Business and Finance

Bank of America Corp. could eventually shrink its 6,100-branch network by about 10 percent as consumers utilize other methods of banking, a spokesman said Tuesday.

Bank of America spokesman James Mahoney made the comments when asked about a published report that CEO Ken Lewis and another bank executive described such a plan to investors at a meeting last week.

The move would be a pullback from the bank’s two-decade expansion, most recently under Lewis’ command, which expanded the bank from coast to coast.

The bank does not have a specific number of branches that will ultimately compose its franchise, Mahoney said, adding there’s no immediate plan to close 10 percent of the bank’s branches.

"In response to a question from an investor on the magnitude of branch closings, Lewis did acknowledge that the range could be potentially 10 percent," Mahoney said.

However, Richard Bove of Rochdale Research said the reason for the closures is both economic and regulatory.

"While the bank is likely to close the branches, the reason being given is simply farcical," Bove wrote Tuesday. "The branches will be closed because they are not economically viable."

The news comes as Bank of America continues to be under the careful watch of the U business cards.S. government, while it works to integrate two recent deals.

Bank of America acquired troubled mortgage lender Countrywide Financial Corp. last summer and investment bank Merrill Lynch & Co. in January.

Those two acquisitions have proven challenging for Lewis, who was stripped of his chairman title by a shareholder vote at the annual meeting in April.

The bank and Lewis have been under intense scrutiny because Bank of America is one of the biggest recipients of government bailout money — $45 billion — and because the losses at Merrill Lynch turned out to be much higher than expected.

Last week, Bank of America announced a big second-quarter profit but tempered the news by reporting that it is still contending with losses from failed loans.

During a call with analysts, Lewis said it would be "much tougher" to turn a profit for the rest of the year.

Bank of America has roughly 61 branches and 2,800 employees in metro St. Louis.

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DUBAI–The Mideast investment fund that recently bet big on Mercedes-Benz said Tuesday it will pay about $280 million to buy nearly a third of commercial space travel startup Virgin Galactic.

Aabar Investments’ buy-in gives British billionaire Sir Richard Branson’s space tourism venture a big financial kickstart at a time when many funding sources have dried up because of the global recession. It also gives the wealthy Persian Gulf sheikdom of Abu Dhabi a chance to build its own space flight industry as it broadens its economy beyond the oil sector.

Aabar will buy an approximately 32 per cent stake in Virgin Galactic’s holding company under the terms of the deal.

In exchange, the state-controlled fund will acquire "exclusive regional rights" to eventually launch Virgin Galactic tourism and scientific research space flights from the United Arab Emirates capital.

"The significant partnership not only falls in line with Abu Dhabi’s larger plans to inculcate technology research and science at a grassroots level but also complements its aim to be the international tourism capital of the region," Aabar Chairman Khadem al-Qubaisi said.

Aabar said it plans to pay an extra $100 million plus transaction costs to fund a program to launch small satellites into orbit, and will build spaceport facilities in Abu Dhabi.

Aabar is the first outside investor in the spaceflight company, which has been owned fully by Branson’s Virgin Group. The deal values Virgin Galactic at about $875 million.

Regulators in the United States and elsewhere must still approve the deal.

Virgin Group has pumped more than $100 million into its space flight venture since forming it in 2004. The company is working to develop flight vehicles with Scaled Composites, the Mojave, Calif.-based aeronautical firm that won the X Prize to build the first privately funded manned space ship.

Virgin Galactic has yet to show that it can put paying customers in orbit, or make a profit doing so. It plans to begin testing a new spacecraft, SpaceShipTwo, by the end of this year. The vehicle will piggyback to 50,000 feet on a large plane before blasting into suborbital space easy payday loan.

The announcement comes as Branson is attending the Experimental Aircraft Association’s annual AirVenture festival in Oshkosh, Wisconsin. The launcher plane for the space ship, dubbed WhiteKnightTwo, is on display at the air fest.

Even without a launch date, Virgin Galactic says it has taken 300 reservations at $200,000 each and is holding $40 million in deposits. Customers include scientist Stephen Hawking and “Superman Returns" director Bryan Singer.

