Tiny Pictures rasies $7.2M Series B, led by Draper Fisher Jurvetson [Posted on February 25, 2008 - 7:00 AM]

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Online services designed to keep friends and family connected are a dime a dozen, but Tiny Pictures Inc. is banking on the camera phone to do the trick. Investors are buying in, with the company announcing Monday morning that it has closed a $7.2 million Series B round, led by Draper Fisher Jurvetson, and including Series A investor Mohr Davidow Ventures. The company, which creates the Radar service for real-time sharing of camera phone photos and video clips, had previously raised $4 million in first-round financing, including seed funding from angel investors Joichi Ito and LinkedIn founder Reid Hoffman. Tiny Pictures is the brainchild of John Poisson, a 10-year veteran of the film and TV business who headed up mobile media research and design groups at Sony Corp. in Tokyo and founded the Canadian digital animation studio, Meteor Studios. (The photo of him above was taken by Ito.) “It was four o’clock in the morning on April 4, 2004, and I was hanging out with some friends in this tiny bar in Tokyo,” Poisson tells Tech Confidential, recalling the moment when he decided to start the company. While in Japan, where camera phones and other handheld gadgets are ubiquitous, Poisson had come to understand “what it means to have these devices in our hands. It’s really about a deep and intimate connection between us and the people in our lives.” Unlike other social networking sites where users publish posts, photos and video clips for all and sundry to consume — think Flickr and YouTube — Tiny Pictures is designed for intimate groups to stay in touch, with casual, personal photos at the center of their discussions. “What I want to do is share experiences, not photographs,” says Poisson. “We can communicate really effectively by sharing pictures of what we’re doing right now.” His idea seems to be attracting a hip, young, camera phone-carrying crowd — as well as some innovative advertisers. For example, Warner Brothers used the Radar service to promote the Will Smith sci-fi flik “I Am Legend,” encouraging people to take photos of its “God Still Loves Us” logos all over the world. Black Eyed Peas frontman will.i.am is joining Tiny Pictures’ advisory board this month and plans to use the service to promote his projects. Investor Tim Draper first heard about the Radar service from his son, a student at UCLA. “Radar is a remarkable service, combining everything that’s powerful about mobile and focusing on a burgeoning opportunity of global scale,” says Draper in a statement. “We fully expect Tiny Pictures’ approach to picture-driven communication to change the world.” Nothing tiny about that. - Mary Kathleen Flynn See Jan. 21 review of the Radar service from SMS Text News

http://www.techconfidential.com/behind-the-money/

blog/angel-investor/-tiny-pictures-inc-is.php

Countrywide Puts an End to Ski Junket

By MICHAEL J. de la MERCED

Published: February 25, 2008

The weather forecast may call for snow and good skiing conditions in Avon, Colo., on Monday. But no one at the luxury resort, near Aspen, will be hitting the slopes — or eating $105 Kobe steaks — on Countrywide’s dime this week.

Countrywide Financial, the besieged mortgage lender, has canceled a gathering of bankers from smaller mortgage banks at the Ritz-Carlton Bachelor Gulch ski resort (where room rates begin at $725), Countrywide said in a statement on Sunday.

The company was to pay for 30 invited guests’ hotel rooms, meals, skiing and tips.

In the statement, the company said that “in light of recent events” it had decided to cancel all gatherings with business partners and clients for the rest of the year, moving quickly after being criticized for planning such an extravagant event.

The three-night gathering, which was to include business meetings as well as skiing, drinking and sampling expensive meals like $140 caviar and Kurobuta pork osso bucco at the Spago restaurant, had already drawn negative press. “Let ’Em Eat Kobe Steak,” a headline in The New York Post sneered on Saturday.

Countrywide has held the gathering every year for its correspondent lenders, which make the loans and sell them to the company. And companies treating business partners to high-priced junkets is nothing new in the corporate world.

But this year’s event coincides with a continued crisis in the mortgage markets. Default rates are skyrocketing. Countrywide, the nation’s largest mortgage company, has foreclosed on about 90,000 loans so far. Banks have called for intervention from the federal government to prevent a wider housing crisis.

Moreover, Countrywide agreed last month to sell itself to Bank of America for $4.1 billion, a fraction of its former market value. It has reported a $422 million loss for its fourth quarter, after setting aside $924 million for credit losses and taking an $831 million impairment charge related to home equity lines of credit.

It has also laid off more than 11,000 employees since last July.

http://www.nytimes.com/2008/02/25/business/25lender.html?ref=business

Faulting UBS for Losses in Bad Debt, Bank Is to Sue

By JULIA WERDIGIER

HSH Nordbank, a state-controlled German bank, said it planned to sue the Swiss bank, claiming it improperly managed a portfolio of complex debt products.

