FLASH: Matt Zames Replaces Ina Drew at $JPM

Ina, once regarded as best in the business, has been ousted post CIO blow up.

Zames has long been discussed as possible heir to Dimon.

Here is an open letter, written by Zames, to Geithner in 2011–regarding the debt ceiling.

Open Letter

Chesapeake Energy on conference call says it market reaction to 10-Q issue was ‘so extreme’ so they wanted to get loan done on Friday afternoon and host conference call this morning

Chesapeake Energy on conference call says it does not know exactly how much it has drawn on its $4 bln revolver before it received the $3 bln loan, but says it was probably ‘north of $3 bln’

Chesapeake Energy on conference call says it ‘would not be surprised’ if Carl Icahn would become a large shareholder

Chesapeake Energy on conference call says it will cut 80% of third party land brokers

Chesapeake Energy on conference call says Eagle Ford Production deal will be delayed or cancelled; Was going to generate $1 bln

Chesapeake Energy on conference call says it still expects to sell assets in 2013 and be cash flow positive in 2014; says remaining assets will worth between $50-60 bln; says asset values will be ‘significantly higher when gas prices improve’

According to the WSJ, Icahn is expected to announce a significant position in CHK Monday morning.

I am sure he will be omitting that from his resume.

***Yahoo CEO Thompson to step down; global media head Levinsohn interim replacement as Board settlement with Loeb nears completion – WSJ

China’s central bank cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world’s second-largest economy.

The People’s Bank of China delivered a 50 basis point cut in banks’ reserve requirement ratio (RRR), effective from May 18, the third cut in six months and one that investors had called for after data on Friday showed the economy weakening, not recovering, from its slowest quarter of growth in three years.

Industrial production weakened sharply in April and fixed asset investment – a key growth driver – hit its lowest level in nearly a decade, surprising many economists who thought Q1’s 8.1 percent annual rate of growth marked the bottom of a downswing and were expecting signs of recovery in Q2 data.

“The central bank should have cut RRR after Q1 data. It has missed the best timing,” Dong Xian’an, chief economist at Peking First Advisory in Beijing, told Reuters.

“A cut today will have a much discounted impact. So the Chinese economy will become more vulnerable to global weakness and the slowing Chinese economy will in turn have a bigger negative impact on global recovery. Uncertainties in the global and Chinese economy are rising,” he said.

The domestic production and investment data had followed hot on the heels of weaker than forecast trade data, with the annual rate of export growth around half the level expected and growth in imports grinding to a halt on a nominal basis in April, underlining China’s vulnerability to weakness in global demand for goods produced in the country’s vast factory sector.

Bank lending in April was also sharply below forecast at 681.8 billion yuan ($108.04 billion), missing the 800 billion consensus call and raising doubts about whether Beijing had policy settings slack enough to keep the economy expanding.

“It confirms our view that the economy was not able to sustain its momentum on current policy and policy needs to be loosened,” said Ken Peng, an economist with BNP Paribas.

“The fact that it waited so long meant it could have been responsible for the poor data in April. This sends a very positive signal that policymakers are accommodative.”

Full Article

From Bloomberg: IMF, EU, ECB Open to Changes in Greek Aid Deal, Real News Says

The so-called troika of the European Union, the International Monetary Fund and the European Central Bank is willing to make six important changes to Greece’s financial aid agreement if a pro-European government is formed in the country, Real News said.

The Troika is willing to extend by one year to end 2015 the time for Greece to cut its budget deficit as well as to proceed with a restructuring of loans, the Athens-based newspaper reported in its Sunday edition preleased today, citing “well informed” sources at the European Commission.

The Troika is also willing to maintain the force of collective labor agreements, to alleviate the level of pension cuts or restore certain pensions to previous levels and to keep wage levels in the private sector and reduce the average tax burden on employees, the newspaper said.

Full Article

Another addition is indoor walking directions, allowing users in the US and Japan to use Google Maps to navigate inside malls and airports.

“This will help you get directions not only to a building’s front door, but also through those doors to the places where you want to go inside,” online magazine Stark Insider cited Benjamin Grol, product manager at Google, as saying.

Full Article

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One trader estimated more than a dozen hedge funds and banks profited by taking the other side of J.P. Morgan’s trades. Firms such as BlueMountain Capital Management LLC and BlueCrest Capital Management LP each scored gains of about $30 million, according to people familiar with the matter. The firms declined to comment.

Full Article

Chesapeake Energy Corp said it had received a $3 billion loan from Goldman Sachs and Jeffries Group that will give it breathing room to sell assets and close a funding gap this year.

The unsecured loan will be used to repay money borrowed under its existing $4 billion revolving credit facility, Chesapeake said.

“This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012,” Chief Executive Aubrey McClendon said in a statement.

