AG Mortgage Investment Trust, Inc. Reports Fourth Quarter Earnings

NEW YORK–(BUSINESS WIRE)–
AG Mortgage Investment Trust, Inc. (“MITT” or the “Company”) (NYSE: MITT – News) today reported net income for the quarter ended December 31, 2011 of $5.8 million and net book value of $20.52 per share.
FINANCIAL HIGHLIGHTS

• Net income of $5.8 million, or 0.58 per share for the fourth quarter
• Net income of $19.0 million, or $3.20 per share for the period from March 7, 2011 to December 31, 2011
• Core Earnings of $6.5 million or $0.65 per share for the quarter
• Core Earnings of $12.4 million, or $1.24 per share for the period from July 6, 2011 (the consummation of our initial public offering) to December 31, 2011
• Net realized gains of $2.9 million, or $0.29 per share, on Agency RMBS for the fourth quarter and $7.2 million, or $0.72 per share, for the period from July 6, 2011 to December 31, 2011
• Net realized losses of ($3.5) million, or ($0.35) per share, on credit investments for the fourth quarter and for the period from July 6, 2011 to December 31, 2011
• $0.70 per share dividend declared for the fourth quarter and $1.10 per share dividends declared for the period ended December 31, 2011
• Approximately $0.46 per share of undistributed taxable income as of December 31, 2011(1)
• $20.52 net book value per share as of December 31, 2011(1)

INVESTMENT HIGHLIGHTS

• $1.4 billion investment portfolio value as of December 31, 2011 (2) (4)
• 5.86x leverage as of December 31, 2011 (2) (3)
• 91.0% Agency RMBS investment portfolio (4)
• 9.0% credit investment portfolio, comprising Non-Agency RMBS, CMBS and ABS assets (4)
• 5.0% constant prepayment rate (“CPR”) for the fourth quarter on the Agency RMBS investment portfolio (5)
• 2.25% net interest margin as of December 31, 2011 (6)

FOURTH QUARTER 2011 AND PERIOD ENDED DECEMBER 31, 2011 RESULTS
AG Mortgage Investment Trust, Inc. is an actively managed REIT that opportunistically invests in a diversified risk-adjusted portfolio of Agency RMBS, Non-Agency RMBS, CMBS and ABS. For the fourth quarter, the Company had net income of $5.8 million, or $0.58 per diluted share, and Core Earnings of $6.5 million, or $0.65 per diluted share. For the period from March 7, 2011 to December 31, 2011, the Company had net income of $19.0 million, or $3.20 per diluted share (7), and for the period from July 6, 2011 to December 31, 2011 (“period ended December 31, 2011”), the Company had Core Earnings of $12.4 million, or $1.24 per diluted share. Core Earnings represents a non-GAAP financial measure and is defined as net income (loss) excluding (i) net realized gain (loss) on investments and terminations on derivative contracts and (ii) net unrealized appreciation (depreciation) on investments and derivative contacts. (See “Non-GAAP Financial Measure” below for further detail on Core Earnings)
David Roberts, Chief Executive Officer, commented “We are pleased to announce our fourth quarter earnings. During the quarter, Core Earnings increased to $0.65 per share and we announced our first full quarter dividend of $0.70 per share. In addition to meeting our financial goals, we continued to diversify funding relationships and in January we were able to successfully complete an equity raise which has improved our stock’s liquidity. We are proud of our accomplishments over the last two quarters and look forward to the opportunities ahead.”
“Amidst uncertainty in the global markets, European liquidity difficulties and year-end funding pressures, we continued to optimize our Agency portfolio, opportunistically rotate the credit portfolio and retain capital for potential market dislocations,” said Jonathan Lieberman, Chief Investment Officer. “While Agency RMBS yields have compressed, we believe the low interest rate environment and a carefully selected investment portfolio will continue to support attractive risk-adjusted returns. Over the course of the quarter, we rotated a significant portion of the Agency portfolio into securities with more favorable prepayment attributes to further mitigate prepayment risk. Allocations to credit securities were concentrated in less volatile short duration Non-Agency securities and CMBS tranches with superior intrinsic value. We believe MITT is well positioned to continue to produce sustainable returns and take advantage of the opportunities ahead in both the Agency RMBS and credit markets. With the success of the European Central Bank’s Long-Term Refinancing Operation, funding risks have materially declined and we anticipate deploying capital in a more aggressive style. New capital from our January equity transaction allows greater latitude to the investment team to selectively increase our capital allocation to credit opportunities.”

KEY STATISTICS (2)
		Weighted Average at						Weighted Average
		December 31, 2011						at September 30, 2011
Investment portfolio		$	1,388,006,801					$	1,332,205,377
Repurchase agreements		$	1,189,303,407					$	1,126,859,885
Stockholders’ equity		$	206,283,920					$	207,413,703
Leverage ratio		5.86x			(3	)		5.70x			(3	)
Swap ratio			66	%	(8	)			51	%	(8	)
Yield on investment portfolio			3.16	%	(9	)			3.26	%	(9	)
Cost of funds			0.91	%	(10	)			0.82	%	(10	)
Net interest margin			2.25	%	(6	)			2.44	%	(6	)
Management fees			1.49	%	(11	)			1.43	%	(11	)
Other operating expenses			1.57	%	(12	)			1.58	%	(12	)
Book value, per share		$	20.52		(1	)		$	20.64		(1	)
Dividend, per share		$	0.70					$	0.40

INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as of December 31, 2011 (2):

														Weighted Average
		Current Face			Premium (Discount)				Amortized Cost		Fair Value			Coupon		Yield
Agency RMBS:
15-Year Fixed Rate		$	738,344,948		$	22,525,476			$	760,870,424	$	772,310,909		3.32	%	2.62	%
20-Year Fixed Rate			227,566,114			7,362,001				234,928,115		237,586,837		3.69	%	3.00	%
30-Year Fixed Rate			232,890,169			12,162,512				245,052,681		246,679,482		3.99	%	3.18	%
Interest Only			43,505,596			(34,046,500	)			9,459,096		6,636,871		5.50	%	3.45	%
Non-Agency RMBS			102,246,062			(8,980,754	)			93,265,308		90,368,316		5.90	%	6.31	%
CMBS			19,500,000			(5,411,965	)			14,088,035		13,537,851		5.88	%	13.44	%
ABS			21,046,150			(34,497	)			21,011,653		20,886,535		4.50	%	4.50	%
Total		$	1,385,099,039		$	(6,423,727	)		$	1,378,675,312	$	1,388,006,801		3.81	%	3.16	%

As of December 31, 2011, the weighted average yield on the Company’s investment portfolio was 3.16% and its weighted average cost of funds was 0.91%. This resulted in a net interest margin of 2.25% as of December 31, 2011. (6)
The CPR for the Agency RMBS portfolio was 5.0% for the fourth quarter and 5.0% for the month of December 2011. (5)
The weighted average cost basis of the Agency investment portfolio, excluding interest-only securities, was 103.5% as of December 31, 2011. The amortization of premiums (net of any accretion of discounts) on Agency securities for the fourth quarter was $1.9 million, or $(0.19) per share. The unamortized net Agency premium as of December 31, 2011 was $42.0 million.
Premiums and discounts associated with purchases of the Company’s securities are amortized or accreted into interest income over the estimated life of such securities, using the effective yield method. Since the cost basis of the Company’s Agency securities, excluding interest-only securities, exceeds the underlying principal balance by 3.5% as of December 31, 2011, slower actual and projected prepayments can have a meaningful positive impact, while faster actual or projected prepayments can have a meaningful negative impact on the Company’s asset yields.
We have also entered into “to-be-announced” (“TBA”) positions to facilitate the future purchase of Agency RMBS. Under the terms of these TBAs, the Company agrees to purchase, for future delivery, Agency RMBS with certain principal and interest specifications and certain types of underlying collateral, but the particular Agency RMBS to be delivered are not identified until shortly before (generally two days) the TBA settlement date. At December 31, 2011, we had $100 million net notional amount of TBA positions with a net weighted average purchase price of 103.8%. As of December 31, 2011, our TBA portfolio had a net weighted average yield at purchase of 3.01% and a net weighted average settlement date of February 5, 2012. We have recorded derivative assets of $1.4 million and derivative liabilities of $0.5 million, reflecting these TBA positions.
LEVERAGE AND HEDGING ACTIVITIES
The investment portfolio is financed with repurchase agreements as of December 31, 2011 as summarized below:

