Thursday, January 29, 2015

POSTED: Monday, January 26, 2015, 3:57 PM
RadioShack is closing 1,100 "underperforming" stores in a move similar to what befell former electronics retailer Circuit City, an analyst said. (Mati Milstein / Bloomberg)

Radio Shack has been trying to close more than 1,000 of its 5,000 stores for the past year; its lenders are resistingbankruptcy threatens.

Meantime other retailers are weighing whether Radio Shack sites -- 29 in Philadelphia and its nearby suburbs, a total of 130 from Wilmington to Princeton, each about 2,000-2,700 sq ft -- would make good lunch spots, phone stores, massage salons.

"We have a lease" to take over a Philadelphia-area Radio Shack -- he won't say which, it's still open -- and are negotiating for others in Boston, Atlanta, Miami, and Austin, Tex., Todd Leff, CEO of Hand and Stone Massage and Facial Spas, a 200-store franchise chain based in Hamilton Township, N.J., told me.  Hand and Stone says it has 35 locations in the Philadelphia area and South Jersey, and plans up to 15 more. Each store employs about 30.

POSTED: Monday, January 26, 2015, 11:45 AM

Thanks to "drastically improved predictability and access" for drug approvals by the Food and Drug Administration, following changes to the Prescription Drug User Act and FDA's own Critical Path Initiative, drug approvals are way up and "investment capital is pouring into life-science tools and drug R&D," Paul Knight, pharma analyst at Janney Capital Markets, tells clients in a report this morning. He expects drug sales for the Top 12 pharma companies will rise and accelerate, starting this year, after dropping in each of the past three years. 

FDA Phase III approval rates (approvals/application/year) rose to 78% in 2013, up from 46% over the previous 10 years (following the Vioxx scandal that made FDA extra cautious), Knight writes, after meeting last week with FDA economists who have been updating agency data.  New FDA "molecular entity" (chemistry-based drugs) "were the strongest in over 17 years" in 2014, Knight writes, with 41 approvals, up from an average of 27 a year for 2003-13. 

Thanks to FDA's "increased cooperation and innovation," venture capital investments in drugs rose 29% in 2014, Knight added, citing data from PricewaterhouseCoopers LLP and the National Venture Capital Association. That data shows venture firms invested $8.6 billion in 789 drug deals last year, up from $6.8 billion last year and the most since the record of $9.6 billion in 2007.

POSTED: Friday, January 23, 2015, 12:11 PM

N.J. Gov. Chris Christie's appointment of ex-Detroit financial restructuring chief Kevyn Orr and consultant Kevin Lavin to take charge of Atlantic City's finances as casino closings cut city finances has provoked Moody's Investors Service to cut the credit rating on $344 million of Atlantic City's general-obligation debt by a big six notches, to Caa1 (substantial risk") from Ba1 ("speculative"). The agency threatens further cuts, analyst Josellyn Gonzalez Yousef writes in a note to Moody's clients this morning.

Moody's big drop in confidence Atlantic City will pay back its bond buyers "reflects the appointment of an emergency management team of two specialists mandated to consider debt restructuring," which Moody's believes is likely to include a reduction in the payments the city promised when it sold bonds and borrowed money from investors.

"The increased risk of default further arises from the city's looming $12.8 million note maturity on February 3," Gonzalez Yousef added. "This is a rapid, dramatic change from the State of New Jersey's prior policy of preventing default or bankruptcy of Atlantic City or any New Jersey local government. The Caa1 rating indicates a high risk of default over the next five years."  Moody's will cut the rating again if Christie's commissioners reduce bond payments by more than 10%.  

POSTED: Wednesday, January 21, 2015, 3:49 PM

Ted Peters, newly retired chief executive of Bryn Mawr Trust Co., and Jason O’Donnell, past investment research director at Merion Capital Group and Boenning & Scattergood, have joined partners with Lee Calfo, a former Cohen & Co. executive who is a principal at Bluestone Capital in Wayne, to set up the Bluestone Financial Institutions Fund.

Peters says the group will invest in up to 30 small-bank stocks, which have been out of favor with many investors because of low profit margins due to low U.S. interest rates. Calfo will serve as portfolio manager and Bluestone Capital analyst Andrew Giannone will serve as an analyst for the fund.  

Peters says they will focus on banks with “strong turnaround prospects,” high potential takeover values, or good growth potential. O’Donnell said the group will work closely with executives of the banks it invests in, not as an antagonistic "activist" investor but to help boost growth or sale prospects where appropriate. 

