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The Biz Roundup February 25

Thanks for the bank bailout plan. Not like there was any rush, guys.

Under the plan, US banks will have six months to raise enough private capital to continue lending through a deeper-than-expected recession, or be forced to take a special form of government capital. This government capital will come in the form of convertible preferred shares with a 9 per cent fixed dividend that will convert into ordinary shares as needed to shore up equity eroded by accumulating losses.

“US government ownership is not an objective” of the programme, Treasury said in a statement. “However, to the extent that significant government stake in a financial institution is an outcome of the program, our goal will be to keep the period of government ownership as temporary as possible.”

Officials said the top 19 US banks would be subject to a stress test based on a scenario in which the economy shrinks 3.3 per cent this year and barely grows next, with unemployment averaging 8.9 per cent this year and 10.3 per cent in 2010.

A senior administration official said the hope was that by strengthening the big banks pre-emptively, so they would be in a position to continue to extend credit in such a deep recession, they would make this adverse scenario less likely.

(“,” Financial Times, February 25) And the first question that comes to mind is: why wasn’t this done four months ago? Oh, I remember: it’s because Doctor Manhattan and Lex Luthor were in charge of the bank bailout. V is for vacation.

What happens when the news goes out of business? I left my profit in San Francisco edition.

In a statement, Hearst said that if the savings cannot be accomplished “quickly,” the company will seek a buyer, and if none comes forward, it will close The Chronicle. The Chronicle lost more than $50 million in 2008 and is on a pace to lose more than that this year, Hearst said.

(“Hearst wants ‘significant’ cuts at Chronicle,” San Francisco Chronicle, February 25) It’s when they prognosticate that they’ll be “stronger” for the cutbacks that you know that “stronger” means “dead.” I’ve been a dedicated reader of the Chronicle for almost 25 years — it is a great paper and its demise will make San Francisco the first major city without a major paper. Yet people only get upset if their city doesn’t have an NFL or baseball team. Go figure.

What happens when the news goes out of business? Dividend death time edition.

Newspaper chain Gannett Co Inc (GCI.N) said on Wednesday it would cut its quarterly dividend by 90 percent, to 4 cents per share, in response to the global recession and tightening credit markets.

The largest U.S. newspaper chain and publisher of USA Today said it will use the more than $325 million in free cash flow savings to pay down debt and position itself to “seize opportunities for growth,” Chairman and Chief Executive Craig Dubow said in a statement. . . .

Gannett’s debt rating has been hovering near junk status after it reported a 36 percent decline in advertising revenue

(“US newspaper chain Gannett cuts dividend 90 pct,” Reuters, February 25) I’m not sure USA Today counts as news, but if newspapers for dumb people are doing badly, that doesn’t augur well for the ones that target smart people.

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