National City offers to sublease space

National City Bank wants to sublease two large blocks of office space at separate locations Downtown and on the North Side.

The bank is hoping to find other companies to occupy about 100,000 square feet at Allegheny Center office-retail complex, and 80,000 square feet at National City Center on Stanwix Street.

"We are always exploring ways to use our space in Allegheny Center and National City Center more efficiently," spokesman William Eiler said on Friday. "Changes in our business such as work stations, technology and imaging to name a few require this sort of ongoing assessment."

National City has about 275,000 square feet at Allegheny Center and about 162,000 square feet at National City Center.

The company, the nation's 10th largest bank and subject to takeover speculation because of troubles with problem real estate loans, has 1,900 employees in the Pittsburgh region.

Eiler said that includes about 250 at National City Center, and no major changes in that number are expected.

National City has a long-term lease at National City Center, and the company is "pleased with the building and its location, ownership and management," he said.

The company occupies 10 of the 20 floors in the building and has hired the Jones Lang LaSalle commercial real estate firm to market a portion of that space and the space at Allegheny Center for sublease, he said.

"We have occupied Allegheny Center since 1993 and have always had space available," he said. "Over the past five years, we have consolidated operational functions to and from Pittsburgh."

In January 2007, the company sold its subprime mortgage business -- First Franklin of San Jose, Calif. -- to Merrill Lynch & Co. At that time, it shut down a separate unit at Allegheny Center that originated subprime loans, called Preferred Advantage, eliminating 50 jobs.

It also sold its Home Loan Services business to Merrill Lynch, and since that time, that unit's employment at Allegheny Center has increased by 300 to 600, Merrill Lynch spokesman Bill Halldin said.

The business processes mortgage payments, taxes and related documents for subprime loans. It occupies about 144,000 square feet at Allegheny Center, Halldin said.

It employs more than 300 people at a related call center on Boyce Road in Upper St. Clair.

A Beacon of Sanity in Subprime

Glass manufacturer may add 300 jobs at new Findlay site

2 regional firms developing armor improvements

Two of the Pittsburgh region's largest corporations are using steel, glass and plastics to save soldiers' lives by improving the armor and antiballistic capabilities of the military vehicles that carry them into combat.

PPG Industries Inc. is developing the next generation of "transparent armor," also known as ballistic-resistant windows, while Allegheny Technologies Inc. makes a high-hard armor steel at its Washington plant for use in the framework that holds the transparent armor front and side windows for a light armored vehicle.

"The threat (to soldiers) has been increasing, and we need new technology to respond to the threat," Mehran Arbab, director of glass research and development, said Friday at the PPG Glass Technology Center in Harmar.

PPG yesterday received $1.2 million from the Defense Department to develop the transparent armor for use in armored vehicles known as the Mine Resistant Ambush Protected and the High Mobility Multi-purpose Wheeled Vehicle. PPG previously received an $800,000 grant from an Army research laboratory to do similar work, so the new grant is a continuation of that effort, Arbab said.

The challenge is to develop an armored window that will stop fragments from blasts and bullets that are larger and faster, that can withstand multiple hits, is lighter and keeps the vehicle's interior cooler by reducing the amount of solar heat that warms the inside. Currently, each armored front window, or portal, weighs about 125 pounds.

The federal funding will add three or four jobs at the technology center, where about 300 people work.

"We're trying to make it as ballistic-resistant as possible," said George Goodwin, senior research assistant, as he stood next to a 3 1/2-inch thick test piece of transparent armor comprised of several alternating layers of glass, plastic and polycarbonate. That glass was shattered by a piece of fragment similar to shrapnel created by an improvised explosive device. The model was a success, because the fragment did not exit the glass, Goodwin said.

Researchers are using glass that is produced at PPG's plant in Carlisle, and the ballistic-resistant windows are assembled at a PPG plant in California, Arbab said. The transparent armor typically is sold to AM General LLC of South Bend, Ind., which makes the High Mobility Multi-purpose Wheeled Vehicle.

In the case of Stryker light armored vehicles, Allegheny Technologies said its 500-MIL, a high armor steel, is being used by Carapace Armored Technology of Fayetteville, N.C. The steel is part of the mounting framework holding the transparent armor in add-on kits for the Stryker vehicles. It's the first use of the 500-MIL armor steel on an older vehicle system, Allegheny Technologies has said.

The new high-armor steel is easier to fabricate than other high-armor steel, which makes it good for use in such framework, ATI spokesman Dan Greenfield said.

