Archive for March 2009

Springtime for TARP

The last week of winter was not kind to President Obama or Treasury Secretary Geithner.  Critics’ voices got louder and insisted that the administration was not up to the task of restoring confidence in our financial markets and institutions.  The late-night visit with Jay Leno by the President did not help and there started to be calls from some quarters to replace Tim Geithner with Larry Summers.

As we started spring on the morning of March 20th, we had snow flurries in New York City and the first full week of spring remained winter-like, by and large cold and damp from a weather perspective.  For the administration, though, spring arrived when Secretary Geithner moved from a bank recovery blueprint several weeks ago that was not well received by the markets to a plan to use both public and private funds to remove toxic assets from the banks’ balance sheets.  Wall Street, even with a down Friday, reacted very positively and the Dow finished the week up 6.8%. The 17% gain over the past three weeks was the "best three-week stretch since September of 1982." (WSJ 3/28/09)  I’ve spoken with a number of individuals who have re-entered the market for the first time since the fall. And I have consistently stated that the recovery would not begin until we had a plan that met the markets approval to restore the balance sheets of the major banks by removing the toxic assets. With that plan in place, a recovery will begin.

President Obama ended the week by hosting a meeting with the heads of the major banks. The rhetoric at this meeting was much cooler than it was during the AIG bonus debacle a week earlier.  The bankers emerged from the meeting talking about cooperation with the government in solving the current credit crisis and restoring growth to the U.S. and our trading partners’ economies.

For those of us in the media business, I believe that we will see a much-improved 2nd quarter, with advertising starting to rebound off the floor of November-February. Credit markets will also start to show some daylight, but EBOs  (equity buyouts) will remain the most viable transactions at least through the summer, as many overleveraged deals from '06 and '07 will continue to struggle.

In the midst of the economic turmoil, March Madness roars on, with the Big East demonstrating its dominance and strength. My personal favorite at the start, Rick Pitino's Louisville Cardinals, remain my pick to win it all after their dominating 103-64 win over the supposed Cinderella Arizona Wildcats.   Each time I watch the Cardinals I am impressed by their athleticism, strong defense and bench strength.

If you have a moment this week, please take a look at our new corporate website, where all our products and services can be found:

EBOs vs LBOs

On Thursday March 12th in the Wall Street Journal, Peter Lattman wrote,  “The LBO is dead. Long live the EBO” (WSJ, “Lacking Leverage, Firms Embrace EBOs”).  In the article he quoted Scott Nuttall, a partner at KKR speaking at a private equity conference, "Opportunities abound right now. You don't need to use leverage to buy companies when they're trading at a 50% discount to their historic average multiples."

The appeal of the EBO for the seller is there is not the risk of a transaction failing to close because of the credit markets. In the same article, an October deal by Advent was cited. Advent paid all cash for a card-processing business, later renamed Monext. This was a $260M transaction. "We were able to provide certainty, which is a scarce commodity these days," according to  Advent’s Stephen Hoffmeister.

In the media space we will see more EBOs than LBOs this year -- if deals are going to get done. The EBO does carry some risk for the private equity firm, though. In order for these deals to be successful in the long run, there needs to be realistic price expectations  on the part of the sellers and their advisers.

Earlier this week, Bill Cohan's new book, “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street,” was published by Doubleday.  The initial reviews have all been outstanding. Bill has clearly made the transition from investment banker to established author. This story of Bear Stearns' demise, together with his first book, “The Last Tycoons,” has established him as a force to be reckoned with on Wall Street.

Later this afternoon, "Selection Sunday" will provide answers for the March Madness field of 65. There are always disappointments for the schools on the bubble, but on Monday morning the NIT selection extends their season.

Several readers have asked for some new wine recommendations to carry them from winter to spring. Here are several new ones from northern California that provide both value and very good quality.

Steel Plow Syrah
Landmark Vineyards consistently produces quality wines that represent real value. Most of their releases are priced between $20 and $40. One of my recent favorites is their '06 Steel Plow Syrah, which can be purchased on their website for $30.  I have had it several times recently in restaurants and find it to have depth. It is perfect when paired with a short rib on a winter evening.  The Wine Spectator recently rated it a 94 (WS 94).

I was recently introduced to Rich Moran by my friend and former publishing colleague Stewart Alsop. Rich is a partner at the venerable venture capital firm Venrock. Rich and his wife Carol collaborate on producing limited (600 cases per year) Bordeaux-style blends, named Anagram. Their vineyard is located in Knights Valley. I ordered a mixed case of their '04, '05 and '06 releases. When we returned late on Friday night to New York City from Blackhawk, we opened the '04 Anagram with our favorite pizzas from Una Pizza Napoletana ( I was impressed with the balance, the wonderful nose and the nuances of this release. I could not find a review from either the Wine Advocate or the Wine Spectator, but I rated it an 89-90. At an average price of $40 this represents excellent value. Please let Rich or Carol know when you order that you have read this blog entry. Small wineries need viral, word-of-mouth marketing. It is nice to see someone from our industry have as many varied interests, all of which Rich does successfully. While Stewart introduced us, Rich and I must thank Tom Peterson of El Dorado Ventures for pointing out to us that we shared a passion for wine.

