Think the credit crisis is a bad thing? Well, Wilbur Ross doesn't. He's a maestro restructuring expert – having decades of experience on highly complex deals. In fact, he was prescient with key roll-ups in sectors like steel (where he made billions).
His next stop? He likes US banks. In fact, according to a piece in Bloomberg, Ross is putting together a $4 billion fund to capitalize on the opportunity. Apparently, he's talking to a variety of investors in Abu Dhabi. Hey, sovereign wealth funds have already shown their alacrity for US financial institutions, with investments in mega firms like Merrill Lynch (NYSE: MER) and Citigroup (NYSE: C).
Ross' strategy makes a lot of sense; that is, he wants to buy 100 to 200 banks. Thus, by building some heft, he should realize economies of scale – and ultimately build more value for his investors. Simply put, it's a formula he has refined.
Actually, Ross has already been aggressive in the financial services sector. For example, he recently spent $1.1 billion on Option One Mortgage, which was purchased from H&R Block (NYSE: HRB).
JP Morgan (NYSE:JPM) may be raising cash it does not need to prepare its balance sheet for more losses. The bank reported a $2.37 billion profit. That was down by half from a year ago, but was still an impressive number. The firm did set aside $4.4 billion for loan losses and took about $2.6 billion of write-downs tied to mortgages.
According toReuters JPM "results calmed investors, who had hoped the bank would deal with the credit crisis better than some others."
So, why raise the capital? The answer may be in news that Wilbur Ross, billionaire specialist in Chapter 11 investing, is putting together cash from sovereign funds to invest in weak US financial stocks. According toBloomberg "Ross will talk with Gulf investors in Abu Dhabi next week about 100 to 200 so-called thrift banks."
Now that JP Morgan has acquired Bear Stearns (NYSE:BSC), it is almost a sure bet that JPM CEO James Dimon will go looking for other bargains. He learned the practice under former boss Sandy Weill and his company is the product of a large merger with Bank One.
JP Morgan's likely desire to buy smaller financial firms may be a sign that stocks in banks and brokerages are bottoming. Dimon wants a piece of that. Why should Ross have all the fun?
Douglas A. McIntyre is an editor at 247wallst.com.
Four well known CEOs weighed in on CNBC's Squawk Box, giving their particular insight on economic conditions one day after the Federal Reserve made yet another basis rate cut. Each of the four Chief Executives acknowledged the tough going in the economy, yet each also sought to inject a thread of optimistic patience into their commentary.
Mike Jackson, CEO, Auto Nation Inc. (NYSE: AN), came to the defense of Reserve Board Chair Ben Bernanke. While admitting that the chairman may have crawled blindly into what is now mostly economic turmoil, Jackson stated: "...I think he absolutely has it right now. He's got to be on full flight recession mode, and we'll worry about the dollar, and commodities and inflation later." Personally, I think Benanke should be making moves to protect the consumers and their dollars first, and let inflation take care of itself until the consumer sector is back up to speed.
Wilbur Ross, CEO, W L Ross & Co. Played the most obtuse card stating: "My own opinion is that it's just more of the same volatility." More of the same volatility? Yeah the economy is volatile ... DUH!
Wilbur Ross may like to invest in distressed companies, but it looks like some of the teetering bond insurers may be too much even for him. According to Forbes.com, today he put an end to speculations about shoring up a troubled insurer by announcing he would be investing nearly $1 billion in the relatively stable Assured Guaranty(NYSE:AGO), a Bermuda-based reinsurer.
Some on Wall Street had hoped Ross could put his cash muscle behind on of the insurers that struggling, such as AMBAC Financial Group(NYSE:ABK). But Ross is playing it safer in these turbulent financial markets.
According to Marketwatch, Ross insists that the first $250 million is not "rescue capital". "The idea is to enhance their position for internal growth." he said. So more deals may be in the future.
The markets like the news as shares of AGO are up today a little over 10%.
With shares of Ambac Financial Group (NYSE: ABK) in the toilet amid concerns about the company's credit rating, billionaire investor Wilbur Ross is mulling an investment in the company.
He goes on to say that ,"Here's why Ross's involvement -- if it's real -- seems unlikely to help. The company's stock is issued is by a holding company; it is virtually impossible that Ross would inject capital here, because 'the parent' can only receive cash when its insurance or portfolio management subsidiaries send it dividends. In short, it does no real business. More likely, Ross would invest in or purchase Ambac's regulated insurance subsidiaries, because those are the only parts of Ambac's business that seem likely to generate earning any time soon, if ever."
William Ackman's bearish calls on Ambac and MBIA Inc. (NYSE: MBI) have been spot-on so far -- and I'm a lot more inclined to trust his analysis of these companies than their own executives. Ackman is still banging the drum on just how terrible these two companies are, even sending a letter to the ratings agencies explaining why they should be downgraded.
