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VOL. 6 | NO. 27 | Saturday, June 29, 2013

Daily Digest

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Georgia-Pacific Converting Buckeye Deal to Merger

Georgia-Pacific is converting its acquisition of Buckeye Technologies Inc. to a merger that requires a shareholder vote because of regulatory inquiries.

Georgia-Pacific LLC, a privately held paper, packaging and building products company, said Wednesday, June 26, that it was converting to a “long form” merger from a pending acquisition because of a second request from the Justice Department for details about Buckeye’s nonwovens business.

The Atlanta company also said that it was ending the tender offer related to the transaction.

Georgia-Pacific announced in April that it had reached a deal to buy Buckeye for about $1.46 billion.

Buckeye, which is based in Memphis, runs manufacturing plants in the U.S. and Germany. It makes and markets specialty fibers and nonwoven materials made from wood and cotton.

Those products are used in personal hygiene products, disposable diapers, engine air and oil filters, napkins, cleaning supplies, baby wipes and a series of other goods.

Earlier this month Georgia-Pacific said that it received another request from the Federal Trade Commission and the antitrust division of the Justice Department for more information and documents related to the Buckeye acquisition. The FTC and antitrust unit had asked for more information and documentation on Buckeye’s nonwovens business, with the companies saying that they would continue to work with both parties.

A long form merger is when more than the minimum number of shares – but less than 90 percent – are tendered in an offer. In such an instance, shareholders must vote in favor of the deal for it to close. In a short form merger, 90 percent or more of the shares are tendered and no shareholder vote is needed.

The companies said that Buckeye will hold a special shareholders meeting promptly to vote on the merger agreement. At least 75 percent of Buckeye’s outstanding stock must be voted in favor of the deal.

If the transaction is approved, Buckeye shareholders will receive $37.50 per share in cash. This is the same amount they would’ve received in the tender offer.

Holder to Retire from Tennessee Supreme Court

Tennessee Supreme Court Justice Janice M. Holder of Memphis announced Wednesday, June 26, that she will retire from the court effective Aug. 31, 2014.

The retirement date is the end of Holder’s current eight-year term and means she will not seek re-election in the judicial retention races on the August 2014 ballot.

“It has been my privilege to serve the people of Tennessee as a trial judge and Supreme Court justice, and an honor to have been selected by my fellow justices as the first female chief justice in our state’s history,” Holder said in a news release.

She notified Gov. Bill Haslam by letter that she will not seek re-election in the August 2014 judicial retention election.

Holder, a former Shelby County Circuit Court judge, was appointed to the Supreme Court in December 1996 and elected in August 1998 and then re-elected in 2006.

In 2008 she became the first woman to serve as chief justice of the Tennessee Supreme Court.

She is the third woman to serve on the high court. She held the position of chief justice from September 2008 to August 2010.

Zacks Equity Rates First Horizon at Neutral

Zacks Equity Research has reiterated a neutral recommendation on Memphis-based First Horizon National Corp., the parent company of First Tennessee Bank.

The research company cited improved credit quality metrics at First Horizon coupled with the downside of declining revenues. First Horizon currently has a Zacks rank of “hold.”

“Despite the macroeconomic pressure, First Horizon’s credit quality continues to normalize,” according to Zacks. “Credit metrics consistently improved in 2012 as the overall financial condition of businesses and consumers strengthened and the housing market improved in many areas. Going forward, we expect asset quality to improve with continuous reserve releases.

“We are also impressed with the company’s cost-control measures, which have aided in improving bottom-line performance amid the sluggish macroeconomic environment. Moreover, we believe that the company’s solid capital levels will offer flexibility regarding capital deployment as well as other strategic acquisitions in Tennessee or its adjacent markets that will be accretive to growth. … We are also concerned about the company’s top-line growth and margins, which continue to be impacted by the low rate environment and sluggish economic recovery. Further, First Horizon’s significant exposure to problem loan categories, such as industrial and commercial mortgages, is another problem. Additionally, regulatory issues will limit the company’s flexibility with respect to business investments.”

Magna Bank Honored for Small Business Administration Lending

Magna Bank has been named Community Bank of the Year by dollar value for its Small Business Administration lending.