Lucia Chardonnay, Lucia Pinot Noir
This is another brand from Pisoni Vineyards. The current releases include the '07 Lucia Chardonnay, $40 and the '07 Lucia Pinot Noir, $40.  It also includes the Gary's Vineyard release for $50. I am just ordering this weekend, but since their introduction several years ago, all of the Lucia releases have represented excellent quality and value.

March Madness

It is crunch time for the Division I men's college basketball teams. With "Selection Sunday" looming large on March 15th, teams on the bubble need to make their move. has just published its projections for the field of 65. Penn State, Kentucky, Cincinnati and Miami are currently the last four in. Virginia Tech, Maryland, Michigan and Temple are currently the last four out. Michigan improved its chances for a bid this week with a win over #16 Purdue.

The projected #1 seeds are North Carolina, Connecticut, Pittsburgh and Oklahoma. The projected #2 seeds are Louisville, Michigan State, Duke and Memphis. Will the projected 9th seed Boston College be a Cinderella team with its wins over North Carolina, Duke and Florida State, or will the team that lost to Harvard show up at tourney time?  Over the years, the lead-up to the tournament has become a sign that spring is almost here and another winter behind us.

After an exciting finish by Phil Mickelson (will he hold on or will he self destruct?) last Sunday at the Northern Trust PGA event at the Riviera Country Club in Los Angeles, their was an uproar in the press and the halls of Congress over Northern Trust's sponsorship and entertaining during the event. On Friday, Northern Trust CEO Frederick Waddell responded in a letter to Congressman Frank, chairman of the House Financial Services Committee, and 17 other members of Congress.  While stating that Northern Trust understood that this is a time of great financial uncertainty, Waddell defended the sponsorship and pointed out that "the event has raised more than $50M for charity since its inception."  Northern Trust (NTRS) remains profitable and has announced that it will return the $1.6B in TARP funds, with interest, as soon as it can replace it with private capital. I sense that they will not be alone. Healthy financial institutions would like to make their own decisions on appropriate marketing activities as they have in the past, which I fully support. Those of us who plan events as an important part of our product and service offerings need to be extra sensitive in the current climate when we select venues.

On Sunday evening in Los Angeles the 81st Academy Awards took place at the Kodak Theatre, just down the road from the Riviera Country Club.  Slumdog Millionaire walked off with 8 Oscars! The movie captured the dichotomy of Mumbai, India, with its poverty juxtaposed against the growth of the city that took place over the last decade. Slumdog Millionaire managed to capture the spirit and determination of the people of Mumbai.

We held Asset International's first global sales meeting this week and laid out our growth plans to the sales teams from London, New York and Stamford, which represent their respective markets, Global Custodian, Plan Adviser and Plan Sponsor. The meeting ended with a real enthusiasm for our global vision and a real sense of team. This will serve us well as we prepare to launch The 5000 in late April.

Later this week, Mary Claire and I will head to our home in Blackhawk to get an early feel for spring. I know we will be sharing our Kindle 2 on the flight. If you have not already done so, you should go to and take a tour of the latest Kindle. For those of us who love to read, this is a must-have platform. It demonstrates that the digital transformation is at hand. I marvel that it can hold a library of 1,500 books, and its capability for wireless downloads is truly impressive.

While we are in Blackhawk, I will have the opportunity during a round or two of golf with my friend and golf partner, George Riggs, a longtime newspaper executive who recently retired, to share thoughts and insights on the perilous state of the newspaper industry. The two Philadelphia papers that Brian Tierney acquired with a group of investors from McClatchy (MNI $.49  2/27/09) as part of the Knight-Ridder transaction filed for bankruptcy this past week. This was quickly followed by an announcement from Hearst that the San Francisco Chronicle, which lost $50M+ this past year, will have to find a path to profitability, be sold or  be shut down.  Finally later in the week, Scripps (SSP), which had made a similar announcement to Hearst earlier, followed through and shut down the storied Rocky Mountain News.

We are starting to see all of the overleveraged newspaper properties headed toward bankruptcy filings as they try to deleverage. And those properties that are still seeking a viable new model and have healthy, diversified media company parents are finding out that their owners’ patience is coming to an end. Will there be an investment opportunity found in the rubble when the dust settles, or has the digital divide left newspapers behind? Is there brand equity left that will allow new models, with low overhead and debt, to thrive during an economic recovery?