iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
19,896 Blog Posts

The Next Shoe to Drop

How many companies were taking available cash and reaching for yield?

ADCT fesses up, taking a gigunta writedown.

On previous occassions we reported that credit concerns in the capital markets have significantly reduced our ability to liquidate auction-rate securities we hold. These securities are classified as both short and long-term available-for-sale securities on our balance sheet.

We reported a $29.4 million other-than-temporary impairment charge as of the end of our fiscal 2007 (i.e. October 31, 2007) because of a decrease in the fair-value of our auction-rate securities. Further, we reported that we expect to take an additional other-than-temporary impairment charge as the end of our first quarter of fiscal 2008 (i.e., February 1, 2008) estimated to be $31.0 million because account statements dated November 30, 2007 and December 28, 2007 received from the firms managing our investments indicated a further decrease in the fair-value of these securities. We stated that the amount of this first quarter charge was subject to significant change in the event of additional changes in market conditions.

On February 6, 2008 we received account statements dated February 1, 2008 from the firms managing our investments. We analyzed these statements and concluded on February 6, 2008 that a further decrease in the estimated fair value of the auction-rate securities we hold has occurred. We therefore have increased the estimated amount of the other-than-temporary impairment charge we expect to take at the end of our first fiscal quarter from $31.0 million to approximately $50.0 million. This updated estimate for the first fiscal quarter is subject to change as we complete the preparation of our financial results in connection with the filing of our quarterly report on Form 10-Q.

Taking into account this current increase in the estimated other-than-temporary impairment charge, our auction-rate securities had an estimated fair value of approximately $90.4 million as of February 1, 2008. On October 31, 2007 the estimated fair value of our auction-rate securities was $140.4 million. The estimated fair value of the auction-rate securities we hold could decrease or increase significantly in the future based on market conditions. We will continue to assess the fair value of our auction-rate securities based on our analysis of account statements we receive from the firms managing these investments.

We all know how rich corporate balance sheets are. Well, here’s a thought, where do they have the cash parked? Perhaps the same place [[ADCT]] has it?

UPDATE: G7 fuckers admit writeoffs could total more than 400 billion.

UPDATE II: This is a fitting song.

[youtube:http://www.youtube.com/watch?v=dE-LDfroa1w&eurl=http://lolstreet.blogspot.com/ 450 300]

UPDATE III: More shoes (must read)

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28 comments

  1. Dinosaur Trader

    I didn’t know what ARSs were. Thank the Internet Gods for Wikipedia.

    -DT

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  2. Born2Code

    I wonder if that’s why MSFT needs to borrow money to finance the yahoo purchase?
    after all, why would a company with $45 billion in “parked cash”, generating +$1 billion a month in additional free-cash flow and acquiring a company that itself is generating a ton of free cash-flow need to borrow any money?

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  3. Tim

    Born2Code, MSFT money is in T-BILLS, look in the 10K, MSFT is using debt because they want to leverage their cash flows, actually better for share holders in the long run.

    Actually, ARPS (Auction Rate Preferred Securities) are almost always over collateralized by at least 2x but usually more. so for example if a fund manager has a 100mm morgtage portfolio, they can actually sell 50mm in ARPS and pay money market rate for that leverage. now… the company is the guaranteer of those ARPS, now the mortgage portfolio may go to 0, but a big company mananging those funds is liable for payment of principal to the ARP holder. buying those at a discount to par is easy money, regardless of how many times the auction fails

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  4. Sierra Water

    As prime starts to collapse, OTC derivatives will start obliterating the balance sheets of “sound” companies like F5 sister Tornados. Here is a clip from an Analyst at Morgan:

    Credit quality is now deteriorating sharply even for prime mortgages,” Posner said, referring to home loans issued to people with good credit. “Delinquency trends and transition rates have deteriorated in the last few months at an accelerating pace.”

