Thread: Bear: Billions More in New Write-Downs Likely

Bear: Billions More in New Write-Downs Likely

MoneyNews
Friday, March 14, 2008

S&P 500 financial companies are likely to post additional first-quarter write-downs of $35 billion to $70 billion as deteriorating credit markets will require further recapitalizations, Bear Stearns said.
"The current (credit) crisis threatens the stability of the U.S. financial system," analyst Jonathan Golub said.

S&P 500 financials have recognized about $130 billion in write-downs so far, and the sector's market capitalization has fallen by over $763 billion since the end of the third quarter, Golub noted.

"Currently, there is much debate over whether the economy is in recession or soon will be. We believe that the more important issue is the integrity of financial markets," Golub wrote in a note to clients.

The analyst, however, said that both financials and the market will likely end the year higher, despite a number of important hurdles facing the group, including disorderly credit conditions and compromised collateral values.

U.S. financials may recognize write-downs in excess of actual losses that are ultimately realized, Golub said.

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Two Las Vegas Housing Projects Have Missed Payments, WSJ Says

By Nicholas Larkin

March 15 (Bloomberg) -- Two Las Vegas housing projects have each missed an interest payment in recent weeks on about $765 million of debt and are holding talks with lenders, the Wall Street Journal reported, citing development partner Focus Property Group.

The Inspirada and Kyle Canyon Gateway ventures, which include Toll Brothers Inc., KB Home and Lennar Corp., have received default notices, the newspaper said, citing Focus Chief Executive Officer John Ritter.

The 2,000-acre Inspirada project was expected to develop as many as 13,500 homes over the next seven years, though only about 162 homes have been sold so far, the Journal cited Ritter as saying. He now expects the project to last between 10 and 15 years because of a severe housing downturn in Las Vegas, the Journal said.

The ventures are holding talks with principal lenders JPMorgan Chase & Co. and Wachovia Corp. about restructuring the loan terms, the newspaper said, citing Ritter. Both banks declined to comment, the Journal said.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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