		Agency RMBS						Non-Agency RMBS / CMBS / Other
Repurchase Agreements Maturing Within:		Balance			Weighted Average Rate			Balance			Weighted Average Rate
30 days or less		$	652,002,000		0.35	%		$	68,187,000		1.74	%
31-60 days			334,825,407		0.42	%			1,749,000		1.95	%
61-90 days			118,340,000		0.37	%			14,200,000		1.80	%
Greater than 90 days			-		-				-		-
Total / Weighted Average		$	1,105,167,407		0.37	%		$	84,136,000		1.75	%

As of December 31, 2011, the Company had entered into repurchase agreements with twenty-one counterparties. We continue to rebalance our exposures to counterparties and add new counterparties.
We have entered into interest rate swap agreements to hedge our portfolio. The Company’s swaps as of December 31, 2011 are summarized as follows:

Maturity		Notional Amount			Weighted Average Pay Rate			Weighted Average Receive Rate*			Weighted Average Years to Maturity
2012		$	100,000,000		0.354	%		0.285	%		0.14
2013			182,000,000		0.535	%		0.286	%		1.78
2014			204,500,000		1.000	%		0.395	%		2.54
2015			184,025,000		1.412	%		0.380	%		3.56
2016			87,500,000		1.625	%		0.328	%		4.63
2018			35,000,000		1.728	%		0.511	%		6.88
Total/Wtd Avg		$	793,025,000		1.008	%		0.350	%		2.72
* Approximately 50% of our interest rate swap notionals reset monthly based on one-month LIBOR and 50% of our interest rate swap notionals reset quarterly based on three-month LIBOR.

TAXABLE INCOME
The primary differences between taxable income and GAAP net income include (i) unrealized gains and losses associated with investment and derivative portfolios are marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized or settled, (ii) temporary differences related to amortization of net premiums paid on investments (iii) the timing and amount of deductions related to stock-based compensation and (iv) excise taxes. As of December 31, 2011, the Company had undistributed taxable income of approximately $0.46 per share.
DIVIDEND
On December 14, 2011, the Company declared a dividend of $0.70 per share of common stock to stockholders of record as of December 30, 2011 and paid such dividend on January 27, 2012. The Company declared dividends of $1.10 per share for the period ended December 31, 2011.
SUBSEQUENT EVENT
On January 24, 2012, the Company completed a follow-on offering of 5,000,000 shares of its common stock and subsequently issued an additional 750,000 shares of common stock pursuant to the underwriters’ over-allotments at a price of $19.00 per share, for gross proceeds of approximately $109.3 million. Net proceeds to the Company from the offerings were approximately $104.1 million, net of issuance costs of approximately $5.2 million.
SHAREHOLDER CALL
The Company invites shareholders, prospective shareholders and analysts to attend MITT’s fourth quarter earnings conference call on March 1, 2012 at 11:00 am Eastern Time. The shareholder call can be accessed by dialing (888) 424-8151 (U.S. domestic) or (847) 585-4422 (international). Please enter code number 8732511#.
A presentation will accompany the conference call and will be available on the Company’s website at www.agmit.com. Select the Q4 2011 Earnings Presentation link to download and print the presentation in advance of the shareholder call.
An audio replay of the shareholder call combined with the presentation will be made available on our website after the call. The replay will be available until midnight on March 15, 2012. If you are interested in hearing the replay, please dial (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international). The conference ID number is 8732511#.
For further information or questions, please contact Allan Krinsman, the Company’s General Counsel, at (212) 883-4180 or akrinsman@angelogordon.com.
ABOUT AG MORTGAGE INVESTMENT TRUST, INC.
AG Mortgage Investment Trust, Inc. is a real estate investment trust that invests in, acquires and manages a diversified portfolio of residential mortgage assets, other real estate-related securities and financial assets. AG Mortgage Investment Trust, Inc. is externally managed and advised by AG REIT Management, LLC, a subsidiary of Angelo, Gordon & Co., L.P., an SEC-registered investment adviser that specializes in alternative investment activities.
Additional information can be found on the Company’s website at www.agmit.com.
ABOUT ANGELO, GORDON & CO.
Angelo, Gordon & Co. was founded in 1988 and has approximately $22 billion under management. Currently, the firm’s investment disciplines encompass five principal areas: (i) distressed debt and leveraged loans, (ii) real estate, (iii) mortgage-backed securities and other structured credit, (iv) private equity and special situations and (v) a number of hedge fund strategies. Angelo, Gordon & Co. employs over 250 employees, including more than 90 investment professionals, and is headquartered in New York, with associated offices in Amsterdam, Chicago, Los Angeles, London, Hong Kong Seoul, Shanghai, Sydney and Tokyo.
FORWARD LOOKING STATEMENTS
This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, changes in interest rates, changes in the yield curve, changes in prepayment rates, the availability and terms of financing, changes in the market value of our assets, general economic conditions, market conditions, conditions in the market for Agency securities, and legislative and regulatory changes that could adversely affect the business of the Company. Additional information concerning these and other risk factors are contained in the Company’s most recent filings with the Securities and Exchange Commission (“SEC”). Copies are available on the SEC’s website, http://www.sec.gov/. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.

AG Mortgage Investment Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
			December 31, 2011			April 1, 2011
Assets			(Unaudited)
Real Estate securities, at fair value
Agency – $1,186,149,842 pledged as collateral			$	1,263,214,099		$	-
Non-Agency – $47,227,005 pledged as collateral				58,787,051			-
CMBS – $2,747,080 pledged as collateral				13,537,851			-
ABS – $4,526,620 pledged as collateral				4,526,620			-
Linked transactions, net, at fair value				8,787,180			-
Cash and cash equivalents				35,851,249			1,000
Restricted cash				3,037,055			-
Interest receivable				4,219,640			-
Derivative assets, at fair value				1,428,595			-
Prepaid expenses				317,950			-
Due from broker				341,491
Due from affiliates				104,994			-
Deferred costs				52,176			-
Total Assets			$	1,394,205,951		$	1,000
Liabilities
Repurchase agreements			$	1,150,149,407		$	-
Payable on unsettled trades				18,759,200			-
Interest payable				2,275,138			-
Derivative liabilities, at fair value				7,908,308			-
Dividend payable				7,011,171			-
Due to affiliates				770,341			-
Accrued expenses				668,552			-
Due to broker				379,914			-
Total Liabilities				1,187,922,031			-
Stockholders’ Equity (Deficit)
Common stock, par value $0.01 per share; 450,000,000 and 1,000 shares of common stock authorized and 10,009,958 and 100 shares issued and outstanding at December 31, 2011 and April 1, 2011, respectively				100,100			1
Additional paid-in capital				198,228,694			999
Retained earnings				7,955,126			-
				206,283,920			1,000
Total Liabilities & Equity			$	1,394,205,951		$	1,000

AG Mortgage Investment Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
							Period from
			Quarter Ended				March 7, 2011 to
			December 31, 2011				December 31, 2011
Net Interest Income
Interest income			$	10,022,275			$	18,748,669
Interest expense				1,106,097				1,696,344
				8,916,178				17,052,325
Other Income (Loss)
Net realized gain (loss)				(589,747	)			3,701,392
Gain (loss) on linked transactions, net				(1,013,291	)			(808,564	)
Realized loss on periodic interest settlements of interest rate swaps, net				(1,175,788	)			(2,162,290	)
Unrealized gain (loss) on derivative instruments, net				70,663				(6,491,430	)
Unrealized gain (loss) on real estate securities				1,346,237				11,040,692
				(1,361,926	)			5,279,800
Expenses
Management fee to affiliate				770,341				1,512,898
Other operating expenses				811,372				1,566,642
Equity based compensation to affiliate				97,343				176,165
Excise tax				105,724				105,724
				1,784,780				3,361,429
Net Income (Loss)			$	5,769,472			$	18,970,696
Earnings Per Share of Common Stock
Basic			$	0.58			$	3.20
Diluted			$	0.58			$	3.20
Weighted Average Number of Shares of Common Stock Outstanding
Basic				10,009,958				5,933,930
Diluted				10,010,799				5,933,930
Dividends Declared per Share of Common Stock			$	0.70			$	1.10

