bstocksdev

TheStreet.com's Jim Cramer says the only action in the sector is that the rumor mill is spinning overtime.

There are tons of ridiculous stories that can be written in the Naked City. Notice that every day we are blessed with a story about how there are three private-equity firms examining Lehman Brothers (NYSE: LEH) (Cramer's Take) and Neuberger Berman (NYSE: NEU) (Cramer's Take). I think I have read that story a dozen times now.

You can list them, too: Blackstone (NYSE: BX) (Cramer's Take), KKR (NYSE: KFN) (Cramer's Take), Apollo (NASDAQ: AINV) (Cramer's Take), maybe Cerberus. What are they going to do, deny it? "No, we are not looking at it?" Their investors would love that: "Well what the heck are they doing with our money?" would be the reaction of investors if they issued denials. I predict weeks more of phantom tire-kicking of Lehman by nonexistent private-equity firms.

How about private equity about to swarm over collateralized debt obligations? Usual cast of characters there. Right? Come on, those stories are a penny a dozen. Every day I read about them. But nobody, other than Lone Star, is doing anything, anything at all on this front. If there were buyers, you can bet that Lehman and AIG (NYSE: AIG) (Cramer's Take) wouldn't be in the woods, lost, hopeless, with tons of bad European paper.

Lehman Brothers Holdings Inc. (NYSE: LEH) is poised to lose $2.6 billion and it's trying to dump $40 billion worth of real estate from its books. The Wall Street Journal reports that Guy Moszkowski, a Merrill Lynch & Co., Inc. (NYSE: MER) analyst thinks Lehman could lose $2.6 billion -- while others expect a mere $1.8 billion loss. Lehman normally reports in mid-September but it may pre-announce earnings this month.

I always find it interesting when analysts -- particularly those who work for banks with their own problems -- offer bearish earnings outlooks for their competitors. But I have met Moszkowski and I found him to be both very smart and a straight shooter. The Journal reports that he "more than doubled his loss projection to $2.6 billion and predicts that Lehman will take a $4.5 billion hit from write-downs." It quotes him as saying that an additional markdown up to 20% related to Lehman's remaining $64 billion in mortgage and commercial real-estate exposure "seems like a lot but can't be ruled out." If that were to happen, Lehman might need to raise more capital.

Speaking of that real estate, FT.com reports that Lehman is in talks to dump $40 billion worth of commercial real estate assets and securities. FT.com reports that there is a wide gap in what the potential buyers -- Blackstone Group (NYSE: BX) and BlackRock (NYSE: BLK) -- and Lehman think those assets are worth. It also reports that the assets in question consist of mortgages and mortgage-backed securities that Lehman valued at $29.4 billion at the end of May and real estate assets then valued at $10.4 billion.

With surging energy prices, investors have been pouring huge sums into alternative energy and cleantech deals. For example, according to a recent survey from Ernst & Young/Dow Jones VentureSource, venture capital investments in the category have surged 83% to $961.7 million in Q2.

Well, private equity shops also want some of the action (especially since buyouts continue to remain fairly dormant). That is, the Blackstone Group LP (NYSE: BX) has established its Cleantech Energy Group.

The chief of this division will be James D. Kiggen, who certainly brings some nice credentials. He was the senior vice president at AllianceBernstein L.P, where he analyzed emerging technologies. He also structured investments in a variety of cleantech companies, like A123Systems and Powerspan.

It looks like Kiggen will have a wide mandate. Some of the investment themes include wind power, solar, ethanol, renewables and so on.

In fact, Blackstone has already made some cleantech investments. One example is an investment with Windland Energieerzeugungs GmbH to complete Meerwind, a massive wind farm project in the North Sea. There was also an $870 million deal for a Bujagali hydroelectric power station (late last year).

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

According to the Blackstone Group LP (NYSE: BX) conference call, it appears that the buyout market is getting somewhat better. For example, in Q2 the firm struck deals like the purchase of the The Weather Channel.

