S4 Liquidations

Treasury 30-Year Bonds Rise Before Fed Debt-Buying Announcement
September 29, 2011, 5:43 PM EDT

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By Susanne Walker and Cordell Eddings

Sept. 29 (Bloomberg) — Treasury 30-year bonds advanced for the first time in five days as the Federal Reserve prepared to announce its schedule of purchases of longer-maturing debt under Operation Twist.

U.S. seven-year securities dropped after the government’s $29 billion auction drew a record low yield. Treasuries were headed for their biggest quarterly rally since the depths of the financial crisis in 2008 on concern Europe’s sovereign-debt crisis and a sluggish U.S. economy will undermine the global recovery.

“There’s some set-up for when the Fed comes in, and there may be some anticipation with the announcement due tomorrow,” said Anthony Cronin, a trader in New York at Societe Generale, which as one of the 20 primary dealers is obligated to participate in auctions. “It may have a little psychological impact.”

Yields on 30-year bonds dropped two basis points, or 0.02 percentage point, to 3.05 percent at 4:59 p.m. in New York, according to Bloomberg Bond Trader prices. The 3.75 percent securities due in August 2041 increased 11/32, or $3.44 per $1,000 face amount, to 113 18/32.

The long-bond yields have increased 15 basis points this week after dropping 41 basis points last week following the Fed’s announcement of Operation Twist in the biggest five-day decrease in almost three years.

Treasuries have returned 5.9 percent this quarter, the most since the last three months of 2008, according to Bank of America Merrill Lynch indexes. Thirty-year bonds have returned 27 percent since June 30.

Seven-Year Auction

At today’s seven-year debt offering, the securities drew a yield of 1.496 percent, which was lower than the previous record of 1.580 percent set at the Aug. 25 offering. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.02, compared with an average of 2.79 for the previous 10 sales.

Indirect bidders, a class of investors that includes foreign central banks, bought 41.6 percent of the notes, compared with 51.7 percent last month and the 10-sale average of 46.8 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 13.6 percent, compared with the average of 8.2 percent.

At yesterday’s $35 billion five-year sale, the notes drew a record low auction yield of 1.015 percent. A $35 billion sale of two-year notes on Sept. 27 drew the highest demand in a year.

Seven-Year Notes

Seven-year note yields increased two basis points to 1.47 percent after advancing five basis points before the auction. Benchmark 10-year note yields gained one basis point to 1.99 percent after earlier rising five basis points. Yields on 10- year notes fell last week to 1.6714 percent, the lowest in Fed data beginning in 1953.

“The concessions that developed ahead of the auction were helpful,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. “The auction was decent.”

The central bank announced on Sept. 21 that it would buy $400 billion of U.S. debt with maturities of six to 30 years through June while selling an equal amount of securities maturing in three years or less to support growth. The Fed is scheduled to publish a schedule of purchases tomorrow.

Seven-year securities are the first issue likely to benefit directly from Fed debt buying, Wrightson ICAP analysts said today in a research note.

October Schedule

“The Fed is scheduled to buy Treasuries in the six- to eight-year range three times a month, which means that the October schedule that will be published tomorrow should include a coupon pass for which this issue would be eligible by the second week of October at the latest,” according to Wrightson, a unit of ICAP Plc that specializes in U.S. government finance.

Treasury notes dropped earlier today after the Commerce Department reported that the U.S. economy grew at a 1.3 percent pace in the second quarter, faster than estimated last month. The revised increase in gross domestic product compares with a 1 percent gain previously calculated by the government.

German lawmakers approved an expansion of the euro-area rescue fund, clearing the way for European officials to focus on what next steps may be needed to stem the debt crisis.

U.S. notes pared their decline just before the auction after Fitch Ratings cut New Zealand’s long-term foreign-currency issuer default rating to AA from AA+. Fitch cited a high level of debt and unfavorable economic growth. The long-term local- currency rating was cut to AA+ from AAA. The outlook on both ratings is stable.

Ten-year yields will increase to 2.24 percent by year-end, according to the average forecast in a Bloomberg News survey of banks and securities firms, with the most recent forecasts given the heaviest weightings. On Aug. 12, yields were projected to end 2011 at 2.72 percent.