Faulting UBS for Losses in Bad Debt, Bank Is to Sue

By JULIA WERDIGIER

Published: February 25, 2008

LONDON — HSH Nordbank, a state-controlled German bank, said Sunday that it planned to sue the Swiss bank UBS over a portfolio of complex debt products, which it contends that UBS improperly sold and mismanaged.

HSH Nordbank, based in Hamburg, said it wanted to recover “significant losses” from a $500 million portfolio of collateralized debt obligations linked to the American mortgage market, which the German bank bought from UBS in 2002. HSH said it would file the claim against UBS by the end of February in New York, under whose state laws the original deal was fashioned. A UBS spokesman, Dominik von Arx, declined to comment.

Some investors have started to file legal claims against financial institutions in an effort to recover losses from the subprime mortgage crisis. Massachusetts’s top securities regulator, for example, accused Merrill Lynch this month of defrauding the city of Springfield with investments linked to subprime mortgages.

Large financial services firms sold billions of dollars’ worth of complex debt products, which are now losing value.

“Our claims against UBS will show that the manner in which the investments were sold to HSH Nordbank and UBS’s subsequent management of the assets were clearly contrary to our interests,” said Bernhard Blohm, head of communications at HSH Nordbank.

HSH Nordbank claims that the investment was supposed to be “conservatively managed by UBS according to prudent investment objectives” but that UBS “appears to have condoned actions which benefited only itself, at the expense of its clients.”

The bank said it had repeatedly tried to speak to UBS’s senior management about its concerns but was left with no option but to start legal proceedings.

Banks have rarely compensated clients for losses on their investments, because of concern about setting off a wave of similar claims or lawsuits.

Over the last decade, German banks like HSH Nordbank piled on complex debt products to diversify their holdings and bolster income at a time when revenue growth in their home market was slowing.

The products were initially deemed to be low in risk by ratings agencies, but their ratings changed when it appeared last year that many of them were linked to subprime loans in the United States that have gone bad.

UBS senior managers will face shareholders this week at an extraordinary meeting in Switzerland to discuss record write-downs at the bank because of its exposure to the global credit crisis through C.D.O.’s and other securities.

Also on the agenda is the sale of a stake in the bank to sovereign funds in Singapore and the Middle East. UBS was among the financial institutions hardest hit by the credit crisis; it has so far written down more than $18 billion.

But HSH Nordbank has been affected by the recent market turmoil beyond the portfolio it bought from UBS. This month, it provided financing to cover its 3.3 billion euro ($4.8 billion) structured investment vehicle, an investment instrument that uses short-term debt to invest in higher-yielding securities, to prevent a fire sale of the assets.

HSH Nordbank is the result of the merger in 2003 of Hamburgische Landesbank and Landesbank Schleswig-Holstein. It has 4,600 employees and total assets of 205 billion euros ($304 billion), according to its Web site. The city of Hamburg is its largest shareholder, owning 35.8 percent of the bank.

 http://www.nytimes.com/2008/02/25/business/

worldbusiness/25bank.html?ref=business

 http://www.bloomberg.com/apps/news?pid=2

0601109&refer=news&sid=a.qZBZCE.qRE

As Goodyear Junk Bonds Slide, Shares Signal Rebounding Economy
By Fabio Alves and Michael Tsang

Feb. 25 (Bloomberg) — Goodyear Tire & Co.’s stock climbed 14 percent in the past six weeks, while U.S. Steel Corp. gained 7 percent. Both shares rallied as their junk-rated bonds dropped.

During the past decade, a retreat in high-yield debt has foreshadowed every decline of at least 10 percent in the Standard & Poor’s 500 Index. This time bonds may be wrong, and stocks may prove more prescient, signaling corporate profits can withstand $162 billion in banks’ credit writedowns and a slowing economy.

Shares of the 691 U.S. companies with non-investment grade bond ratings have climbed 5.3 percent in the past month, according to data compiled by Bloomberg. That compares with a 5.2 percent increase in the yield investors demand to own high- yield bonds rather than U.S. Treasury notes, according to an index of 892 issuers compiled by Merrill Lynch & Co.

“The stock market is acting more rationally,” said James Swanson, who helps oversee $200 billion as chief investment strategist at MFS Investment Management. “It seems to be saying, `As bad as things are, we’re not in a recession.”’

Goodyear and U.S. Steel shares are advancing even after the prospect of the U.S. economy slipping into a recession eroded bond investors’ confidence that the least-creditworthy companies will repay their debts. The yield premium for junk bonds, which stands at 7.35 percentage points, has tripled since falling to an all-time low of 2.41 percentage points on June 5, according to index data from New York-based Merrill, the world’s largest brokerage.

Junk bonds carry ratings below Baa3 from Moody’s Investors Service and BBB- from Standard & Poor’s.

High Risk, Low Return?