Non-GAAP Financial Measure
This press release contains Core Earnings, a non-GAAP financial measure. AG Mortgage Investment Trust’s management believes that this non-GAAP measure, when considered with GAAP, provides supplemental information useful in evaluating the results of the Company’s operations. This non-GAAP measure should not be considered a substitute, or superior to, the financial measures calculated in accordance with GAAP. Our GAAP financial results and the reconciliations from these results should be carefully evaluated.
Core Earnings are defined by the Company as net income excluding both realized and unrealized gains (losses) on the sale or termination of securities, including underlying linked transactions and derivatives. As defined, Core Earnings include the net interest earned on these transactions, including credit derivatives, linked transactions, inverse Agency securities, interest rate derivatives or any other investment activity that may earn net interest. One of the objectives of the Company is to generate net income from net interest margin on the portfolio and management uses Core Earnings to measure this objective.
A reconciliation of GAAP net income to Core Earnings for the quarter and period ended December 31, 2011 is set forth below:

						Period from
		Quarter Ended				March 7, 2011 to
		December 31, 2011				December 31, 2011
Net income/loss		$	5,769,472			$	18,970,696
Add (Deduct):
Net realized gain			589,747				(3,701,392	)
Gain/loss on linked transactions, net			1,013,291				808,564
Net interest income on linked transactions			554,729				900,638
Unrealized gain/loss on derivative instruments, net			(70,663	)			6,491,430
Unrealized gain/loss on real estate securities			(1,346,237	)			(11,040,692	)
Core Earnings		$	6,510,339			$	12,429,244

Footnotes
(1) Per share figures are calculated using outstanding shares including all shares granted to our Manager and our independent directors under our equity incentive plans as of quarter end.
(2) Generally when we purchase a security and finance it with a repurchase agreement, the security is included in our assets and the repurchase agreement is separately reflected in our liabilities on our balance sheet. For securities with certain characteristics (including those which are not readily obtainable in the market place) that are purchased and then simultaneously sold back to the seller under a repurchase agreement, US GAAP requires these transactions be netted together and recorded as a forward purchase commitment. Throughout this press release where we disclose our investment portfolio and the repurchase agreements that finance it, including our leverage metrics, we have un-linked the transaction and used the gross presentation as used for all other securities. This presentation is consistent with how the Company’s management evaluates the business, and believes provides the most accurate depiction of the Company’s investment portfolio and financial condition.
(3) Calculated by dividing total repurchase agreements, including $39.2 million included in linked transactions, plus payable on unsettled trades on our GAAP balance sheet by our GAAP stockholders’ equity.
(4) The total investment portfolio is calculated by summing the fair market value of our Agency RMBS, Non-Agency RMBS, CMBS and ABS assets, including linked transactions. The percentage of Agency RMBS and credit investments are calculated by dividing the respective fair market value of each, including linked transactions, by the total investment portfolio.
(5) This represents the weighted average monthly CPRs published during the period for our in-place portfolio during the same period.
(6) Net interest margin is calculated by subtracting the weighted average cost of funds from the weighted average yield for the Company’s investment portfolio, which excludes cash held by the Company. See footnotes (9) and (10) for further detail.
(7) Diluted per share figures are calculated using weighted average outstanding shares in accordance with GAAP. For the period from March 7, 2011 to December 31, 2011, the calculation reflected the impact of 100 shares outstanding from July 1, 2011 through the settlement date of our IPO.
(8) The swap ratio was calculated by dividing the notional value of our interest rate swaps by total repurchase agreements, including those included in linked transactions, plus payable on unsettled trades.
(9) The yield on our investment portfolio during the period represents an effective interest rate, which utilizes all estimates of future cash flows and adjusts for actual prepayment and cash flow activity as of quarter end. This calculation excludes cash held by the Company.
(10) The cost of funds was calculated as the sum of the weighted average rate on the repurchase agreements outstanding at quarter end and the weighted average net pay rate on our interest rate swaps. Both elements of the cost of funds were weighted by the repurchase agreements outstanding at quarter end.
(11) The management fee percentage at quarter end was calculated by annualizing management fees incurred during the quarter and dividing by quarter-ended stockholders’ equity.
(12) The other operating expenses percentage at quarter end was calculated by annualizing other operating expenses recorded during the quarter and dividing by quarter-ended stockholders’ equity.
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Private Equity, Finance Lawyer Melinda Rishkofski Joins Baker Botts L.L.P. as Partner in Moscow

MOSCOW, February 28, 2012 /PRNewswire/ –
Melinda Rishkofski, who has represented private equity fund managers, international financial institutions and portfolio companies in Russia, Eastern Europe, the UK and the US, has joined Baker Botts L.L.P. as a partner in the firm´s Moscow office.
(Photo: http://photos.prnewswire.com/prnh/20120228/DA58239)
(Logo: http://photos.prnewswire.com/prnh/20100503/BAKERBOTTSLOGO)
Rishkofski´s experience includes working with Russian and Eastern European privatization policies, policy advice and drafting laws for the new Russian economy, development of Russian corporate securities and regulatory structures. She also worked on regulatory and legislative matters with representatives for the U.S. and Russian governments.
“Melinda adds depth to our international transactional resources, ” said Baker Botts Managing Partner Walt Smith. “Her focus on the Russian market and her extensive private equity experience are significant additions to our client offerings.”
Prior to joining Baker Botts, Rishkofski was general counsel for Russian-based Baring Vostok Capital Partners. As principal advisor, negotiator and transaction counsel, she provided legal support to financial institutions, multilateral development banks, private equity fund managers and Russian companies with respect to debt and equity financing transactions, mergers and acquisitions, restructurings, employee incentive programs, dispute resolution and general corporate matters.
In this role, Rishkofski has worked with and served more than 35 investee companies and the legal needs of private equity investment funds with more than $2 billion in capital and assets. She has also worked extensively with the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD) and the Overseas Private Investment Corporation (OPIC) on secured credit and debt and equity financing transactions.
“Melinda´s extensive knowledge of the private equity and funds sector in Russia and the CIS, a market sector where we expect to see significant increased activity in 2012, will provide our clients working in or entering into this sector an expertise not currently available from legal consultants in the region, ” said Steven Wardlaw, Partner in Charge of Baker Botts´ Moscow office.
Rishkofski obtained a BS from the Pennsylvania State University in the U.S., a J.D. from the Dickinson School of Law (now part of the Pennsylvania State University), and an LL.M in International Business and Finance from the University of London, Kings College in the UK.
About Baker Botts L.L.P.
Baker Botts is an international law firm with over 725 lawyers and a network of 13 offices around the globe. Based on our experience and knowledge of our clients´ industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Throughout our 172-year history, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit http://www.bakerbotts.com/.
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Stephen Winningham Joins Houlihan Lokey as Co-Head of European Corporate Finance

LONDON–(BUSINESS WIRE)–
Houlihan Lokey, an international investment bank, announced today that Stephen Winningham has joined as Managing Director and Co-Head of European Corporate Finance in the firm’s London office.
Mr. Winningham, formerly with Lloyds Banking Group, will work alongside Brian McKay, Managing Director and fellow Co-Head of European Corporate Finance, and will focus on further developing the firm’s European M&A and financing business. He will report to Scott Adelson and Robert Hotz, Senior Managing Directors and Global Co-Heads of the firm’s Corporate Finance business.
Mr. Winningham was recently head of Major Corporates at Lloyds Banking Group, overseeing the group’s coverage of U.K. and U.S. investment grade corporate clients. Prior to this, he was global head of Lloyds Banking Group’s Financial Institutions business.
“Stephen’s extensive international experience and proven track record in building client relationships will be instrumental in further enhancing our European and cross-border coverage,” said Scott Adelson. “Stephen’s appointment underlines our commitment to provide fully-integrated client focused advisory services to our corporate clients. He will be working closely with our sector and product specialists to build on the strong presence Houlihan Lokey has already created in the region,” added Robert Hotz.
“I’m delighted to join the firm at a time when there is an increasing need for independent strategic advice in the marketplace, which is something that Houlihan Lokey specializes in,” said Stephen Winningham. “I look forward to contributing to our growth strategy and further enhancing our client offering.”
Mr. Winningham brings with him three decades of experience in investment banking and commercial banking. Prior to Lloyds Banking Group, he was group head of the Asia Industrials and M&A groups at Salomon Brothers/Citigroup in Hong Kong. He also held leadership roles at Paine Webber Inc. and Kidder Peabody & Co. in New York (both now part of the UBS Group). He started his investment banking career at Drexel Burnham Lambert. Mr. Winningham holds a MBA from Columbia University and a bachelor’s degree from Colgate University in New York. He undertook additional graduate level studies in economics at New York University.
About Houlihan Lokey
Houlihan Lokey is an international investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation serving clients for 40 years. The firm is ranked globally as the No. 1 restructuring advisor, the No. 1 M&A fairness opinion advisor over the past 10 years, and the No. 1 M&A advisor for U.S. transactions under $1 billion, according to Thomson Reuters. Houlihan Lokey has 14 offices and more than 850 employees in Europe, the United States and Asia. The firm serves more than 1,000 clients each year, ranging from closely held companies to Global 500 corporations. For more information, visit http://www.hl.com/.
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Hollywood to Be Wooed by $800 Million Chinese Media Fund