The first paid flights are expected to launch from the U.S. state of New Mexico once testing is complete.

Aabar has emerged as one of Abu Dhabi’s most active investment funds. It bought 9.1 per cent of Mercedes-Benz maker Daimler AG in March, and earlier this month bought 4 percent of San Carlos, California-based electric car producer Tesla Motors.

Abu Dhabi is the richest of the seven semiautonomous sheikdoms that make up the United Arab Emirates, and holds nearly all the country’s vast oil reserves. It has long competed for international attention with neighboring emirate Dubai.

Virgin Galactic President Will Whitehorn said in an interview that the agreement with Aabar will help his company focus on launching not just tourists but also commercial satellites into space, and to do so for a fraction of the cost now.

"By Abaar coming on board, we can speed up that capability,” he said. "We believe there’s a big market opportunity here.”

A Dubai-led group is preparing to send the UAE’s first satellite, DubaiSat-1, into orbit aboard a Russian-made Dnepr rocket from Kazakhstan this week.

Abu Dhabi’s plans to turn itself into a space travel hub aren’t the country’s first. A rival space tourism company, Space Adventures Ltd., announced plans in 2006 to build a $265 million spaceport in the northern UAE sheikdom of Ras al-Khaimah, but almost no progress has been made since.

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Arch Coal Inc., the nation’s No. 2 coal producer, reported a $15.1 million second-quarter loss as sales declined amid sagging demand for fuel to run power plants and make steel.

But its shares soared 7.5 percent Friday as the company announced more cuts to planned output and capital spending.

The stock rose $1.27 to close at $18.14 in New York Stock Exchange composite trading, and is up 11 percent this year.

"They’ve taken production off the market, and they’ve cut capital spending, which is good," said Michael Dudas, a coal analyst at Jefferies & Co. "Arch will benefit from an eventual recovery."

Arch’s net loss of 11 cents a share was wider than analysts expected. It included $3 million of expenses for the planned purchase of the Jacobs Ranch mine in Wyoming’s Powder River Basin.

The quarter represented a dramatic reversal from the same period last year when coal prices were peaking and the company earned $113 million, or 78 cents a share pay day loans.

Arch said second-quarter sales fell 29 percent to $554.6 million as previously announced cuts in output led to a 20 percent drop in coal shipments. Realized coal prices fell 7.6 percent to $19.43 a ton with the biggest decline in Appalachian coal used by steelmakers.

The company expects to sell 114 million to 118 million tons of coal from its own mines this year compared with 137.8 million tons in 2008. Capital spending will be $290 million to $320 million, or far less than last year’s $497.3 million.

Other coal producers, too, have lowered output targets and cut spending in response to the recession.

Arch CEO Steven F. Leer told analysts during a conference call that the coal markets have "reached a bottom" and there are signs of increasing demand later this year.

Bloomberg News contributed to this report.

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VANCOUVER – The B.C. government plans to harmonize its provincial sales tax with the federal GST for a single, 12-per-cent sales tax.

Premier Gordon Campbell said Wednesday that harmonizing the taxes on July 1, 2010 will boost new business investment, improve productivity, enhance economic growth and create jobs.

"This is the single-biggest thing we can do to improve B.C.’s economy," Campbell said of the harmonized sales tax or HST.

"This is an essential step to make our businesses more competitive."

British Columbia is following Ontario, which will also harmonize its provincial sales tax with the GST for a 13-per-cent tax starting Canada Day next year.

Finance Minister Colin Hansen said that compared to other provinces that have also taken steps to introduce the HST, B.C.’s will be the lowest in Canada by combining the seven per cent provincial tax with the five per cent GST.

Quebec, Nova Scotia, New Brunswick and Newfoundland and Labrador have already harmonized their sales taxes with the GST, a move that became politically unpopular for some when consumers ended up paying more for goods that were previously exempt from the provincial tax life insurance quotes.

Campbell estimated the new HST will remove over $2 billion in costs from B.C. businesses.

The new combined tax will also have exemptions similar to the provincial sales tax.