–With assistance from Emma Charlton in London. Editors: Dennis Fitzgerald, Dave Liedtka

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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READER DISCUSSION

HAVANA (Reuters) – For the first time since the 1959 revolution, Cubans will have the right to buy and sell cars in a much-anticipated reform under President Raul Castro, another step toward greater economic freedom on the communist-led island.

An official government decree published on Wednesday said Cubans and foreign residents would now be able to do with their cars what they wanted without any prior authorization from any entity.

The regulations, which take effect on Saturday, are not without limits, but they were welcomed by Cubans, most of whom have not been able to own cars for more than five decades.

Its great because it was something forbidden and prices were really high — and if you had a car you werent able to do anything with it, said office worker Silvia Santos.

Its a way of freeing something, she said.

The liberalizing of car sales was one of more than 300 reforms put forth by Castro and approved in April at a congress of the Communist Party, Cubas only legal political party.

The proposed changes put a greater emphasis on private initiative, which had been largely stifled under Cubas Soviet-style system, and less government control.

Previously, only automobiles that were in Cuba before the 1959 revolution could be freely bought and sold, which is why there are so many 1950s or older cars, most of them American-made, rumbling through Cuban streets.

There are also many Soviet-made cars, dating from the era when the Soviet Union was the islands biggest ally and benefactor. They have been available for those with government permission, including assorted officials, athletes, artists and doctors returning from service overseas.

A black market in which people illegally purchased cars licensed to somebody else has also been active.

SLOW BUT WIDE-RANGING REFORMS

The new regulations will only allow Cubans with government permission and foreign residents to import cars, while all others will be limited to autos already on the island.

They also allow Cubans migrating from the island to sell their cars or to give them to family members, neither of which they could do in the past.

Foreign residents temporarily living on the island will be limited to buying two cars, imported or not, during their stay.

Castros reforms, which he says are needed to ensure the survival of Cuban communism, are wide-ranging, but have been slow in developing.

Its a law that should have been approved a long time ago, said taxi driver Fabio Brito, 54. This exists in all countries in the world. Why should we be different?

Reaction to the change was swift on Revolico.cu, a website where Cubans buy and sell goods and services.

Listings to buy or sell all kinds of cars were posted on Thursday afternoon, at prices ranging from the equivalent of $25,000 for a 1951 Chevrolet to $4,800 for a 1948 Dodge.

The seller of the Dodge, Yosvany, who chose not to give his full name, said he did not know about the new law when he posted his car, he just needed money.

He said the old pre-revolution cars might drop in price as people finally had access to newer models. Imagine someone who has a Toyota or a Hyundai that they can sell now with the new rules. Prices for those might take off.

One difficulty facing many Cubans, who make an average monthly salary equivalent to about $20, will be rounding up the money to buy a car. Its a good law, but I cant even buy a bicycle, said a peanut vendor who did not give his name.

Maybe if I can save money one day in my life I will be able to buy a car, said Santos. Its going to be hard, but at least now its a possibility. (Editing by Todd Eastham)

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By Tess Stynes

NeoPhotonics Corp.

/quotes/zigman/1542764/quotes/nls/nptn NPTN
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agreed to acquire privately held Santur Corp. in a deal potentially valued at up to $46.7 million, adding capabilities in laser array and packaging technologies for communications.

The maker of components used by telecom network equipment companies will pay an estimated $39.2 million in cash for Santur, plus as much as $7.5 million in milestone payments through next year. The deal is expected to close by year’s end.

California-based NeoPhotonics, which went public in February, makes photonic integrated circuit-based products used on telecommunications networks. It sells them to top global optical network hardware vendors, which supplied more than 90% of the global market in 2009.

Santur’s products provide reduced size, power consumption and cost for a wide range of networking applications and generated revenue of $21 million for the six months ended June 30.

NeoPhotonics in August reported that it swung to a second-quarter profit of $13.6 million as revenue rose 14% and margins strengthened.

Shares were up 1.8% at $6.73 in early trading. The stock is down 39% from its IPO price of $11.

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Sept. 29, 2011 4:03p

Bill Davidson was a graduate of that old school you keep hearing about. Whatever it was, thats where Davidson learned about business.

It was a school that said loyalty meant something, and a contract was worth not just the paper it was written on but the forest that produced the trees that made that paper.