Despite all this, things are still far from good. In fact, Blackstone predicts that the slowdown will continue into 2009 and perhaps 2010. Actually, it looks like the problems are slipping over into Europe and even Asia.

So it should be no surprise that Blackstone's recent financial results are fairly lackluster. The firm posted a net loss of $156.5 million, or $0.60 per share, which compares to a profit of $774.4 million or $0.20 per share in the same period a year ago. Revenues plunged 63% to $353.7 million. Of course, the main reason is that Blackstone hasn't had opportunities to exit investments from its portfolio.

However, Blackstone believes there are juicy investment opportunities. For example, the firm's credit-focused hedge fund, GSO Capital, is investing in distressed debt and even providing financing for Blackstone buyouts. Interestingly enough, the alternative asset management segment saw a 34% spike in revenues to $225.2 for Q2.

Some other good news: Blackstone is still collecting large amounts of assets. So far, the amount is about $113 billion, providing the firm with lots of power to capitalize on things.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

When the Blackstone Group LP (NYSE: BX) went public a year ago, the Chinese government invested $3 billion in the firm. No doubt, this was a sign that Blackstone was ready for lots of dealmaking.

But so far, things have been underwhelming. One of the deals was for a mere $600 million for a 20% stake in China National Bluestar Corporation (a chemicals company). There was also the $160.7 million purchase of a commercial building in Shanghai.

However, Blackstone isn't giving up. In fact, today the company announced the opening of its Chinese office in Beijing. The chief of the operation will be Fu Shan who was formerly the VP of Beijing Mainstreets Investment Group Corporation (which focuses on real estate deals). He also has extensive background with governmental divisions, such as the National Development and Reform Commission (NDRC).

Blackstone realizes that China requires more than just money and deal structuring. There needs to be staff that has deep experience in dealing with the intricacies of the country. Even with this, the dealmaking is still likely to be a slog.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

With bulging coffers, U.S. private equity firms have been aggressively expanding into foreign markets. One of the big players is The Blackstone Group LP (NYSE: BX).

According to a piece in the Financial Times, it looks like Blackstone is taking a look at Informa Plc, a UK publisher.

Actually, it looks like other major private equity firms, such as Providence Equity Partners Ltd. and Carlyle Group, are swarming over the company.

Informa was formed, in 1998, as the result of a merger of the IBC Group plc and LLP Group plc, but if you take a look at the various businesses, the roots go back to 1734 with the first maritime publication.

As of now, Informa has operations in 40 countries and about 10,000 employees. Moreover, the firm organizes more than 10,000 events and conferences a year. There are also 2,500 subscription based information services.
In other words, Informa has a fairly steady business, with strong recurring revenues.

Interestingly enough, last month Providence Equity made a preliminary overture for Informa for about $4.29 billion. But getting debt financing won't be easy.

Then again, in the case of Blackstone, it might not have to worry about such things since it looks like the firm is teaming up with the cash-flush Dubai World Trade Center sovereign wealth fund.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

TheStreet.com's Jim Cramer says as long as there are other buyers of the paper, look for other similar deals.

Merrill's (NYSE: MER) (Cramer's Take) deal with Lone Star gives the first real stab of the private market value of this paper, 22 cents on the dollar. But when you add in the financing you can argue that it is about half that.

Why so low? Because even after a year and a half of stress, we still can't publicly value this stuff.

Remember the deal with Lone Star is a private one, where the investors have to wait five years for the paper to mature. We don't really know what a CDO is worth, you just know what they may have paid.

This is despite the fact that for years now, this stuff has existed, no one has come out and said "this CDO has a lot of Florida, so it is bad," or "this piece of paper has a 90% default rate," or "this debt is hindered by bad HELOC."

Without that info, we can't price it. Lone Star knows more than most, but basically had to put up very little. In this deal, Merrill said "here, we will pay you to take these off our hands."

TheStreet.com's Jim Cramer says KKR will join the list of buyout firms that fleece the small investor by going public.

