Ambac Financial to sell $1.5 billion in stock
Ambac Financial Group’s plan to try to sell $1.5 billion in stock in a bid to safeguard its critical “AAA” financial-strength rating has also avoided the specter of splitting the company to raise the capital.
Unconvinced investors, however, sent the company’s shares down nearly 19 percent.
With the New York Insurance Department’s backing, Ambac will offer common stock and equity units to boost its reserves in an effort to maintain its top-notch credit rating, a virtual necessity for it to book new business.
Ambac said its total offering consists of a public stock offering for at least $1 billion and a $500 million offering of equity units that would be exchangeable for common stock in May 2011. The company also said it plans to stop writing certain riskier lines of business.
Merrill Lynch will stop funding home-loan unit
Merrill Lynch & Co. said on Wednesday it will stop funding loans at its troubled First Franklin home lending unit, and explore selling the company it bought for $1.3 billion at the real estate market’s peak.
The world’s largest brokerage suffered $11.5 billion in write-downs during the fourth quarter linked to the subprime mortgage market’s collapse. It will spend $60 million in 2008 to pay for severance and other real estate costs linked to unwinding First Franklin’s operations.
Some 650 people will be affected by the closure, and it has already reduced head count at First Franklin by 70 percent since July. The closure won’t affect mortgage origination from its global wealth management group or international business.
Fidelity Investments will pay settlement
Fidelity Investments will pay $8 million to settle U.S. regulatory claims that Vice Chairman Peter Lynch and a dozen employees accepted Super Bowl tickets, private-jet travel and other gifts from brokers.
The world’s largest mutual-fund manager failed to seek the best terms for trades as employees took gifts and had “romantic relationships” with outside brokers, the U.S. Securities and Exchange Commission said in a statement Wednesday. Lynch, former manager of Fidelity Magellan, former head trader Scott DeSano and 11 other current and former employees accepted more than $1.6 million in perks, the agency said.
The settlement ends a three-year investigation that tainted the reputation of the Boston-based money manager, which oversees $1.6 trillion for 24 million customers.
Loss aside, Ford to pay performance bonuses
Even though it lost $2.7 billion last year, Ford Motor Co. will pay performance bonuses to all hourly and salaried workers in the United States and Canada, and to its management team around the globe, the automaker’s chief executive announced Wednesday.
In an e-mail message to workers sent Wednesday morning, Chief Executive Alan Mulally said the bonuses will come in paychecks this month because the company is making significant progress toward becoming profitable again.
Although the Dearborn-based Ford fell short of its market share goals in North and South America and Asia, the company met objectives in all other categories including cost performance, quality, automotive cash flow and financial results in these regions, the message said.
Reports send dollar to record low against euro
The U.S. dollar sank to another record low against the euro Wednesday, with a growing list of reports pointing to a worsening U.S. economy.
The euro rose to $1.5302 before dropping back slightly to $1.5262 in late New York trading. The new low for the dollar broke through the previous record set Monday at $1.5275.
The euro had bought $1.5208 in New York late Tuesday.
Delta, Northwest union leaders in talks
Pilot union leaders at Delta Air Lines and Northwest Airlines Corp. were meeting Wednesday in Washington, a hopeful sign that formal negotiations over integrating seniority lists to facilitate a combination of the two carriers could soon resume, three people familiar with the discussions told The Associated Press.
The people, who asked not to be named because of the sensitivity of the situation, said the meetings included top leaders of the two unions, but not their full negotiating teams.
Before the meetings that started Tuesday in Washington, the two sides had not met since Feb. 21, the three people said.
Costco profits increase 31 percent in quarter
Warehouse club operator Costco Wholesale Corp. reported Wednesday that its second-quarter profits rose 31 percent from the year-ago period, which was burdened with multiple charges.
Net income grew to $327.9 million, or 74 cents per share, from $249.5 million, or 54 cents per share, in the year-ago period that included $53.4 million in charges, the Issaquah-based company said.
Sales rose 12.3 percent to $16.62 billion from $14.8 billion.
Costco operates four stores in the Las Vegas Valley.
Treasury prices decline after announcement
Treasury prices fell sharply Wednesday after struggling bond insurer Ambac Financial Group, seeking to shore up its finances, announced a plan to sell $1.5 billion in stock and equity units.
The benchmark 10-year Treasury note fell 0.69 points to 98.44 with a yield of 3.69 percent, up from 3.63 percent late Tuesday, according to BGCantor Market Data. Prices and yields move in opposite directions.