Markets Live chat transcript for the chat ending at 12:31 on 1 Nov 2011. Participants in this chat were: Bryce Elder/FT Neil Hume, FT Izabella Kaminska
BE
Good morning
BE
And welcome to Tin Hat Live
BE
Neil’s talking to the news desk
BE
Oh – back now.
BE
And welcome rabble.
NH
morning all
NH
just been talking MF Global and Corzine
NH
this trade he put on
NH
wasn’t as simplistic as we thought
NH
not just a straight direction punt on the Eurozone
NH
something much more complex
NH
but I will let Izy explain all that
NH
a bit late
BE
Sure – ok – that’s something to look forward to.
BE
In the meantime, we’ve been knocked off the table by tail risk.
NH
indeed
NH
we could lose all October’s gain
NH
by the end of the week
BE
Huge Pfizer beat just hitting the tape ….
BE
Doubt it’ll help much.
BE
*PFIZER 3Q OPER EPS 62C, EST. 56C
BE
Raising its buyback as well.
BE
Who was arguing yesterday that it’s a tradeable market? It bloody well isn’t.
NH
well that’s some good news
NH
because there isn’t much around
NH
the Greeks are going to vote on the bailout
NH
Chinese manufacturing data was poor
NH
and there was something else
NH
negative
NH
I can’t remember what
NH
not UK GDP
NH
that was good
BE
UK GDP? It was a positive negative.
NH
as good as it will get for months
BE
Anyway, quick look at the FTSE
BE
Down 2.6% at pixel
BE
Off 145 points at 4399
NH
you’ve missed a five off
NH
that’s next weeks reading
BE
Hm. At this pace you may be right.
BE
Down nearly 6% in two days.
NH
how do you trade this market?
BE
I’ve no idea. You’ve got better odds at a casino.
BE
You don’t pay stamp duty on roulette, for instance.
BE
Milky.
(@Milky: yellow.)
BE
So. Movers …..
NH
well
NH
most of the movers are going down
NH
we only have four gainers
G4S PLC (GFS:LSE): Last: 247.60, up 3.4 (+1.39%), High: 253.30, Low: 246.30, Volume: 9.76m
British Sky Broadcasting Group PLC (BSY:LSE): Last: 711.00, up 7 (+0.99%), High: 714.00, Low: 688.00, Volume: 1.71m
Reckitt Benckiser Group PLC (RB.:LSE): Last: 3,174, down 24 (-0.75%), High: 3,209, Low: 3,173, Volume: 369.21k
Imperial Tobacco Group PLC (IMT:LSE): Last: 2,262, down 12 (-0.53%), High: 2,284, Low: 2,242, Volume: 699.68k
NH
three of those defensive
NH
and the other up
NH
because it’s decided to abandon its over ambitious bid for a rival
NH
we are of course talking about G4S
NH
the ISS deal has died
BE
As called totally wrongly by me yesterday. Thank you very much.
BE
So …..
BE
Where does this leave Buckles?
NH
(@Senior – we are delayed on AV. trust me they are up)
NH
I think he’s OK
NH
they won’t fire him
NH
and he won’t fall on his sword
NH
however
NH
he’s got some explaining to do
NH
like what exactly is the company’s strategy
NH
he signalled with this deal
NH
that the security market wasn’t big enough
NH
and now he’s been forced to back track
NH
what next
BE
Good question. We can’t view G4S as the same company is was pre bid.
BE
Even if management doesn’t change
NH
no
NH
and it can’t command the same rating
NH
and this will send a warning to other companies trying to big, bold deals against this economic backdrop
NH
don’t bother
BE
Yeah – that’s the feeling I think.
BE
Too ambitious a proposal.
NH
a bull market deal
NH
and we aren’t in a bull market
NH
shareholders only go along with these ideas
NH
when animal spirits are high
BE
So it would be wrong to see the “no” vote as a vote of no confidence in management ….
BE
More like a safety valve vote. A “settle down” vote.
NH
some comment then?
NH
after which
NH
I can put up the Q&A
NH
note sent to employees
NH
which is quite amusing
NH
Right
NH
here’s Mike Allen at Panmure Gordon
NH
We applaud the decision G4S has taken to withdraw from the ISS takeover
and associated rights issue. Our concerns on the deal were based on the
quality of future earnings and execution risk, with the focus now likely to be
on organic growth and bolt-on acquisitions. We raise our target price to 256p
from 226p, which is based on 10x 2012E, but maintain a Hold
recommendation for now with just 5% upside to our revised target price
and associated rights issue. Our concerns on the deal were based on the
quality of future earnings and execution risk, with the focus now likely to be
on organic growth and bolt-on acquisitions. We raise our target price to 256p
from 226p, which is based on 10x 2012E, but maintain a Hold
recommendation for now with just 5% upside to our revised target price
NH
Investment view: Overall we view this as good news for G4S and believe it to be better
placed by executing an organic growth/bolt on acquisition strategy. The question marks
remain on long term strategy and where it will emerge on the value chain. We raise our
target price from 226p (this was based on ISS deal going ahead) to 256p, which is based
on 2012E EPS. With just 5% upside to our revised target price, we maintain a Hold
recommendation for now, and prefer Babcock at current levels given its current growth
momentum and more clear strategy.
placed by executing an organic growth/bolt on acquisition strategy. The question marks
remain on long term strategy and where it will emerge on the value chain. We raise our
target price from 226p (this was based on ISS deal going ahead) to 256p, which is based
on 2012E EPS. With just 5% upside to our revised target price, we maintain a Hold
recommendation for now, and prefer Babcock at current levels given its current growth
momentum and more clear strategy.