It’s the third-straight year the bank has been recognized by the Tennessee SBA for its lending practices. Magna awarded a SBA loan volume of $13.2 million during fiscal year 2012, up $1 million from fiscal year 2011.

The dollar amount of SBA loans Magna awarded in 2012 was more than any other community bank in the state.

In addition to SBA lending, Magna also provides business banking services that include commercial banking, multi-unit lending and construction lending.

City of Memphis Inspection Stations Close

The city’s motor vehicle inspection stations close permanently Friday, June 28, at 3 p.m.

The administration of Memphis Mayor A C Wharton Jr. confirmed the closings Thursday, June 27, as workers at the stations prepare for either layoffs or to transfer to other city departments.

The stations are closing because last year the Memphis City Council voted to end all funding of the inspection services and the stations effective at the end of the current fiscal year. The fiscal year ends June 30.

Meanwhile, there has been no resolution to talks among the city, Shelby County government and the state of Tennessee on who will continue to do the emissions testing required by the federal Environmental Protection Agency as one of several options for meeting air quality standards.

Council members voted to end the funding because they contend it isn’t fair that Memphis vehicle owners are required to get the inspection and vehicle owners in the county outside the city are not.

The Friday closing is an early deadline for Memphis vehicle owners whose tags expire at the end of June.

But for those with July tags and beyond, Shelby County Clerk Wayne Mashburn will renew vehicle registrations without requiring the notice that the vehicle passed inspection.

30-Year Mortgage Rate Hits 2-Year High

The average U.S. rate on a 30-year fixed mortgage surged this week to 4.46 percent, the highest in two years.

The increase from a 3.93 percent average last week was the largest one-week jump in 26 years, according to a report Thursday from mortgage buyer Freddie Mac. And it shows the Federal Reserve’s hints that it might slow its bond purchases this year are already affecting consumers.

In the short run, a spike in rates could prompt more people to buy homes, giving the housing recovery an added boost. That’s because would-be buyers would want to lock in the rates before they rise further.

But if rates continue to climb, eventually some buyers might feel priced out. That could slow homes sales at a crucial time.

Interest rates have jumped after Fed Chairman Ben Bernanke said on June 19 that the Fed could slow its bond purchases later this year if the economy strengthens. Since Bernanke’s comments, the yield on the 10-year Treasury note has risen to a two-year high. Mortgage rates tend to track the yield on the Treasury note.

Freddie Mac also said the average on the 15-year mortgage rose to 3.50 percent from 3.04 percent last week. That’s the highest since August 2011.

Mortgage rates remain low by historical standards. Still, the impact on buyers’ wallets in just the past two months is striking.

A buyer who locked in a 3.35 percent rate in early May on a $200,000 mortgage will pay $881 a month, according to Bankrate.com. Another buyer who gets a 4.46 percent rate this week on a mortgage of the same amount will pay $1,008 a month.

The difference: $127 more a month, or $45,720 over the lifetime of the loan. The figures don’t include taxes, insurance or initial down payments.

Fed Officials Seek to Calm Markets

Federal Reserve officials sought Thursday to calm investors by assuring them the Fed won’t start trimming its bond purchases until the economy has strengthened. They said any pullback in the Fed’s stimulus will hinge on the economy’s performance, not a calendar date.

The Fed is buying $85 billion a month in bonds to try to keep long-term interest rates low to spur borrowing and spending. Chairman Ben Bernanke jolted investors last week when he said the Fed will likely slow its bond buying this year if the economy continues to improve.

William Dudley, president of the Federal Reserve Bank of New York, said Thursday that if the economy proves weaker than the Fed forecasts, he expects the bond purchases to continue.

The Fed’s timetable for its bond purchases depends on its outlook for the job market and the economy, Dudley stressed at a news conference in New York.

Jerome Powell, a member of the Fed’s board in Washington, said investors appear to have incorrectly concluded that the Fed will taper its purchases soon.

A third Fed official, Dennis Lockhart, president of the Atlanta Fed bank, said Thursday that “the pace of purchases, the composition of purchases and the ultimate size of the Fed’s balance sheet still depend on how economic conditions evolve.”

