Contributed by Martin Mitchell of the Corporate Training Group
In case you were too busy to have kept up with all the news, contributor Martin Mitchell has gathered some important market events from last week to help you start this week well informed:
Mergers and Acquisition
- Two of the five consortia considering bids for London’s Gatwick airport have dropped out – the Gatwick Future Partnership led by Babcock & Brown’s European Infrastructure Fund and Deutsche Bank’s RREEF infrastructure fund, and the consortium made up of 3i’s infrastructure arm and two Canadian pension schemes have both pulled out. The three groups still in the bidding are Global Infrastructure Partners (including Credit Suisse and General Electric), Lysander Gatwick Investment (including Citi Infrastructure Investors) and Manchester Airport Group. Bids are expected to exceed £1.65bn.
- Chinese group Minmetals has unveiled a friendly A$2.6bn takeover offer for Australian miner Oz Minerals.
- BG Group has increased its cash bid for Pure Energy Resources, the Australian gas company and made it unconditional, indicating it is prepared to accept a minority stake. The bid values Pure at £450m, against a competing bid from Arrow Energy of Australia that mixes cash and shares and is worth around £398m.
- US media company Liberty Media has agreed to invest up to $530m for 40% of Sirius XM, a US satellite radio company.
- Japanese beer company Kirin is spending in excess of $1.2bn buying a 49% stake in the Philippines’ largest brewer San Miguel Corp.
- Wall Street firms are planning to lobby the Obama government over its plans to stringently review banks’ financial health. The plans are including in the financial rescue plan announced last week. Administration officials have stated that the financial plan was always intended as a ‘framework’ rather than a final plan and input will be sought from the industry before the details are fleshed out.
- Endeavour, a $3bn London hedge fund that lost a quarter of its value on a day, is in the final stages of shutting its flagship fund.
- UK’s Lloyds Banking Group has lost its coveted AAA long-term credit rating from Moody’s. In the light of the £10bn loss for 2008, mainly due to asset writedowns at HBOS, Moody’s has reduced the rating by three notches to AA3. The AA3 rating is in line with other UK clearing banks Royal Bank of Scotland and Barclays. Sir Allen Stanford, the billionaire Texan and cricket sponsor has been charged by the SEC over an alleged investment fraud through his Antigua-based bank.
- Stanford International Bank sold about $8bn in certificates of deposit, promising ‘improbable and unsubstantiated high interest rates’. The allegations led to a rush by panicked savers to withdraw money from Stanford linked banks in Antigua. Revelations about Sir Allen Stanford’s lifestyle showed he had a $10m Florida mansion, spent almost $75,000 on Xmas presents and children’s holidays, and owned a $100m fleet of private jets.
- Royal Bank of Scotland (RBS), the troubled UK bank that has received a £20bn taxpayer bail-out and is now 70% state-owned, plans to pay up to £950m in bonuses for 2008. The UK Chancellor of the Exchequer, Alistair Darling said that the cash element of the bonuses were the ‘absolute legal minimum’. The vast majority of the bonuses are going to be in the form of deferred awards. These will be subordinated bonds that will be redeemed in three staggered payments starting in 2010, with a claw-back provision that will enable 100% of the award to be withdrawn if performance is not up to scratch. Later in the week, expectations surfaced that RBS will unveil thousands of job cuts and plans to launch an auction of its Asian assets.
- UK private equity firm Candover announced it plans to hand back as much as €3bn of funds raised for its latest buy-out fund. This mirrors similar moves from Permira and TPG.
- UBS is facing a law suit from the US government that as many as 52,000 American customers hid UBS accounts from the authorities violating tax laws. The new law suit came just a day after UBS settled an earlier suit, admitting having enabled clients to evade tax and paying a $780m fine as well as handing over the names of around 250 clients.
- Germany’s Hypo Real Estate (HRE) will potentially need a capital injection from the German government before its nationalisation, due in April. There is a danger that HRE’s tier one capital ratio is deteriorating so swiftly that without an injection, the ratio may fall to 4% – the level at which it would lose its banking licence.
- Unlisted Japanese lender Norinchukin announced plans to raise Y1,906bn ($20.3bn) in new capital. The agricultural lender that pools the funds of Japan’s farm and fishery co-operatives needs the money to offset the negative impact of its exposure to securitisation products.
- Stunning revelations began to emerge about the investment firm run by Bernard Madoff with findings suggesting no securities were purchased on behalf of customers for at least 13 years
- Rumours of nationalisation of US banks Bank of America and Citigroup shook the markets at the end of the week. Citi shares lost around 44% over the week, and Bank of America shares lost almost 34%.
- Lending to small businesses by banks in the UK does not seem to be responding to government incentives. In the month since the government’s £1bn loan guarantee scheme was launched, only about £12m has been lent to companies under the plan.
- The cost of insuring Dubai’s sovereign debt has become almost as expensive as insuring troubled Iceland – it now costs $1m annually to insure $10m of debt against default over 5 years.
- Reed Elsevier is close to agreeing with its banks to extend about $2bn of loan debt by about three years. The so-called ‘forward start’ facility will see Reed paying about 225 basis points more than LIBOR, to banks including Barclays and Royal bank of Scotland.
- Standard & Poor’s has highlighted that many collateralised loan obligations (CLOs) are heavily exposed to the same group of borrowers. For example, the debt of Ineos, the UK chemicals group, is held by 84.2% of European CLOs rated by S&P. Telediffusion de France is held by 87.5% and Amadeus is held by 82.6%.
- In an innovative deal that solved problems for both sides, China agreed to lend $25bn to two Russian state-owned oil companies in return for an agreement to provide 20 years worth of oil supplies. The deal solves the refinancing needs of Rosneft (receiving $15bn) and Transneft (receiving $10bn) and also gives China a secure supply of oil to fuel economic growth.
- Bond insurer MBIA is setting up a new company entirely focused on the US municipal bond market, in an attempt to leave behind the disastrous effects of insuring mortgage-backed securities.
- The new company, the National Public Guarantee Corp, will have an initial portfolio of $537bn of US municipal debt transferred from MBIA.
- Moody’s lowered its credit rating for Australian airline Qantas from Baa1 to Baa2, citing ‘worsening industry fundamentals’.
- A foreign exchange dealer at the center of a money laundering probe by the UK’s FSA reportedly registered with the City watchdog under a new name. Terry Freeman was authorised to act as a director more than two years ago, and under his former name of Terry Sparks he is subject to a 15 year director disqualification that runs until 2012.
- UK property company Land Securities has announced a 5-for-8 rights issue at 270p per share, to raise £756m. It has also drawn down all its existing debt facilities. The capital raising is aimed at offering protection during the downturn as well as potentially buying assets on the cheap.
- The troubles at car-maker General Motors swept over to Europe, where GM’s Swedish arm Saab filed for bankruptcy after failing to raise any state aid. GM’s German unit Opel is currently seeking state aid.
Note : The details contained in this article have been drawn from a daily review of the Financial Times.