Paramount Pictures/Album/Newscom

LONDON — The Hollywood majors and tentpole productions are among the future investment partner targets for a heavyweight Chinese media fund created by China’s Harvest Alternative Investment group and Sun Redrock Investment Group.
The $800 million-fueled private equity fund, the Harvest Seven Stars Media Fund, aims to invest in studio projects with an eye to bringing them to the wider Asian market and mainland China.
Redrock Investment Group, founded by Chinese media entrepreneur Bruno Wu, and Harvest are currently ironing out deals with “major filmmakers and filmed entertainment providers” to invest in English and Chinese language content both for Asia and with the global box office potential.
Wu, speaking on a video conference call with Hong Kong and London, said he expects to be able to detail deals with Hollywood producers and filmmakers “within the next 30 days or so.”
The fund, currently “within sight” of raising the $800 million, aims to invest in Hollywood and beyond, according to Wu. One of the main factors in investing in Hollywood output will be that the projects are “roundly acceptable to Asian audiences,” Wu said.
He cited current movies such as Paramount’s Mission: Impossible – Ghost Protocol and the Sherlock Holmes franchise from Warner Bros. as being the sort of tentpole the fund would be interested in investing in.
The fund will operate in three distinct areas – mergers and acquitisions, distribution in Asia and movie content either through equity investment in companies or operating capital investment — and aims to make its first investments in May this year.
Harvest Seven Stars Media is being advised by Creative Artists Agency’s Beijing office.
Harvest Alternative Investment Group and Sun Redrock Investment Group boast over 70 years of experience in the Chinese media and finance sectors.
Wu said the new partnership emphasizes “our confidence in the strength and potential of the Chinese media industry and the wealth of talent within it. We look forward to cultivating this new joint venture and seeing it grow into one of the world’s leading media funds.”
Harvest Alternative Investment Group’s Lindsay Wright added:  “The addition of this partnership to the Harvest Alternative Investment Group further supports our goal of developing a leading alternative product platform in China and globally.”
Hollywood players are being targeted with the promise of established Chinese media players at the fund offering them a way in to China and Asia at large and help with developing product for the market.
“The overwhelming majority of the titles released by Hollywood works in China,” Wu said. “But it doesn’t work in reverse. By that I mean big Chinese movies and stars aren’t seen as widely outside China.”
Wu said one of the ambitions would be to develop globally outward looking projects with Hollywood partners also.
Harvest Alternative Investment Group is the alternative investment arm of Harvest Fund Management founded in 1999 marking it out as one of the first 10 fund management institutions authorized by the Chinese government as part of its strategy to open up and develop its financial sector.
Sun Redrock Investment is part of Sun Media Group founded by Wu and Yang Lan operating five major divisions including Redrock Capital, Sun Enterprises Group, Sun Publishing Group and Sun Culture Foundation, a charitable foundation which promotes philanthropy and corporate social responsibility in China.

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Scott's Real Estate Investment Trust announces financing and leasing update

TORONTO , Feb. 1, 2012 /CNW/ –  Scott’s Real Estate Investment Trust (TSX: SRQ.UN) (“Scott’s REIT”) today announced the following:

• Extends $32 million original IPO mortgage one year to February 1, 2013
• Enters an agreement for a new first mortgage in Atlantic Canada for $8.5 million
• Re-leases an additional four previously disclaimed properties
• Extends six leases in New Brunswick

Extension of $32 Million IPO Mortgage
Scott’s REIT received a further one-year extension for its $32 million IPO mortgage to February 1, 2013 from February 1, 2012 . The extension has been granted using the same terms as the original loan; 4.9 per cent interest only, payable monthly, and the mortgage is open for payment at any time during the one-year extension period.
New $8.5 Million Atlantic Canada Mortgage
Scott’s REIT entered into an agreement for a first mortgage with First National Financial LP in the amount of $8.5 million , with a further $1 million available if certain leasing targets are met. The mortgage will be secured by 24 properties located in New Brunswick and Nova Scotia, the primary tenant of which is FMI Atlantic Inc. The mortgage will have a term of five years, amortized over a 25-year period, and will bear an interest rate of 4.95 per cent. The mortgage is expected to close during the month of February 2012 and is subject to customary closing conditions. The proceeds from the mortgage will be used to pay down a portion of the $32 million IPO mortgage.
“The extension and partial pay-down of the IPO loan will provide the REIT with much needed stability over this transitional period and will provide the necessary time for Scott’s REIT to re-lease its portfolio as we return occupancy to historical levels,” said Teresa Neto , CFO of Scott’s REIT. “In addition, the extension also provides Scott’s REIT the flexibility to seek alternative refinancing for the remaining outstanding balance of the IPO mortgage, once Priszm announces and executes sales of its Quebec , Manitoba and Alberta KFC operations.”
Leasing Update
Scott’s REIT has completed four new leases for sites disclaimed and previously leased by Priszm, including three sites in Quebec which were disclaimed effective January 27, 2012 . The fourth site is located in London , Ontario and has been leased to Starbucks. Each of the four leases were signed at rents higher than the rent under the previous Priszm lease. Including these four new leases, Scott’s REIT has now leased 18 of the total 43 sites disclaimed, or 40.4% of the total disclaimed GLA.
“We are seeing strong interest in many of our vacant sites as evidenced by how quickly we have been able to re-lease a notable portion of the properties,” said Kevin Salsberg , Chief Operating Officer of Scott’s REIT. “Some of these sites were vacant less than a month before we re-leased them and we believe most of the remaining vacant sites will be re-leased over the next twelve months.”
In addition, Scott’s REIT has also successfully extended six leases in New Brunswick with FMI Atlantic Inc. as KFC restaurants, extending the terms by five years to the year 2023. FMI Atlantic is also the dominant Pizza Hut operator in Atlantic Canada .
“We will be working with our tenants to secure extensions where possible, in particular with the operators seeking to invest in their businesses for the long term”, said Mr. Salsberg .” Extended lease terms with capital invested in the real estate is a win for our tenants and Scott’s REIT”.
About Scott’s Real Estate Investment Trust
Scott’s REIT (TSX: SRQ.UN) is Canada’s premier small-box retail property owner with 229 properties in eight provinces across Canada . Scott’s REIT’s properties are well located and geographically diverse across Canada with the majority of all properties containing long-term quadruple net leases. To find out more about Scott’s Real Estate Investment Trust (TSX: SRQ.UN), visit our website at www.scottsreit.com.
Forward-Looking Statements
This document contains certain information that may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management’s future outlook and anticipated events or results, and may include statements or information regarding future growth opportunities and potential and expected cash distributions or cash distribution levels. In particular, information regarding the REIT’s monthly cash distributions and information relating to the impact of the REIT’s recent acquisitions on annual revenues and interest expense is forward-looking information. Forward-looking information is based on certain factors and assumptions regarding, among other things, occupancy rates, property expense and capital expenditures. While the REIT considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward looking-information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what is currently expected. Such factors include risks relating to the REIT’s reliance on Priszm LP, the REIT’s second largest tenant, risks associated with investment in real property, competition, reliance on key personnel, financing and refinancing risks, environmental matters, tenant risks, risks related to current economic conditions and other risk factors more particularly described in the REIT’s Annual Information Form for the year ended December 31, 2010 . You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Other than as required by applicable Canadian securities law, the REIT does not undertake to update this information at any particular time. Additional information identifying risks and uncertainties is contained in Scott’s REIT filings with the Canadian securities regulators, available at www.sedar.com.

Wells Fargo moving into investment banking arena

The sun was rising over San Francisco’s financial district in November 2009 when Richard Kovacevich picked up the phone in his 12th-floor office to call Omaha, Neb.
It was about a year after Wells Fargo and Kovacevich, the bank’s chairman at the time, had announced a plan to purchase Wachovia, and he was reaching out to Warren Buffett for help. Just days before, Buffett had heralded his own acquisition of railroad Burlington Northern Santa Fe Corp. for $26 billion.
The billionaire chairman and chief executive officer of Berkshire Hathaway had lined up JPMorgan Chase for financing, Kovacevich recalls. Berkshire also is Wells Fargo’s largest shareholder. The two men spoke for no more than 10 minutes, Kovacevich says, and the banker’s message was simple.