It was a school that mandated that you represent your company with the utmost dignity and respect, and that no one individual was greater than the whole.

Davidson brought these credos to the NBA when he bought the Detroit Pistons from Fred Zollner in 1974.

Zollner, for his part, had brought the NBA itself to Detroit, bringing with him his Fort Wayne Zollner Pistons and staking out his big top inside Olympia Stadium, which would be his basketball teams home whenever the tradition-rich Red Wings werent in town.

The Pistons immediately became Detroits redheaded stepchild of pro sports.

Zollners team failed to draw at Olympia, and then the Pistons moved into brand-new Cobo Arena in 1961 and they failed to draw there, too. Pro basketball wasnt moving the sports fan in Detroit, not like it did in hoops-rich towns like New York, Boston and Philadelphia.

Zollners franchise was Goofus to the other Detroit teams Gallant. It seemed to exist only to serve as a cautionary tale. It was perpetually the before in one of those before and after success stories.

The Pistons went through coaches like a Broadway cattle call audition. They made trades that were outshined by the contestants on Lets Make a Deal.

The Pistons couldnt do anything right. They drafted funny.

By the mid-1960s, it was touch and go as to whether Zollner would pick up his tent and move to another burg.

Then the Pistons got lucky, even when they thought they hadnt, and drafted a skinny guard from Syracuse named David Bing, when the guy they really wanted, forward Cazzie Russell from Michigan, went to the New York Knicks. This was 1966.

The Pistons lost a coin toss for Cazzie, and so settled with Bing, who only happened to become the man who would save pro basketball in Detroit.

Still, by 1974, Zollner had become a recluse owner, jetting to Detroit from his home in Florida maybe twice a year to see what his basketball players did to earn the paychecks that bore his signature.

Zollners was an unsuccessful franchise, though it had two big stars: Bing and center Bob Lanier.

Bill Davidson, Zollners neighbor in Florida, had wanted into the pro sports ownership business in the worst way. You know the rest of the joke.

Davidson had bid on Tampas World Football League franchise in 1974, but the price was too high. So he turned his attention to his neighbors pro basketball team.

The Pistons hadnt made a dime of profit in the 17 years theyd been in Detroit. Even a 52-win season in 73-74 failed to spin the turnstiles with much speed or frequency. They were the Edsel of Detroit sports.

Davidson forked over a grand total of $6 million to buy the Pistons from his neighbor Fred Zollner.

The team Davidson purchased was still mostly dysfunctional and by far the fourth favorite in a city with four choices for pro sports.

Fast forward to Thursday afternoon at the Palace, the House That Bill Davidson Built.

On the dais sat a tanned, handsome, 46-year-old manonly five years younger than Davidson was when he bought the Pistons in 1974.

Tom Gores spoke to the media on his first day as Pistons owner. Gores, the day before, had finalized a transaction of mega proportions. In the package came the Palace Sports and Entertainment Group and a dysfunctional basketball team that is by far the fourth favorite in a city with four choices.

The parallels between the state of the Pistons now and their state when Davidson bought them 37 years ago are uncanny.

The Pistons were off the radar in 74, and they pretty much are now, too. The TV cameras dont lie. Games televised from the Palace the past couple of seasons were conspicuous by the absence of fans in the stands. The camera shots looked like an NBA game in the closing seconds of a blowout. Only, it was like that for entire games.

In fact, you could make a case that the Pistons of 74 were in better shape than the ragtag bunch of today, because at least the former had two bona fide superstars in Bing and Lanier.

The Pistons, 2011 vintage, have no one remotely close to being a star, let alone a superstar.

But Gores is plunging into the NBA waters anyway, a Flint kid made goodand how many of those are there? Flint has been kicked, crapped on and stripped of its economy for the better part of 20 years now.

Yet heres Gores, a Flint guy, with hundreds of millions of dollars to throw at the Pistons and the entertainment conglomerate of which they are part.

The price tag that Gores paid for the entity that Bill Davidson paid $6 million for in 1974 is thought to be in the $320 million range.

Oh, and Davidson managed to turn a profit a time or twoalong with winning three league championships.

The Pistons team that Gores has inexplicably bought is filled with unlikable, petulant players who have defiled the teams motto of Going to Work.