Just what we need, a private-equity firm to go public. That worked just great with Fortress Investment (NYSE: FIG) (Cramer's Take), and it was terrific with Blackstone (NYSE: BX) (Cramer's Take). At least this one is some sort of reverse merger that might not inflict too much pain on the public.

Of course, folks in this business are displaying their usual lack of shame. It would be an excellent time for them to have a good reason beyond employee retention; I mean if you are making all of that money, what's the issue with retention? It would also be terrific if they were doing well, but there hasn't been a deal in so long that it would be a bit of an oddity if they were doing anything other than making a lot of fees.

But Kohlberg Kravis Roberts is a storied lot, so I figure the public will lap it up and all will be well until the losses start.

Or maybe this will be the one that's in the blue moon and the public will not be pants'd by the really smart bankers.

The New York Times reports that Kohlberg Kravis and Roberts (KKR), the most famous of the private equity firms, is now ready to part with its private status -- a year after it watched Blackstone Group (NYSE: BX) go public and promptly lose half its value.

The Times reports that KKR already has a public affiliate, KKR Private Equity Investors, which is listed on the Euronext in Amsterdam. KKR will buy that for $3.9 billion. This complex deal will value KKR at between $12 billion and $15 billion. The deal will put 21% of the firm's shares in public hands while KKR executives will own the other 79%.

How do we know that KKR's IPO won't lose half its value as Blackstone's did? We don't. But KKR executives won't be able to sell their shares at the offering -- according to the Times, KKR executives will have a "six- to eight-year vesting period compared with Blackstone's three- to four-year period." And once KKR is public, independent directors will control it; whereas inside directors run Blackstone.

When UK mortgage lender HBOS Plc went to market to raise capital, the outcome was a bust. The company sold only about 8% of the securities. In the end, HBOS's underwriters -- Morgan Stanley (NYSE: MS) and Dresdner Kleinwort Ltd. -- were stuck with $7.6 billion in unwanted paper.

In light of this, it's going to be tough for UK financial institutions to bolster their balance sheets. But there is an alternative: private equity.

In fact, it looks like The Blackstone Group LP (NYSE: BX) is taking a look at Paragon, a UK mortgage lender. It appears that Paragon is opening up its books to engage in some initial due diligence.

Of course, this is still nascent, and deals can easily fall apart, especially in tough markets. However, investors are certainly excited. In London trading, Paragon's shares spiked 23%.

Even so, the value of Paragon is still down 87% over the past year, so it should be no surprise that the private equity folks sense opportunity.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

MAJOR PAPERS:

• The books of Fannie Mae -- Federal National Mortgage Association (NYSE: FNM) -- and Freddie Mac -- Federal Home Loan Mortgage Corporation (NYSE: FRE) -- are being examined by the Federal Reserve and the Office of the Comptroller of the Currency to review their financial condition, according to the Wall Street Journal.
• The Wall Street Journal also reported that the Chevy Volt, an electric car from General Motors Corporation (NYSE: GM), is slated to roll out in two years and it received a major boost from 36 utilities that operate in 40 states who agreed to work together to make the plug-in vehicle possible. Among the utilities are American Electric Power Company Inc (NYSE: AEP), Consolidated Edison Inc (NYSE: ED), Duke Energy Corporation (NYSE: DUK), and Edison International (NYSE: EIX).
• Struggling mortgage lender Paragon is reportedly in talks with The Blackstone Group LP (NYSE: BX) about a potential takeover by Blackstone, the Financial Times reported.

OTHER PAPERS:

• The New York Times reported that TiVo Inc (NASDAQ: TIVO) will today introduce a "product purchase" feature in partnership with Amazon.com Inc (NASDAQ: AMZN). Under TiVo's plan, the television remote control will be turned into a tool for buying products that are advertised and promoted on talk shows and commercials.

The Blackstone Group LP's (NYSE: BX) $930 million purchase of GSO Capital Partners early this year didn't get much fanfare. But so far, it looks like a stellar deal.

Simply put, GSO is a hedge fund that's focused on distressed debt. Of course, with the slowing economy, GSO is in a prime spot to capitalize on some nice opportunities.

