Monday, May 31, 2010

Weekend Update: Memorial Day Holiday, top stories

Weekend Update: Pretty quiet over the Memorial Day Holiday, top stories:
· BP Oil Spill: BP announced Saturday that their “Top Kill” plan ended in failure. Today, BP started
their third attempt to contain the spill, though it could make matters worse in the short term. The plan
involves, “slicing off the leaking pipe at the top of the well's broken blow-out preventer, placing a cap
over the leak and channeling the captured oil and gas to a vessel on the surface.” [AP/WSJ]
· Washington: Federal Reserve officials Charles Plosser and Charles Evans addressed a news
conference in Seoul, South Korea
and were upbeat about the U.S. recovery. Evans comments that
low inflation could cause the central bank to keep interest rates low “for an extended period” [WSJ]
Ben Bernanke also made remarks at this event although didn’t say anything too material.
· Internationally: Spain was downgraded by Fitch during the middle of NY trading on Fri (right after
the European close Fri);
Some color from JPMorgan’s TSY desk: Fitch changed the rating from AAA
to AA+ before even putting Spain on neg watch. This move occurred after most in London had left for
the long weekend and the Sov mkt was closed. The expectation is that Spain CDS opens ~20bp
wider on Tues. This Fitch action had been speculated for a while and it isn't a game-changer.
Elsewhere in sovereign credit - France warned that their AAA rating could be in jeopardy. [London
Times] Also, the ECB release its semiannual Financial Stability review, which said that Eurozone
banks will suffer “considerable” loan losses (up to $239.26B) for 2010 and 2011 in write downs. [WSJ]
· Deals: Prudential PLC held talks over the weekend to restructure their acquisition of AIG’s Asian Life
Insurance unit, but the future of the deal in uncertain. [WSJ] A Centerbridge Partners-led consortium
is said to have won the bidding for Extended Stay Hotels [NYT] Healthscope announced it has
gotten two new takeover bids at $4.92/share ($5.80/share Australian dollars), making the company’s
value $1.84B. Tenet Healthcare is said to be behind of the proposals, and PE firm KKR behind the
other. [WSJ/The Australian]
· Bank Failures: 5 failures were announced on Friday night, which brings the total to 78 so far in 2010.
The failures were: 1) Sun West Bank, Las Vegas, NV 2) Granite Community Bank, NA, Granite Bay,
CA; 3) Bank of Florida - Tampa Bay, Tampa, FL; 4) Bank of Florida - Southwest, Naples, FL; 5) Bank
of Florida - Southeast, Fort Lauderdale, FL.

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