Winners & Losers From the Week That Was
Mel Karmazin: The Sirius head may soon get the present he has been hoping for. The tie-up between Sirius and XM Satellite Radio, which seemed dead on arrival when it was announced back in February, seems increasingly likely to win approval from the Federal Communications Commission and Justice Department, according to this WSJ article. The stock market, though, still doesn’t view the deal as a fait accompli, according to the story.
Investment banking: Yes, the credit crunch has taken its toll on investment banks in recent months, but 2007 is still shaping up to be a record-setting year for investment banking and those working on Wall Sreet. Banc of America reports that revenue from investment banking is on pace to reach $70 billion by year end, which would equate to an 11% rise from the record set last year. (See this Deal Journal post for more.) And that is one reason, Wall Street banks will shell out a record of about $38 billion in bonuses this year, according to this Bloomberg article. Of course, it’s best to be employed at Goldman Sachs. The firm has put aside about $17 billion for bonuses, accounting for about 45% of the total bonus pool.
Lloyd Blankfein: This year has been less than kind to Wall Street’s CEOs, but the Goldman CEO has been one of the exceptions. Blankfein stands to rake in more than the $54.3 million he made in 2006, the New York Times reports here. In fact, his compensation could climb as high as $75 million this year.
Chrysler’s banks: For the second time, $4 billion sale of leveraged loans related to Cerberus’s buyout of the auto maker was postponed. The reason? The sale of the debt at about 97 cents on the dollar wasn’t a steep enough discount for investors. That means the paper, along with $3 billion of additional loans attached to Chryslers Automotive unit, will remain on the books of J.P. Morgan Chase, Citigroup, Goldman Sachs Group, Morgan Stanley and Bear Stearns.
Cerberus: The buyout firm likely wasn’t in the giving thanks mood yesterday after the week, or rather weeks, it has had. The postponed sale of Chrysler’s loans this week was just the latest setback for the firm. Also on the list: United Rentals filing suit to compel Cerberus to go through with the acquisition and the struggles of GMAC’s Residential Capital. (Cerberus acquired a 51% stake in GMAC last year.) Once a big source of profits, ResCap is now saddled with a portfolio of loans rapidly decreasing in value. That has caused it to post big losses and is raising concerns that it could fall into bankruptcy protection unless Cerberus or GM steps in with an equity infusion.
Private-equity firms: After briefly improving slightly in October, the credit markets are tightening again in November (highlighted this month by failed debt sales related to the acquisitions of Chrysler, Alltel and Guitar Center). That should keep the mega-buyouts we saw during the first six months of 2007 on ice for the foreseeable future. If that isn’t bad enough, the WSJ reports here that it seems to be getting more difficult for buyout shops to take the companies they acquire public.
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