‘This is important’

“Here we are, our largest shareholder, and we had never done any meaningful investment banking for him,” said Kovacevich, who stepped down as chairman in 2009 but continues to consult with management and represent the company to customers. “I called him and said we’ve got some great bankers here now, this is important, and we’d really like to show you what we can do.”
The phone call marked a turning point for Wells Fargo, founded in 1852 to serve Gold Rush pioneers. Far from Wall Street, the bank had long rejected the more volatile and transaction-oriented culture of investment banking. In 2005, Kovacevich, then also CEO, said having superstar bankers focused on one-time deals was “incompatible” with his company.
Now, Wells Fargo is pushing into the business it once shunned, even as rivals facing fickle markets, meager revenue and new restrictions scale back. Financial firms worldwide announced plans last year to cut more than 230,000 jobs as global stock offerings plunged 29 percent and U.S. bond issuance fell 6.8 percent.
The move may help Wells Fargo, led since 2007 by CEO John Stumpf, weather head winds facing commercial banks. Firms are struggling to find growth as rules limit overdraft and debit card fees and lending remains sluggish.
“The government has really limited their ability to grow their operations, so I can understand why they are trying to move out of traditional banking, but it’s a tough thing to do,” said William Frels, CEO of money manager Mairs & Power, which held more than 3.6 million Wells Fargo shares at the end of September. “It’s not a positive. My take is that they are desperate to find new avenues of growth.”

Record profit

Still, the bank has been profitable for 12 consecutive quarters, through the three-month period that ended on Dec. 31, setting records in the past six. It reported net income of $15.9 billion in 2011.
After Kovacevich’s call, Buffett added Wells Fargo to the Burlington deal. The bank has gone on to manage Burlington bond issues and in January 2011 helped underwrite Berkshire’s $1.5 billion debt offering. Buffett declined, through a spokeswoman, to comment.
“Before the crisis, we would have had to compromise both our culture and ethics in order to compete,” said Kovacevich, who, during an almost 35-year banking career that began at Citicorp, pursued his own agenda in defiance of industry trends.
The collapse of Lehman Bros. Holdings and the sales of Bear Stearns and Merrill Lynch in 2008 led Kovacevich and Stumpf to rethink their stance.
Buffett’s imprimatur notwithstanding, Wells Fargo has a big hill to climb. The bank ranked 12th among U.S. debt underwriters in 2011, with 1,824 deals valued at $53.1 billion, behind London’s HSBC Holdings and France’s BNP Paribas SA. In U.S. mergers and acquisitions, Wells Fargo ranked 21st, advising on 31 deals last year valued at $27.6 billion.
Wells Fargo also will have to convince naysayers it won’t go the way of other commercial banks that have sought to enter the investment-banking business only to retreat, says Brian Foran, a New York analyst at Nomura Holdings Inc. Bank of America tried expanding into investment banking with limited success until it purchased Merrill Lynch, he said.
“Investors are nervous,” Foran said. “They feel like they’ve seen this movie before.”
This article appeared on page D – 4 of the San Francisco Chronicle
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Saxo Capital Markets Launches Australian Retail Operations

SYDNEY, January 30, 2012 /PRNewswire/ –
Saxo Capital Markets (Australia) Pty Ltd (‘SCM Australia‘) , the online trading and investment specialist, today announced the launch of its retail operations in Australia, offering investors the opportunity to trade thousands of asset classes across award-winning online platforms.
Saxo Capital Markets (Australia) Pty Ltd is a wholly-owned subsidiary of Saxo Bank A/S. It holds an Australian Financial Services Licence 280372 and is regulated by the Australian Securities & Investments Commission.
The move extends Saxo Bank Group’s reach in the fast-growing Asia-Pacific, and is consistent with its goal of being the premier multi-asset online trading platform in the world.
SCM Australia offers local traders sophisticated trading platforms such as SaxoTrader and SaxoWebTrader, permitting the trading of foreign exchange, CFDs and stocks with live streaming prices and lightning-fast stock trades. SCM Australia provides clients with access to over 160 foreign exchange crosses, more than 13,000 stocks from 25 major exchanges and over 140 Futures contracts on live market prices from over 19 exchanges. SCM Australia’s CEO Anthony Griffin said the company believed it had the services and competitive offering to transform the online trading market in Australia.
Mr Griffin states, “In Australia, we will be adopting the standard Saxo business model that has been successfully implemented in over 20 countries and bringing our award-winning platforms to the market.”
Further, he states, “it was critical to ensure that investors were educated as much as possible on the asset classes they were trading in and the risks involved. As a result, SCM has a number of online educational tools available to ensure investors are informed.”
SCM Australia recently completed the acquisition of Logos Commodities Pty Ltd, the holding company of Commodity Broking Services Pty Ltd, bringing with it an excellent client base and broadening its suite of services.
Kim Fournais and Lars Seier Christensen, co-founders and CEOs of Saxo Bank, said in a joint statement:
“While opening an office in Sydney is a strategic decision to support our Asia-Pacific expansion and growth strategy, it has always been a priority for Saxo Bank. The acquisition has brought with it both tremendous staff as well as a great range of clients. That has given us the critical mass for doing business here. This is a good time for us to prove our commitment to the Australian market.”
Saxo Bank was founded in 1992. Saxo Bank’s trading platforms have defined the company’s success in the online trading space for over a decade. Since introducing the SaxoTrader in 1998, Saxo Bank has enhanced and improved its platforms to meet the evolving needs of traders and investors in a continuously changing industry. The Group has expanded overseas since 2006 and now has operations in more than 20 countries including major financial centres such as Tokyo, Singapore, Hong Kong, London, Zurich, Dubai, and Paris.
Disclaimer:
Saxo Capital Markets (Australia) Pty Ltd is a wholly-owned subsidiary of Saxo Bank A/S, the Copenhagen-headquartered online trading and investment specialist. It holds an Australian Financial Services Licence 280372 and is regulated by the Australian Securities & Investments Commission.  Leveraged investments in foreign exchange or derivatives carry a high degree of risk and may result in significant gains or losses. You should carefully consider your financial situation and consult your independent financial advisors as to the suitability of your situation prior to making any investments. For further information, please see: http://au.saxomarkets.com/about-us/general-disclaimer
About Saxo Capital Markets (Australia) Pty Ltd
Saxo Capital Markets (Australia) Pty Ltd is a wholly-owned subsidiary of Saxo Bank A/S, the Copenhagen-headquartered online trading and investment specialist. It holds an Australian Financial Services Licence and is regulated by the Australian Securities & Investments Commission.  Clients can trade Forex, CFDs, Stocks, Futures, Options and other derivatives via SaxoWebTrader and SaxoTrader, its leading multi-asset online trading platforms. SaxoTrader is available directly through Saxo Capital Markets or through one of its institutional clients. White labelling is a significant business area for Saxo Capital Markets, and involves customising and branding of its online trading platform for other financial institutions and brokers.
For more information, please visit http://www.saxomarkets.com.au/
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Saxo Capital Markets (Australia) Pty Ltd Launches Its Retail Operations

