By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and Third by experience, which is the bitterest.
- How to Lose $100 Million (Politico): Everyone should have known better, but apparently nobody did. Take one editor famous for a string of turnarounds of print magazines in the 80s and 90s, one billionaire with a willingness to back a web-based media venture absent a business plan, and one billionaire with a belief that the faltering news magazine Newsweek could be saved, and the result was nothing less than a business debacle that has cost $100 million and blackened the reputation of all involved.
- Energizer Split Leaves Biggest Problem Intact (NYT Dealbook): By splitting itself into two companies, one focused on personal care and the other on household products, Energizer has traded one set of problems for another. The conglomerate discount that shareholders of the $7 billion company were experiencing suggests upside of as much as 20% at the conclusion of the transaction. But the competitive dynamics of the company, soon to be two, have been weakened, as each will be even more resource constrained in their competition with consumer products giant Proctor & Gamble.
- Waterford Gaming Joins LCD’s Watchlist Of At-Risk Debt Issuers (Forbes): Continued weakness at the Mohegan Sun casino has led to a downgrade of Waterford Gaming, which is entirely reliant on the Connecticut gaming site for its revenue. S&P noted in its downgrade of the company that Mohegan Sun is not generating the kind of performance necessary to fund distributions to Waterford Gaming sufficient for that company to satisfy debt maturing in September 2014.
- Shrinking Muniland (Reuters): Issuance of municipal bonds is declining, but some of the slack is being taken up by increased bank lending to municipalities. This is a considerable change in the way that municipalities fund themselves, and is certainly a trend to watch in coming years.
- The Latest Pennsylvania Town That Can’t Pay Its Bills (Atlantic Cities): Shamokin, population 7,300, is facing hard times. The town has $800,000 in unpaid bills, and lenders are not interested in extending credit. For Pennsylvania municipalities facing these challenges, Act 47 is a welcome last resort. Act 47 provides state aid to troubled cities and towns to enable them to restructure their debt. The major criticism of the program is that of the 27 municipalities that have made use of Act 47 since 1987, only seven have emerged (and six have been in the program for more than 25 years). Pennsylvania legislatures are reviewing options to modify the law to force troubled municipalities to make hard choices earlier, or face stiffer penalties.