"It protects against such threats as armor-piercing rounds, while also offering good blast-resistant properties," ATI said.

While this is the first application for the new high-armor steel, Greenfield said it is being looked at for other applications where armor is needed. The steel can be installed on above-deck structures on ships, and even aboard planes, by using a lighter-weight perforated version.

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National City a ripe target for takeover

National City Corp.'s decade-long run of heavy mortgage lending that included risky subprime loans has placed the bank in the takeover sights of larger and stronger rivals.

Pittsburgh's second-largest bank is believed to be discussing a merger with several banks, including PNC Financial Services Group, the area's biggest, although spokespeople for the institutions refused to comment.

National City spokeswoman Kristen Baird Adams said the bank is "strong, stable and well-capitalized."

Analysts said regulators, concerned about weakened banks, likely would allow a PNC tie-up, despite the dominant Pittsburgh-market concentration it would produce.

A sale of Cleveland-based National City, the nation's 10th-largest bank, would continue a string of departures of giant U.S. banks.

JPMorgan Chase recently bought Washington Mutual, the nation's biggest savings institution. And it appears Wachovia Bank will be acquired by Wells Fargo after Citicorp said Thursday it would not pursue a competing bid.

Also talking merger with National City is Toronto-based Bank of Nova Scotia, the Wall Street Journal reported yesterday. Other reports included Banco Santander, Spain's biggest bank, as a possible suitor.

"At this point, a sale has to be considered a pretty realistic possibility. The decline of the stock price itself puts pressure on management to sell," said Sean Ryan, an industry analyst for Sterne Agee, New York.

Stock in the struggling bank dropped about 85 percent this year. National City slashed its dividend to one penny a share in April, when it raised $7 billion in capital to shore up its balance sheet. Shares of the bank closed at $2.15 yesterday, down 8 cents.

National City, which employs about 2,000 people in this region, posted a $1.76 billion loss for the spring quarter. Analysts expect more losses when the bank posts summer-quarter results in two weeks and another loss after the fall quarter.

"Do they need to be acquired? No," said Frank Barkocy, research director of Mendon Capital Advisors, New York. "They could survive on their own, unless we had a severe economic recession. But obviously, they probably could be better with a strong partner."

At yesterday's closing price, National City's total stock is worth about $4.8 billion. PNC spent more, $6 billion, to buy Mercantile Bancshares, Baltimore, in March 2007.

PNC spokesman Fred Solomon said PNC doesn't comment on rumors or speculation. Bank of Nova Scotia spokespeople did not return phone calls.

National City and PNC branches overlap mainly in three metropolitan markets, according to June 30 data from the Federal Deposit Insurance Corp.

In Pittsburgh, PNC ranks No. 1 with 96 branches and 37.1 percent of deposits, and National City has 158 branches and 15.5 percent of deposits. In Louisville, National City is No. 1 with 64 branches and 18.8 percent of deposits; PNC (No. 3) has 49 branches and 10 percent of deposits. In Cincinnati, National City (No. 3) has 65 branches and 5.2 percent of deposits, and PNC (No. 4) has 52 branches and 4.2 percent of deposits.

National City disclosed in January it hired Goldman Sachs Group to serve as "capital adviser," which usually signals a company might be willing to sell.

The bank has been subject to merger speculation before. JPMorgan Chase was rumored to be looking at National City earlier this year. The New York bank bought Washington Mutual in mid-September, a deal brokered by federal regulators.

"Regulators' concerns about antitrust issues have moved down a notch to preserve confidence in the overall system, particularly with large institutions," said Ryan.

Analysts note National City made real repairs this year. It raised the $7 billion in capital in April, which is now "well above its peers," said an Oppenheimer & Co. analysis. The bank has a "strong base" of deposits and "loan quality much healthier than WaMu," it said.

Analysts say the bank found itself in play because it was weakened by its concentration in home mortgage lending -- including risky subprime loans -- during the worst housing slump in more than 25 years.

"It was their excesses in the mortgage area. They were so focused on growing residential real estate that once things started to collapse, it was like a string of dominos," said Barkocy. Defaults and delinquencies started rising in early 2007, he said.

National City entered subprime lending in 1995 when it acquired Integra Financial, then one of Pittsburgh's largest banks. Its portfolio of subprime loans equaled $776 million in 1997.

The risky loans jumped to $3.9 billion by mid-2000. The bank stopped writing subprime loans in early 2001 but continued to service them. The portfolio grew to $5.5 billion by late 2000 when it added those originated by an affiliate, First Franklin in San Jose, Calif.