Those will include sales books, children’s clothing and shoes, children’s car seats and diapers.

"The PST is an outdated, inefficient and costly tax, some of which is hidden in the price of goods and services and passed on to and paid by consumers," Hansen said.

To ease the pain of switching to a single tax in 2010 and reduce the political fallout, Ontario will give modest income tax breaks to most taxpayers and offer government cheques totalling $1,000 for a family earning under $160,000.

Single people making less than $80,000 will receive $300.

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The federal Competition Bureau says Suncor Energy Inc. can go ahead with its acquisition of Petro-Canada, but only if it divests 104 retail gas stations in southern Ontario and sells off its storage and distribution network in the Greater Toronto Area.

Suncor has agreed to the conditions. The bureau said it was concerned that the merger would lessen competition "substantially" in the region and could have led to increased gasoline prices.

"Requiring the companies to sell retail outlets will lead to increased competition by independent retailers who can expand their market presence," said interim competition commissioner Melanie Aitken, in a statement.

"In addition, the parties’ commitment to sell terminal space in the Greater Toronto Area is important to promoting a competitive dynamic in that market."

Both companies have committed to selling about 1.1 billion litres of annual terminal storage and distribution capacity, which will be used for wholesale distribution during a 10-year period at their terminals located in the GTA.

The merged company, according to the agency, must also supply 98 million litres of gasoline each year, for 10 years, to independent gasoline marketers quick cash loans.

"On the surface this looks like a fair condition," said Jane Savage, president and chief executive of the Canadian Independent Petroleum Marketers Association.

"It means some other player will be there at the wholesale level. For the buying public, this is very important because wholesale prices underpin retail prices."

Suncor proposed to acquire Petro-Canada in March for $19.1 billion. The deal is the largest in the history of Canada’s oil industry and would create a new "made in Canada" company valued at more than $45 billion and capable of producing the equivalent of 683,000 barrels of oil a day.

But on the retail side it would have given the company an Ontario network of more than 700 retail stations, of which 104 will now have to be divested.

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Regulatory hearings on Internet traffic management practices, held in windowless rooms in Gatineau, Que., in the middle of summer, are not likely candidates to attract much attention. Yet for seven days this month, hundreds of Canadians listened to webcasts of Internet service providers defend their previously secret practices while engaging in a robust debate on net neutrality.

The interest in the Canadian Radio-television and Telecommunications Commission hearing may have caught the regulator off-guard (the webcast traffic was, by a wide margin, its most ever for a hearing), but it was the testimony itself that was the greatest source of surprise.

The seven-day hearing was billed as a debate over whether rules are needed to govern ISP network management practices. While many Internet users remain unaware of the issue, behind the scenes ISPs employ a variety of mechanisms to control the flow of traffic on their networks, with some restricting or throttling the speeds for some applications.

Those practices have proven highly contentious, with creator interests, technology companies, privacy rights organizations and consumer groups all expressing fears that they may curtail innovation, invade user privacy, stifle competition, and create an uneven playing field for content distribution.

ISPs argue that such measures are essential to provide their subscribers with a good experience at an affordable price.

Days of testimony revealed the issue is far more complicated than the rhetoric might suggest.

First, there is a wide variation in the use of traffic management tools with a different approach for pretty much every major ISP. Some throttle all the time (Cogeco), some during large chunks of the day (Bell), some only during congested periods (Shaw), and some not at all (Telus, Videotron).

Second, ISP disclosures are woefully inadequate. For example, Rogers admitted that it charges tiered pricing for faster upload speeds but that all tiers are throttled to the same speed when using peer-to-peer applications. In other words, subscribers to the Extreme service pay $59.99 per month and are promised fast upload speeds (1 Mbps) but actually get the same upload speed as Express subscribers who pay $46 car insurance.99 per month and are promised upload speeds at half that rate.

Third, notwithstanding the perception that network traffic is growing dramatically, the reality is that the rate of growth is actually slowing. ISPs acknowledged they could cope with the growing demand through reasonable new investment in their networks.

Given all the competing evidence, what is the commission likely to do? A four-pronged approach is possible.