Lincoln Anderson, who oversees $271 billion as chief investment officer at LPL Financial Services in Boston, says the worst start to a year for junk bonds since 1990 isn’t warranted.

High-yield bonds in less than two months this year have lost 2.8 percent, including coupon payments, and trade at an average of 89.18 cents on the dollar, Merrill Lynch data show. During the nine-month long recession in 2001, junk bonds declined 2.4 percent. In 1990, they fell 4.4 percent.

While the market for junk bonds may be showing that a contraction is a foregone conclusion, Wall Street economists say otherwise. The economy may expand 1.8 percent this year, according to economists surveyed by Bloomberg. That’s more than the 1.6 percent growth rate in 2001 and compares with a contraction of 0.2 percent in 1990, according to Bloomberg data.

Lumped Together

“It’s indiscriminate selling and not particularly thoughtful analysis of underlying company fundamentals in credit markets,” said Anderson. “Bond investors are just lumping everybody in together, which is a big mistake.”

Credit-default swaps, or contracts used to hedge against the risk a company will be unable to repay its debts, indicate that 9 percent of junk-rated companies may default in the next 12 months, according to MFS’s Swanson, a former high-yield bond specialist who has worked for the Boston-based company for 22 years. That’s almost double the rate that Moody’s expects in 2008.

Still, the first decline in home prices since the Great Depression and higher financing costs for companies and households may cause defaults to accelerate and stifle economic growth. More than one in five high-yield bonds are now considered distressed, meaning they yield at least 10 percentage points more than benchmark rates, Merrill said last week. That’s about the same ratio as before the recession of 2000.

“The high-yield bond market is correctly focused on the stresses in the financial system,” said Margaret Patel, fund manager at Evergreen Investment Management Co. in Boston, which oversees $274 billion. “I don’t think we’re seeing any indication of more optimism.”

The stock market tells a different story.

A Good Year

After Goodyear, the largest U.S. tiremaker, this month posted a better-than-forecast fourth-quarter profit of $52 million, shares of the Akron, Ohio-based company jumped the most since Oct. 30, when it last announced results.

Goodyear has beaten analysts’ profit estimates for three straight quarters. At the same time, the spread on its bond yield to Treasuries has risen more than 80 percent in the past year. In the past six weeks, the yield premium on Goodyear’s 9 percent notes due in 2015 has widened by 33 basis points to 488 basis points. They are rated Ba3 at Moody’s, three steps below investment grade. S&P ranks them at B, two rungs lower.

U.S. Steel, the second-largest U.S.-based steelmaker by market value, has gained 5.8 percent since the company reported an 88 percent drop in fourth-quarter profit.

Consensus estimates indicate the Pittsburgh-based company’s earnings per share will rise 49 percent in 2008, after falling 34 percent last year. Still, the yield premium on its $450 million 6.05 percent notes due in 2017 widened 125 basis points to 353 basis points since the first week of January, trading at 92.52 cents to the dollar. The debt is rated BB+ at S&P.

“The stock market is correctly smelling out most of these cases, that these companies aren’t going to default,” said Swanson, 58. “It’s just the bond market working where so many people need to sell at once that it’s driving the prices crazy low. It’s irrational from a fundamental point of view.”

To contact the reporters on this story: Fabio Alves in New York at falves3@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

Last Updated: February 24, 2008 19:02 EST

 http://www.bloomberg.com/apps/news?pid=20

601109&sid=a3Pj6ZN5Y.x8&refer=news

Buyout Executives Meet in Germany as Takeovers Vanish (Update1)
By Edward Evans

Feb. 25 (Bloomberg) — Carlyle Group founder David Rubenstein and TPG Inc.’s David Bonderman will join a meeting of about 1,500 executives from the leveraged buyout industry in Germany this week, as funding for takeovers vanishes and returns deteriorate.

At last year’s Super Return conference, executives toasted an unprecedented $713 billion of acquisitions with a reception at the Frankfurt Zoo, where they were entertained by a dance troupe and challenged to find the glass of champagne containing a real diamond.

That was four months before the U.S. subprime mortgage market started to collapse, leaving banks with a backlog of about $230 billion in buyout loans and reducing their appetite to fund any new takeovers. Two preferred routes to generate quick returns, selling assets to other buyout firms or taking dividends from investments, also withered in the credit drought.

“The industry made its fortune on the debt bubble and now it’s got to harvest it,” said Jon Moulton, the managing partner of Alchemy Partners, who will give the conference’s opening address in Munich tomorrow. “Returns will go to hell in a hand- basket.”

Only three months ago, Johannes Huth, Kohlberg Kravis Roberts & Co.’s European chief, stood up in front of a conference of private equity executives in Paris and reassured them that bankers would resume lending in January.

“Slightly wrong there, I think,” Moulton said. “We’ve got at least a year of very tough credit markets. Banks are short of capital.”