3 West Tennessee Towns Receive TDOT Grants

City leaders in Humboldt, Milan and Trenton, Tenn., were awarded state transportation grants Wednesday, June 26, for downtown improvement projects.

In each case, the grants, which emphasize pedestrian or bicycle pathways, are for the latest phases on ongoing projects.

Trenton city leaders were awarded $525,469 for the second phase of Trenton Trail that adds sidewalks along with new signage and traffic calming devices. The trail highlights Civil War sights.

Humboldt’s $396,248 grant is for a project that includes sidewalks and curbs in Humboldt’s business district as well as pedestrian lighting and stamped concrete driveways.

In Milan, the $392,052 grant funds new sidewalks, crosswalks, bicycle racks and landscaping for southwest Front Street in the town’s Downtown area.

The grants were announced by Tennessee Gov. Bill Haslam and Tennessee Transportation Commissioner John Schroer. Schroer’s department administers the funding, which comes from a federal transportation program.

South Memphis Celebrates New Farmers Market

On Thursday, June 26, Memphis community leaders will celebrate the completion of a new facility that will house the South Memphis Farmers Market.

The redeveloped green grocer is at 1400 Mississippi Blvd. and includes a demonstration kitchen that will help educate the community about healthy eating, organic products and healthy food preparation.

The South Memphis Farmers Market opened in 2010 as a collaborative organization run by South Memphis residents, The Works Inc. and the University of Memphis.

The $1.2 million community effort relies on funding from a variety of sources, including the Plough Foundation, the Department of Agriculture, the Department of Health and Human Services, and various local agencies and organizations.

Roshun Austin, the president and CEO of The Works Inc., a community development organization that focuses on South Memphis, says the South Memphis Farmers Market helps eliminate a food desert, while supporting the redevelopment of the South Parkway commercial corridor.

Studies show people that live in communities without supermarkets, often dubbed food deserts, have higher rates of obesity, diabetes and other diet-related health problems. The market is open Thursdays from 10 a.m. to 6 p.m.

Visible Music College, Saint Blues Team Up

Visible Music College and Saint Blues Guitars are teaming up to spread the word about Memphis music.

The institutions will give away four Delta Blues Box guitars this summer at music festivals, where a team of Visible Music College students also will be recruiting for the college.

The students arrived in Mineral City, Ohio, in recent days for Alive Christian Music Festival, and they’ll hit festivals in Pennsylvania, Wisconsin and Minnesota before coming back to Memphis in late July.

Visible Music College has recruited heavily at Christian summer music festivals since its launch.

The partnership with Saint Blues Guitars was dreamed up by Visible Music College supporter and roots music aficionado Tim Price, who also donated a Saint Blues Blindsider guitar to the school for permanent use by students in the guitar program.

Haslam Creates State Chief Operating Officer Position

Republican Gov. Bill Haslam has hired on a former IBM executive to become the state’s chief operating officer, a new Cabinet-level position in his administration.

Haslam announced Tuesday that Greg Adams’ role as COO will be to promote efficiency and effectiveness in operations with state departments. He starts his new job on July 8.

Adams spent 37 years at IBM, most recently as a managing director in the company’s financial services sector. His career with IBM also included stints in Knoxville and Nashville. He later served in a variety of senior management roles in Tokyo, New York and Atlanta.

Adams holds a bachelor’s degree in engineering from Princeton and a master’s in science and management from the Massachusetts Institute of Technology.

The new position pays $165,000 per year.

Fitch Upholds 'A' Rating on Memphis International

Fitch Ratings upheld its A rating on Memphis International Airport bonds following Delta Air Lines’ announcement that it will end connecting activity at the airport Sept. 3.

Earlier this month, Moody’s Investors Service downgraded the rating on the airport’s outstanding revenue bonds to A3, from A2, and revised its investor outlook to stable, from negative.

While Fitch Ratings held its A bond rating on the Memphis-Shelby County Airport Authority’s outstanding $394.8 million in revenue bonds, the New York-based research service revised the rating outlook to negative, from stable.