SINGAPORE–(Marketwire -01/30/12)- Saxo Capital Markets (Australia) Pty Ltd (‘SCM Australia’), the online trading and investment specialist, today announced the launch of its retail operations in Australia, offering investors the opportunity to trade various asset classes across award-winning online platforms.
Saxo Capital Markets (Australia) Pty Ltd is a wholly owned subsidiary of Saxo Bank A/S. It holds an Australian Financial Services Licence 280372 and is regulated by the Australian Securities & Investments Commission.
The move extends Saxo Bank Group’s reach in the fast-growing Asia-Pacific region, and is consistent with its goal of being the premier multi-asset online trading platform in the world.
SCM Australia offers local traders sophisticated trading platforms such as SaxoTrader and SaxoWebTrader, permitting the trading of foreign exchange, CFDs and stocks with live streaming prices and lightning-fast stock trades.
SCM Australia provides clients with access to over 160 foreign exchange crosses, more than 13,000 stocks from 25 major exchanges and over 140 Futures contracts on live market prices from over 19 exchanges. SCM Australia’s CEO Anthony Griffin said the company believed it had the services and competitive offering to transform the online trading market in Australia.
Mr. Griffin states, “In Australia, we will be adopting the standard Saxo business model that has been successfully implemented in over 20 countries and bringing our award-winning platforms to the market.”
Further, he states, “It was critical to ensure that investors were educated as much as possible on the asset classes they were trading in and the risks involved. As a result, SCM has a number of online educational tools available to ensure investors are informed.”
SCM Australia recently completed the acquisition of Logos Commodities Pty Ltd, the holding company of Commodity Broking Services Pty Ltd, bringing with it an excellent client base and broadening its suite of services.
Kim Fournais and Lars Seier Christensen, co-founders and CEOs of Saxo Bank, said in a joint statement:
“While opening an office in Sydney is a strategic decision to support our Asia-Pacific expansion and growth strategy, it has always been a priority for Saxo Bank. The acquisition has brought with it both tremendous staff as well as a great range of clients. That has given us the critical mass for doing business here. This is a good time for us to prove our commitment to the Australian market.”
Saxo Bank was founded in 1992. Saxo Bank’s trading platforms have defined the company’s success in the online trading space for over a decade. Since introducing the SaxoTrader in 1998, Saxo Bank has enhanced and improved its platforms to meet the evolving needs of traders and investors in a continuously changing industry. The Group has expanded overseas since 2006 and now has operations in more than 20 countries including major financial centres such as Tokyo, Singapore, Hong Kong, London, Zurich, Dubai, and Paris.
Company’s logohttp://release.media-outreach.com/i/Download/322
Disclaimer:Saxo Capital Markets Pte. Ltd. (“Saxo Capital Markets”) is licensed as a Capital Market Services provider and an Exempt Financial Advisor, and is supervised by the Monetary Authority of Singapore.
You should carefully consider whether trading in leveraged products is appropriate for you in the light of your financial circumstances. You should be aware that dealing in products that are highly leveraged carry significantly greater risk than non-geared investments such as share trading. As such, you could both gain and lose large amounts of money. You may sustain losses in excess of the moneys you initially deposit and also in excess of the margin required to establish and maintain any positions in leveraged products.
For further information, please see:
http://sg.saxomarkets.com/about-us/general-disclaimer
About Saxo Capital Markets
Saxo Capital Markets Pte Ltd is a wholly owned subsidiary of Saxo Bank A/S, the Copenhagen-headquartered online trading and investment specialist. It serves as the Asia Pacific headquarters and holds a Capital Markets Services license from the Monetary Authority of Singapore. Saxo Capital Markets also holds a Commodity Broker licence from The International Enterprise Singapore.
Clients can trade Forex, CFDs, Stocks, Futures, Options and other derivatives via SaxoWebTrader and SaxoTrader, its leading multi-asset online trading platforms.
SaxoTrader is available directly through Saxo Capital Markets or through one of its institutional clients. White labelling is a significant business area for Saxo Capital Markets, and involves customising and branding of its online trading platform for other financial institutions and brokers.
For more information, please visit http://www.saxomarkets.com.sg/
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PRESS DIGEST – Financial Times – Jan 19

Financial Times
FEARS RISE OVER LOOMING COMMERZBANK AND MPS FISCAL PLANS
European regulators are convinced that two of the continent’s banks, Commerzbank (Other OTC: CRZBF.PK – news) and Monte dei Paschi (Milan: BMPS.MI – news) , will fail to produce credible plans to plug capital deficits by Friday’s deadline, exposing both to the risk of full or partial nationalisation. http://www.ft.com/cms/s/0/7e956578-4202-11e1-9506-00144feab49a.html#axzz1jYRS14J4
RBS PAY PLANS TEST RESOLVE ON REWARDS
David Cameron’s pledge to curb executive pay and stop “rewards for failure” is set to face its biggest test, as Royal Bank of Scotland prepares to offer a bonus of more than 1 million pound to its chief executive, even though the state-controlled bank’s share price has almost halved in a year. http://www.ft.com/cms/s/0/eb2aa428-41c1-11e1-a586-00144feab49a.html#axzz1jYRS14J4
CAIRN INVESTORS CRITICISE CHIEF’S BONUS
Some of the biggest shareholders in Cairn Energy (LSE: CNE.L – news) , the oil group, are marshalling support to vote down a pay award worth nearly 2.5 million pounds for the Edinburgh-based oil group’s chief executive-turned-chairman Bill Gammell. http://www.ft.com/cms/s/0/e499aca4-41e8-11e1-a586-00144feab49a.html#axzz1jYRS14J4
LSE IN U-TURN ON ITALIAN STOCKS
The London Stock Exchange plans to shift the trading system used for trading Italian stocks back to Milan after complaints from Italian banks and brokers that their trades had been slowed down by taking place in the UK capital. http://www.ft.com/cms/s/0/c0a28298-41f3-11e1-a1bf-00144feab49a.html#axzz1jYRS14J4
WPP HOPING FOR US ELECTION BOOST
WPP (LSE: WPP.L – news) saw a stronger than expected finish to 2011, according to Martin Sorrell, chief executive, as the marketing services group looks forward to improving conditions in the U.S. ahead of a lucrative period of election campaign spending. http://www.ft.com/cms/s/0/eaeb582e-41fb-11e1-a1bf-00144feab49a.html#axzz1jYRS14J4
SEVEN CHARGED OVER WALL STREET INSIDER TRADING
Seven hedge fund portfolio managers and analysts have been charged in a $61.8 million insider trading scheme as U.S. authorities escalate their crackdown on Wall Street corruption. http://www.ft.com/cms/s/0/f8ef1b2c-41d3-11e1-a1bf-00144feab49a.html#axzz1jYRS14J4
IMF REQUESTS $500 BILLION FOR BAIL OUT LOANS
The International Monetary Fund has asked its member countries for an extra $500bn in firepower to combat the world’s spreading fiscal emergencies, which it estimates will generate demand for bail out loans totalling $1 trillion over the next two years. http://www.ft.com/cms/s/0/b0d1a476-41e3-11e1-a586-00144feab49a.html#axzz1jYRS14J4
GERMANY’S CENTRAL BANK TO SELL LEHMAN LOANS
Germany’s central bank is set to sell almost 2 billion euros ($2.6 billion) of property loans left over from the collapse of Lehman Brothers, in a deal that marks the latest sign of the growing appetite for distressed real estate debt. http://www.ft.com/cms/s/0/55c10ddc-41e4-11e1-a586-00144feab49a.html#axzz1jYRS14J4
PAYPAL DRIVES EBAY’S GROWTH
Ebay (NasdaqGS: EBAY – news) reported strong revenue growth in the fourth quarter of 2011, driven mainly by its payment arm, PayPal, which the company expects to be at the centre of its innovation in the coming year. http://www.ft.com/cms/s/0/cbf677f0-422d-11e1-9506-00144feab49a.html#axzz1jYRS14J4
($1 = 0.6490 British pounds) (Reporting by Stephen Mangan)
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S&P downgrades euro zone rescue fund

