Citigroup (NYSE: C), Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS) could be affected when S&P updates its credit ratings on the world’s 30 largest banks. (Reuters)

The Highway Loss Data Institute says hybrids are often safer in crashes. (Reuters)

The California Attorney General sends subpoenas to Fannie Mae and Freddie Mac in a review of lending foreclosure practices. (Reuters)

The ECB has a secret 20 billion euro bond-buying limit. (Reuters)

Proxy votes for Microsoft (NASDAQ: MSFT) CEO Steve Ballmer decline. (Reuters)

The Super Committee reaches no decision on Bush-era tax cuts. (WSJ)

The European Central Bank may be the only hope for a euro region bail out. (WSJ)

Eastman Kodak (NYSE: EK) puts its online gallery up for sale. (WSJ)

UBS (NYSE: UBS) will fire thousands at its investment bank. (WSJ)

Pressure on Alcatel-Lucent’s (NYSE: ALU) CEO increases due to poor performance. (WSJ)

Shares of Liberty Starz (NASDAQ: LSTZA) and Liberty Capital (NASDAQ: LCAPA) will be combined. (WSJ)

Data shows that Amazon.com’s (NASDAQ: AMZN) Kindle Fire has low margins. (WSJ)

Yelp files for an IPO to raise $100 million. (WSJ)

A new Spanish government will increase austerity plans. (WSJ)

Activist shareholder Relational Investors will get a Hewlett-Packard (NYSE: HPQ) board seat. (WSJ)

Gamestop (NYSE: GME) cuts its forecasts. (WSJ)

Silver Lake Partners is closer to a deal to buy Yahoo! (NASDAQ: YHOO). (WSJ)

Italy’s new prime minister offers a package to turn around the nation’s finances. (NYT)

Organized crime may be involved in the losses at Olympus. (NYT)

Spain’s borrowing costs soar. (FT)

NYSE Euronext (NYSE: NYX) and Deutsche Boerse will make some concessions to complete their marriage. (FT)

Home prices in many Chinese cities fall. (FT)

Douglas A. McIntyre

Other rating actions were announced for General Motors Co. (NYSE: GM), Liberty Media LLC, Lubrizol Corp., now wholly-owned by Berkshire-Hathaway Inc. (NYSE: BRK-A; BRK-B), ConAgra Foods Inc. (NYSE: CAG), Orbitz Worldwide Inc. (NYSE: OWW), Web.com Group Inc. (NASDAQ: WWWW), and Cummins Inc. (NYSE: CMI)

General Motors Co. (NYSE: GM) is having its ‘Ba2′ corporate family rating and its ‘Baa3′ secured credit facility ratings reviewed for possible upgrade at Moody’s. The company’s new union contract and its improved operating and financial performance are the drivers of the review. Global economic uncertainty and the cyclic nature of the automaking business are the agency’s biggest concern. Also today, S&P assigned ‘AAA’ ratings to $500 million in asset-backed notes for Ally Bank. The funds are primarily intended to finance purchases of new cars from GM and Chrysler.

Liberty Media LLC and its Liberty Starz Group (NASDAQ: LSTZA; LSTZB) and Liberty Capital Group (NASDAQ: LCAPA; LCAPB) have received a ratings downgrade from Moody’s on senior unsecured bonds from ‘B1′ to ‘B3′ and the probability of default rating was downgraded from ‘Ba3′ to ‘B1′. The downgrades follow a court ruling that allows Liberty Media to split-off certain assets. The agency noted that 18% of Liberty Media’s revenues and 37% its enterprise value are being removed, which “disproportionately and negatively affect Liberty Media’s bondholders.”

Berkshire Hathaway Inc. (NYSE: BRK-A; BRK-B) subsidiary Lubrizol Corp. received a ratings upgrade from Moody’s following its acquistion by Warren Buffett’s company. The agency raised Lubrizol’s debt ratings from ‘Baa1′ to ‘Aa2′ with a stable outlook. There’s no substitute for having access to really deep pockets, or as Moody’s says, Berkshire-Hathaway “now guarantees Lubrizol’s public debt.”

ConAgra Foods Inc. (NYSE: CAG) has had its ‘BBB’ corporate credit and its ‘A-2′ short-term and commercial paper rating, among others, re-affirmed by S&P following ConAgra’s decision to give up its attempts to acquire Ralcorp Holdings Inc. (NYSE: RAH). All the company’s ratings have been removed from CreditWatch and the ratings outlook has been declared stable.

Orbitz Worldwide Inc. (NYSE: OWW) has had its ‘B’ corporate credit rating put on CreditWatch with negative implications by S&P. The agency downgraded debt for Travelport Holdings Ltd. yesterday, which together with The Blackstone Group (NYSE: BX) owns 55% of Orbitz.

Web.com Group Inc. (NASDAQ: WWWW) received a preliminary rating of ‘B’ with a stable outlook from S&P on its corporate credit.

