Thursday, July 30, 2009

KBR Has Strong Second Quarter

KBR Inc. on Thursday reported a nearly 40 percent increase in second-quarter net income.
The Houston-based engineering and construction company (NYSE: KBR) reported net income for the three months ended June 30, 2009, of $67 million, or 42 cents a share, on revenue of $3.1 billion, compared with net income of $48 million, or 28 cents a share, on revenue of $2.66 billion in the same quarter last year.

Analysts polled by Thomson Reuters expected KBR to have earnings of 41 cents a share.
The company also said in a statement that it had a backlog worth $12.3 billion as of June 30, and a strong balance sheet with cash and equivalents equal to $1.1 billion.
“I am pleased with the strong revenue and operating income growth over the same period last year, which contributed to KBR’s solid earnings in the second quarter of 2009,” said Bill Utt, chairman, president, and chief executive officer of KBR.

Wednesday, July 29, 2009


New home construction rose in June, driven by a strong surge in construction starts on single-family homes, which were up nearly 15 percent from May's level, according to new figures released on July 17th, by the Census Bureau.

The increases in both building permits and construction starts surprised economists, who had predicted little or no change. Overall, building permits issued in June were up 8.7 percent from May, to a seasonally adjusted annual rate of 563,000. New permits for single-family homes were up nearly 6 percent in June, to an annual rate of 430,000. The survey covers building permits and housing starts for both single-family homes and multiunit buildings.

Overall new housing starts were up 3.6 percent in June, to a seasonally adjusted rate of 582,000 units. The big jump in single-family starts was dampened in the overall figures by a sharp drop in construction starts of multiunit buildings, which dropped by nearly 30 percent following a 60 percent increase in May. The big swing is likely the result of the survey's large margin of sampling error; the Census Bureau cautions that it may take 3-4 months for underlying trends to become reliably established.

By that measure, both new housing permits and housing starts have shown general increases since March after a series of sharp declines throughout the previous year. Both building permits and housing starts in June were at approximately half of their June 2008 levels.

- Don McGraw

Friday, July 17, 2009

Housing starts surge

By Ben Rooney, staff writer

NEW YORK ( -- Initial construction of U.S. homes and applications for building permits both surged in June, according to government figures released Friday.

Housing starts rose to a seasonally adjusted annual rate of 582,000, up 3.6% from a revised 562,000 in May, according to the Commerce Department.

Economists were expecting housing starts to increase to an annual rate of 524,000 units, according to a consensus estimate gathered by

Single-family housing starts were especially strong, up 14.4% on a month-over-month basis. It was the biggest surge in that measure, considered the core of the housing market, since December 2004.

Friday's report suggests that the battered housing market is gradually stabilizing, according to Mike Larson, real estate and interest rate analyst at Weiss Research.

"The new home industry has done a good job of reducing supply," Larson wrote in a research report. "But the existing home market is still vastly oversupplied, and we continue to be inundated with an influx of distressed and foreclosed properties."

Applications for building permits, an indicator of future construction activity, rose 8.7% to a seasonally adjusted annual rate of 563,000 in June. It was the highest number of applications since December and more than the 530,000 annual rate that economists had forecast.

June marks the second month that starts have increased after the annual rate of new homes breaking ground fell to an all-time low of 454,000 units in April.

New home construction activity was strongest in the Midwest, where starts were up by 33.3% versus the previous month. In the Northeast, starts jumped 28.6% in June.

But the West and the South both saw declines in the number of new homes breaking ground last month. Starts were down 14.8% in the West and 1.4% in the South.

Monday, July 6, 2009

Mid-Year Data for Private Equity Activity in 2009

PitchBook, a private equity-focused research firm, has published its report on private equity as of the second quarter of 2009. The findings show that private equity investors continue to wait before deploying their $400 billion in available capital.

