Jimmy Cayne Needs a Bucket

August 10, 2007 |

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When Jim Cayne isn’t on the golf course, we think he’s dining at some fancy restaurant like Le Cirque or smoking those expensive stogies in his office.   As Reuters reports below, he’s getting ready to jet off to communist China to secure some more long term loans — but Bear has “ample liquidity” so their investors should feel just fine even though the firm just vomited up two large hedge funds.  (The irony here is too good to pass up - I just HAD to mention it).  Too bad, the once entrepreneural firm is being beaten to death.   I hope the Chinese restaurants over there have an ample supply of buckets ’cause their gonna need it.    They’re about to get a lesson in gluttony and high livin’.

Are you an investor in Bear Stearns?  Do you care that the executives seem to care more about their lifestyles than their business?  Do you care that the firm as been downgraded by the S&P to Latvian bank status, as Fintag says?

Bear Stearns looks to China as crisis rolls on

By David Wighton and Francesco Guerrera in New York and Jamil Anderlini in Beijing

Published: August 10 2007 04:31 | Last updated: August 10 2007 04:31

Jimmy Cayne, the chief executive of Bear Stearns, is planning to travel to China in the next few weeks amid speculation about a possible joint venture with Citic, the state-owned financial conglomerate.

News of the plan comes as Mr Cayne seeks to head off a crisis of confidence in the bank whose co-president, Warren Spector, was ousted on Sunday.

Bear has sent letters to clients reassuring them it has “ample liquidity” to support its businesses in spite of the fallout from the collapse of two mortgage hedge funds it managed.

One senior Wall Street banker said Bear might need to line up new long-term funding to calm counter-parties and lenders. “A strategic stake by a partner with deep pockets would be even better,” he said.

Last year, Bear was in talks about a joint venture with China Construction Bank but negotiations fell apart due to opposition from senior Chinese officials who felt left out of the process, according to one Chinese banker. CCB’s then president, Chang Zhenming, is now vice-chairman of Citic.

The talks with CCB involved the Chinese bank buying convertible bonds that could be translated into an equity stake of up to 20 per cent in Bear.

Mr Cayne is keen to increase the international revenues of Bear, which are relatively smaller than its bigger Wall Street rivals, and China represents a huge potential market for US investment banks.

Top Chinese officials are now nervous about big direct investments in US financial companies following the fall in Blackstone’s share price, according to a senior US banker who was in China last week.

In June, the Chinese government paid $3bn for a stake in the private equity group, whose shares are now trading almost 20 per cent below their flotation price. However, China Development Bank went ahead with a proposed $3bn investment in Barclays last month.

In spite of Bear’s challenges, it would be reluctant to sell a significant stake at about the current share price which is only about 1.2 times book value.

Brad Hintz, analyst at Sanford Bernstein, said Bear was facing “an old-fashioned funding run” amid concerns about counterparty risk. “Trading lines are being pulled and repo lines are being reduced. The Japanese banks aren’t answering Bear’s phone calls, the commercial paper investors are passing on their paper, counterparties are telling Bear’s traders that they are ‘full up’ on Bear’s name.”

But Mr Hintz, a former chief financial officer of Lehman Brothers, said his analysis showed that Bear could survive a funding run.

Who do you think buys out the Bear? 

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