BRUSSELS (Reuters) – U.S. rating agency Standard & Poor’s cut its credit rating of the euro zone’s EFSF rescue fund on Monday, and Greece was under pressure to break a deadlock in debt swap talks if it is to avoid an unruly default.
French Finance Minister Francois Baroin said there was no need to shore up the European Financial Stability Facility after S&P downgraded it by one notch to AA+ from triple-A, echoing the view of Germany, the only major euro zone member to retain a top-notch credit rating.
S&P said in a statement the decision was all but inevitable following identical cuts three days earlier to the creditworthiness of France and Austria, two of the EFSF’s guarantors.
“We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF’s guarantors and securities backing the EFSF’s issues are currently not in place,” the agency said in a statement.
“We have therefore lowered to AA+ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities.”
Financial markets, which had fallen after the mass downgrades of euro zone members on Friday, showed little reaction to the latest blow — which had been expected — and Japan, a major buyer of EFSF bonds, said they remained an “attractive” investment.
A growing number of experts, including a Standard & Poor’s official, warned that a Greek default was on the cards, after Greece’s talks with creditors broke down on Friday.
Greece was under growing pressure to secure a last-ditch agreement with its private creditors to accept voluntary losses on their holdings of Greek bonds.
Athens risks going bankrupt when 14.5 billion euros of bond redemptions fall due in late March. Without a private sector bond swap involving a voluntary writedown, a 130 billion euro second international bailout for Greece could fall apart.
The talks with creditor banks broke down because of different views on what interest rate is acceptable, the head of the group leading private sector talks said.
Charles Dallara, managing director of the Institute of International Financial, said the banks were “very surprised” at the stance taken by some officials representing both governments and multilateral institutions, without naming them.
The EFSF was set up by the 17 governments that share the European single currency in May 2010 and has so far been used to provide emergency loans to Ireland and Portugal. It is also expected to contribute to a second bailout of Greece.
The fund has an effective lending capacity of 440 billion euros, which depends on guarantees, mainly from the euro zone’s AAA countries, only four of which now remain: Germany, Luxembourg, Finland and the Netherlands.
LENDING CAPACITY UNAFFECTED
In a statement, the EFSF said the downgrade would not affect its lending capacity, and emphasized that its short-term rating remained at S&P’s top level.
“The downgrade to ‘AA+’ by only one credit agency will not reduce EFSF’s lending capacity of 440 billion euros,” said the fund’s chief executive, Klaus Regling.
“EFSF has sufficient means to fulfill its commitments under current and potential future adjustment programs until the ESM becomes operational in July 2012,” he added.
The ESM — the European Stability Mechanism — is a permanent rescue fund that is expected to have an effective capacity of 500 billion euros, based on paid-in capital of 80 billion euros and callable capital of 620 billion euros.
French Finance Minister Francois Baroin said there was no need to shore up the EFSF despite the S&P rating downgrade.
“The EFSF has kept intact its ability to lend, with enough means and guarantees to fulfill the full range of its present and future commitments,” he said in a statement. “There is therefore no need to act on the EFSF at the moment.”
German Chancellor Angela Merkel’s spokesman, Steffen Seibert told reporters: “The government has no reason to believe that the volume of guarantees that the EFSF has now should not be sufficient to fulfill its current obligations.
“We should not forget that it has been decided to significantly move forward the ESM and to have it in place in mid-2012, one year earlier than planned.”
There was also support from Japan, with Finance Minister Jun Azumi saying Tokyo’s trust in EFSF bonds, in which it has so far invested 21 billion euros, had not been shaken.
“Japan has bought them by certain amounts and our stance will not immediately change just because of the downgrade,” Azumi told reporters after a cabinet meeting.
The euro hovered just above a 17-month trough against the dollar early in Asia on Tuesday, but reaction to the S&P downgrade was muted. Trading overnight was subdued as U.S. markets were shut for the Martin Luther King holiday.
The head of Austria’s debt office told Reuters the loss of Vienna’s AAA status had also been priced into the market already, and Austria was able to sell treasury bills on Monday at rates very close to zero.
French President Nicolas Sarkozy brushed off the historic loss of Paris’ top credit rating for the first time since 1975, a blow to his campaign for re-election in May, saying France’s policy would not be dictated by rating agencies.
Contrasting S&P’s move with a statement by rival watchdog Moody’s, which still has France on an Aaa rating, he said: “My deep belief is that it changes nothing. We must reduce the deficit, we must reduce our spending and we must improve the competitiveness of our economy to return to a path of growth.”
LOSERS TO PAY?
Italian Prime Minister Mario Monti, whose debt-laden country was downgraded by two notches along with Spain, called last week during a visit to Berlin for the EFSF to be increased to ward off attacks on his country’s bonds.
But a senior politician in Merkel’s conservative CDU party, Michael Meister, said it was the downgraded countries that should increase their guarantees for the fund.
“Germany was not downgraded so our contribution should not be changed. Countries that were affected must contribute more to the guarantees,” Meister told Reuters.
Sources familiar with Greece’s talks with its private creditors said EU paymaster Germany was pressing for new bonds to be given to banks in the planned swap to carry a low coupon of less than four percent that would increase the banks’ effective losses to 75 percent.
The IMF was also weighing on the talks by warning that the Greek economy and the euro zone’s economic outlook have worsened since the bailout package was agreed in October, raising Athens’ funding needs to make its debt sustainable by 2020, they said.
Greece put a brave face on the standoff. “There is a little pause in these discussions,” Greek Prime Minister Lucas Papademos told CNBC television. “But I am confident they will continue and we will reach an agreement that is mutually acceptable in time.”
(Additional reporting by Lefteris Papadimos in Athens, Steve Slater and Richard Hubbard in London, Jan Strupczewski in Brussels and Fiona Ortiz in Madrid; Writing by Paul Taylor; Editing by Tim Pearce and Alex Richardson)
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Quid Pro Quo: IMF Cash For Europe In Exchange for Iran Oil Ban?

By Ian Talley

Europe may have just traded a U.S.-pushed Iranian oil embargo in exchange for Washington’s support of International Monetary Fund bailout loans to Italy and Spain, if one economist’s speculation is right.
Jacob Kirkegaard, a fellow at the Peterson Institute for International Economics, speculates the timing Europe’s newly-proposed ban on Iranian oil imports is too fortuitous to be purely coincidental.
Greece, Spain and Italy–in that order–heavily depend on Iranian crude and have been the most resistant to an embargo. They are now no longer fighting a ban–Italy has stated it would support it in principle while the others have signaled they wouldn’t stand in the way. [The agreement in principle is subject to substantial negotiations on timing or exemptions for long-term deals.]
Each of those countries are also the current epicenters of Europe’s sovereign debt crisis. Athens is in the middle of negotiating an agreement with bondholders on a debt deal that will pave the way for a near doubling of emergency loans, including from the IMF. Italy has to roll over nearly $340 billion in debt this year, but the cost of borrowing has soared beyond levels economists say is sustainable. Rome late last year turned down an offer for an IMF loan, but many economists say Italy will need IMF credit to pull itself out of its financial mire. And Spain’s banks are facing a housing bubble that could very well mean Madrid must soon ask for IMF assistance.
Meanwhile, each time the possibility of new IMF loans to Italy or Spain has been raised among members of the Group of 20 nations, Washington has pushed back. U.S. Treasury officials have so far insisted that  Europe use its own resources to build a firewall against the contagion engulfing Italy and Spain. Any further lending to Europe from the IMF, the officials have said, would be purely supplementary.
Europe said it planned to lend EUR150 billion to EUR200 billion to the IMF as seed money for a bigger fund. Europe expects that cash to be matched by China, Japan and perhaps sovereign wealth funds such as that owned by oil-rich Saudi Arabia, which would ostensibly provide alternative crude supplies to Europe.
If that plan gains traction–and so far it hasn’t–it could create a new funding pool at the IMF worth roughly EUR500 billion.
Washington has largely been opposed to boosting IMF coffers for big European bailouts.
But rather than maintaining such opposition, Kirkegaard said he sees it as entirely rational horse-trading for U.S. Treasury Secretary Timothy Geithner to now give reluctant consent for the fund to help play savior in Europe in exchange for Europe supporting an oil embargo. [The U.S. is the only country with veto power on the IMF's executive board.]
The European Central Bank has already oiled the gears. The ECB has stepped up its liquidity provision to banks and bond buying for beleaguered euro zone members to levels that, if maintained through the year, top more than the EUR1 trillion Washington says is an effective firewall.
That will make it much easier for the U.S. to back IMF loans that give its lending members protected seniority while requiring the structural and fiscal reforms needed to return the euro zone back to health.
Spokesmen from the U.S. Treasury and International Monetary Fund weren’t immediately able to comment.
(Benoit Faucon in London contributed to this piece)