Its a bunch that has won a grand total of 57 games over the past two seasons, not coming close to the playoffs in either year. Attendance is way down, befitting the overall interest in the team throughout metro Detroit.

It is, in effect, 1974 all over again when it comes to pro basketball.

From this embarrassment of non-riches, Tom Gores plans on making money and winning another championship and leading a resurgence of NBA basketball in a town that could, right now, pretty much take it or leave it.

Just like what Bill Davidson hoped to do 37 years ago.

Oh, and theres a lockout looming in less than a month.

Gores is either about to show off his mad skills as an astute businessman, or hes a damn fool.

But a guy from Flint whos just managed to come up with $320 million couldnt be a fool, could he?

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By Melodie Warner

Constellation Energy Group Inc.

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has agreed to acquire Houston retail electricity provider StarTex Power for $142.5 million in cash, a move that furthers its plans to expand in the residential sector market.

StarTex Power is employee-owned and currently has 170,000 residential and commercial customers.

The Baltimore power company reported earlier this month its first-quarter profit fell 63% on increased costs and as revenue edged down on outages resulting from severe weather in Texas.

Exelon Corp.

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agreed to buy Constellation Energy in a stock-for-stock deal valued at about $8 billion when announced in April. The deal could put Exelon, the largest operator of nuclear plants in the U.S., in a position to resuscitate some nuclear plans Constellation had abandoned because they were beyond its means.

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Waikiki is getting another time-share resort.

Hilton Grand Vacations has bought the long-shuttered Ohana Islander Waikiki Hotel on Lewers Street from Honolulu-based Outrigger Enterprises Group for an undisclosed amount, the companies announced Friday.

Hilton will renovate the 285-room hotel into an upscale urban time-share resort to be called Hilton Grand Vacations Club — Waikiki Beach Walk. It is expected to open in the summer of 2013.

So, eager observers of Hawaii’s main economic driver know that this spells construction activity, contracts and jobs.

The Islander hotel, at 270 Lewers St. right at the edge of Outrigger’s Waikiki Beach Walk development, has sat empty and unused since 2008, when Outrigger halted work on a $40 million renovation of the hotel when the economy tanked. Since then, a construction crane has hovered above the property while clear tarps covering unfinished rooms flap about in the wind, signaling a dead project on a bustling part of Waikiki.

Now, as economists continue to pat the industry on the back for driving Hawaii’s economic recovery, Hilton’s confidence in moving this particular project forward is a big deal.

Outrigger is a homegrown hospitality company best known for managing its own line of hotels as well as those of other brands, Hilton included.

Hilton has built an industry recognized time-share business and has made no secret of its desire for more time shares in Hawaii. In December 2008, it opened the brand new time-share tower, the Grand Waikikian. Last year, executives detailed a master plan for the Hilton Hawaiian Village Beach Resort amp; Spa that included — guess what? — more time shares. The Islander Waikiki property will be Hilton Grand Vacations’ seventh time share in Hawaii.

Many longtime riders may be surprised to hear that motorcyclists are increasingly likely to buy new helmets online instead of at a motorcycle shop, according to the new 2011 US Motorcycle Helmet Satisfaction Study from JD Power and Associates.

The survey found that 23% of motorcycle helmet owners buy their helmets on the Internet, compared with $20% a year ago. In 2002 just 4% of riders who use helmets bought them online.

“While the dealership is still the main source for a majority of helmets purchased, it’s clear that customers are continuing to shift to the online channel to purchase their motorcycle helmets,” said Brent Gruber, senior manager of the powersports department at JD Power.

Motorcyclists traditionally bough t helmets at bike shops where they can try on different brands and designs to assess their comfort. Today helmet makers generally provide more measurements online that can help customers find a good fit without trying the helmet on, but anyone with an unusual head shape who has trouble finding a comfortable fit will probably continue to buy helmets from bricks-and-mortar outlets.

More broadly the study looked at overall satisfaction with new motorcycle helmets based on 11 attributes: quietness; ventilation and air flow; de-fogging; face shield effectiveness of keeping wind out; the face shield’s resistance to scratching; ease of replacing the face shield; scratch resistance of the helmet shell; color and graphic design; weight; ease of fastening the strap; and fit and comfort.