Analysts attributed the rating outlook downgrade to Delta’s recent move to end all remaining connecting activity at the airport and said annual enplanements may fall below 1.8 million, leaving the airport more reliant on non-airline and cargo revenue.

Fitch warned Memphis International’s rating likely will be downgraded unless the airport can maintain healthy debt service coverage through increasing origination and destination traffic, boosting airline rates and charges, and decreasing expenses.

Potter Resets Hearing for Nineteenth Century Club

Environmental Court Judge Larry Potter said Monday, June 24, that he hopes the new owners of the historic Nineteenth Century Club building on Union Avenue will preserve the decaying structure.

“It is my fervent hope what we will see is an effort to save the structure,” he said.

Potter was addressing John Lee, a partner in the business entity, The Union Group LLC, that purchased the building at auction in January for $550,000.

Lee said the controlling partner in the group, Shon Lin, did not appear in court because he did not speak English well. Potter reset the hearing for Monday, July 1, and said if Lin, who operates three restaurants in the Memphis area, did not appear in court he would assess a $150 fine for each day Lin does not appear.

“I’m unhappy with the fact Mr. Lin decides to ignore a court summons because he’s not confident in his English,” Potter said.

The owners of the historic property have been cited for owning or maintaining a dangerous or neglected building, including rotting wood, broken windows and a deteriorated roof. Power lines to the building have been severed and Potter warned Lee that the building should not be altered in any way until Lin appears in court.

“I do not want any significant steps, work or anything done without Mr. Lin being before this court,” Potter said.

The stately but decaying property ay 1433 Union Ave. was built in 1907 by Rowland Jones, a Memphis lumber king.

In 1926, the 15,813-square-foot house that is listed on the National Register of Historic Places was acquired by the Nineteenth Century Club, a philanthropic women’s organization.

The Union Group won a competitive bidding process in January, beating out a group that offered $350,000 and wanted to turn the property into a women’s business center. The three-story, wood frame structure is commercially zoned and sits on 1.2 acres at Union between Kimbrough and Cleveland streets.

Tenet Healthcare Buying Vanguard Health for $1.8 Billion

Tenet Healthcare Corp. is buying Vanguard Health Systems Inc. for about $1.8 billion, helping to expand its service offerings and broaden its geographic reach, the company has announced.

Tenet, owner of Saint Francis Hospitals in Bartlett and Memphis, will pay $21 per share, a 70 percent premium to Vanguard Health’s Friday closing price of $12.37.

Shares of Vanguard Health soared $8.14, or 65.8 percent, to $20.51 in premarket trading Monday.

The companies said Monday that the transaction also includes $2.5 billion in debt and value the entire deal at $4.3 billion. Following the acquisition, Tenet will own 79 hospitals and 157 outpatient facilities. It currently has 49 hospitals and 126 outpatient facilities.

Both boards unanimously approved the deal, which is expected to close before year’s end.

Tenet expects annual savings of $100 million to $200 million and for the acquisition to add to earnings in the first year.

Nashville-based Vanguard Health said that its founder, Chairman and CEO Charlie Martin, will join Tenet’s board. Vanguard’s vice chairman, Keith Pitts, will continue in that position at Tenet.

Central Defense Security Raises Money for City Camp Program

Central Defense Security, a leading provider of business, retail and warehouse security, raised more than $10,500 to support the Memphis Parks and Neighborhoods’ Summer Day Camp program, which is hosted at community centers around the city.

The money will cover the cost for more than 100 campers to attend camp at several locations around the city, as well as allow the city to hire five summer employees. It’s the second straight year CDS has held a fundraising drive to raise money to offset camp fees for many Memphis families, including some of the security firm’s officers.

Last year, CDS collected more than $7,500, which enabled the firm to sponsor 50 campers at six sites around Memphis. The firm last year also adopted the Riverview Community Center’s camp, and CDS employees visited the campers to deliver gifts and play games on what was the company’s seventh anniversary. This year, the firm plans to visit campers around the city, as well as participate in several special events at the community centers.

PROPERTY SALES 50 389 12,758
MORTGAGES 21 248 8,003
BUILDING PERMITS 295 813 29,934
BANKRUPTCIES 35 164 6,064