Tag - Sup

Stocks sharply slid at closing on Friday on news that Citigroup would likely have to allow the U.S. government to own a 36% stake in the embattled firm, and on shrinking Q4 GDP. Some of today’s small-cap gainers were Permian Basin Realty Trust (NYSE:PBT), Superior Industries (NYSE:SUP) and Aircastle (NYSE:AYR).

Other Market Watch highlights today included:

• The Russell 2000 (NYSE:IWM) closed down 3.93, or 1%, to 389.02. The S&P 500 closed down 2.36% to 735.09. The Dow Jones Industrial Average closed down 119 points, or 1.66% at 7,062, its lowest close since May 7, 1997.
• For the year, the Russell is down 22.11%, the Dow is down 19.52% and the S&P 500 is down 18.62%.
• Citigroup reported it has reached a deal that will give the U.S. government up to a 36% stake in the embattled bank.
• U.S. government: Economy has shrunken at a faster-than-expected 6.2% pace in fourth quarter -- the worst showing in 25 years 
• Eastern Europe's struggling banks will receive $31.1 billion worth of emergency help from leading international financial institutions.

Small Cap Gainers:

• Permian Basin Realty Trust climbed 20% higher after Jim Cramer recommended the stock on "Mad Money" on Thursday night. See (NYSE:PBT). 
• Superior Industries closed up 19% after being upgraded to "neutral" today. See (NYSE:SUP).
• Aircastle rises 13% after seeing its Q4 adjusted profit increase by 31.8%. See (NYSE:AYR).

Small Cap Losers:

• Macquarie Infrastructure reported a widened Q4 loss; shares head south 37%. See (NYSE:MIC).
• Union group opposes aid to Principal Financial; shares tumble 25%. See (NYSE:PFG).
• A.M. Best downgrades ratings of FBL Financial Group, Inc., sending shares 24%. See (NYSE:FFG). 

Small-cap stocks opened sharply lower, pressured by a renewal of the credit crisis fears and reeling from a dramatic surge in crude oil that could crimp consumer spending habits and weigh on sentiment. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 4.43, or 0.62%, at 715.12.

Financial shares sparked a wave of overnight selling after American International Group (NYSE:AIG) released earnings that disappointed investors and renewed concerns about debt write-downs among financial institutions. AIG tumbled 5% on the regular opening (which was better than the overnight showing), and the largest bank Citigroup (NYSE:C) was basically flat — also not as bad as overnight action — as the CEO spoke at an investor meeting.

There also was talk of asset allocation plays being back in vogue this morning, with investors shifting money away from equities and into treasury products. The old stock market adage “sell in May and go away” appeared to have a life this first full week of May trading.

In a Goldman Sachs research report released overnight, analysts say that the underlying shock of mortgage credit defaults is large and “still has a ways to go.” Although they say that some of the markets that have been beaten down will normalize and create positive spillover on sentiment in the broader economy, they said that excess housing supply, acceleration of home price declines and over leverage in the U.S. housing market will not go away anytime soon.
 
“We believe that such losses (from over leverage) imply further adverse surprises for balance sheets in parts of the financial sector, with correspondingly adverse effects on lending and economic activity. The focus of the pain is likely to shift away from subprime mortgages, where the markets are already discounting very large losses, to other residential mortgage debt, including prime mortgages. This is one reason why we are expecting a renewed slowdown in economic activity after the stimulus-fueled bounce in mid- to late 2008. In turn, it makes us fairly confident that . . .

It’s been a long and sometimes rocky road for Hayes Lemmerz International (Nasdaq: HAYZ) since its founding companies manufactured wood-spoke wheels for Henry Ford’s Model T. The Northville, Mich.-based maker of steel and aluminum wheels has survived the decline of the Big Three automakers in Detroit and a Chapter 11 reorganization earlier this decade, and now seems on track to reap the benefits from its concentrated effort to restructure operations and restore profitability.

The company earlier this month announced solid gains in sales and earnings for the first fiscal quarter ended April 30, and said it was on target to reach full-year goals of $2.2 billion in sales and $200 million to $210 million in EBITDA, compared with $2.06 billion and $188.6 million in the year ended January 31.

Hayes Lemmerz is the global leader in supplying steel and aluminum wheels to passenger cars and steel wheels to commercial vehicles. It has had a laser focus in the past couple of years in positioning itself in the global automotive market and now realizes three-quarters of its sales outside the United States (and four-fifths of its wheel sales). While it still depends heavily on the Big Three in the Unites States, it has won virtually all the major European and Asian carmakers as customers as it shifts production to low-cost sites in Czech Republic, Turkey, Thailand and India.

At the same time, it has shut down and sold off non-core operations in the Unites States  and in general downsized the company, going from 43 facilities and 11,000 employees when it emerged from Chapter 11 in 2003 to 30 facilities and 8,500 employees now. Of those 30 facilities, only seven, with 1,500 employees, are in the Unites States – the remaining 23 facilities and 7,000 employees are spread among 13 foreign countries. Wheels, which represented two-thirds of sales in 2003, are projected to account for 84% in 2007. Other products include components for brakes and powertrains.

The company followed up its operational efforts with a successful capital restructuring this spring, raising $180 million in a rights offering, plus a $13 million direct investment by manager Deutsche Bank, to retire senior debt. It consolidated the rest of its debt in a $495 million syndicated loan and a $175 million euro-denominated note offering in Europe, so that the end result is to slash $24 million annually from its interest expense ($76 million in the past fiscal year), extend maturities (the earliest now is 2013), and better match its income streams.