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November 24, 2008

The Giants of Wall Street
by Reggie Middleton

Excerpted from From the NY Daily News:

Giants claim defunct firm Lehman Brothers owes team $300M

Big Blue claims the bankrupt investment behemoth owes the team $301.8 million from a complex financing deal for its new stadium in the Meadowlands.

The battle centers on a high-risk financial contract - the kind that has contributed to America's economic meltdown - between football's reigning champs and Wall Street's leading chumps.

It surfaced in a little-noticed, 238-page claim Giants co-owner John Mara filed in federal Bankruptcy Court on Oct. 17. It contends the team was guaranteed full payment because Lehman defaulted on its obligations.

The team filed a second claim to collect another $401,500 from Lehman to cover half of its $803,000-a-year bill for leasing an on-the-sidelines luxury suite with a bar and space for 24 guests, bankruptcy filings show. A stadium spokeswoman said the luxury suite issue had been "resolved." She refused to provide details...

... "It would be quite unhealthy to hold your breath waiting for the Giants to get paid," said Reggie Middleton, who runs the Boom Bust Blog and was one of the earliest investors to warn of Lehman's impending demise. "They can expect to recover less than 9 cents on the dollar - a lot less - and they'll probably get zilch."

The Giants have a long wait before they can collect. "It could be as long as three or four years," said Lynn LoPucki, a law professor at both Harvard and UCLA and an expert on corporate bankruptcies. "Widows and orphans might qualify for a hardship claim and get paid earlier, but the New York Giants are an unsecured creditor - and they won't be on anybody's list to get paid ahead of schedule."

The flashpoint is the 82,500-seat, open-air new Meadowlands Stadium the Giants and Jets have been jointly building since 2007 on a 40-acre site across the Hudson.Complete with four restaurants, a Hall of Fame, 213 luxury suites, 2,000 video screens and a 300,000-square-foot outdoor plaza for tailgate parties, the stadium, expected to open in the spring of 2010, is budgeted at $1.6 billion.

To fund it, the National Football League loaned the teams $150 million apiece in 2007. The Giants and Jets each snared $650 million bank financing deals, with the Giants buying 40-year bonds from a seemingly healthy Lehman Brothers. Interest on those bonds, paid out until 2047, could be punishing, and the Giants wanted to reduce borrowing costs.

So they entered into a so-called interest rate swap with Lehman, "swapping" interest that could float much higher for fixed interest that would remain moderately priced, court filings indicate...

..."The agreement broke down the day Lehman declared bankruptcy" on Sept. 15, said Middleton, who analyzed the deal at the request of The News. The Giants were suddenly at risk of having to pay over time all the borrowing costs they had expected to save - an amount calculated at $301.8 million - because Lehman defaulted.

I have been crowing about investment bank and commercial bank insolvency for over a year now.

Why didn't Wall Street read my post on Lehman being a yellow lying lemon? See "Is Lehman really a lemming in disguise?" and realize that this post was made on February 20th, when Goldman Sachs had a recommended price of about $55 while this blog warned that Lehman may be done for. This very similar to when I warned about the potential demise of Bear Stearns in January, when the rest of the Street had a "buy" at about $130 per share. See Is this the Breaking of the Bear? We all know how both of these stories ended.

If I am not mistaken, didn't the major rating's agencies have an investment grade rating on Lehman leading up into its bankruptcy? What a damn shame.

Reggie Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Visit his blog Boom Bust Blog.

Copyright © 2007-2009 Reggie Middleton

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