Deal Slump

After announcing a record $537 billion of deals in the first six months of 2007, the pace of buyouts slumped. Private-equity firms announced $202 billion of deals worldwide in the second half, according to data compiled by Bloomberg. The firms have announced $25 billion of deals in 2008, Bloomberg data show.

Funding costs for buyouts have almost doubled, according to Merrill Lynch & Co. indexes. The extra yield, or spread, investors demand to hold high-yield debt has more than tripled since June to 749 basis points.

“The banks are only dealing with a fraction of their true potential credit losses,” Terra Firma Capital Partners founder Guy Hands wrote in a letter to his investors last week. “The full scale of the problem will only become visible over the next two to four years.”

The cost of protecting European corporate bonds from default also surged to a record, according to contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings.

$1 Billion Benchmark

“Buyout firms will find it harder to finance acquisitions,” said Howard Marks, who oversees $51 billion in distressed debt at Los Angeles-based Oaktree Capital Management LLP, in a note to clients last month. “Especially large ones.”

The LBO firms can’t get more than 1 billion euros ($1.45 billion) of debt for each buyout, because demand from investors such as collateralized loan obligation funds has evaporated, Carlyle managing director Robert Easton said earlier this month at an industry meeting in London. ` Raising more than $1 billion is “much more difficult,” said Apax Partners Worldwide LLP co-founder Ronald Cohen in an interview on Bloomberg television today. Capital is much less available because of concern about the slowing economy, he said.

Firms also will struggle to refinance loans they took out to fund deals in the boom years on the same terms, according to Oaktree’s Marks. So-called leveraged recapitalizations, where a private equity-owned company takes new loans to pay its owner a dividend, will become harder to finance and that may cut returns, Marks said.

`Severe Writedowns’

“It will be harder for firms to achieve profitable exits, as would-be buyers from private equity funds won’t find it as easy to finance purchases or pay high prices,” Marks wrote. “And IPOs will be an uncertain route to realizations.”

Firms may also have to write down the value of their investments from the boom years as the economy slows, according to Moulton.

“There will be some very severe writedowns,” he said. “Returns will already start to look pretty manky and get worse as the year goes on.”

Still, executives see one advantage for private equity firms after 18 months of unprecedented political scrutiny of their employment record and tax arrangements.

“The debate has moved on,” said Adrian Johnson, chief executive of British insurer Legal & General Group Plc’s private equity unit, in a Feb. 21 interview. “`The big firms are not doing transactions now and there aren’t things going on that remind people of private equity.”

To contact the reporter on this story: Edward Evans in London at at eevans3@bloomberg.net

Last Updated: February 25, 2008 04:09 EST

Rob now, HOPE later

A robber in a ski mask blamed the bank for what he was about to do, The Associated Press reported Feb. 22.

“You took my house, now I’m going to take your money!” the assailant hollered. Talk about a reverse mortgage!

The FBI plans to review the bank’s foreclosure records for clues.

The suspect is presumed to be ARM’ed and dangerous.
(hat tip Sam frm SNL)

Posted by CalculatedRisk at 9:16 AM

Comments (39)   Labels: humor

housingwire.com will stop at nothing

 http://www.housingwire.com/2008/02/22/friday-rumor-bofa-buying-ubs/

 do these guys have short sales on in BofA or UBS shares? 

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Friday rumor: BofA Buying UBS?

• by Paul Jackson
• February 22, 2008

The powers that be here at HW have been busy focusing on getting a new Web site launched today (you’ll see it starting this weekend). But market rumors keep moving around, with the craziest being that Bank of America is looking to buy UBS. We’re not kidding.

Just read the speculation over at FT Alphaville. Sounds as if they’re as cynical as we are here in the HW newsroom about the alleged deal.

Sure, it’s just a rumor at this point. But if it’s right, at least we can say HW was among the first to mention it. Or that we were duped by those hacks at the Financial Times. Take your pick.

 http://calculatedrisk.blogspot.com/

Sunday, February 24, 2008

Loan liquidator: CRE values in for steep drop

From Financial Week: Commercial property values in for steep drop, says loan liquidator

In what may well be a sign of things to come, Mission Capital Advisors said it is accepting bids for a $131.2 million portfolio of non-performing loans secured by commercial mortgages foreclosed on by a Midwestern bank.

… [David Tobin, a principal at Mission Capital] predicted commercial property values are heading for a steep fall due to the rising tide of troubled portfolio sales by banks, as they move to get non-performing assets off their books.

… Eventually, Mr. Tobin believes the declines in the commercial real estate market could mimic those being registered in the residential market now.

The CRE slowdown is here, but I don’t think the CRE bust will be as bad as the residential bust.

Posted by CalculatedRisk at 1:41 PM

Comments (110)   Labels: CRE  http://calculatedrisk.blogspot.com/