• Consumer credit in the United States fell by a record $11.1 billion in March after the jobless rate reached its highest level in a quarter century and banks made it harder to get loans in an effort to firm up their balance sheets.  Consumer credit fell by $2.55 trillion, almost three times more than forecast and the most since records began in 1943, according to a Federal Reserve report released yesterday (Thursday) in Washington. “When you have record job losses, you have to expect record declines in spending and economic activity in general,” Richard Yamarone, chief economist at Argus Research Corp. in New York told Bloomberg.

• General Motors Corp. (NYSE: GM) said it burned through $10.2 billion in the first quarter as it tapped into federal bailout funds to survive a sharp decline in global sales that overwhelmed its cost-cutting efforts.  Revenue dropped by almost half to $22.4 billion as the company cut production by about 900,000 vehicles and worked to run down costly inventories in the United States and Europe.  Chief Financial Officer Ray Young said there was evidence consumers were scared away from GM cars and trucks because of concern the automaker was headed for bankruptcy, Reuters reported.

• Delinquencies on commercial mortgages in the U.S. jumped to the highest levels in over 11 years in April as scarce credit made it difficult for landlords to refinance loans, Bloomberg reported, citing a report from property research firm Trepp LLC.  About 2.45% of loans are now 30 days or more behind in payments, more than five times the year-ago number said the report. “It’s about as bad as it’s ever been,” said Thomas Fink, a Trepp senior vice president. “I don’t think we’re done yet. Where it’s going to top out, I don’t know, but we’re not done.”

• Nearly two-thirds of U.S. retailers posted better- than-expected monthly sales results for a second straight month in April, giving fresh evidence that consumer spending is warming up. Most retailers reported April sales at stores open at least a year that topped Wall Street estimates and a handful said their first-quarter results, which start landing next week, will be better than expected. “Overall, you are seeing some signs of a return to discretionary purchases throughout different areas of retail,” Barclays Capital PLC (NYSE: BCS) analyst Robert Drbul told Reuters.

• The U.S. Justice Department’s proposed budget calls for adding more FBI agents to investigate mortgage fraud and white-collar crime, Attorney General Eric Holder said on Thursday. In prepared testimony to a Senate appropriations subcommittee, Holder said the proposed $26.7 billion budget includes a 3.8% increase from the previous year for combating financial fraud for fiscal 2010, Reuters reported.  Increased funding would be used for “additional federal prosecutors, civil litigators and bankruptcy attorneys to protect investors, the market, the federal government’s investment of resources in the financial crisis and the American public,” he said.

• Boeing Co. (NYSE: BA) lost a deal for 25 of its 787 Dreamliners, the biggest order cancellation yet for the plane, meaning the giant jetmaker now has lost one more contract this year than it has won.   The scrapped deal, valued at about $4.44 billion, takes Boeing’s cancellations in the first four months to 59, versus 58 purchases, according to data published today on the Chicago-based company’s Web site, Bloomberg reported. Airbus SAS (NYSE: SPR) said earlier it has 11 net orders after signing 30 agreements and losing 19. The 787 remains Boeing’s best-selling new plane ever, with 861 contracts remaining. The jet, built mostly of composites, has suffered four delays because of defects, parts shortages and redesigns and is due to fly by the end of next month before entering service in the first quarter of 2010.

Investment News Briefs Friday, May 8, 2009

The volume of commercial mortgages at risk of default has quintupled since the beginning of 2008 as a deteriorating economy has made it increasingly difficult for shops and businesses to keep up with their payments.

Special servicers, companies that collect payments from borrowers in distress on behalf of mortgage bond investors, reported $23.7bn of mortgages under their care at the end of the first quarter, according to Fitch Ratings.

That was five times higher than the $4.6bn of mortgages needing special servicing at the end of 2007. Servicers experienced an almost 50 per cent increase in the volume of distressed commercial mortgages in the first quarter alone.

Mortgages for multi-family residential properties suffering from the housing downturn represented the largest share of the troubled loans at 31 per cent, said Fitch. However, mortgages for shops and businesses were catching up, with retail loans at 28 per cent of the distressed pools.

“Retail properties were the first property type to see the effects of declining economic conditions and consumer spending,” said Stephanie Petosa, analyst at Fitch. “[We have] observed an increase in defaults of retail loans and expect them to eventually surpass multi-family as the highest property type concentration.”

Fitch says it expects commercial mortgage defaults to continue to increase this year. At the end of the first quarter, defaults and payments more than 60 days late were at 1.53 per cent of outstanding mortgages. Fitch said they could reach 4 per cent by the end of 2010.

Good luck to banks holding onto junk commercial real estate loans… They better hope the government has deep pockets to cover the coming wipe out.

• Abu Dhabi’s state-controlled International Petroleum Investment Company (IPIC) said it would buy a 9.1% stake in the German automaker Daimler AG (DAI) for almost $2.72 billion (2 billion euros). It also pumped $1.41 billion into Aabar Investment PJSC, giving the Middle East emirate majority control in the IPIC, Reuters reported.

• Tata Motors Ltd. (ADR: TTM) announced it will begin sales of the Nano, the world’s cheapest car. It will accept bookings for the new car from April 9 and April 25, and customers will have to pay full price (about $2,000) as a deposit, Bloomberg reported.

• Walgreen Co. (WAG) took reconstruction charges and spent more promoting nonprescription items in its second-fiscal quarter ended Feb. 28, leading to a profit of $640 million, or 65 cents per share. The earnings beat expectations, and Morningstar Senior Analyst Mitch Corwin told Reuters that he believes the company will “emerge from this downturn a better firm.”

• U.S. banks now face increasing loan delinquencies from owners of skyscrapers and shopping malls, as commercial property prices plummet. Commercial property prices are down almost 20% in the past year, and with the global recession worsening, there’s “significant stress” in the market, William Schwartz, a credit analyst at DBRS Inc. in New York, told Bloomberg. The country’s 10 biggest banks have $327.6 billion in commercial mortgages, which face a wave of defaults as office vacancies grow and retailers and casinos go bankrupt.

• Gannett Co Inc. (GCI) will force employees to take a new round of furloughs in April, May and June to save money as newspaper advertising revenue slides. Gannett was among the first U.S. newspaper publishers to furlough workers to cut costs as ad revenue sinks and people forsake printed papers to get free news on the Internet. The furloughs come after a one-week unpaid leave saved the company $20 million, according to a memo from a company executive obtained by Reuters.

• Oil prices hit their highest level in nearly three months yesterday (Monday) as a U.S. plan to purge banks of toxic assets triggered a rally on Wall Street, Reuters reported. U.S. crude rose $1.73 to settle at $53.80 a barrel on the New York Mercantile Exchange, after climbing as high as $54.05, its highest price since December 1. London Brent crude rose $2.25 to $53.47. Dealers said the bank plan could brighten the outlook for global business and consumer energy demand.

• TreeHouse Foods Inc. (THS), whose largest customer is Wal-Mart Stores Inc. (WMT), said the recession hasn’t stalled plans to make “substantial” acquisitions and reach $2 billion in sales in a consolidating private-label food industry, Bloomberg reported. The recession has spurred growth in  private-label goods from name brands as consumers look for ways to save money. Treehouse, whose roots trace back to Keebler elves, has gained 24% in the past 12 months, compared with a 39% drop in the Standard & Poor’s Smallcap 600 Index (IJR).

Source: Global Investment News Briefs Tuesday March 24, 2009