From Larry Ramer of Theflyonthewall.com

Banks Getting Better Financing Deals, But Not Pulling the Plug Yet

So far, it seems that banks are not pulling the plug on merger and acquisition deals that were in place prior to the credit crunch. In some cases, however, lenders are demanding – and getting – more favorable terms from the companies and private equity firms whose deals they are financing.

For example, banks are demanding concessions from private equity firm KKR, which is buying First Data Corp. (FDC) for $24B. KKR may be willing to remove covenant-light and PIC toggle terms in order to close the deal, according to a report in today’s Private Equity Hub. In the case of the sale of Home Depot’s (HD) construction-supply unit, it was the seller who made concessions to lenders, as Home Depot cut the price for the unit by 18%, agreed to guarantee $1B in debt and will buy back 12.5% of the division for $325M.

As yesterday’s “Deal Journal” in the Wall Street Journal points out, investment banks would hurt themselves by torpedoing mergers and acquisitions. If all the deals from 1H07 are completed under current terms, investment banks stand to make $11.8B in fees. So firms like JPMorgan (JPM) and Goldman Sachs (GS) are certainly not going to nix deals unless they really feel they are too risky to be salvaged.

However, there are some signs and speculation that it may be easier for foreign banks to supply credit for deals than U.S. banks. Gerdau Ameristeel Corp. recently switched from a financing package for its acquisition of Chaparral Steel (CHAP) that was exclusively supplied by JP Morgan, to a financing deal with mostly banks from outside the U.S. Gerdau was able to obtain terms that are “at least as favorable” as its original deal, the company reported. In addition, the Wall Street Journal reported on Wednesday that Asian banks have been hit less by the subprime crisis than American banks, allowing Asian lenders to more easily finance deals.

It’s only been several weeks since the subprime crisis began to really affect large U.S. banks, and the situation could change quickly. (For example, action or inaction by the Fed on September 18 could really alter the whole picture). Up to this point, however, no big deals have fallen through, although there does seem to be a trend of deal terms being changed to help lenders.

Filed under: Major movement, Deals, Good news, Industry, Nucor Corp (NUE), Options, Technical Analysis

Nucor Corp. (NYSE: NUE) opened at $61.05. So far today the stock has hit a low of $61.05 and a high of $62.49. As of 10:55, NUE is trading at $62.46, up $2.38 (4.0%).

After hitting a one year high of $69.93 on June 1, the stock dropped sharply over the next four weeks before rebounding at the end of the month. NUE is jumping this morning as a buyout in the sector is lifting all the steel stocks. Gerdau Ameristeel (NYSE: GNA) announced yesterday after the close that it will buy Chaparral Steel (NASDAQ: CHAP) for $4.22 billion. Technical indicators for NUE are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an August bull-put credit spread above the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 9.9% return in less than 2 months as long as NUE is above $55 at August expiration. NUE would have to fall by more than 11% before we would start to lose money.

NUE hasn't been below $55 for more than a few days since October and has shown support around $57 recently. This trade could be risky if the company's earnings (due out July 19) disappoint, but even if that happens, it looks like this position could be protected by some support the stock has around $55.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in NUE, CHAP, or GNA.

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The Greek's Week Ahead has been engineered to prepare you for events that could impact your portfolio this week.

Your nation is at war, and I'm not talking about that mess in the desert of the Middle East. That's the obvious guess, but not the kind of thing your favorite Greek uncovers for you. No, look closer, listen more attentively. Do you hear the faint firing of a single rifle, and another, and do you see the distant flash of mortar fire? You have to really pay attention.

The signs are everywhere actually, ever since the well publicized meetings of the economic dream team, headlining Hank Paulson and Ben Bernanke. Since the grand summit of high ranking financial market representatives of the battling nations, the United States and China have been engaged in economic warfare. News flash, we're winning, or at least getting our message across that the days of turning a blind eye are over.

It started with the well-publicized deaths of the adored pets of many Americans. This brings to light the ancillary impact of the economic struggle being strategically waged, the impact to the consumption preferences of American consumers. Americans adore their pets, something not well understood in much of the developing world, and definitely not in most of China, where more basic needs understandably take priority. When news media headlines read, "Chinese Sourced Component Sickens Fido," Americans start looking at the ingredients information and the "made in" label. Hank Paulson, someone I've been maybe too harsh on here in the past, is playing hardball now, and I like it!

And you know what, sometimes people or nations need to have something taken away before they can properly appreciate its contribution. The Chinese government has been treating America like an opponent they want to get the most out of before eventually overcoming, rather than a nation they want to be an honest long-term trading partner with. It's about time we called them on it! Our own greed and goal for expanding profit margin has led us to overlook many troubling issues it seems. I mean, if we only just "discovered" pollutants (perhaps a kind substitute for poisons) in food products, it certainly does not mean they weren't there for years. I guess we previously thought a little anti-freeze in toothpaste might warm folks through cold winters, and with global warming, we wouldn't need that anymore.?..