First, it could adopt a test advocated by the Open Internet Coalition, a group of technology companies that includes Google, that permits traffic management practices so long as they further a pressing and substantial objective, are narrowly tailored to the objective, and are the least restrictive means of achieving the objective. This test would give useful guidance to ISPs and ensure that there are appropriate limits on traffic management practices that have no clear correlation with network congestion.

Second, it can affirm the role of current law against leveraging network management for unfair advantage.

Third, the commission can establish minimum disclosure requirements, including information on traffic management practices such as time, targets and the actual speeds consumers are likely to experience.

Fourth, it can dictate limits on the use of personal data that ISPs obtain from traffic management.

Alternatively, the commission could decide to do nothing and simply retain the power to address complaints as they arise. If so, significant political pushback is likely with political parties lining up in the fall in support of net neutrality legislation.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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Charter Communications is heading into a pivotal week in its effort to escape bankruptcy without some of the debt shackles that have crippled it for years.

Monday marks the start of its confirmation hearings in the U.S. Bankruptcy Court for the Southern District of New York, where a judge will decide whether the company’s reorganization plan is workable. Success is not expected to come without a fight.

The Town and Country-based company’s plan has drawn objections from several groups, including lenders, stockholders, the Justice Department and the Securities and Exchange Commission. And if the company hopes to meet its goal of leaving bankruptcy by summer’s end, there’s not much room for delays.

"Monday is absolutely critical for that," said Shelly Lombard, an analyst with corporate bond research firm Gimme Credit.

Charter’s reorganization plan — through a deal reached earlier this year with a large group of bondholders — seeks to trim $8 billion of its $21.7 billion in debt. Some bondholders will be given new debt and stock in the company when it leaves bankruptcy, while all current shares will be eliminated.

Charter, which filed for bankruptcy protection on March 27, would not discuss the specifics of the case, but spokeswoman Anita Lamont issued a statement: "We are pleased with the progress we are making with our financial restructuring and believe our plan should be confirmed. We have been working constructively with our bondholders and look forward to emerging from this process as soon as practicable."

Charter is the nation’s fourth-largest cable provider. It has 2,450 employees in the St. Louis area.

The company amended its reorganization plan on Thursday, increasing by $66 million the amount of preferred stock that will be issued to some note holders, and changing the mandatory redemption date to five years from seven. The amendment, however, did not address some of the objections that have been filed in court.

Among them are complaints filed by the U no fax payday loans.S. Trustee, an arm of the Justice Department, and the SEC targeting provisions that release Paul Allen, the company’s chairman, and other officers from shareholder lawsuits.

The biggest issue, however, revolves around nearly $12 billion in debt that may or may not be affected by bankruptcy.

Charter wants the judge to reinstate that chunk of debt — a move that would keep the current terms in place. The company is arguing that it has done nothing to violate those loan agreements and has continued to make its required payments. That’s also why the reorganization calls for Microsoft co-founder Allen to retain control of the company, despite seeing his personal stake fall to 3 percent from 51 percent. Allen would be granted 35 percent voting control to avoid violating change-of-control covenants on those loans.

But several banks, including Wells Fargo and a consortium represented by JPMorgan Chase & Co., have argued that Charter has already violated its loan terms. If the judge rules in the banks’ favor, Charter could be forced to renegotiate its loans. Charter has said that could cost the company more than $500 million a year in new interest payments, erasing much of the $800 million expected to be saved annually through the restructuring. "If they can’t reinstate that bank debt, the whole plan unravels," Lombard said.

It’s unclear how long the hearing will last, though some reports suggest it could take up most of the week. And it would not be unusual for the process to drag on longer if critics are able to convince the judge the plan doesn’t do enough for creditors. Gaining support from creditors will be key for Charter, said Jacen Dinoff, chief executive officer of KCP Advisory Group, a corporate restructuring firm in Boston.

"You need someone on your side," Dinoff said. "The more supporters the better."

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XpresSpa is now offering pre-boarding pampering for travelers at Lambert-St. Louis International Airport.

