BUSINESS BRIEFS
Bond insurer Ambac Financial is downgraded
Associated Press
NEW YORK — A downgrade of bond insurer Ambac Financial Group Inc. is likely to have far-reaching effects, making it more difficult for cities to issue new bonds and forcing further write-downs at financial services companies, analysts said.
After Ambac scrapped plans to raise $1 billion in capital, Fitch Ratings cut the company's crucial financial strength rating to "AA" from "AAA."
The downgrade likely means Ambac will not underwrite any more business, said John Flahive, director of fixed income for BNY Mellon Wealth Management. Market prices of existing bonds insured by Ambac and MBIA Inc. were trading lower before the downgrade, and Flahive suggested any downgrade could accelerate the decline.
Ambac and chief competitor MBIA together insure $700 billion in municipal bonds, and MBIA's "AAA" rating is also under threat.
SPRINT STOCK FALLS ON CUTBACK NEWS
KANSAS CITY, Mo. — Sprint Nextel Corp.'s stock plunged yesterday after the wireless carrier said it will cut 4,000 jobs and close 125 retail locations in response to a steep drop in its customer base.
Sprint shares plummeted nearly 25 percent, prompting analysts to forecast even more cuts in the coming months as the nation's third-largest wireless carrier struggles to compete with AT&T Inc. and Verizon Wireless.
The layoff of about 6.7 percent of Sprint's workforce and closure of 8 percent of its stores is to be completed in the first half of the year. Sprint said the cuts will trim costs by $700 million to $800 million a year.
Some analysts said the moves would not be enough to stem losses resulting from a fourth-quarter loss of 683,000 so-called postpaid subscribers — more than twice the net loss Wall Street analysts predicted — for a net decline of 109,000 subscribers.
GENERAL ELECTRIC REPORT POSITIVE
HARTFORD, Conn. — General Electric Co. delivered some cheer yesterday to investors worried about a slowing economy, saying its quarterly profit rose 4 percent and reaffirming its outlook for 2008.
The conglomerate's big-ticket business — jet engines, railroad locomotives, and water treatment plants — powered GE's profit, posting $3.4 billion, or 26 percent more than the fourth quarter of 2006. It also gave GE a global reach that should help blunt the impact of a possible U.S. recession.
"Every place we went, there's a need for power, there's a need for planes, and there's just no signs that this global infrastructure boom is slowing at all," chief executive Jeff Immelt told investors in a conference call.
Total net income rose to $6.7 billion, or 66 cents a share, in the fourth-quarter ended Dec. 31, from $6.44 billion, or 62 cents a year earlier. Earnings from continuing operations climbed to 68 cents a share in the latest period, from 58 cents in the prior-year period.
AMTRAK, UNION IN TENTATIVE DEAL
WASHINGTON — Amtrak said yesterday it has reached tentative agreement on a long-sought contract with 12 unions, averting what would have been the railroad's first strike in its 36-year history.
Amtrak, as part of the deal, agreed to pay workers thousands of dollars in back wages built up through the years when they worked without contracts. The union said the payments amount to about $200 million, part of which is contingent on future funding by Congress. Amtrak also dropped demands to change work rules, including contracting out more work and giving the railroad more leeway over overtime and terminations.
The agreement covers about 10,000 workers. Amtrak has 19,500 employees, 16,000 of whom are unionized.
"The last eight years have been very tough on the members of the union and our families," said Jed Dodd, of the Brotherhood of Maintenance and Way Employees.
