian biofuels. The European Union has delayed economic talks. The IMF has closed its office in Buenos Aires and given Argentina until September to rectify its statistics on inflation and gross domestic product. The U.S. announced in September it would vote against multilateral loans for Argentina until further notice, and last month it revoked trade preferences for Argentina because of its failure to pay arbitration awards to two U.S. companies.

Fernandez, however, has Argentine public opinion on her side. Her takeover of YPF was backed by more than 60 percent of those polled. Mixing high drama with low politics, she has repeatedly wrong-footed her weak and disorganized domestic opponents and successfully played on public resentment over the rushed privatizations of the 1990s (which included Aerolineas and the pension funds) and the huge privations that followed after the 2001 default.

Moreover, thanks partly to a commodity boom, Fernandez has kept Argentina’s economy growing and unemployment low, even as she has manipulated economic policies. She has demonstrated time and again that she doesn’t care what the outside world thinks.

That doesn’t mean Argentina should be allowed to violate international agreements and obligations with impunity. Members of the World Trade Organization should vigorously pursue their complaints about Argentina’s rising wall of import restrictions. The IMF and its members should push Argentina to bring its statistics up to snuff. Companies and their national governments should keep the pressure on Argentina to make good on damages that have been awarded.

But if such pressure is not carefully targeted, it can backfire. Consider the U.S. decision to vote against almost all multilateral loans for Argentina. The U.S. lacks the clout to make the ban stick -- at the Inter-American Development Bank, for example, no other country has followed its lead. To the extent that the move sends a signal, it is an unfortunate one: the familiar heavy hand of Uncle Sam, albeit one now holding a rather diminished stick. Moreover, some of these loans -- like one approved last November to buttress Argentina’s finance ministry -- are intended to strengthen the administrative sinews of Argentina’s public sector, whose weakness has been exploited by Fernandez. The U.S. should reconsider what seems a largely self-defeating strategy.
Argentine Borgia

The U.S. should also keep in mind that Fernandez’s political maneuvers have more in common with the Borgias than with Fidel Castro of Cuba or Hugo Chavez of Venezuela. In 1993, she and her husband supported YPF’s privatization. Now she has reversed it. At the same time, she’s also soliciting offers from foreign oil companies to operate some of YPF’s fields. She would doubtless welcome foreign investors willing to develop Argentina’s shale gas reserves -- and, given that they are the world’s third largest, inevitably they will come, regardless of Repsol’s unhappy experience and whatever outlandish terms she sets.

Eventually, her misguided economic policies may cause her government’s undoing. Argentina’s refusal to settle with its holdout creditors has cut it off from global credit markets, and left it reliant on increasingly dubious mechanisms to service its rescheduled debts. Foreign investment is shrinking. Capital flight is growing. Subsidies on utilities and transportation are increasing government deficits, and caps on rates have made it less profitable for energy companies to invest. Private economists put Argentina’s inflation at more than double the government’s stated figure of around 9 percent.

Rather than play the role of outside oppressor in Fernandez’s well-scripted narrative, the U.S. and other countries should let Argentina’s house of cards collapse of its own accord. Don’t restrict visas for Argentinian officials or try to throw it out of the Group of 20, as some have recommended; instead, rely on countries like Mexico and Brazil to apply suasion at June’s G-20 meeting, and otherwise do what can be done to strengthen Argentina’s democratic institutions.

From regional power politics and United Nations peacekeeping to nonproliferation, the U.S. has interests with Argentina that go beyond just collecting unpaid bills. The best way to advance them is to take the high road and the long view.

Read More

Financial markets brace for crunch Greek election

NOT only Greece but also Europe braced today for an election that polls indicate will decimate the two main parties and fail to produce a clear winner, sparking market fears about fresh eurozone turmoil.

In comments widely quoted by Greek newspapers on the eve of Sunday's vote, German Finance Minister Wolfgang Schaeuble said that if Greece's new government deviated from its commitments the country would have to "bear the consequences."

"Membership of the European Union is voluntary," the minister from the eurozone's chief contributor to Greece's 240 billion euros ($314.0 billion) in bailouts and the main proponent of European belt-tightening was quoted as saying.

Greece has written off a third of its debts, is in its fifth year running of recession, one in five workers is unemployed, its banks are in a precarious position and pensions and salaries have been slashed by up to 40 per cent.

With Portugal and Ireland also getting aid and Italy and Spain on shaky ground as well, last year there were worries of some sort of break-up of the eurozone. These fears have subsided in recent months but have not completely disappeared.

For markets, it is Greece's vote rather than France's presidential decider, also on Sunday, that "weighs heavier" in investors' minds, said Valerie Plagnol, director of research at the Credit Suisse bank.

Holger Schmieding, economist at Germany's Berenberg Bank, said there was a 40-percent risk of Greece leaving the eurozone this year, with a "high" chance that no stable government willing to implement more reforms can be formed.

Europe's press shared these worries, with Germany's Spiegel saying Greek politicians were behaving like "alchemists", while Belgium's Le Soir said it was "vital" for the eurozone that a new government is formed soon.

Germany's centre-right Frankfurter Allgemeine Zeitung daily said that efforts throughout "southern Europe" to cut spending and implement reforms must continue, otherwise "the crisis could escalate badly."

Election campaigning has been marked by voter anger with Greece's two main parties over the cuts that the country has been forced to promise in return for its bailouts. In June new savings of 11.5 billion euros have to be found.

"People are spending half what they used to," Panos Ioannidis, 41, the owner of a flower shop in an up-market area of Athens, told AFP. "If in June wages go down another 30 percent, we are expecting the worst."

The two main parties, the socialist Pasok and the conservative New Democracy, want to be cut more slack on the terms of the bailout, and many of the smaller parties want to tear up the agreement entirely.

"We need to break from this corrupt political system of lackeys of foreign imperialism," Petros Alachmar, 31, an activist from far-left Syriza party, one of several expected to steal votes from Pasok, told AFP late Friday.

"We have had enough of austerity measures."

Voters are also fed up corruption and cronyism, while immigration has also been an issue. The neo-Nazi Golden Dawn, completed with swastika-like emblem, may enter parliament for the first time in nearly 40 years, polls show.

The election is being fought over "a mixture of economy, immigration and national humiliation," said analyst George Sefertzis.

New Democracy is expected to win the most votes but not enough to govern alone, forcing leader Antonis Samaras into a coalition with smaller parties. If no coalition is formed, new elections could be called.

"Our place in Europe and the euro will be decided on Sunday," Pasok leader Evangelos Venizelos, 55, told a rally in Athens' central Syntagma Square, the focal point of sometimes violent protests in recent years, late Friday.

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