Full Article

FITCH: JPMORGAN MAGNITUDE OF LOSS IMPLIES LACK OF LIQUIDITY

Fitch Ratings-New York-11 May 2012: Fitch Ratings has downgraded JPMorgan Chase & Co.’s (JPM) Long-term Issuer Default Rating (IDR) to ‘A+’ from ‘AA-‘ and its Short-term IDR to ‘F1’ from ‘F1+’. Fitch has placed all parent and subsidiary long-term ratings on Rating Watch Negative.
Fitch has also downgraded JPM’s viability rating (VR) to ‘a+’ from ‘aa-‘ and placed it on Rating Watch Negative. In addition, Fitch affirmed JPM’s ‘1’ support rating and ‘A’ support rating floor. A full list of rating actions follows at the end of this release.
The rating actions follow JPM’s disclosure yesterday of a $2 billion trading loss on its synthetic credit positions in its Chief Investment Office (CIO). The positions were intended to hedge JPM’s overall credit exposure, particularly during periods of credit stress.
Fitch views the size of loss as manageable. That said, the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity. It also raises questions regarding JPM’s risk appetite, risk management framework, practices and oversight; all key credit factors. Fitch believes the potential reputational risk and risk governance issues raised at JPM are no longer consistent with an ‘AA-‘ rating.
Still, at the ‘A+’ level JPM’s ratings continue to reflect its dominant domestic franchise as well as its solid and growing international franchise in investment banking and commercial banking. Capital remains sound and compares well with global peers, providing the bank with sufficient cushion to absorb a material idiosyncratic loss event. Fitch believes JPM continues to be well prepared to meet the minimum standards under Basel III.
Like other global trading and universal banks (GTUBs), the complexity of JPM’s operations makes it difficult to fully assess the risk exposure. This trading loss is precisely the kind of risk factor inherent in the GTUB business model. Fitch believes JPM, like other GTUBs, is in a highly confidence sensitive business and the longer-term implications for the firm’s reputation are not yet known. As a result, Fitch believes JPM’s ratings remain at heightened risk for downgrade until the firm’s risk governance practices, appetite, oversight and reputational impact can be further reviewed.
In addition, ongoing volatility and further losses are likely to arise from these positions as the firm unwinds them, creating some uncertainty. The firm’s Value at Risk (VaR) methodology was also changed in first-quarter 2012 (1Q’12) but subsequently reverted back to the original methodology. This resulted in a near doubling of VaR to $170 million, from 4Q’11 VaR of $88 million. The variance emanated from the CIO VaR and a negative $47 million diversification benefit. Fitch believes this also highlights some problems with modeling related to this portfolio.
Resolution of the Rating Watch Negative will conclude upon a further review of how JPM has addressed what Fitch views to be risk management and oversight deficiencies that allowed such a loss to occur. Fitch will also attempt to assess the future earnings and capital impact from these exposures. Fitch will also review the potential implications for market confidence in JPMand reputational damage as a result of this loss on both its liquidity profile and counterparty and dealings.
Fitch believes the Rating Watch resolution could result in a further downgrade of one notch if the risks are not appropriately sized and addressed. The complexity and opacity of these positions may also result in lingering concerns around the firm.
A return to a Stable Outlook will be dependent upon Fitch’s ability to gain comfort with the risk management concerns, potential ongoing nature of these synthetic credit positions and volatility they may create, as well as the reputation issues raised.
Fitch has placed all of the ratings below (with the exception of the short-term and commercial paper ratings) on Rating Watch Negative.
Fitch downgrades and affirms JPMorgan’s ratings as follows:
JPMorgan Chase & Co
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Long-term senior debt to ‘A+’ from ‘AA-‘;
–Long-term subordinated debt to ‘A’ from ‘A+’;
–Preferred stock to ‘BBB-‘ from ‘BBB’;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Commercial paper to ‘F1’ from ‘F1+’;
–Viability to ‘a+’ from ‘aa-‘;
–Market linked securities to ‘A+-emr’ from ‘AA-emr’.
JPMorgan Chase Bank N.A.
–Long-term deposits to ‘AA-‘ from ‘AA’;
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Long-term senior debt to ‘A+’ from ‘AA-‘;
–Long-term subordinated debt to ‘A’ from ‘A+’;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Short-term debt to ‘F1’ from ‘F1+’;
–Short-term deposits at `F1+’;
–Viability to ‘a+’ from ‘aa-‘;
–Market linked long-term deposits to ‘AA-emr’ from ‘AAemr’;
–Market linked securities to ‘A+emr’ from ‘AA-emr’.
Chase Bank USA, N.A.
–Long-term deposits to ‘AA-‘ from ‘AA’;
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Long-term senior debt to ‘A+’ from ‘AA-‘;
–Long-term subordinated debt to ‘A’ from ‘A+’;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Short-term debt to ‘F1’ from ‘F1+’;
–Short-term deposits at `F1+’;
–Viability to ‘a+’ from ‘aa-‘.
Custodial Trust Co.
–Market linked long-term deposits to ‘AA-emr’ from ‘AAemr’;
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Viability to ‘a+’ from ‘aa-‘.
JPMorgan Bank & Trust Company, National Association
–Long-term deposits to ‘AA-‘ from ‘AA’;
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Short-term deposits at `F1+’;
–Viability to ‘a+’ from ‘aa-‘.
JPMorgan Chase Bank, Dearborn
–Long-term deposits to ‘AA-‘ from ‘AA’;
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Short-term deposits at `F1+’;
–Viability to ‘a+’ from ‘aa-‘;
Bear Stearns Companies LLC
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Long-term senior debt to ‘A+’ from ‘AA-‘;
–Long-term subordinated debt to ‘A’ from ‘A+’;
–Short-term IDR to ‘F1’ from ‘F1+’;
–Market linked securities to ‘A+-emr’ from ‘AA-emr’.
J.P. Morgan Securities LLC
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Short-term IDR to ‘F1’ from ‘F1+’.
JPMorgan Clearing Corp (formerly Bear Stearns Securities Corp)
–Long-term IDR to ‘A+’ from ‘AA-‘;
–Short-term IDR to ‘F1’ from ‘F1+’.
Banc One Financial LLC
–Short-term IDR to ‘F1’ from ‘F1+’;
–Short-term debt to ‘F1’ from ‘F1+’.
Bank One Capital Trust III
Bank One Capital Trust VI
Chase Capital II
Chase Capital III
Chase Capital VI
First Chicago NBD Capital I
JPMorgan Chase Capital X through XXVIII
–Preferred stock to ‘BBB’ from ‘BBB+’.
Bank One Corp
–Long-term subordinated debt to ‘A’ from ‘A+’.
J.P.Morgan & Co., Inc.
–Long-term senior debt to ‘A+’ from ‘AA-‘;
–Long-term subordinated debt to ‘A’ from ‘A+’.
Morgan Guaranty Trust Co. of New York
–Long-term senior debt to ‘A+’ from ‘AA-‘.
NBD Bank, N.A. (MI)
–Long-term subordinated debt to ‘A’ from ‘A+’.
Providian National Bank
–Long-term deposits to ‘AA-‘ from ‘AA’.
Washington Mutual Bank
–Long-term deposits to ‘AA-‘ from ‘AA’.
Collateralized Commercial Paper Co., LLC
–Short-term debt to ‘F1’ from ‘F1+’.
The following ratings were affirmed:
JPMorgan Chase & Co.
–Support at ‘1’;
–Support Floor at `A’;
–Long-term debt guaranteed by TLGP at `AAA’.
JPMorgan Chase Bank N.A.
–Support affirmed at ‘1’;
–Support Floor at `A’.
Chase Bank USA, N.A.
–Support affirmed at ‘1’, rating;
–Support Floor at `A’ rating.
Custodial Trust Co.
–Support at ‘1’.
JPMorgan Bank & Trust Company, National Association
–Support at ‘1’;
–Support Floor at `A’.
JPMorgan Chase Bank, Dearborn
–Support at ‘1’;
–Support Floor at `A’.