This quiet trade war does not start or end with foods products, however. Back in February, we filed a dispute through the World Trade Organization alleging that China was providing illegal incentives to exporters. Then, in the spring, the Commerce Department imposed tariffs on imports of Chinese paper. In mid-April, the U.S. filed two more complaints against China through the WTO. That last dispute was concerning the violation of intellectual property rights with books, music and films.

What's behind this new found battle ready mentality from an administration that was dead set on free trade solving all concerns on its own? It might have something to due with the President's trade negotiation rights, set to expire in June. These rights were previously approved by a Republican dominated Congress. The administration must be smoking some funny cigarettes though, if they think the Democrats are going to renew it.

Maybe the President is trying to stave off more drastic Congressional action against China. This doesn't make sense either though, since the Democrats are going to want to take the credit for standing up to the Chinese. That would mean an acceleration of economic warfare, not vice versa.

No, what really makes sense here is actually pretty simple. First, of course we want fair trade rules implemented over the long-term, but we always have, as soon as we run out of the bigger benefits from outsourcing our manufacturing over there.

Meanwhile, we really need Chinese and Russian support to establish harsher sanctions on Iran. The administration is determined to stymie the progress of Iran toward a nuclear weapon, and it may be worthwhile to America to negotiate with the Russians on missile defense and the Chinese on trade. This, once the Chinese see what they could lose in a trade war.

Guess who else loses in a trade war with China, our dear old friend and key to U.S. economic stability, the American consumer. Imagine if core inflation were to rise like the headline figure has. The Fed would be faced with a significant challenge as consumer spending would soften at the same time prices rise. This is a scenario we already expect, but the situation would be exacerbated if trade war escalated.

So, as the news wires are full of rumors of high level administration meetings to discuss just how to paint a plan to withdraw our troops from Iraq, while somehow saving face, we have to wonder what the plans are for Iran. Are we pulling the troops out of the line of fire? After all, in their current position they would be massively outnumbered and surrounded by Iraqi Shiites and the huge Iranian army, not to mention the Syrians. Clearly, this disregards our balance of power winning sea and air support, barring Russian or Chinese submarine intervention. Wall Street Greek certainly agrees it's important to shake up the chess board and force the Iranians to digest a new playing field before we engage, and this means moving the troops from Iraq.

Still, even if we've figured out the war plan, the more important question remains, will it work. We think China will call the American bluff here. However, the Chinese are also less likely to stand in the way of American or American/European/Israeli intervention, while the Russians are likely to take the deal. Russia stands to benefit from the likely rocketing oil prices that would ensue, so no matter how much Putin plays the contrarian, he's prepared to benefit from either eventuality. We think the Chinese will stand down. God help us in any other scenario, because world war would loom on the horizon.

Enough prognosticating... let's look at the week ahead...

It's earnings season again, and Alcoa ( NYSE: AA) leads things off on Monday in traditional fashion. Also reporting on a relatively light day, expect news from Pepsi Bottling Group ( NYSE: PBG), Schnitzer Steel Industries (SCHN), WD-40 ( Nasdaq: WDFC) and a few others. The savior of the market's inhibition may have arrived, earnings season, and just in time to temporarily steal the focus from rising interest rates.

In the afternoon, May consumer credit will be reported. The consensus is looking for an increase of $5.6 billion, according to Bloomberg. April's growth of $2.6 billion surprised most, as it was short of expectations for $5.0 billion. I read this as a negative, and possibly a sign that new credit is being restricted thanks to the sins of borrowers' past, so to speak. It's hard to say with certainty since credit card defaults held up well in the latest reading, compared to other debt.

On Tuesday, we'll get the latest news from the ICSC-UBS on same-store sales. We didn't view last week's numbers too bad, despite comments from Bob Pisani at CNBC saying so. Still, let's be clear, we anticipate the metric will trend poorly in the months ahead despite the employment numbers of last week. We have discussed the reasons why in detail in past articles, in case you are a new visitor to the site. Please review those.

The Bank of Canada will announce its decision on key rates at 9:00 a.m. Expectations are for the newly cool and common quarter point increase to 4.5%. Wholesale trade data should be reported Tuesday, though Barron's has it listed for Wednesday. Expectations are for inventories to increase 0.4%, compared to a 0.3% increase last time around.

Reporting earnings, look for Acuity Brands ( NYSE: AYI), Audiovox ( Nasdaq: VOXX), Chattem, Inc. ( Nasdaq: CHTT), Emmis Communications ( Nasdaq: EMMS), Helen of Troy ( Nasdaq: HELE), International Speedway ( Nasdaq: ISCA), Rocky Mountain Chocolate (RMCF) and a few others. Sealy Corp. ( NYSE: ZZ) also reports Tuesday, and we wonder if Peter Lynch, famous for using common man logic to choose stocks, would look to the current bed bug epidemic as a sales driver for the mattress maker.

The Mortgage Bankers Association makes its regular report of purchase applications for the week just passed, but Wednesday is all about earnings. With the season moving into full swing, look for earnings from AAR Corp. ( NYSE: AIR), Chaparral Steel ( Nasdaq: CHAP), Genentech ( NYSE: DNA), Mercantile Bank ( Nasdaq: MBWM), Ruby Tuesday ( NYSE: RT), Wolverine World Wide ( NYSE: WWW) and Yum! Brands ( NYSE: YUM). We wrote a special pre-earnings piece last week about YUM for another site, and will republish it on our site Monday.