But there is more. Basically, GSO has become a key source of buyout financing (this is according to Bloomberg.com).

For example, when the Weather Channel was up for sale, it was tough to get financing for the deal. So why not GSO?

It worked. In the end, Blackstone and Bain Capital teamed up with General Electric (NYSE: GE) to pull off the acquisition. As for GSO, it provided higher-risk mezzanine debt financing.

Of course there are issues. After all, Blackstone has a conflict. But at the same time, the financial markets are mired in a credit crunch. So, if there are essentially no alternatives, GSO is probably going to provide the best offer.

More importantly, Blackstone realizes that there are some juicy opportunities right now. Thus, by having the GSO advantage, Blackstone certainly is positioned nicely.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

On Tuesday, the Securities and Exchange Commission threw a brushback pitch at those who are betting on the further collapse of our big financial institutions. Instead of suggesting better oversight of the companies, the SEC is going after short sellers.

For 30 days starting Monday, short-selling will be restricted on 19 financial companies. Financial regulators are also cracking down on "sensational rumors." To put the short-selling rule in perspective, consider that even when the market re-opened after the September 11th attacks, the SEC considered, but didn't implement, short sale restrictions.

Since Bear Steans collapsed and Vanity Fair bought the company's story that short-sellers did them in, everyone is worried that short sellers are bringing the market down. And I'm sure they are, but short-selling, after all, is legal. The SEC just loosened rules on it last year.

Yesterday, SEC chair Steven Cox testified that he's worried about short-selling in connection with spreading false rumors to manipulate the market. OK, that's not legal, but as Cox pointed out, the SEC brought its first case -- EVER -- for this sort of deception this year. And it still hasn't gone after anyone for spreading false positive rumors about a company.

Cleveland-Cliffs Inc (NYSE: CLF), founded 160 years ago, is a global mining operator. It's the biggest producer of iron ore pellets in North America and is a major supplier of metallurgical coal. Over the past year, Cleveland's stock price has gone from $28.20 to a high of $121.95. No doubt, the company has benefited handsomely from the surge in the steel market.

Today, Cleveland has offered to pay $128 per share – a cool $10 billion – for Alpha Natural Resources, Inc. (NYSE: ANR), a high-quality Appalachian coal supplier. The expected pro forma enterprise value of the merged companies, which will be called Cliffs Natural Resources, is expected to be about $22 billion.

The metrics on the deal look enticing. By 2009, Cliffs should have revenues of $10 billion and EBITDA of $4.7 billion. Moreover, by 2010, there are expected to be at least $200 million in annual synergies.

All in all, the deal will increase scale, which is becoming essential as the steel industry consolidates. For example, Cliffs will have reserves of about one billion tons of iron ore and one billion tons of metallurgical and thermal coal.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

MAJOR PAPERS:

• The Financial Times reported that Bain Capital, The Blackstone Group LP (NYSE: BX) and General Electric Company's (NYSE: GE) NBC universal will acquire The Weather Channel properties from Landmark Communications for approximately $3.2B in a leveraged buy-out. The Weather Channel will be run separately.
• A top Goldman Sachs Group Inc (NYSE: GS) trader is defecting to GLG Partners Inc (NYSE: GLG), the UK's second-largest hedge fund. Goldman's Driss Ben-Brahim, a partner in the firm and the head of its emerging market trading business, will take over GLG's $1.2B emerging markets special situations fund, the Financial Times reported.

OTHER PAPERS:

• Take-Two Interactive Software Inc (NASDAQ: TTWO), which makes video games, will probably sign video game creator Ken Levine to a new contract. The deal would bolster Take Two's argument that its value exceeds the $25.74 per share that Electronic Arts Inc (NASDAQ: ERTS) has offered as a takeover price for the company, The New York Post believes.

WEB SITES:

• Reuters reported that Deutsche Bank AG (NYSE: DB) is the only bidder remaining for Citigroup Incorporated's (NYSE: C) German retail operations. Sources said Commerzbank AG (OTC: CRZBY) dropped out of the running on Friday.