XpresSpa, in the East Terminal next to Gate E-18, has a staff of personal-care specialists who offer massages, manicures, pedicures, facials and waxing.

Passengers can also purchase an assortment of personal care products including bath and body, nail care and spa therapy payday loan online.

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Drug makers Merck & Co. and Schering-Plough Corp. will pay $5.4 million to settle a multistate investigation that they delayed the release of test results casting doubt on the effectiveness of two blockbuster cholesterol drugs. The companies settled with attorneys general from 35 states, including Missouri and Illinois, and the District of Columbia online health insurance. The study compared Zetia and Vytorin with Zocor, a drug that is one of Vytorin’s ingredients. (AP)

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Canadian new car sales are in a slump, down 18 per cent in the first six months of 2009.

This means you can find some great new car buys as the 2010 models start to come in.

Dealers are still rolling out cash rebates, low-rate financing, free gasoline and job-loss protection plans to get you in the door.

But you have to shop carefully. The incentives aren’t as rich as earlier in the year, experts say, and some popular models are in short supply.

"This is a wake-up call to people who think they can keep the old car around," says Paul Timoteo, president of Armada Data Corp., which runs several automotive websites.

"Summer is a very good time to buy, when the market is a bit slower."

Incentives for buyers are good, but not quite as generous as in the recent past, says Dennis DesRosiers, a well-known auto industry analyst.

General Motors, which had the most generous incentives, has gone through bankruptcy protection – meaning that other automakers do not have to match GM’s incentives any more.

Some companies, however, are bucking industry trends.

Hyundai Canada sold 21 per cent more cars in the first half of this year, boosted by low prices and much improved quality.

Just ask DesRosiers what brand he’d pick as the best combination of price, quality and fuel efficiency.

"Hands down, it’s Hyundai," he says. "In terms of value for money, it’s offering the best deals in the market, bar none."

What brands would he stay away from?

"I’d avoid brands that are bankrupt, such as Saab, Hummer and Pontiac, primarily because the resale value will drop.

"This happened with Mercury and Oldsmobile after they were discontinued. Of course, you can buy a Pontiac if you want to drive it until it dies."

Chrysler Canada has big cash rebates and low-rate financing after coming out of bankruptcy protection. But since production stopped for several weeks, inventory is low.

"Chrysler and GM are both short of cars," says Zvi Richman of First Rate Auto Leasing Inc., who acts as a broker.

Meanwhile, Toyota and Honda are trimming back rebates after their sales dropped this year online cash advance.

"There are still good deals on some models, but not as high as in February or March," Richman says about the two big Japanese automakers.

"Honda Civic had a $1,500 cash rebate earlier this year, but now it’s zero. Honda Odyssey, no rebate. Toyota Sienna, no rebate."

Remember when all the ads screamed, "Now is the best time in history to buy a new car?"

Well, the message got through, Timoteo says.

"The deals are becoming few and far between. Because the dealers were running scared in the spring and didn’t order enough cars, now it’s too late to order. Everyone is scrambling."

Timoteo runs a consumer website, CarCostCanada.com, which supplies dealer cost invoices for $39.95.

In the past two years, his members have saved an average of more than $5,500 on GM models and $6,000 on new Cadillacs.

There are different types of cash incentives, Timoteo says. Automakers can discount the car’s suggested retail price and offer rebates to buyers over and above that amount.

As well, automakers can offer rebates directly to dealers. These dealer incentives are rarely advertised and only known to buyers who do their homework.

The Automobile Protection Association, a consumer group with offices in Toronto and Montreal, also has a dealer cost pricing service.

APA counsellor George Powell likes the Hyundai Elantra, which has a five-year bumper-to-bumper warranty, zero per cent financing for three years or 0.9 per cent financing for four years, plus a cash rebate of $3,000 to $3,350.

But he warns buyers to hurry before the incentives run out.

His son Geoff got a $6,500 rebate on a 2009 Ford Fusion mid-size sedan with leather seats and sunroof last March.

Today, the cash-back amount has gone down to $4,500.

"He was $781.20 better off buying in March than today," Powell says.

eroseman@thestar.ca

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