by Calculated Risk on 7/20/2009 10:18:00 PM

From the SacBee: Schwarzenegger, lawmakers reach state budget agreement

Gov. Arnold Schwarzenegger and legislative leaders agreed Monday to balance Californias $26 billion deficit ... The proposal includes spending cuts to programs ranging from schools to welfare-to-work to prisons. It takes money from local governments, including borrowing $2 billion that the state will repay starting in 2013 and taking gas taxes that normally go toward local road projects.

by Calculated Risk on 7/20/2009 08:23:00 PM

Press Release: CIT Announces $3 Billion Credit Facility and Initiates Recapitalization Plan (ht jb)

CIT Group Inc. ... today announced that it entered into a $3 billion loan facility provided by a group of the Company’s major bondholders. CIT further announced that it intends to commence a comprehensive restructuring of its liabilities to provide additional liquidity and further strengthen its capital position.

Today’s actions, including a $3 billion secured term loan with a 2.5 year maturity (the “Term Loan Financing”), are intended to provide CIT with liquidity necessary to ensure that its important base of small and middle market customers continues to have access to credit. Term loan proceeds of $2 billion are committed and available today, with an additional $1 billion expected to be committed and available within 10 days.
...
As the first step in a broader recapitalization plan, CIT has commenced a cash tender offer for its outstanding Floating Rate Senior Notes due August 17, 2009 ... for $825 for each $1,000 principal amount of notes tendered on or before July 31, 2009. Lenders in the Term Loan Financing have agreed to tender all of their August 17 notes. ...

Additional information regarding the financing will be available in a Form 8-K to be filed by the Company with the Securities and Exchange Commission. Further, the Company’s earnings release and conference call previously scheduled for July 23, 2009, have been cancelled. The Company will report its results for the quarter ended June 30, 2009 when it files its quarterly report on Form 10-Q.
emphasis added

Cancelling the earnings release and conference call, and proposing a 20% haircut on debt due in 30 days, does not inspire confidence.

by Calculated Risk on 7/20/2009 06:40:00 PM

Texas Instruments is seeing a pickup in orders, but is this just inventory restocking or because of a pickup in end demand?

From the conference call (ht Brian):

Analyst: You mentioned that visibility has improved markedly. And it's obvious in a way because your bookings were up and your backlog is higher. Are there -- is there anything that you're hearing or seeing from your customers that says to you what we're seeing is more sustainable than one might have thought a quarter ago?

TXN: Well, the signals that we're seeing, Glen, have to do with the rate of decline that we're seeing in their inventory levels. It has slowed substantially. Which certainly signals to us that they believe their inventories are much better aligned now with their true end demand. So that's probably one of the better signals that we're seeing. And the second, of course, is the orders. We actually saw our backlog for the current quarter increase about 27% versus where we were 90 days ago. In other words, starting the third quarter, we had 27% more backlog than we did starting the second quarter. So that's given us increased visibility and increased confidence for the third quarter.

Analyst: your guidance [for Q3 indicates] the mid-point would be up 7.8% from where you came in in Q2. I'm curious how much of that you feel is [inventory] restocking which might occur in the channel. I just note that a little more typical seasonal might be up maybe 3% to 4%.

TXN: Where we have great visibility in terms of actually knowing the specifics of inventory trends will be at distribution. When we start moving out into the OEMs and EMS , we generally will have a feel for what's going on, but it's difficult to be specific. If you just look at for example last quarter, our largest customer which did report last week announced that they reduced their inventory 14%, the other area where I said we had great visibility was at distribution where we saw inventory go down 10%. So, between those two guys alone, they represent half of our revenue, in second quarter we continued to ship below the rate at which they're shipping out. The other half of our revenue basically we think there are general trends that probably match the other half -- the first half I described. So going into third quarter, we know based upon the half of our revenue that I just described, our shipments entering the quarter are below the rate at which the customers are shipping out. So we know or we believe there's more room to go in terms of what I would call the convergence of our shipments and the rate at which our customers are [shipping]. Does it go beyond that and have those customers start to replenish inventory, that wouldn't be surprising just given the seasonality of third quarter coming into the holiday market. But I don't want to speculate on what will or will not happen other than a normal seasonal trend would indicate that.

It sounds like TI's customers are trying to match their inventory to their new lower level of shipments, but it isn't clear there is any pickup in end demand.

by Calculated Risk on 7/20/2009 05:30:00 PM

From CNBC: Roubini: Economic Recovery to Be 'Very Ugly'

"The recovery is going to be subpar," [Nouriel] Roubini said. "I see a one percent growth in the economy in the next few years. There will also be 11 percent unemployment next year and the recovery is going to be slow. It's going to feel like a recession even when it ends."
...
When asked about the economy Monday, Roubini said, "We may be out of a freefall for the financial system," said Roubini. "We have seen the worst in that sense. But in my view there is a sluggish U shaped recovery that might go into a W double dip if we don't fix the problems in the economy."
...
On a second stimulus: "I think there will be another one toward the end of the year. We need to have more shovel ready labor intensive infrastructure projects. We'll need it."

by Calculated Risk on 7/20/2009 03:09:00 PM

This is the second consecutive month were vehicles miles driven were flat, or slightly above, the comparable month in 2008 (May 2009 compared to the May 2008).

The Dept of Transportation reports on U.S. Traffic Volume Trends:

Travel on all roads and streets changed by +0.1% (0.2 billion vehicle miles) for May 2009 as compared with May 2008. Travel for the month is estimated to be 257.3 billion vehicle miles.

Click on graph for larger image in new window.

The first graph shows the rolling 12 month of U.S. vehicles miles driven. (label corrected: trillions)

By this measure (used to remove seasonality) vehicle miles declined sharply and are now moving sideways.

The second graph shows the comparison of month to the same month in the previous year as reported by the DOT.

As the DOT noted, miles driven in May 2009 were 0.1% greater than in May 2008.

Year-over-year miles driven started to decline in December 2007, and really fell off a cliff in March 2008. This makes for an easier comparison for May 2009.