Philadelphia Fed President Charles Plosser is scheduled to speak in London on housing prices and monetary policy. Also, Secretary Paulson will be meeting with Brazilian President Lula da Silva, the central bank governor and others. The Petroleum Status Report and/or anticipation of it could deflate oil prices a bit, after their recent frantic run higher.

The Commerce Department will report on May international trade on Thursday morning, with expectations for the deficit to have widened to $60 billion in May, from $58.5 in April. It will be interesting to see if there has been any notable impact from the stealth trade war and theme of this week's article. Earlier this same morning, news from Asia is expected regarding the Bank of Japan's decision on interest rates. Rates are anticipated to be held steady, but a rise in rates could be bad for U.S. securities. The bank's commentary could indicate signs of a future hike, and this may prove equally damaging for stocks in the U.S., as concerns would rise that borrowers in Japanese currency might reverse investment and loan positions. The European Community will offer its quarterly growth forecast as well.

Later in the afternoon, the treasury budget for June is expected to be $30 billion, versus $20.5 billion in May. San Francisco Fed President Janet Yellen is scheduled to speak about the U.S. economic outlook and monetary policy. We'll look for clues as to the tone of the FOMC meeting minutes from last week, which are yet to come. Weekly initial jobless claims are seen right around their four-week moving average, at 315,000. Natural gas inventory will be reported right on schedule Thursday.

Monthly chain-store sales should be reported for many of the nations retailers, and could set off a selling spree if consumer softness is portrayed. If not, buyers may appear, since the shares of many retailers have already factored in concern. Earnings reporters include Electro Scientific Industries ( Nasdaq: ESIO), Fastenal ( Nasdaq: FAST), Fleetwood Enterprises ( NYSE: FLE), M&T Bank ( NYSE: MTB), Marriott International ( NYSE: MAR), Texas Industries ( NYSE: TXI) and a few others.

Friday finishes off the first week of the second quarter earnings season with the important Retail Sales Report for June, with expectations for no change. Excluding automobiles, the consensus is looking for an increase of 0.2%. In May, a relatively strong month, sales increased 1.4% over April, which was impacted by weather. We expect this poor expectation for June is correct, and consumer softness concerns should be the hot topic of the day. In a second early morning report, import and export prices are due out. Bloomberg's consensus is expecting import prices to show a rise of 0.6% in June, versus a 0.9% increase in May. Business inventories are expected to show a 0.3% rise in May, versus a 0.4% increase in April.

The RBC Cash Index should provide even more color on consumer attitudes for the future, and the preliminary Michigan Consumer Sentiment Report for July is expected to show a slight rise from June to 86. The RBC Index has trended lower this year, though with choppy months of spike. Judging by spending, we suspect the consensus is wrong about sentiment, and we look for a lower reading.

Earnings reports include General Electric ( NYSE: GE), Shaw Communications ( NYSE: SJR) and some others.

Thank you again for your interest, and we hope you will continue to support our advertisers at our site, Wall Street Greek. (disclosure)

In our Top Picks for 2007 report, Neil Macneale chose 2 steel stocks -- Chaparral (NASDAQ: CHAP) and Steel Dynamics (NASDAQ: STLD). Their performance qualified for Neil for 5th place in our top 10, with STLD up 49% and CHAP rising 67%.

Here, the editor of 2-for-1, a newsletter that focuses exclusively on companies tha thave announced stock splits, updates these stocks and looks at a new favorite, Cummins (NYSE: CMI).

"The rate of return on Steel Dynamics and Chaparral Steel cannot continue forever, but there is every reason to believe these remain good stocks to own.

"As I stated in my original recommendation for these two stocks, steel should continue to perform given the strength of the economy, even without a strong housing market. As the housing market improves, steel should get even stronger.

"In both cases, fundamentals for these companies remain strong and the stocks still sell at a discount when compared to peers in their industry and sector."

"Meanwhile, here's an idea to consider for the second half of 2007. On balance, the world will be in better shape and commerce will more stable and more profitable. The war in Iraq is going to be winding down, either because the 'surge' is working, or because the Congress is fed up and pulls the plug.

"There are numerous signs that September is the unspoken deadline for Congress, at which point I would expect our leaders to begin focusing on other important issues; indeed, I expect to see a move to focus on environmental issues.

"Cleaning up emissions and freeing ourselves from foreign energy supplies will bring enormous growth to the USA, both in jobs created and in technology we can export. The second half of 2007 will be seen as the just the beginning of the next wave of progress for the world's economies.

"Cummins Inc. will benefit from more stringent air quality standards. This manufacturer of diesel engines is at the forefront of clean diesel technology, with clean burning new engines and retrofit kits for older engines.

"Cummins's stock price has jumped significantly since our initial recommendation in April, but it still has great stats and should be a long-term winner."