POSTED: Wednesday, January 21, 2015, 3:22 PM

United Food and Commercial Workers Union Local 152, which represents 14,000 South Jersey supermarket workers from its office in Mays Landing, says it has filed unfair-labor-practice complaints with the National Labor Relations board alleging "illegal activities to silence dispensary workers" against the Compassionate Care Foundation, which runs a medical marijuana dispensary in Egg Harbor Township.

Around 11 workers are seeking representation, Local 152's Chad Brooks told me. "Their pay ranges from $12 to $25 an hour. They currently do not receive medical benefits." The union says "a majority" of Compassionate Care workers last fall asked the union to represent them, but Compassionate Care's board has refused. In a statement, Local 152 president Brian String accused foundation chairman David Knowlton of "pulling out the stops" to prevent union recognition by re-designating workers as bosses and farmworkers, who are not covered by the federal union statute; and by reducing hours for pro-union workers.  

The union says NLRB plans its first-ever hearing to review union representation in the "medical marijuana industry" on Feb. 4 to review Local 152's petition to represent workers, in "an industry that is still federally illegal." String says UFCW locals on the West Coast have organized marijuana workers there, apparently without NLRB intervention. Dispensary manager Tom Olah referred questions to CEO Frank DAgostino, who was not immediately avilable at his office and mobile phone.

POSTED: Wednesday, January 21, 2015, 2:57 PM

Advocates of privately-run public road, bridge and infrastructure construction ("public-privarte partnerships") are pleased by the Obama administration's acquiesence with a plan to allow builders and investors to issue and sell more "private-activity bonds" tax free. Berwyn lawyer Frank Rapaport, who represents builders seeking cheaper financing for private-led projects, tells more:

One of the perennial arguments raised against long-term public-private partnerships for transportation infrastructure is that the financing cost will be higher, because revenue bonds issued by the private sector carry higher interest rates, since the interest on those bonds is taxable. If the same project were carried out by a government toll agency, the bonds would be tax-exempt and therefore have lower interest rates...

This was a foolish distinction for federal policy to make. Tax-exempt bond status should depend not on who the project developer/operator is, but rather on whether or not it is available for use by the public.

POSTED: Wednesday, January 21, 2015, 11:55 AM

The Securities and Exchange Commission this morning settled "fraudulent misconduct" allegations against Standard & Poor's Ratings Service for its overly-optimistic ratings of bonds backed by questionable commecial real estate mortgages in 2011. S&P agreed to pay the SEC $58 million, plus $12 million to New York and $7 million to Massachusetts, which also filed complaints after investors in those states suffered losses from trusting S&P.

"Standard & Poor's elevated its own financial interests above investors' by loosening its rating criteria to obtain business," without warning investors, SEC Enforcement chief Andrew J. Ceresney said in this statement, which also links to the SEC complaints. 

It's the first bust directed by the SEC against a major credit-rating agency; many investors and commentators had urged similar action against both S&P and rival Moody's for their failure to warn investors about millions of bad mortgages leading up to the 2008 home finance crisis.

POSTED: Wednesday, January 21, 2015, 11:28 AM

A British company whose Philadelphia headquarters was praised by state and local leaders as a symbol of the city's aspirations to be an energy business center is shutting down.

Pennsylvania has asked for the return of $150,000 in state grant money from Mark Group, the Navy Yard-based home insulation firm the state had wooed to the city four years ago, Pennsylvania Department of Community and Economic Development spokeswoman Lyndsay Kensenger told me. Home rehab supplies piled at Mark Group's U.S. headquarters will be the subject of a liquidation sale scheduled for Jan. 27, 11 a.m., at the company's offices, 4050 S. 26th St.

Mark, run by Jeff Bartos, an ex-Toll Bros. lawyer, was offered $3.28 million in Pennsylvania taxpayer aid by then-Gov. Rendell to open at the Navy Yard in late 2010. But the company either didn't apply for or wasn't approved for most of those grants, Kensenger told me. On Jan. 6, her agency "sent a letter requesting full reimbursement of the $150,000 Opportunity Grant due to company closure prior to the five year site commitment," she said. "It is our understanding that they do not intend to be in operation in the future." Bartos hasn't returned messages left at his Navy Yard office or Main Line home.

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at or 215 854 5194.

Joseph N. DiStefano
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