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Biotech / Medical : Biotech Valuation

CRSP 56.00

+8.5%

Dec 3 3:59 PM EST

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To: Biomaven who started this subject	4/30/2002 5:10:27 PM
From: IRWIN JAMES FRANKEL	Read Replies (2) of 52153

Comments on the credit markets. This is indirectly related to valuation. The commercial paper market has been a big source of funds for large corporations in recent years. It allowed them to lower the cost of raising funds substantially with little risk since they were able to back up the short term paper with lines of credit from banks. The banks liked it since they got were paid for issuing the line even if if was never drawn - which was the expected outcome. Enron and the dominoes that toppled after it caused lines to be drawn down. Enter the FASB which decided that banks issuing lines of credit need to mark them to market as a derivative. That makes sense but the banks doing this did not like the rule. cfo.com JP Morgan was reportedly responsible for about $700 million of the $1.4 billion in these lines and today decided to withdraw from the market. (Reported by Maria Bartaromo on CNBC this morning.) Some months ago I was talking to a senior bank officer who told me that the major banks were getting many corporate customers coming to them for loans to replace commercial paper. He indicated that the banks were not ready to fill this need. This has all the makings of a credit crunch for corporations and as the big ones figure out how to raise the capital they need the smaller companies will be crowded out. A different topic. I run a collection law firm that represents many large creditors. I have mentioned before the huge acceleration that I have observed in the credit/collections business over the last two years. (I have been in the business since 1975.) This week I heard the first sign that the case volume may be leveling off. In a conference call with a major creditor I was told that they thought that claim volume will be slowing down this year. It is too early to know if they have this call right but they are very large and should have some view of the future from their data systems. ij

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