Ackman has demonstrated a better knowledge of these businesses than anyone else out there. As usual, the Wall Street analysts totally missed this train wreck in the making, and one has now taken the unusual step of blaming naked short sellers.
As long as Ackman is bearish, I'd watch from the sidelines.
Bloomberg News reports on rumors that Wilbur Ross, a private equity investor who's made billions investing in industries like steel when they were down on their luck, will take over Ambac Financial Group (NYSE: ABK). Ambac's market capitalization has fallen $8 billion in the past year, and Fitch Ratings last week stripped it of the AAA credit rating it depends on to guarantee $556 billion of debt.
Why does bond insurance matter? Bond insurers lend their AAA rating to $2.4 trillion of municipal and structured finance debt. Downgrades would throw into doubt rankings on the debt the companies guarantee, including thousands of schools and hospitals as well as collateralized debt obligations (CDOs) owned by banks. CDOs account for $133 billion in write-downs and credit losses since the beginning of 2007 at more than 20 of the world's largest banks and securities firms.
If Ross buys into Ambac, it could be a far more effective solution than the one being discussed a few days ago involving a $15 billion bailout from weakened banks that was being pushed by the New York Insurance Department. I've been hoping that hedge funds or private equity would step into the breech. And if Ross is serious, this could be great news for the market.
Liberty Media Corporation (NASDAQ: LCAPA) filed a lawsuit in Delaware against IAC/InterActiveCorp's (NASDAQ: IACI) Barry Diller in an attempt to block Mr. Diller from completing the spinoffs of several units on terms that could dilute Liberty's voting power; the suit follows a suit filed by IAC against Liberty seeking to complete the divestiture on its own terms, the Wall Street Journal said.
OTHER PAPERS:
The Evening Standard learned that billionaire Wilbur Ross is in takeover talks with AMBAC Financial Group Inc (NYSE: ABK) and that a deal could come within the next two weeks.
WEB SITES:
According to analysts, TheDeal.com's Dealscape blog reported that the troubles at WellCare Health Plans Inc (NYSE: WCG) could lead to a sale of the company after the departure of the company's three executives.
Citing a source close to Advanced Micro Devices Inc (NYSE: AMD), CRN.com reported that rumors of a merger between the company and International Business Machines Corporation (NYSE: IBM) "is nothing but speculation." A rumor in Mergermarket, which caused AMD's share price to spike almost 11% on Wednesday, said IBM's microelectronics division could merge with AMD "possibly in the near term."
TheStreet.com's Jim Cramer says we need Wilbur Ross to save someone's bacon to make this a healthier market all around.
Wilbur Ross, don't screw it up, we are all counting on you.
Yesterday it wasn't just the Fed cut that made the bank stocks rally. That mattered because it will help one portion of the banks' biggest woes: the lack of margin on their loans. Obviously, it also matters as a way to avoid a severe recession, which is why the retailers rallied.
But I believe what was even bigger than the rate cut for some of these banks was the possibility that we would not have another round of big losses, this time from a lack of insurance, because the grave dancing Wilbur Ross indicated he is choosing a bond insurer -- or bond insurers? -- to save with a big investment or takeover.
These companies just can't raise the capital on their own. Despite their endless protestations, even the limited disclosure they have given us doesn't give you much comfort that they can get their paws on the money themselves.
Some of the smart money that tracks the car industry thinks total sales in the US could go as low as 14.5 million to 15 million vehicles next year, down from 16 million this year.
Investors like Wilbur Ross and former Chrysler president Thomas Stallkamp see car sales in America hitting their worst year in the last 15. According to Reuters, "Stallkamp, a partner at private equity firm Ripplewood Holdings, which owns several auto parts makers, said the market could slump to 14.5 million, the lowest level since 1993."
High fuel prices and a falling housing market are likely to cause a large drop in demand for vehicles.
It would be hard to underestimate the impact of such a drop on Detroit and the largest Japanese firms. It had been anticipated that GM (NYSE: GM) and Ford (NYSE: F) might get their North American operations back into the black next year, helped by favorable UAW contracts.
If pessimistic forecasts hold true, though, 2008 could be awful for Detroit.
Douglas A. McIntyre is an editor at 247wallst.com.
Think the credit crisis is a bad thing? Well, Wilbur Ross doesn't. He's a maestro restructuring expert – having decades of experience on highly complex deals. In fact, he was prescient with key roll-ups in sectors like steel (where he made billions).
Four well known CEOs weighed in on 
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TheStreet.com's Jim Cramer says we need Wilbur Ross to save someone's bacon to make this a healthier market all around.
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