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Why First Republic didn’t make a deal

    First Republic will report quarterly results on Monday, the first since the fall of Silicon Valley Bank led to a regional banking crisis. The pressure on the sector is not over yet: Moody’s, the rating agency, downgraded 11 regional lenders on Friday, including Zions and Western Alliance. And despite a $30 billion bailout provided by some of the country’s largest banks, shares of First Republic are down nearly 90 percent over the past six months.

    So why hasn’t a deal been struck to raise more money or sell assets — or itself?

    The challenge is significant. The hole in First Republic’s balance sheet is reportedly about $25 billion. That raises the question of who is going to absorb those obligations — and how. It’s a problem First Republic is trying to solve through a combination of government, big banks, and private equity (although it won’t necessarily be all three), DealBook hears. Each of these parties has different priorities, timelines and constraints. Discussions are continuing.

    How much time is on the clock? First Republic is not expected to announce a deal beyond its earnings. But it is is expected to advise on the stability of its deposit base and the size of its potential losses. Assuming those have been moderated, First Republic has time to resolve its issue. But the decision to suspend dividends on its preferred stock shows that the bank is clearly focused on cash management. It has already lost wealth advisers to competitors, and the situation could change if further shocks in the commercial real estate sector trigger another run on deposits, or if other unexpected issues emerge.

    Still, analysts say those challenges may not be fatal just yet, leaving First Republic in a somewhat painful holding pattern. “The only takeover scenario possible for FRC, in our view, is via receivership, where a prospective acquirer can take advantage of an FDIC-backed bargain,” Wedbush Securities analysts wrote on April 10. Therefore, we conclude that FRC will try to eradicate it as a standalone company in the near future.”

    Johnson & Johnson is reportedly trying to end the IPO doldrums. Starting today, the group will begin pitching to potential investors in Kenvue, the consumer health division that produces household products like Tylenol, according to The Wall Street Journal. J.&J. hopes to raise at least $3.5 billion with the offering.

    A top Budweiser marketing executive steps down amid conservative backlash. Alissa Heinerscheid, who oversaw Bud Light’s collaboration with a transgender influencer, is taking a leave of absence after calls to boycott the brand from critics of her efforts to adopt more inclusive marketing. Others have since attacked Budweiser for its steps to quell the controversy.

    Twitter’s verification overhaul takes a strange turn. After the social network stripped thousands of notable users of their checkmark icons, a move designed to boost subscriptions to the Twitter Blue service, it reinstated badges for a number of celebrities — including decedents such as chef and author Anthony Bourdain. Critics said the confusion was the latest sign of chaos on Twitter under Elon Musk.

    The dean of Tulane Law School is leaving. David Meyer becomes dean of Brooklyn Law School. Since assuming this role in 2010, Meyer has helped oversee Tulane’s Corporate Law Institute, which is arguably the most important gathering for M.&A. lawyers, bankers and other consultants who come down to the school’s hometown of New Orleans to talk.

    News yesterday that Jeff Shell stepped down as CEO of NBCUniversal after an inappropriate workplace relationship with an employee shocked media executives in New York and Hollywood.

    And it leaves a hole in NBCUniversal’s top leadership at a crucial time as the company and its parent company, Comcast, try to figure out its future.

    Shell fired after weeks of investigation after a woman — who, according to The Wall Street Journal, was a veteran journalist at NBCUniversal — filed a complaint against him. Few at the company knew about the investigation, conducted by an outside law firm, until Comcast announced the news on Sunday.

    “We are disappointed to share this news with you,” Comcast CEO Brian Roberts told employees. “We built this company on a culture of integrity.”

    It is unclear who will replace Shell, an old Comcast executive who had Roberts’ ear. In the meantime, Mike Cavanagh, Comcast’s president and heir to the throne of Mr. Roberts, will oversee the company.

    Potential longer-term candidates include Mark Lazarus, who leads NBCUniversal’s TV and streaming operations; Cesar Conde, head of the news department; and Donna Langley, president of Universal Pictures.

    Shell’s departure comes at a difficult time for NBCUniversal, struggling to meet the challenges of the current media age. Peacock, its streaming service, lost $2.5 billion last year and is expected to lose another $3 billion this year. Shell had long called on NBCUniversal to embrace streaming and led an effort to move the company’s content from Hulu — of which Comcast owns about a third but controlled by Disney — to Peacock.

    Meanwhile, NBCUniversal’s extensive cable channel offerings are suffering from the broader decline in traditional TV viewership.

