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In Case You Missed It: News Round-up

martin.jpgContributed 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 Acquisitions

  • The auction of the scandal-hit Indian company Satyam Computer Services was won by Tech Mahindra. The bid will involve Tech Mahindra paying Rs29bn ($585m) for 51% and is considered risky because of the uncertain financial situation at Satyam after its former chairman admitted to fixing the books, plus class action suits from disgruntled US investors in Satyam’s ADRs. Tech Mahindra is planning to use a mix of cash, debentures, bonds and bank debt to fund the acquisition.
  • Rio Tinto’s $19.5bn fundraising from Chinalco saw disgruntled shareholders questioning the board at the AGM. The deal involves Rio selling stakes in a number of assets to the Chinese group, plus a bond paying a 9% coupon that is convertible into equity. The shareholders are concerned that the stake sales amount to selling the ‘company silver’ and that they would like to have been offered to participate in the bond issue. The Chairman told them that he hoped to be able to ‘offer something that pleases everyone’.
  • Japan’s NEC Electronics and Renesas Technology are in talks about a merger that would create the world’s third largest chipmaker by sales. NEC Electronics is a listed company 65% owned by its parent NEC, Renesas is a joint venture that is 55% owned by Hitachi and 45% owned by Mitsubishi Electric.
  • Zurich Financial Services is purchasing AIG’s Personal Auto Group for $1.9bn. Personal Auto is a US business that deals in car, motorcycle and commercial vehicle insurance. The deal will contribute to AIG repaying the $100bn received in federal aid.
  • HSBC and Standard Chartered are among those talking to Royal Bank of Scotland about buying its Asian assets. The assets embrace 170 branches employing 7,000 staff and could be worth £500m to £1bn. Morgan Stanley is leading the sale process for RBS.

Financial Institutions

  • Goldman Sachs made $1.81bn in the first quarter of 2009, helped by a record $6.5bn in revenues from its fixed income, commodities and currencies activities. A day following the results announcement, Goldman raised $5bn by selling common stock. The money is earmarked to pay back some of the $10bn of federal government aid Goldman received in 2008.
  • Goldman Sachs has also raised $5.5bn for a fund aiming to buy discounted private equity holdings. Goldman’s Vintage V fund is a secondary fund that will buy investors’ holdings in private equity funds, in what is expected to be a busy area in the coming months as banks and others consider cashing in on their stakes in private equity funds.
  • Nomura is shifting its investment banking focus away from Japan, particularly to London. Hiromi Yamaji, Nomura’s chief executive of global investment banking will run Nomura’s global investment banking operations from London.
  • The Industrial and Commercial Bank of China, already the world’s biggest bank by market capitalisation is now also the biggest by deposits and the most profitable. At the end of March, it had deposits of Rmb8,900bn (£878bn) comfortably ahead of both Mitsubishi UFJ Financial Group and JPMorgan Chase, and its net profits increased by 36% over the previous year to Rmb111bn.
  • The European administrators of Lehman Brothers presented a six months progress report. The report said that Lehman Europe’s gross assets were $628.6bn at the point of collapse, and its gross liabilities were $611.8bn resulting in $16.9bn of headroom. However the administrators, PwC, warned that unsecured creditors are unlikely to see all of their money given the tiny headroom relative to the gross balance sheet. PwC fees earned to date are £77m.
  • UBS unveiled a worse than expected loss of SFr2bn (£1.2bn) for the first quarter and further job cuts. The job cuts will see 8,700 jobs go by 2010.
  • Moody’s has downgraded 9 UK building societies over concerns of further weakening in house prices. The UK’s largest building society, Nationwide has been downgraded from Aa2 to Aa3, with other smaller societies suffering larger falls, for example Chelsea Building Society and West Bromwich falling from A2 to one notch above junk status at Baa3.
  • Panmure Gordon, the stockbroker listed on the UK’s AIM market, has raised £17.3m in a share placing with private equity group BlueGem. The deal will strengthen Panmure’s balance sheet and see BlueGem holding 40% of the enlarged share capital.
  • JPMorgan Chase reported first quarter results with net income down 10% at $2.1bn, including a record $1.6bn profit in the investment banking unit. Comments from chief executive Jamie Dimon made clear that the bank could repay the $25bn in federal aid received in 2008 ‘tomorrow’ with no additional capital, and that it will not participate in the US government’s public-private partnership to help banks sell toxic assets.
  • Lloyds Banking Group and Royal Bank of Scotland are set to offer loans to staff that have seen their bonuses deferred for up to three years. The loans will be at a commercial rate of interest and only relate to the parts of the bonuses that are not subject to clawback. Both banks are thought to have consulted with UKFI, which manages the UK government’s majority stakes in the banks.
  • Citigroup reported better-than-expected results for the first quarter. Net income of $1.6bn included a $2.7bn boost from revaluing its debt, $5.4bn in asset writedowns and a $2.8bn profit from investment banking.

Credit

  • Fears are growing that General Motors might file for bankruptcy, with a JPMorgan research note suggesting bankruptcy may be ‘politically less painful’ for the US government if it has to restructure its $13.4bn in loans to GM.
  • M&G’s UK Companies Financing Fund is aiming to raise £2bn to £3bn to lend to companies that are unable to access loans from banks due to the credit crunch. The fund already has the backing of two major pension funds, the West Midlands Pension Fund and the BT Pension Fund.
  • UK soft drinks company Britvic has refinanced its debts. Britvic had two loans, a £229m US privately placed loan with an interest rate of 6% that will expire in eight years and a £300m revolving credit facility provided by six banks maturing in May 2010 costing Libor + 60 basis points. The second loan has been refinanced with a £283m loan that will start in May 2010 and run until May 2012, from substantially the same group of banks but at a vastly higher interest rate of Libor + 250 basis points.
  • The Central Bank of Bahrain revealed plans to raise more than $1bn of debt. It will raise $500m from a five year shariah-compliant ‘sukuk’ issue, and a further $660m from a local currency denominated issue of three-year bonds.
  • US state and local governments are lining up to sell taxable bonds to take advantage of subsidies provided by the US government’s stimulus package. The federal government will pay 35% of the interest on taxable bonds sold this year and next year to finance infrastructure projects like roads, schools and sewer systems. The bonds have been dubbed ‘Build America Bonds’ (BABs) and California and Texas are amongst those planning imminent issues.
  • Indonesia is gauging interest for a global sukuk issue that could raise $650m. Rated at Ba3 from Moody’s, BB- from S&P and BB from Fitch, the sukuk issue is being marketed by Barclays Capital, HSBC and Standard Chartered Bank.
  • Mining company Anglo American tapped the bond markets with a $1.5bn convertible bond that was more than 4 times subscribed. The five year bond will pay a twice-yearly coupon totalling 4% and will convert to ordinary shares if the Anglo American share price reaches £18.63. The share price currently stands at £14.12.
  • Moody’s placed Ireland’s country rating of AAA on review for a possible downgrade.

Other

  • The biggest trucking company in the US, YRC Worldwide is negotiating with its unions to suspend cash payments into its defined benefit pension scheme and to pledge real estate as collateral instead.
  • Equiduct, a share trading platform that is majority owned by Borse Berlin, has become one of the growing list of multilateral trading facilities offering trading in FTSE 350 stocks.
  • The Deutsche Borse announced plans to launch new pan-European equities trading platform allowing investors to trade blue-chip equities across the region. The new platform will be called Xetra International Market, using Eurex Clearing and will be launched in the fourth quarter.

Note : The details contained in this article have been drawn from a daily review of the Financial Times.

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