National City took a $120 million loan loss in fourth quarter 2006, and a $200 million loan loss a year later, when it set aside $700 million to cover bad loans.

"You had the First Franklin, subprime lending, an overconcentration in the real estate sector and a series of missteps, so that as the economy started to turn down, it caught them with an overexposure in these areas," said Barkocy.

"Some of their (loan) underwriting standards got a little lax, and that led to problems as well," he said.

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Mylan in good shape, according to CEO

Mylan Inc., the biggest U.S. maker of generic drugs, is "well capitalized" and able to manage debt from last year's purchase of Merck KGaA's generics unit, Chief Executive Officer Robert J. Coury said Thursday.

While Mylan "is one of the most leveraged companies in the industry, we're not in a situation that is unmanageable," Coury told reporters in Lyon, France, at an event to mark the opening of a new plant. Mylan swapped $500 million in floating debt to fixed rates to take advantage of a decline in medium-term dollar interest, the company said in a statement.

The Canonsburg-based drugmaker has lost more than half its value in the past 12 months as investors worry how it will pay off last year's $6.7 billion purchase of Merck KGaA's generics unit. The acquisition made Mylan the world's third-largest maker of copied medicines with the scale and low manufacturing costs needed to survive in an increasingly competitive industry, executives have said.

Companies that make lower-priced versions of branded medicines may benefit from the weakening global economy, Coury said. Governments, which favor generic drugs as a way to control the rising cost of health care, may turn even more to the products to keep costs down as they divert taxpayer money to bail out banks embroiled in the credit crisis.

"There's an opportunity here," Coury said. "One of the things generics offer is that solution."

The integration of Merck Generics is going to plan, the executive said. "We're very comfortable with what we've seen."

Mylan fell 11 cents to $7.62 in trading yesterday.

Mylan has so far swapped $2 billion in floating debt to rates fixed at an average of 6.55 percent, the company said.

The interest rate swaps allow the drugmaker to lock in costs for its $4.1 billion term loan, which the company used to finance its acquisition of the Darmstadt, Germany-based Merck unit. About $850 million of the debt remains subject to Libor fluctuations, Mylan said.

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K&L Gates preparing for move to One Oliver Plaza

Renovation of 14 floors at One Oliver Plaza has begun to prepare the Downtown office tower for the offices of the K&L Gates LLP law firm.

The firm, the city's largest, will be moving to the 37-story building from its current offices in the Oliver Building early in 2010.

"We are proud to renew our commitment to the City of Pittsburgh," said Peter J. Kalis, chairman and global managing partner of the the firm that in February signed a lease for about 251,000 square feet at the 37-story building at 210 Sixth Ave.

The building will be renamed K&L Gates Center, and the firm's name will be placed on the top of the tower, which is owned by One Oliver Associates LP, an affiliate of Kojaian Cos., of Bloomfield Hills, Mich.

The K&L Gates name will replace that of Ariba Inc., a Sunnyvale, Calif.-based software company, that remains a major tenant, but downsized its space there in 2007 from 10 floors to five.

Ariba signs are expected to be taken down in the coming weeks in preparation for the installation of the new K&L Gates signs next year.

Work planned includes the addition of a state-of-the-art conference facility, renovation of the building lobby, the exterior facade of the first two floors and the plazas surrounding the building.

The renovated space will house K&L Gates' Pittsburgh lawyers as well as administrative functions that support the global law firm's operations.

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Credit counseling field opened to for-profits

Consumers who need credit counseling and debt management services will be able to choose a for-profit company in addition to nonprofits, and providers must be licensed, under state legislation passed this week.

The House passed the Debt Management Services Act on Wednesday, shortly after the Senate approved it, giving the state Department of Banking oversight over credit counseling agencies that operate in the state.

It sets standards for proper conduct for counseling, including person-to-person counseling, said Johnna Pro, a spokeswoman for Rep. Dwight Evans, D-Philadelphia, the prime sponsor of the bill. Each agency must post a bond to cover fraud or theft, and there are limits placed on fees debtors pay for services.

Steven Piotrowski, chief executive of the nonprofit Advantage Credit Counseling, which has offices on the South Side, in Greensburg and Butler, opposed the legislation. He said Thursday that requiring licensing of counselors and credit counseling agencies is a step in the right direction, but permitting for-profit businesses to offer debt management services is a misstep.

"I don't believe a for-profit company should be counseling people who have debt issues," Piotrowski said. In some instances, counselors may offer advice that's good for the company's business, but not good for the debtor, he said.

