In a $350 million bond offering earlier this month, Mattel Inc. laced its five-year notes with “poison puts.”
The puts enable investors to redeem the notes for 101 cents on the dollar in the event of a change in ownership and a subsequent downgrade in the rating of the El Segundo-based company.
A spokesperson for the world’s largest toymaker insisted that the so-called poison is harmless, adding that the puts are necessary to raise capital in today’s debt markets.
“The change-of-control put is a standard clause now commonly requested by credit investors in debt issuances,” said Jules Andres, director of corporate communications, in a statement.
But with reasonably sound public firms like Mattel trying to lure investors with poison, evidence is growing that the credit crunch is creeping into the upper echelons of Wall Street.
“It’s a sign of the times,” said Lloyd Greif, president and chief executive of L.A. investment bank Greif & Co. “A year ago it was a borrower’s market. Nowadays, lenders are not just going along for the ride. They want the ability to jump off at any time.”
While Mattel remains in healthy financial condition, storm clouds are gathering on the horizon. The downward spiral in the housing market is raising concerns for retailers and their suppliers.
“Retailers will be ordering fewer toys than last year, and that is still not reflected in the share price,” said Gerrick Johnson, an analyst with BMO Capital Markets in New York.
Even if Mattel’s sales remain strong, the company might end up fighting on a different front. Costs of production are rising in China and Southeast Asia, where the toymaker’s manufacturing operations are located.
New Chinese bank
California’s newest state-chartered bank opened its doors in San Gabriel in February.
With an initial capitalization of $23 million raised from 173 investors, Mega Bank will offer retail and commercial banking services in the San Gabriel Valley, targeting the Chinese immigrant community.
“Every year we have many new immigrants from Taiwan, Hong Kong and mainland China, and we think we can expand our service to these new immigrants,” said Edward Lo, chief executive of Mega Bank.
Last year, 18 de novo state banks opened in California, while scores of other banks expanded their operations by adding hundreds of branches throughout the state, according to the California Department of Financial Institutions.
Prior to launching Mega Bank, Lo served as chief executive of Omni Bank and later stood at the helm of United National Bank until it was sold to East West Bancorp in 2005.
“Over the past 10 years, many small banks have disappeared as they merged with larger Chinese banks,” Lo said. “There is a gap for a community bank to provide services to small businesses.”
Mega Bank primarily will loan to businesses working in import-export, as well as those working in the commercial real estate construction and small business sectors.
Lending will initially be based on hard collateral, but the bank will gradually extend credit to receivables and inventory as its lending relationships mature.
“Our deposits are already at $12 million, and we have $6 million in loans,” Lo said.
Not a bad first month for a de novo bank.
Spreading the Wealth
U.S. Trust, Bank of America Private Wealth Management in March announced that it would add 12 wealth management professionals to its Los Angeles operation, boosting its local staff by about 10 percent.
With approximately 20,000 high net-worth individuals and growing, Los Angeles is home to the nation’s second largest market for wealth management services.
U.S. Trust, a unit of Charlotte, N.C.-based Bank of America, has appointed about 40 wealth management professionals in California since 2007 as part of the company’s growth strategy. Bank of America bought U.S. Trust from Charles Schwab Corp. in 2006 for $3.3 billion.
The company’s competitive strategy is to provide each client with a group of on-site advisers even as some other wealth management operations move heavily into online operations.
“A lot of our competitors based in Boston or New York talk about virtual teams. I’m not quite sure what that is, but we have the resources in our office here,” said Rich Tribiano, managing director of U.S. Trust. “We feel unique in having a fully operational private wealth operation right here in downtown Los Angeles.”
Staff reporter Mitch Deacon can be reached at
[email protected]
, or at (323) 549-5225, ext. 225.
