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By Donna Childs 
A DOW JONES NEWSWIRES COLUMN  

NEW YORK (Dow Jones)–CIT Group, Inc. (CIT), one of the largest lenders to US small businesses, is clearly in a distressed state. But a successful rescue requires a deep understanding of how commercial finance contracts work.

This is particularly pertinent to our regulators who, seemingly, have yet to grasp the gravity of the situation.

CIT is seeking assistance from the federal government on the grounds that its survival is key to financing the nation’s small businesses, which have been going through a credit drought. But small businesses are also creditors to CIT, so CIT’s failure represents a greater systemic threat than CIT’s management can admit.

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By Sameer Bhatia 
A DOW JONES NEWSWIRES COLUMN 
 
NEW YORK (Dow Jones)–In the newspaper industry, the written word doesn’t appear to be worth the paper it’s printed on these days. The imminent demise of the newspaper industry is a favorite headline of the media, but there will be survivors.

While who the newspaper survivors will be is an important question, a more pertinent one is what form will they ultimately survive in.

Struggling newspapers are trying out different strategies as they face a steep decline in circulation.

According to a recent study by PricewaterhouseCoopers, or PwC, global newspaper revenues are forecast to decline by 10.2% in 2009 and further expected to decrease 4.5% annually over the next five years.

Newspapers have been hit by a triple whammy of a global downturn in advertising spending, a loss of ad revenue to the Internet as well as rising newsprint costs. Barclays Capital forecasts newspapers’ share of advertising revenue is expected to fall from 18.4% in 2002 to 9.7% in 2010, in a period when total advertising spend has been flat.

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By Robert Armstrong 
A DOW JONES NEWSWIRES COLUMN 

NEW YORK (Dow Jones)–If Charter Communications Inc. (CHTRQ) can’t bring uncooperative creditors into line over the next few months, it may emerge from Chapter 11 with a capital structure that could threaten the cable giant’s survival.

Most of Charter’s peers in the cable industry trade at an enterprise value that’s 5x their earnings before interest, taxes, depreciation and amortization (Ebitda). Using this ratio, Charter, which generated $2.4 billion in Ebitda in the last 12 months, ought to be worth between $12 billion and $13 billion.

That’s a big number, but it looks a lot smaller when compared to the company’s $21.7 billion in debt, accumulated through aggressive M&A and capital expenditure. Continue reading…

By Donna Childs 
A DOW JONES NEWSWIRES COLUMN 
 
NEW YORK (Dow Jones)–America’s many community banks should first explore ways to raise money from capital markets before responding to U.S. Treasury Secretary Timothy Geithner’s invitation to tap into TARP funds.

In an address to community bankers this week, Geithner said the Treasury plans to reopen a window for smaller banks, those with less than $500 million in assets, to apply to the Troubled Asset Relief Program. The apparent intent is to recycle TARP funds that are likely to be repaid soon by larger institutions into smaller, community-based organizations.

But the smaller banks have the benefit of learning from the experience of the larger banks as they weigh the benefits and costs of TARP participation.

Clearly one benefit of availing TARP funds is the cost of funds. Banks participating in the Capital Access Program within TARP were able to issue cumulative preferred stock to the Treasury with a 9% dividend convertible to common equity at a 10% price discount.

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 By Donna Childs 
A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–Bank of America Corp. (BAC) should view its assets through the eyes of a restructuring banker, rather than the lens its management and regulators appear to be using.

A day before the U.S. Treasury is scheduled to release results of its stress test for the large U.S. banks, reports suggest a possible capital shortfall of $35 billion for Bank of America.

Regulators and analysts have suggested various ways to close this gap, ranging from additional infusions of government money to asset sales.

But some of the past events may not have caught up with Bank of America’s current reported results, such that the shortfall may exceed $35 billion in the near future.

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 By Robert Armstrong 
Of DOW JONES NEWSWIRES 
 
NEW YORK (Dow Jones)–Two of Amylin Pharmaceuticals’ (AMLN) prominent shareholders, Carl Icahn and Eastbourne Capital, want the company to consider selling itself.

Many assume the logical buyer would be Eli Lilly & Co. (LLY), Amylin’s marketing partner for diabetes drug Byetta. But Lilly should stay away.

The back-and-forth between the activist investors and Amylin has focused on poison puts, standstill agreements and determining when separate investment funds legally constitute a single “group.”

The reasons for Lilly to steer clear don’t involve governance or questions of law, however. They are strategic.

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NEW YORK — It’s time for some radical thinking at Citigroup (C).

The bank has been selling parts of its sprawling empire in the past year as part of efforts to restructure its capital. Noted among them was the sale last year of its German retail banking operation, on which it booked an after-tax gain of $4 billion.

For Citi, international assets are particularly attractive candidates for divestiture, as credit deterioration is becoming worse abroad than in the U.S. However, divestitures are confounded by the dearth of buyers in the financial services industry relative to motivated sellers.

Now is the time for Citi to think outside of the financial services paradigm: Call Wal-Mart Stores Inc. (WMT).

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By Robert Armstrong 
Of DOW JONES NEWSWIRES

As the curtain rises on the drug industry’s latest act, the scene is ominous. Executives must choose a strategic course in the face of shifting industry economics. This will not be easy.

Revenues are declining as the blockbuster drugs that have driven growth reach the end of their life-cycles, and R&D departments haven’t produced enough new products to replace the fading blockbusters. When new drugs do make it out of the clinic, they face increasingly stringent regulatory review. All this threatens to permanently erode profits.

For pharma executives, the question is, do they continue to invest heavily in research despite the recent slump in productivity? If so, should they reinvigorate their internal research departments, or do they pursue acquisitions and partnerships?

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