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  5. mo'money

    Barak Huessein Obama

    http://starbulletin.com/2006/08/27/news/art10.jpg

    Unbelieveable

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  6. mo'money

    Bow down to
    lord Clinton… I did not let that young girl blow me…. That stain on her dress was a grande skim latte from SBUX, damnit.

    http://www.washingtonpost.com/wp-dyn/content/video/2008/02/10/VI2008021001313.html

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  7. mo'money

    praise jesus halleluluiagh…. hell yes my brotha yes muthafugga we can!!

    http://www.youtube.com/watch?v=jk7AfHTtj-c&feature=related

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  8. tehdrunky

    hey fly,

    400 BILLION, not million

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  9. Mr. LIMM

    Fo hunnit mirrions not so much money, Fry.

    G7 Muddah fluckas not get out of bed fo dat much.

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  10. Q4

    Like the chorus, “Wall Street Meltdown”. It’s good to be ahead of the curve. IBC

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  11. Mr.  LIMM

    I not see so many shoes dlopping since home town’s combination sneakah factoly/sugah lefinally brew up accidentary!

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  12. The Fly

    BAC Bank of America gets Wells notice – WSJ (42.16 )

    WSJ reports the co said said it received a so-called Wells notice Feb. 4 from the SEC indicating the regulator’s intent to pursue the bank for violations of securities law. The possible civil charges relate to a wide-ranging investigation of bid-rigging of municipal-bond proceeds invested in guaranteed investment contracts. “We’ve cooperated with the SEC and will continue to do so,” said spokeswoman Shirley Norton. The bank has received Justice Department amnesty from criminal charges.

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  13. are we paying attention?
    are we paying attention?

    CRM announcing a buyout this afternoon or something? wtf?

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  14. calvino

    no, they are squeezing the huge short interest.. hold it

    update.. the rest of the crm coders are red on m screen, a few up a fraction..

    i saw them pulling this same shit dance the day before they dropped 11%.. shit like this makes you wonder what the fuck the SEC does except jerk each other off in the broom closets. CRM reports quarte at end of day on the 27.. the shoe, the ax, the whole fucking house drops down.. goldman already called earnings down..

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  15. Juice

    rumors of orcl for crm at $75

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  16. CubsRock

    That was our 6th bounce off Dow 12,100. Can’t last much longer can it?

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  17. calvino

    Salesforce is pitching itself for $75? Why would Larry Ellison pay 50% premium two weeks before the stock craters. A rumor started on a company pitching itself for 50% takeout premium. Get the fug outta here. Like I’m saying, where the fuck are you, Christopher Cox?

    http://www.salesforcewatch.com/2008/02/salesforceora-1.html

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  18. TraderCaddy

    For the Daytraders-So far its so obvious you have to laugh-go long SMH,XHB. When Dow turns trade some European ETFs like EZU or VGK. Daytrading only.

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  19. Juice

    the market is like holding a beachball underwater .. it keeps resurfacing .. it acts like a pile of flotsam & jetsam even as the bears are sure its gonna sink to the bottom with the next shoe

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  20. Anyone watching CREE? Someone’s been buying right thru this market turmoil. Wonder if GE is back in the market?

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  21. TraderCaddy

    CREE has been the subject of a takeout for the last 6-12 months.
    Who gives a crap about the screenwriters strike? It has nothing to do with the real economy except in LA. Just outsource the scriptwriting to India. Maybe, the shows will then improve.

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  22. are we paying attention?
    are we paying attention?

    DECK on life support vs the 200. I figure DECK vs ICSC, Redbook, and Retail Sales rpt on Wed will be like watching three Godzillas against one Japanese tourist…

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  23. JakeGint

    Speaking of Godzilla, I saw “Cloverfield” with the boys over the weekend.

    If you have any susceptibility to motion sickness (ie, sea, air, etc), you do NOT want to be going to this movie.

    Aside from having to get up twice to walk around and get some fresh air, I thought it was pretty cool.

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  24. calvino

    attention .. agree.. ugly shoes will be shovelling the barn floor

    update.. since oracle is pushing siebel to its clients, and since ellison owns a huge chunk of netsuite.. would the salesforce deal make sense?

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  25. KickAssZone

    Lovely post. I like your pencraft and that’s great that you’ve opened this subject. Only fool can disagree with this!

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