Barnes & Noble Stumbles Into EBook

Barnes & Nobles (BKS) announced the purchase/acquisition of Fictionwise an eBook marketing service. Barnes & Noble did announce the purchase price $15.7 million but did not provide much if any information on earn out formula’s.

The idea is to get into the eBook business and compete with Amazon (AMZN) and Google (GOOG). OK you have to understand the strategy but you also have to understand that eBook reading devices have been under development for quite some time.

Sony and Kindle have their offerings available right now. Amazon has a strong brand in the book business. Google has a lot of money. Q3 cash position for Barnes & Noble was south of $20 million.

Babcock & Brown Auto-Pilot To Where?

Babcock & Brown air (FLY) released Q4 and year end numbers and reported to shareholders that they have acquitted themselves rather well. The numbers support this assumption. They have had to repossess and remarket several aircraft which indicates the market is tough. What they do not report is who they have leased to, what the rates are, remaining term and if there have had to be any renegotiations.

Leasing is a financial transaction. The portfolio is approximately 60 jumbo jets. The receivables department is incredibly simple to operate. By understanding the end user you will be able to predict their behaviour. This is critical when indebtedness has increased exponentially and something called maintenance payment liability has also increased dramatically.

The company may be on auto-pilot and the investor is not sure what the destination will be.

AIG PR Spin Machine

AIG (AIG) who probably holds the American Title for consumption of emergency taxpayor funding seems to have employed an impressive army of spin meisters according to an article in the NY Times Deal Book who in turn relied on Breakingviews. Essentially they collectively report that in addition to an impressive in house team they have retained Kekst & Company, founded by Gershon Kekst, the lion of New York’s financial spindustry, to work on its asset sales. Sard Verbinnen — a longtime A.I.G. adviser — helps the insurer present its earnings. And the company has Hill & Knowlton and Burson-Marsteller toiling in Washington

Hutchison Promises No Update

Hutchison Telecommunications International Limited (HTX) announced some fine results. Business seems to be looking good despite the global financial difficulties. A high percentage of new customers appear to be businesses and you have to wonder if that trend will continue. Productivity is a compelling selling feature up to a point. Communications is an enabler but not a driver of business activity.

Take a look at the cautionary statement that Hutchison included with their press release. I found this quote to be particularly interesting.

“....Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events......”

So let me get this straight. If something major changes that was discussed they do not feel an obligation to disclose the changes. This does not sound compliant with Reg FD. Time to walk down to legal department and kick this one around a bit. Because every business will have its problems. That’s called risk. But if you hide the problems that’s called (insert nasty words of your choice)

Wendy's Challenged With Covenant Compliance

Wendy’s (WEN) delivered their news yesterday. Of course it has just been restructured and financially re-engineered and now has a newer management group in charge. They pulled the breakfast menu because it was not working and will try to come back with a winner. They insist the product pipeline is looking good. But none of the comments really focused on breakfast. They continue to focus on improving margins and seem to be digging their way out of the $0.99 low margin fiasco that the QSR industry managed to get itself into.

The issue that concerns me the most is Wendy’s attempts to restructure their borrowings and make covenant compliance more manageable. This of course makes sense but why was it not thought of before all the wheeling and dealing. Lenders will now be asked to view financial statements is a different fashion. The conflict will develop as to how long the maturities will be scheduled for. Lenders may wish for quicker repayment. This will compete for cash flow for capex. If capex is not adequately funded than corporate momentum will falter. If the bankers are worried they may become seduced by hard or soft promises to raise equity and that means dilution.

So keep an eye not on the sandwich but on the banker who may need to eat it.

Citigroups Other Shareholders Need Watching

Citigroup (C) apparently is now 36% controlled by Uncle Sam. Everyone is singing the blues but no one has an alternative. The interesting side tidbit is that Singapore and Prince al-Waleed bin Talal of Saudi Arabia, will also swap up to $27.5-billion worth of preferred shares for regular stock. This is roughly equal to Uncle Sam’s 36%. Therefore the marketplace only owns 28% of the equity. While everyone else is focused on what Uncle Sam will do, let’s start thinking about what deals Uncle Sam may have to cut with Singapore and the Saudi Prince. They do not always see the world through western-centric eyes.