Cummins Inc. (NYSE: CMI) received a corporate credit upgrade from ‘BBB+’ to ‘A’ from S&P. Cummins is an engine and parts maker and has been performing above expectations for the past three quarters. Analysts have raised EPS estimates for the current quarter by 10%.

Paul Ausick

Audit Integrity

The corporate communications staffs of these companies and their outside public relation firms will tell their managements to keep quiet and not react. A reaction, they will argue, just makes it look like Audit Integrity knows what it is doing and that there is some validity to their analysis. Audit Integrity is probably counting on that. It will get a lot of exposure for the study and little ,if any, legitimate criticism.

Audit Integrity says its research services support risk management practices that help investors, insurers and others lower risk and improve performance with objective ratings and reports.

The basis by which it determines which companies are in trouble is to look at three methods for examining firms  tha may be in trouble. Audit Integrity says“Each of these three approaches – accounting-based, market-based, fraud-based –is moderately effective on a stand-alone basis in predicting bankruptcies. Since the models are not highly correlated, each model has the potential to add incremental value to the other models. Audit Integrity combined the three approaches to determine whether the accuracy ratio of an aggregate model would surpass that of any single approach.”

The list does include some companies that are probably in deep financial trouble  including Rite Aid (RAD) and Macy’s (M).

Also listed are American Air (AMR), which just raised $2.9 billion, which the analysis probably does not take into account. Transportation companies Continental Air (CAL) and Hertz (HTZ) are on the list.

Some of the better known public companies that have been targeted by Audit Integrity  include advertising giant Interpublic (IPG) and US tire company Goodyear (GT). Not surprisingly, Las Vegas Sands (LVS), a casino firm that has battled for its life for months is included.

The balance of the list is Federal Mogul (FDML), Textron (TXT), Liberty Media Capital (LCAPA), Mylan (MYL), Apartment Investment and Management (AIV), Redwood Trust (RWT), Oshkosh (OSK) and Amkor (AMKR).

Douglas A. McIntyre

The company will also have Game Show Network, FUN Technologies and the three regional sports networks. Liberty Entertainment Inc. will now be comprised of:

• approximately 54% of the common stock of DIRECT;
• Liberty Sports Holdings, which owns three regional sports networks;
• a 65% interest in Game Show Network (GSN) and FUN Technologies;
• approximately $30 million in cash in addition to cash generated by operations after March 31;
• $2 billion in debt.

DIRECTV will provide to LEI up to $650 million in funding pursuant to a term loan facility in order to service the LEI debt.

In the split-off, each holder of Series A Liberty Entertainment group tracking stock will receive 0.9 of a share of LEI Series A common stock and will retain 0.1 of a share of Liberty Starz stock; each holder of Series B Liberty Entertainment group tracking stock will receive 0.9 of a share of LEI Series B common stock and will retain 0.1 of a share of Liberty Starz stock for each share of Series B Liberty Entertainment group tracking stock held at the time of the split-off.

LEI and DIRECTV Group (DTVG) will merge with subsidiaries of a newly formed subsidiary of DTVG that will be called DIRECTV. DIRECTV will become the parent company of DTVG and LEI. DIRECTV will have two classes of stock, Class A which will be entitled to one vote per share and Class B which will be entitled to 15 votes per share. In the DTVG merger, DTVG shareholders will receive one share of DIRECTV Class A common stock for each share of DTVG common stock held. The holders of LEI Series A and Series B common stock (other than John Malone, his wife and associated trusts) will receive 1.1111 shares of DIRECTV Class A common stock for each share of LEI Series A or Series B common stock held. John Malone, his wife and associated trusts will receive 1.1111 shares of DIRECTV Class B common stock for each share of LEI Series B common stock held.

This has been a very confusing story for years.  The new structure does not seem that much less complicated on the surface.  We have heard of many shareholders who have refrained from investing in the Liberty companies because they have had too hard of a time determining what they really own in each class of stock.  And after reading the above scenarios it may be good to ask yourself if the structure sounds easy to explain now……..

JON C. OGG

The ratings agency said the upgrade was to reflect its comfort over near-term liquidity needs after refinancing the 2009 debt maturities out to 2011 after Liberty Media (LCAPA) came to the rescue.  S&P said it also believes that additional cost savings can be realized, although noted that the $300 million EBITDA goal may be difficult to reach in 2009.

S&P raised the corporate credit ratings to ‘CCC+’ from ‘CCC.’  S&P also lifted its issue-level ratings by a notch.  This might not sound like an eager endorsement since it is still so deep in junk bond territory.

The one issue which was not raised was the senior unsecured notes that were affirmed at ‘CCC-’ in this call.  The good news is that the company’s outlook is stable.

The Sirius XM 9.625% and 3.25% senior unsecured notes were raised to ’6′ from ’5′ in an indication of negligible (0%-10%) recovery for noteholders in the event of a payment default.

The $172 million 14% senior secured PIK, or pay in kind, notes due in 2011 were assigned as ‘CCC’ with a recover rating of ’5′ as an indication of a 10% to 30% recovery for noteholders in the event of default.

