KeNo's Housing and Economic Portal: Monday January 5 Housing and Economic stories

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New Jersey to bail out Atlantic City with short-term loan - (www.reuters.com) Atlantic City, New Jersey's struggling gambling hub, will get a short-term $40 million loan from the state rather than try to borrow the money in the capital markets this year, a city official said on Tuesday. Even the city's originally planned $40 million note sale, now squashed, was itself a scaled back version of a larger bond issuance that was delayed amid uncertainty over the city's next financial steps. The city must repay the loan by March 31 at a 0.75 percent interest rate, according to the loan agreement, signed on Dec. 18 by Mayor Don Guardian and the state. Atlantic City still hopes to issue at least $140 million of bonds in the first quarter of 2015, revenue director Michael Stinson told Reuters. That will help pay down property tax appeals won by casinos.

Michigan board votes to send state money to Detroit pension funds - (www.reuters.com) A Michigan board on Monday agreed to send nearly $195 million in state funds to Detroit's two retirement systems on Feb. 9 as part of a pivotal deal that helped to end the city's historic bankruptcy, a state spokesman said. Jeremy Sampson, a spokesman for Michigan's Treasury Department, said the three-member Michigan Settlement Administration Authority took the action after the city's bankruptcy reached certain triggers, including the dismissal of legal claims against the state that were related to the bankruptcy. The state funds are part of the so-called grand bargain, which includes $366 million from philanthropic foundations and $100 million from the Detroit Institute of Arts pledged over 20 years to ease cuts to pensions for Detroit retirees and save artwork from being sold to pay city creditors. The first payments by the foundations and the museum to the retirement systems totaling $23.3 million were made on Dec. 10, the effective date that marked Detroit's exit from the biggest-ever U.S. municipal bankruptcy.

Oil Crash Wipes $11.7 Billion From Buyout Firms’ Holdings - (www.bloomberg.com) Oil’s plunge makes energy a great investment for the coming years, according to Blackstone Group LP (BX)’s Stephen Schwarzman and Carlyle (CG) Group LP’s David Rubenstein. For private equity firms, it’s also been painful. More than a dozen firms -- including Apollo Global Management LLC (APO), Carlyle, Warburg Pincus and Blackstone -- have lost a combined $11.7 billion in 27 publicly traded oil producers since June, when crude prices reached this year’s peak before beginning their six-month slide, according to data compiled by Bloomberg. Stocks of buyout firms with exposure to energy have slumped, and bond prices suggest some closely held oil producers may struggle to pay for their debt. “It’s been a really volatile period, and frankly that’s how Saudi Arabia wants it,” said Francisco Blanch, head of global commodity research at Bank of America Corp. “This is a battle of endurance.”

Canadian Oil Surge to U.S. Gulf Puts Mexico on Defensive - (www.bloomberg.com) A price war is brewing between Canada and Latin America over who will satisfy U.S. Gulf Coast refiners’ hunger for heavy oil. The new Seaway Twin pipeline will almost double the amount of heavy Canadian crude coming to Gulf terminals and plants to about 400,000 barrels a day starting in January, according to Calgary-based ARC Financial Corp. The shipments are growing even without the Keystone XL pipeline, which has been delayed for six years because of environmental opposition. The Canadian supply will square off against crudes from Mexico and Venezuela that have traditionally fed refineries along the Texas and Louisiana coasts. State-owned Petroleos Mexicanos widened its discount for U.S. buyers in December by the most since August 2013. Valero Energy Corp. and Marathon Petroleum Corp., which invested in special equipment to refine heavy crude, stand to gain the most from the Canadian supply.

U.S. Bond Sentiment Is Worst Since Disastrous ’09 - (www.bloomberg.com) Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending. With Federal Reserve Chair Janet Yellen poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg. Getting it right hasn’t been easy. Almost everyone who foresaw a selloff this year as the Fed ended its bond buying was caught off-guard as lackluster U.S. wage growth and turmoil in emerging markets propelled Treasuries to the biggest returns since 2011. Now, even as the bond market’s inflation outlook tumbles, forecasters are sticking to the view that Treasuries are a losing proposition as the economy strengthens.

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