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CEOWORLD Magazine Media Digest 5/22/2009

By Amarendra Bhushan for CEOWORLD Magazine Updated:May 22, 2009

# BankUnited seized by regulators in biggest bank failure of 2009

Regulators on Thursday shut down BankUnited FSB, a struggling Florida thrift whose closure is expected to cost the Federal Deposit Insurance Corp. $4.9 billion.

The failure of the Coral Gables, Fla.-based bank represents the second-largest hit to the FDIC’s insurance fund so far _ the costliest was last year’s seizure of California lender IndyMac, on which the FDIC is estimated to lose $10.7 billion.

# AIG chairman and chief executive Edward Liddy is to step down

American International Group yesterday announced that Edward M. Liddy is stepping down as chairman and chief executive of the troubled insurance giant, but he plans to remain until the company’s board of directors names his replacement.

# Federal Reserve Bank of Philadelphia President Charles Plosser Says Inflation to Increase, Warns of Complacency

The U.S. economy is not yet in a position for the Federal Reserve to increase its benchmark lending rate, but such a move will eventually have to be made, Philadelphia Federal Reserve President Charles Plosser said on Thursday.

“The economy is probably not ready for an increase in Fed funds yet, but at some point we will have to do that,” Plosser told reporters after giving a speech to the Money Marketeers in New York.

# Tyson says CEO search may take few months

It may be a few months before Tyson Foods Inc names a permanent chief executive, the interim CEO of the world’s largest meat company said. The Springdale, Ark.-based company said it was too soon to assess the impact of the virus, which has sickened more than 1,000 people globally.

# US TREASURY INJECTS 7. 5 BILLION DOLLARS IN GMAC

Two weeks after being told by federal regulators it needed to raise billions of dollars to survive, GMAC LLC received an infusion of $7.5 billion from the U.S. Treasury. Treasury Secretary Tim Geithner said the recapitalised GMAC would offer strong credit opportunities, help stabilise the car financing market and help in the recovery of the recession-hit economy.

# Bill Gross, co-chief investment officer of Pacific Investment Management Co. (PIMCO) in Newport Beach, California, said yesterday that the U.S.’s top AAA credit rating will “eventually” be lost. “The markets are beginning to anticipate the possibility of” a downgrade.

Bill Gross, manager of the world’s biggest bond fund, warned on Thursday the US was “going the way of the UK” and will eventually lose its top AAA credit rating – a fear that had already spooked financial markets on Thursday and could keep the dollar, stocks and bonds under heavy selling pressure, reports Reuters.

# Moody’s Still Plans To Make Muni,Corporate Ratings Comparable

Moody’s Investors Service on Thursday said it is comfortable with the triple-A sovereign rating on the United States, but it is not guaranteed forever.
“There are longer-term pressures on the rating, that’s very clear,” said Steven Hess, lead analyst for the U.S. credit ratings agency.
Moody’s has a stable outlook on the U.S. rating, which indicates a change is not expected over the next 18 months.

# Hutchison pens amendment for Chrysler dealerships

- Texas Sen. Kay Bailey Hutchison, R-Texas, has introduced an amendment that will buy some time for Chrysler dealerships in the United States, including four in New Mexico, that face closure.

- The head of the Senate Commerce Committee said he would hold hearings early next month on Chrysler LLC’s plans to close 25 percent of its dealers by June 9 — even after the company vowed to work to aid closing dealers.

- Lawmakers pressed automaker to help dispose of inventory

- Chrysler agrees to help dealers after senatorial pressure

- A Chrysler LLC executive said Thursday if the company’s sale of most of its operations to Fiat SpA isn’t approved by bankruptcy court, all 3,181 of its remaining dealers will face elimination.

# UAW Announces Tentative GM Labor, Medical Agreement

- The United Auto Workers said it reached a tentative agreement with General Motors Corp. and the U.S. Treasury to modify the carmaker’s 2007 labor contract and a health-care trust for union retirees.

- The UAW announced it had reached what it called a “tentative understanding” with GM and the U.S. Treasury about cost-saving changes to the 2007 labor contract and a retiree health care trust. While details were not disclosed, the deal is said to be similar to the new Chrysler LLC labor contract.

_ General Motors Corp., union leaders and the Treasury Department have reached an agreement to reduce the failing auto giant’s $20 billion retiree medical obligations, the Wall Street Journal reported

- The agreement could ease one of GM’s biggest problems: The cost of its workforce. But the automaker is still struggling with a crushing debt that may drive it into a Chapter 11 bankruptcy.

- In the new plan reached between the United Auto Workers, or UAW, and GM, the union would waive $10 billion in retiree health funds for as much as 39% of the restructured GM. The UAW has also reached an agreement with GM towards reducing labor costs.

_ The United Auto Workers struck a deal with General Motors and the U.S. government Thursday to cut labour costs, close factories and change retiree health care funding.

The agreement could ease one of GM’s biggest problems: The cost of its work force. But the automaker is still struggling with a crushing debt that may drive it into a Chapter 11 bankruptcy reorganization.

# Open Table IPO harkens back to dot-com heyday

Online restaurant-reservations system OpenTable Inc. dished out the best IPO performance since late 2007, delivering a 59% gain in its trading debut.

Shares of the San Francisco company on Thursday closed at $31.89 apiece on the Nasdaq Stock Market, well above its initial offering price of $20.

The San Francisco firm’s stock soared 59% to close at $31.89 on Nasdaq, after the company and insiders late Wednesday sold a total of 3 million shares at $20 each.

That’s the biggest first-day gain for an IPO since energy-management systems firm Orion Energy Systems shot up 65% in its debut in December 2007, according to IPO tracker Renaissance Capital. (That stock, by the way, has since crashed.)

# S&P cuts UK’s rating outlook to negative

Britain faces the unsettling possibility of seeing its debt rating downgraded after Standard & Poor’s said yesterday it has revised the country’s outlook, from “stable” to “negative.”

The agency affirmed Britain’s ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings.

“We have revised the outlook on the UK to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100 percent of GDP and remain near that level in the medium term,” Standard & Poor’s credit analyst David Beers said in a statement.

# Treasury Secretary Timothy Geithner committed to cutting U.S. Budget Deficit Amid Rating Concern

Treasury Secretary Timothy Geithner will travel to Italy next month to attend a meeting of finance officials from the world’s top eight industrialized powers, the department announced.

“There are encouraging signs that the financial system is starting to heal,” Geithner told the Senate Banking Committee this morning. “Concern about systemic risk has diminished and overall credit conditions have started to improve. These are welcome signs, but we have a long way to go.”

# Xerox CEO Anne Mulcahy steps down

Xerox Chairman and Chief Executive Officer Anne Mulcahy will pass the torch to the current president, Ursula Burns, effective July 1, according to a statement from the company. Mulcahy will remain as the chairman of the board.

Burns, who will be the first black female CEO among Fortune 500 companies, has to work on maintaining Xerox’s cash flow and improving the product line, said John Engler, president of the National Association of Manufacturers, where Burns served as a director. Her promotion follows two straight quarters of sales declines amid the worst economic slump in more than 50 years.

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