The industry appears to be rethinking the leveraged buyout and focusing on middle-market private equity deals, financed with mostly equity and little borrowing. PitchBook CEO, John Gabbert says of the report, “PitchBook’s analysis shows that the private equity industry is currently shifting gears in a return to its roots. More attention is being paid to middle-market deals using a healthier amount of equity where private equity’s operational and financial expertise can make a big difference. ”

Total Amount Invested in PE Deal Type ($M)

Key Findings from the 2009 Mid-Year Report

The first half of 2009 was the slowest six-month investment period since 2002 with only 407 completed investments, and just 174 of those were completed in the second quarter. However, another 44 deals, totaling $6.5 billion were announced during the quarter but have yet to close.

In response to the current credit markets private equity investors have been using less leverage and targeting smaller operational improvement and distressed company investments. These lower and middle-market companies now account for 70% of all investments. PE firms are also strengthening their current portfolio companies through add-on acquisitions, which accounted for 43% of all buyouts in the first half of 2009.

In Q2 2009 only the Business Products & Services and Information Technology industries were able to maintain their investment levels from the first quarter, with 54 and 29 deals respectively.

The BankUnited Financial acquisition was the largest of the quarter and accounted for over 25% of the total invested capital for the quarter.

The decrease in private equity investment is not due to a lack of available capital, which remains at an all time high of $400 billion. PE investors continue to raise capital and currently have enough dry powder to more than support the combined deal activity of 2004, 2005 and 2006 with the use of moderate leverage.

So half-way through 2009 private equity is still in a slump and investors are holding onto about $400 billion in capital.

Wednesday, July 1, 2009

Hedge Fund Returns Up, Redemptions Down

Tuesday, June 30, 2009

BOSTON (Reuters)—Hedge funds are living up to their high-flying reputation again with strong returns in the last three months, but many investors burned by last year's losses are clamoring for reforms before committing new money.

Final June quarter data will not be released until next week, but Merrill Lynch analysts who track returns in the $1.3 trillion industry wrote on Monday [June 29] that hedge funds will likely post their best quarterly performance since early 2000.

The rebound became visible in April when the average hedge fund returned 2.7%. It gained strength in May with a 4.4% rise, Merrill Lynch analysts wrote. For the second quarter, they estimate a gain of 6% or more.

That would mark a dramatic recovery from 2008 when the average hedge fund lost 19% and some celebrated funds, including Citadel Investment Group LLC, run by Kenneth Griffin, the 41-year-old Chicago billionaire, were down as much as 50% at the height of the financial crisis.

This year's stock rally, sparked by hopes that the worst of the global economic downturn is over, has helped boost many funds' returns.

Tudor BVI Global Fund, run by Paul Tudor Jones of Tudor Investment Corp., gained 12.4% through the end of May, while Lee Ainslie's Maverick Fund gained 8.8% through the end of May, their investors said.

"I believe there's been a very big change of mood and it has come at least three months earlier than I was expecting," said Christopher Fawcett, chief executive of hedge fund firm Fauchier Partners in London.

Last year, pension funds, endowments and wealthy individuals reacted to hedge funds' heavy losses and high fees by demanding a record $152 billion back in the last three months of 2008, research firm Hedge Fund Research said. This year, the pace of redemptions has slowed. In the first quarter, investors pulled $103 billion, according to HFR.

In May, hedge funds saw inflows of $3.4 billion, their first inflows since May last year, researchers at TrimTabs found.

"Redemptions have really dried up," said Mark Kary, chief executive of hedge fund firm Polar Capital in London, noting that his firm also saw small net inflows in the second quarter.

While inflows are still small, industry researchers said they played a critical role by letting hedge funds stop selling market positions to raise cash needed to let investors out.

"The inflows kept hedge funds from being a drain on the markets," TrimTabs President Conrad Gann said.

Pension funds and other investors have said they plan to commit more money to hedge funds in the second half of 2009, but they are also ready to attach conditions about how their money will be invested and a right to get it back fast.

"Transparency, liquidity, good fee terms, no gates, no side pockets. That is what the institutional community will be pressing hedge funds for," said Eric Goodbar, hedge fund strategist at Mellon Capital Management, a unit of Bank of New York Mellon Corp. "Hedge funds that are essentially large lockup structures will be viewed with caution."

By Svea Herbst-Bayliss and Laurence Fletcher