Monday, January 26, 2015

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. 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.

POSTED: Wednesday, January 21, 2015, 11:01 AM

Metro Bank, the investor-backed British bank started by former Commerce Bancorp chief Vernon Hill of Moorestown, N.J., has more than doubled in size over the past year, to $5.5 billion in loans and investment assets at its 31 "stores" in greater London. Deposits total $4.4 billion, loans total $2.4 billion, nearly half of that to small businesses. 

With its high expansion and marketing costs -- the company plans up to 10 more branches this year -- Metro lost nearly $15 million in the last quarter, but still has a fat pile of capital, which Metro says totals 28% of risk-weighted assets, well within U.K. targets. Losses have dropped for "six straight quarters," the bank says.

Hill had planned to sell shares to investors before now. But with interest rates chronically low and bank profits elusive, he instead raised capital from U.K. and U.S. real estate investors and other private backers and has plowed it into boosting market share. Hill told me this morning he hopes to take Metro public next year. He has also been an investor in Philadelphia's Republic Bank and Harrisburg-based Metro Bank of Pa., two banks that have struggled to grow in the slow lending environment of the past few years.

POSTED: Tuesday, January 20, 2015, 4:21 PM
Philadelphia union leader and DRPA board member John "Johnny Doc" Dougherty Jr. on the Camden Delaware River Waterfront April 24, 2014. ( TOM GRALISH / Staff Photographer )

International Brotherhood of Electrical Workers Local 98, the Philadelphia electricians' and computer workers' union headed by John Dougherty, the most politically successful of area labor leaders recently, has doubled its geographic jurisdiction by absorbing smaller IBEW Local 380 and its 100-acre Collegeville office and training center, Doughtery told me.

By Doc's count, Local 380 had 700 dues-paying members and a few hundred retirees in a jurisdiction that stretched  along U.S. 30, from Wayne on the Main Line to Coatesville in Chester County, north to the North Penn area in central Montgomery County.  98 has 6,000 active members, according to Dougherty. Like many smaller unions, 380 faced a challenge funding its long-term pension payments as the number of retirees began to approach the number of working members. Dougherty says his union is already at work organizing new job sites for the 380 members, and growth will keep the union healthy.

"I'm looking forward to working with Liberty, Brandywine, O'Neill and all the (landlords and developers) we have good business relations with who are also active" in what he calls the "98 North" suburban territory, Dougherty says. The move, backed by the IBEW international union, was effective in December. "I'm not looking to bring Philadelphia out to Montgomery County," he added. "I am looking at creating an economic engine for a lot of IBEW members." Statement by "Local 98 North" here, map here.

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 JoeD@phillynews.com or 215 854 5194.

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