Contact:
Primary Analyst
Joo-Yung Lee
Senior Director
+1-212-908-0560
Fitch Inc.
One State Street Plaza
New York, NY 10004
Secondary Analyst
Christopher Wolfe
Managing Director
+1-212-908-0771
Committee Chairperson
Ed Thompson
Senior Director
+1-212-908-0364

Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: [email protected].
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

From 10-Q: “As part of our asset monetization planning and capital expenditure budgeting process, we closely monitor the resulting effects on the amounts and timing of our sources and uses of funds, particularly as they affect our ability to maintain compliance with the financial covenants of our corporate revolving bank credit facility. While asset monetizations enhance our liquidity, sales of producing natural gas and oil properties adversely affect the amount of cash flow we generate and reduce the amount and value of collateral available to secure our obligations, both of which are exacerbated by low natural gas prices. Thus the assets we select and schedule for monetization, our budgeted capital expenditures and our commodity price forecasts are carefully considered as we project our future ability to comply with the requirements of our corporate credit facility. As a result, we may delay one or more of our currently planned asset monetizations, or select other assets for monetization, in order to maintain our compliance. Continued compliance, however, is subject to all the risks that may impact our business strategy.”

The stock fell 14%.

Reuters is reporting that Linkedin and Silverlake are interested. Share shot higher by 20%.

The drama, it’s almost to much to bear.

“Assumptions! I didn’t say any names so if u took offense to it then it’s something you feel guilty about,” he countered.

Full Article

As we discussed yesterday, some lucky guy(s) loaded up on JPM May $41 puts, EXPIRING TODAY, for as much as .40. Those same puts, after the bad news, are now worth more than $4.00. Not bad for a single days work.

JPMorgan Chase downgraded to Hold at Stifel Nicolaus (40.74)
Stifel Nicolaus downgrades JPM to Hold from Buy saying the company now becomes somewhat unanalyzable. Firm asks how does one go about assessing the risk contained within the company’s significant derivatives book when they have no meaningful access to anything to analyze and the one thing that made them comfortable with the exposure was the sound risk management behind it (providing benefit of the doubt), which now comes into question?

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