    (On a bright note is the strong performance of Universal Pictures’ “Super Mario Bros. Movie,” which took in $871 million at the worldwide box office and is the year’s highest-grossing title.)

    The division’s future is hazy. In a sign that Comcast has been considering all sorts of options for its media unit, the conglomerate weighed last year to combine NBCUniversal with video game giant Electronic Arts, aiming to keep the new company afloat. That deal didn’t happen, but it suggests that almost everything is on the table, especially as analysts predict more media mergers will happen.

    Expect a lot of questions for Comcast’s leaders when the company reports results on Thursday.

    In Credit Suisse’s latest financial report before it was sold to UBS, the bank today shed more light on its final days – including a massive capital flight that most likely convinced Swiss regulators that the long-struggling lender needed bailing out.

    Customers pulled up nearly $69 billion in assets in the first quarter, especially in the second half of March, in what Credit Suisse called “significant net outflows.” The figure underlines the evaporation of confidence in the company amid the market turmoil caused by the collapse of Silicon Valley Bank.

    Although Credit Suisse borrowed billions from the Swiss central bank to allay investor fears about its health, months of growing doubts about its survival – driven by years of scandals and financial missteps – eventually led authorities to conclude that the lender had to be bailed out and orchestrated the sale to UBS.

    Overall, Credit Suisse lost 1.3 billion Swiss francs ($1.46 billion) this quarter.

    Customers are not fully back yet, even though Credit Suisse will be absorbed by its stronger rival. That highlights some of the challenges UBS faces in trying to stabilize the bank it agreed to bribe for $3.2 billion.

    Credit Suisse also completed a $175 million deal to buy M. Klein, the boutique financial advisory firm owned by longtime dealmaker and former board member Michael Klein. That acquisition was intended to support a turnaround plan for Credit Suisse, which would combine the investment bank with Klein’s and spin off the company.

    Bed Bath & Beyond finally died on Sunday, after the retailer filed for bankruptcy after months of trying to come up with a bailout. The collapse, days after David’s Bridal, the wedding dress chain, also filed for bankruptcy, is the latest sign that the post-pandemic retail landscape boosted by free money and stimulus checks is over.

    Bed Bath & Beyond’s debt became a problem. According to the bankruptcy filing, as of November 2020, the company had about $1.5 billion in cash on hand, compared to about $1.2 billion in debt. But it spent $1 billion on buybacks as sales plummeted. That, coupled with the sharp and sudden drop in the company’s stock price (the stock trades for less than $1 for a month after peaking at about $80 about a decade ago), hammered into Bed Bath’s financial stability. & Beyond.

    Suppliers lost confidence. According to the filing, the retailer was unable to meet an estimated $100 million in sales in the third quarter of 2021 because it did not have the products. Bed Bath & Beyond delayed payments to suppliers and canceled orders early last year to focus on private label brands, and suppliers went elsewhere.

    Sue Gove, who became permanent CEO in October, said the stock was around 70 percent over the past holiday season.

    The company was weighed down by its physical activities. Bed Bath & Beyond didn’t invest enough in e-commerce and never got to grips with the deadly combination of declining store sales and sticking to the massive costs associated with having more than 300 outlets.

    This week, a number of major technology companies and consumer goods groups will report quarterly results, the US will release economic data for the first three months of the year and President Biden could announce his intention to run for re-election.

    Tomorrow: Alphabet And Microsoftboth cutting jobs and competing with each other in AI; McDonald’s, Pepsi And Nest give a glimpse of consumer confidence; And UBS announces results.

    Wednesday: Meta publishes results after the latest round of layoffs last week. British regulators are ready to rule from Microsoft $69 billion acquisition of Activision Blizzard.

    Thursday: Amazon announces earnings after shares surged last week based on a report last week that sales will exceed analyst estimates. The US releases first-quarter GDP figures.

    Friday: Investors will be watching to see if Exxon Mobil maintain its rising profits thanks to high energy prices.

    Offers

    • What investment do tech tycoons like Jeff Bezos, Bill Gates and Marc Benioff have in common? Nuclear fusion. (WSJ)

    • An auction of Celsius, the bankrupt crypto lender, is scheduled for tomorrow, with bidders expected to include exchange operator Coinbase. (Fortune)

    Policy

    • The Sackler family, owner of the maker of OxyContin, gave $19 million to a federally chartered advisory group that shaped the government’s response to the opioid crisis. (NYT)

    • “Small Towns Chase America’s $3 Trillion Climate Gold Rush” (WSJ)

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