The legislation prohibits credit counseling agencies from paying or receiving a fee to refer clients to another business professional, but Piotrowski said that may be difficult to enforce.

Licensing debt counselors will provide consumers with protection, said Rep. Joseph Markosek, D-Monroeville, who voted for the bill.

The legislation would allow corporations such as CareOne Services Inc. of Columbia, Md., to do business in the state, spokeswoman Clarky Davis has said. CareOne is a for-profit credit counseling and debt management company that offers services in Maryland, Vermont, Mississippi, New York and other states. She said Pennsylvania has not changed its rules in 70 years, and since consumers' needs have changed, more choices should be available.

Davis could not be reached for further comment yesterday.

The state is opening up credit counseling and debt management services to competition at a time when demand is rising. Bankruptcies were up 7 percent through Sept. 30 in Western Pennsylvania compared to 2007. Counseling is required for most people who file for bankruptcy.

Advantage Credit Counseling provided bankruptcy counseling to 6,426 clients in the state through Oct. 3. The agency counseled 7,577 in the state in 2007, said spokeswoman Kristen Garrett. In 2006, 6,311 clients were counseled.

"We've had an uptick in bankruptcy counseling," Garrett said. The increases likely are the result of the poor economy and the fact that some people in debt delay getting help, she said.

The whole point of bankruptcy counseling is to see if a person can do anything to keep out of bankruptcy, Garrett said. The agency offers a debt management plan negotiated with a debtor's creditors in an attempt to get them to accept a portion of the debt, Garrett said. The wage earner makes a monthly payment to the agency, which in turn distributes the money to the creditors.

Gasoline prices likely to sink

Gasoline prices, already more than 60 cents a gallon cheaper than mid-summer's $4-plus, could fall well below $3 a gallon within six weeks, experts believe.

"Prices can go anywhere; it all depends how bad things get," said Don Bowers, who manages Ross-based Superior Petroleum Co.'s gasoline business. "If it gets real bad, we could see gasoline between $2 and $3 a gallon within four to six weeks."

"I believe that $3 a gallon or less at the pump will be a common price within the next few weeks," said Tom Kloza, senior oil analyst with Oil Price Information Service in Rockville, Md., in his Speaking of Oil Web site on Monday.

Kloza said he bases his retail projection on current wholesale prices. Given that retail prices generally are some 60 cents a gallon more than wholesale, even the country's highest wholesale price, in California, is $2.46 a gallon.

A general economic slowdown, rapidly spreading worldwide, is the primary reason gasoline prices are falling, experts believe. So is speculators fleeing the commodities markets.

"Going from summer to fall, there always is a lot less usage, but this year there was even less usage," Bowers said. "Speculators pushed up prices as much as they could until people ran out of money, and when they run out of money, they do other things. People now are doing other things."

AAA East Central's weekly Fuel Gauge gasoline survey found the average price this week for a gallon of regular gasoline from a self-service pump dropped 14.5 cents from last week, to $3.408 from $3.553.

One big problem with lower gasoline prices is that the farther the price falls, the worse shape the national economy is in, said Duquesne University Kent Moors, director of the Energy Policy Research Group at Duquesne.

"The problem is, if the price goes down more, we're in a great deal of economic difficulty. People will be less concerned with lower gasoline prices for their SUVs and more concerned that when they get into that SUV, will they have a job to go to."

Concerns about the success of the federal government's $700 billion banking bailout, shrinking demand worldwide for petroleum products and concerns for a national recession have combined to grab the crude oil and thus the gasoline markets, with falling prices the result, Moors said.

"Oil prices are lower because the global economy stinks," Kloza said.

The federal government's Energy Information Administration on Tuesday issued its latest short-term energy outlook, in which it projects the average price for regular gasoline from a self-service pump during the final three months of the year will be $3.34, and $3.56 for the entire year. The annual figure is 75 cents higher than 2007's $2.81 average and exactly the same as the agency's 2009 average price projection.

Moors and Kloza cautioned drivers not to get used to lower prices. Moors said that the national credit crunch already is affecting some small-marginal oil producers that are shutting down or curtailing operations because they can't get financing to drill for crude oil.

Kloza said don't be fooled into believing the world suddenly has become conscientious about saving crude oil/gasoline, or willing to sacrifice for the good of all.

""We shouldn't be delusional about the prospects for considerably higher prices in 2009 or 2010 or beyond," Kloza wrote. "The world hasn't lost its appetite for oil -- we'll get drunk again."

Cheaper Gas Prices, but Less Demand