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Travel smarter this year

Electronic communication, such as disposable mobile phones, cheap and easy Wi-Fi, and social networking, is revolutionizing the way we communicate when we travel. But the digital development I am most enthused about is the smartphone. My iPhone has quickly become my favourite travel companion, whether it’s keeping me on top of my work, keeping me in touch with my kids, or simply keeping me entertained.
I’m not alone. It was predicted that by the end of 2011, 40% of all Canadian mobile phone users will have a smartphone –iPhone, Android, Windows or BlackBerry — compared to just 10% in 2008. And as smartphones get more capable, they are becoming essential tools for travellers.
For instance, if I’m in a cafe in Paris that has free Wi-Fi, I can pop onto the Internet and check sports scores back home. If an impromptu soccer game breaks out on a piazza in Naples, I can record a video of it, then use the Dropbox application to send it to my assistant, who can post it to my Facebook page. Using Skype on my phone, I can connect to Wi-Fi and call my daughter in the U.S. for free.
About the only thing I don’t do with my smartphone when travelling is use it as an actual cellphone. When roaming in Europe with a North American phone, calls are expensive (often $1.50 per minute or higher). To save money, I use a phone I bought years ago in Europe and buy a new SIM card in each country I visit (a SIM card is a removable chip that stores your information).
A phone must be “unlocked” to swap out SIM cards (but be aware smartphones can be complicated to unlock). I make a lot of calls when I’m in Europe, but if you don’t, you might find it easier to roam with your own phone.
With smartphones, it’s important to watch dataroaming charges. A three-minute video from YouTube can cost about $40. While casual browsing and e-mailing costs less (around 20¢ to send or receive a basic message), charges can pile up quickly.
To avoid these costs, it’s easiest to cut off this feature by calling your carrier to disable it and turning off data roaming using your phone’s menu (before you get on your transatlantic flight). You can still use the Internet, but you’ll have to wait until you reach a Wi-Fi hotspot. Otherwise, for better rates, talk to your carrier about international dataroaming plans.
Even if you don’t use your smartphone for calls or data roaming, it can still come in handy thanks to the many travel-oriented applications that are available. Although I still prefer flipping through a paper guidebook, many publishers also offer travel guides in e-book format.
Apps for TripAdvisor and Yelp give you access to millions of user reviews of restaurants, hotels, and sights. And my Rick Steves Audio Europe app has radio interviews and audio walking tours of Europe’s top sights, such as the Acropolis and Versailles.
If you need to search for flights, hotels or rental cars, try Orbitz, Priceline, Booking.com,Expedia’s TripAssist and Travelocity. Skyscanner searches a variety of European budget airlines to find the cheapest connection.
TripIt is a clever app that stores all of your trip details in one place. Note that many apps (such as e-books) work on their own once you download them, but others (such as flight-search apps) need to access content online. You’ll either have to find a Wi-Fi hotspot or spring for data roaming to make them work.
To figure out train schedules, DB Navigator, German Rail’s comprehensive train timetables, includes connections for all of continental Europe. For the U.K., try thetrainline. Big cities, such as London and Paris, offer subway apps that save you from having to unfold an unwieldy map on a crowded platform.
If you don’t parlez-vous the local language, download Google Translate, which lets you type or speak foreign words for a translation. You can also say or type a sentence in English to hear a translation or see it written out. With Lonely Planet’s audio phrase-books, simply press a button to hear the phrase you’re struggling to pronounce.
Other useful travel apps include Measures, which converts various European units (such as clothing sizes and currency) to North American ones; the Weather Channel and AccuWeather, which help you figure out how to dress for the day; and mPassport, city-specific apps that direct you to English-speaking doctors and hospitals, as well as local names for prescription medications.
As more people travel with smartphones, I expect that more creative apps will become available. I am something of a tech holdout but if technology can make travel smoother and smarter, I’m all for it.
Rick Steves (ricksteves.com) writes European travel guidebooks and hosts travel shows on public television and public radio. Email him at rick@ricksteves.com, or write to him c/o P.O. Box 2009, Edmonds, WA 98020.



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Travel chaos as storms lash Britain

Fierce storms have battered Britain with heavy rain and winds gusting over 100mph.
The latest round of unsettled weather added more misery to the January blues as people returned to work after the Christmas and New Year holidays.
Around the country trees fell onto railway tracks and power lines, lorries toppled over on busy roads and local authorities issued flood warnings after rivers swelled.
High seas caused the Port of Dover to close, gusts of wind damaged the roof to a stand at Epsom Downs Racecourse and a power surge led to a washing machine catching fire in Wales.
Commuters faced travel chaos as the bad weather meant some East Coast main line trains between London and Scotland had to start and terminate at Newcastle upon Tyne.
Gemma Plumb, a forecaster from Meteogroup, the weather division of the Press Association, said: “Everywhere has seen strong winds today. So far we’ve seen gusts across central and southern parts of Scotland of 85 to 97mph. That’s an hourly figure, so there’s a chance there may have been stronger gusts of more than 100mph.”
Figures published by the Met Office reported wind speeds of 106mph at Great Dun Fell in the north Pennines and 102mph in Edinburgh.
A bus driver had to be freed after a large tree fell on his vehicle, trapping him inside in Witley, Surrey. The single-decker Stagecoach bus was in Petworth Road when the oak tree, measuring 6ft across, fell on to it at about 8.25am.
A Surrey Police spokesman said: “It is believed that the driver, who was freed by fire crews, has suffered serious injuries and he is being taken to St George’s Hospital in Tooting. There was only one passenger on board the bus at the time of the incident, who escaped uninjured.”
In the South West, the Environment Agency has “yellow” flood alerts active on 21 rivers from Cornwall to Wiltshire. The Tamar Bridge, which spans the river between Devon and Cornwall, has been closed to high-sided vehicles because of strong winds.

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Credit Agricole to cut jobs as loss looms

PARIS (Reuters) – Credit Agricole will make a 2011 loss, write off 2.5 billion euros ($3.2 billion) worth of assets and cut 2,350 jobs in a cull of its investment banking operations, the French bank said on Wednesday in its second profit warning of the year.
The warning reflects mounting pressure on lenders to curtail risky activities to meet tougher capital standards even as they wrestle worsening economies and slumping markets. The deepening euro zone debt crisis has slammed French banks in particular as traditional sources of dollar funding have evaporated.
“These are all things we would have expected to happen at some point, but putting it all in one quarter, in this kind of market, is unhelpful,” said a London based analyst who did not want to be named. “The stock is at bombed-out levels already … What will be key in how bad this gets is what they tell us about the ongoing business.”
The bank is following in the footsteps of larger domestic rivals BNP Paribas and Societe Generale , which have also announced job cuts primarily in investment banking as they seek to cut debt and wean themselves off funding markets frozen by the economic slump.
The pressure on the French banks’ capital and liquidity has led to recurring speculation that they could eventually seek a government bailout, but Credit Agricole Chief Executive Jean-Paul Chifflet denied that it would need any help in reaching stringent Basel III regulations.
“We will meet Basel III with our own resources,” he told a conference call.
That will call for some bitter medicine.
Credit Agricole, which in recent years abandoned its humble agricultural origins in favor of international growth, will exit 21 of the 55 countries where it operates and shutter entire businesses like equity derivatives and commodities.
MARKET TURMOIL
The writedown includes 1.3 billion euros to reflect the shrinkage of its investment banking division and 1.23 billion euros as writedowns of minority stakes, such as those in Spain’s Bankinter and Portugal’s Banco Espirito Santo .
Chifflet said in an interview with Les Echos newspaper that the bank was mulling the sale of stakes in both lenders, although he ruled out the sale of its holding in its Newedge joint venture with Societe Generale.
The bank also shelved its 2014 financial goals and eliminated its dividend for this year to preserve capital.
Analysts had expected France’s No. 3 lender to post a full-year profit of 2.4 billion euros after it was profitable in all previous quarters.
In July, Credit Agricole warned that deepening problems at its Emporiki Bank unit in Greece would wipe nearly 1 billion euros off its first-half results.
The job losses include 1,750 at Credit Agricole’s corporate and investment bank, which employs 13,000 people, and 600 at its factoring and consumer finance arms.
The bulk of the job losses will take place internationally, although 550 investment banking and 300 consumer finance jobs will be cut in France.
Credit Agricole shares slumped 6.7 percent to close at 4.23 euros, part of a wider rout in French banking shares which saw Societe Generale slide 8 percent and BNP Paribas lose 7.4 percent.
More than six months of intense market turmoil sparked by the euro zone debt crisis is pummeling investment banks globally, denting their bond and stock trading income and sparking a wave of layoffs in Asia, the U.S. and Europe.
JOB LOSS TALLY GROWS
Citigroup was last week among the latest to press ahead with job cuts, while banks in some of the crisis hotspots — such as Italy’s UniCredit and Intesa Sanpaolo — are also laying off thousands of people.
More than 120,000 job losses have been announced this year, and many in the industry fear the tally will be greater than at the height of the financial crisis in 2008, as redundancies continue into 2012.
Like its French rivals, Credit Agricole is primarily pulling back in certain financing businesses, such as those in dollars, which have become harder for it to access, and will cut staff accordingly.
It also has a European equity broker, Chevreux, and a majority stake in Asian brokerage CLSA. But the bulk of cuts are likely to fall in fixed-income, which houses its rates and credit divisions, analysts said.
Credit trading in particular has come under pressure at all banks this year as wary investors shy away from the market and new regulation bites.
The recently appointed Chifflet has espoused a back-to-basics focus on retail banking in France and Europe after moves like the purchase of Emporiki backfired, rendering it deeply sensitive to turmoil in the eurozone economy.
Chifflet’s team is mulling various ways of bolstering the bank’s balance sheet, banking sources say, even though Credit Agricole’s robust parent network of regional banks has provided a cushion that has made raising additional capital unnecessary.
This may include more deal-making. The bank is close to announcing the sale of its private-equity activities, while it has also struck a $374 million deal to sell minority stakes in its CLSA and Cheuvreux brokerage brands to Chinese brokerage Citic Securities .
While Credit Agricole would be open to letting Citic increase its stake in the ventures — now at 19.9 percent — it aims to at least keep majority control, according to a person familiar with the bank’s thinking.
(Editing by David Holmes)


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