SIRIUS XM closed down almost 3% at $0.35 today, and shares are up about 2% at almost $0.36 in the after-hours session.  This is not any endorsement for any great waves of upgrades, but it is a start and the criteria for good news is far different than it used to be a few weeks ago.

JON C. OGG

Bed Bath & Beyond (NASDAQ: BBBY) Cut to Neutral at SunTrust Robinson Humphrey.
BB&T (NYSE: BBT) Cut to Underperform at KBW.
First Horizon National (NYSE: FHN) Cut to Underperform at KBW.
Liberty Media Capital (NASDAQ: LCAPA) Raised to Buy at Deutsche Bank.
O2 Micro (NASDAQ: OIIM) Cut to Underweight at Morgan Stanley.
Regions Financial (NYSE: RF) Cut to Market Perform at KBW.
SunTrust (NYSE: STI) Raised to Outperform at KBW.
Universal Health (NYSE: UHS) Raised to Outperform at Credit Suisse.

Jon C. Ogg

Under terms of the deal,  Malone’s Liberty will invest in Sirius XM.  The satellite radio provider and its lenders have also agreed to extend its outstanding loans which are due in May.

These transactions “should” resolve resolve the uncertainty over the company’s and its subsidiaries’ debt that is maturing in 2009.  The company says this DOES resolve it, but we argue it SHOULD resolve it.

Sirius XM also announced that the term loan and revolving loan for  XM Satellite Radio, a subsidiary of Sirius XM,  been rolled into a single term-loan facility of $350 million.

Liberty will loan $150 million to XM Satellite Radio to repay a portion of the  10% convertible notes due December 1 issued by its former corporate parent.  Sirius XM has granted Liberty 12.5 million shares of new preferred stock convertible into 40% of the common stock of Sirius XM.

Saying a $0.13 or $0.14 stock was “allowed to live” is a misnomer.  This company is living on life support and may be in a coma.  There are still many issues ahead for Sirius XM, and the shaky economy and plummeting auto sales  is just a small piece of the pie.

Sirius XM shares are up more than 6% today to $0.1384.

Jon C. Ogg
March 6, 2009

It sold more than 1.3 millionshares at the very end of 2008.  A filing today showed another 344,000shares were sold off at prices of between $15.96 to$16.14.

This is so far not an exit from the stock.  That would take fartoo a high toll on Liberty.  It also still hasplenty of skin in the game with almost 27.2 million shares remainingafter the last filing.

This follows steady selling since the end of 2008.  It seems that BarryDiller’s victory over John Malone came with a price.

The Malone structure is complicated.  if you want to know which stock is which, here is a list:

• Liberty Media Interactive (NASDAQ: LINTA),
• Liberty Media Corporation (NASDAQ: LINTB),
• Liberty Media Corporation (NASDAQ: LMDIB),
• Liberty Media Capital (NASDAQ: LCAPA),
• Liberty Media Corporation (NASDAQ: LCAPB)

Jon C. Ogg
January 6, 2009

This was part of Liberty’s repurchase plan, but it was a privately negotiated transaction as this trade nor enough shares crossed on the exchange on that day.  According to trade recaps, this stock only traded 1.04 million shares of common stock on October 7 and the stock closed at $11.22 with an intra-day trading range of $11.16 to $12.49.

Jon C. Ogg
October 9, 2008

We covered this scenario in our SPECIAL SITUATION newsletter that went out on April 2, 2008 at $21.22; and the intro to subscribers was as follows:

• ….Our current pick is IAC/Interactive (NASDAQ: IACI), and we gave three likely scenarios we believe to occur. Our downside target limits the implied risk to 12% if you hedge your transaction as we would do. The upside would be an implied 33% to more than 50% if the scenarios pan out the way we expect. Barry Diller isn’t entirely out of the soup yet and Malone may have some more tricks up his sleeve. After the ruling came out we ran the hard detailed numbers and eyeballed various probabilities for this call….

Liberty has agreed to drop its appeal and will not oppose the proposed single-tier spin-offs of HSN, Interval International, Ticketmaster and Lending Tree.  IAC advanced those filings earlier today by making its initial filings with the SEC.  This is all within our line of expectations and should clear the way to the unlocking of value.

Liberty & IAC also agreed on a number of arrangements regarding the governance of the spun off companies as follows:

• Liberty’s right to board representation on each company,
• a standstill agreement that limits Liberty’s ability to increase its ownership stakes,
• and to take a variety of other actions with respect to the spun off companies.

You can join our open email distribution list to hear about other break-ups, IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

John Malone may be happy with what he got here and he may not, but as far as we are concerned this looks like a clear win for Barry Diller.  IAC shares closed up 2.7% at $23.00 in normal trading today, and shares are up over 3% at $23.85 in after-hours trading.

Jon C. Ogg
May 12, 2008

Jon Ogg produces the twice-monthly SPECIAL SITUATION INVESTING subscriber newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.