NH
Here’s Seymour Pierce
NH
G4S has bowed to investor pressure announcing this morning it will not be going ahead with the proposed acquisition of ISS and will not be proceeding with the rights issue. Costs of £50m will be incurred which will be charged as exceptional items in the FY11 accounts. The question is where now for G4S?
NH
G4S has bowed to investor pressure announcing this morning it will not be going ahead with the proposed acquisition of ISS and will not be proceeding with the rights issue. Costs of £50m will be incurred which will be charged as exceptional items in the FY11 accounts. The question is where now for G4S?
NH
and finally Olivetree Securities
NH
with some good stats on where G4S
NH
where trading before the deal went live
BE
(@NS: that’s a bit of a non-sequitur. When was the last time you heard a fund manager complaining about UK companies being bid for?)
NH
CONCLUSION: The moral of this story seems to be that G4S management now need to work hard to keep the market focused on the (still excellent) prospects for the standalone business in 2012, rather than speculate on fallout from this failed transaction. We are aware of some short positions in GFS, but nowhere near as many as were in place at the end of the Pru/AIA deal, so we could envisage any material outperformance as short lived. Whereas the stock should see strength first thing this morning, to us the challenge is more for the stock to keep this strength over the next few days and weeks. We would see the stock up a maximum of 5% (255p?) this morning, and even from there we wonder if it can continue its strength.
NH
As a reminder, before this transaction was announced, G4S was trading at 282p, which was 12.5x 2011 PE and 7.5x EV/EBITDA. The stock fell some 22% on announcement, and last night (at 244p) was trading some 13.5% below its original level. In this time, the FTSE100 is up 1.0%. The market will no doubt start to price back some of that underperformance. As of last night, the stock traded on 10.8x 2011 PE and 6.7x EV/EBITDA.
NH
However, the Prudential comparison we have talked about before must also be remembered. Despite Harris’s pledges of allegiance to G4S management (“we have a great deal of respect for Nick Buckles and rhe G4S management team”), there will likely now be speculation on both the future of this management team and on the future direction for the company. Many shareholders we knew thought the proposed ISS transaction was a flag that management thought the previous strategy of a focus on security and emerging markets had had its day. The Prudential precedent was somewhat different – management had upset shareholders much more, and were seen to be somewhat arrogant in their stance (although ultimately managed to hold onto their positions).
NH
there we go
NH
now
NH
want to see some of the Employee Q&A
BE
Sure.
NH
Why didn’t investors support the deal?
We have met with over 200 investors in the last two weeks and it is clear that whilst we have strong support for G4S and our current strategy many were not supportive of a large and complex deal of this nature – shareholders felt that the level of risk for them was too high, compared to the expected returns.
We have met with over 200 investors in the last two weeks and it is clear that whilst we have strong support for G4S and our current strategy many were not supportive of a large and complex deal of this nature – shareholders felt that the level of risk for them was too high, compared to the expected returns.
NH
Did we not seek shareholder opinions before announcing the deal more widely?
Yes, we did – through a process called “pre-marketing”. However, the process means that you only have up to an hour to put the deal to the shareholders and to gain some feedback – this was a large and complex acquisition. The initial feedback from the shareholders who we consulted with, gave us enough confidence to go ahead and announce the transaction on 17 October.
Yes, we did – through a process called “pre-marketing”. However, the process means that you only have up to an hour to put the deal to the shareholders and to gain some feedback – this was a large and complex acquisition. The initial feedback from the shareholders who we consulted with, gave us enough confidence to go ahead and announce the transaction on 17 October.
NH
Look at that
NH
shareholders had up to an hour
NH
to consider the merits of a £5.2bn takeover
NH
I mean
NH
what’s the point of that?
BE
Is that what “wall crossed” means now? 60 minutes ahead of the market?
BE
If that’s true, I’m amazed.
BE
Does that mean they got the call at 6am, before the RNS?
NH
pass
NH
Where does this leave G4S?
The good news is that is strong support for the G4S stand alone story:
The good news is that is strong support for the G4S stand alone story:
• outsourcing trends in developed markets
• multi-service offering in developing markets
• nearly a third of the group’s revenues in higher-growth developing markets
• cash solutions expertise to differentiate us
• adding consultancy and technology capability to manned security to differentiate the service
• all with security at the core
NH
Did we try to re-negotiate the deal once we realised the shareholders would not support the one that was on the table?
We did discuss a number of possible alternatives, but were unable to create a deal structure which would satisfy the needs of the ISS owners and G4S shareholders.
We did discuss a number of possible alternatives, but were unable to create a deal structure which would satisfy the needs of the ISS owners and G4S shareholders.
NH
look at that
NH
they tried to renegotiate
NH
but presumably the ISS PE backers
NH
did not want to play ball
NH
Why did you decide not to go ahead with the shareholder vote? Was there no chance that we would win it?
Investors would have been able to vote or change their vote right up until the General Meeting itself, so we will never be certain as to what the actual outcome would have been. However, from the feedback we had, we were able to take the decision to discuss a termination with the owners of ISS and we quickly reached the conclusion that we would not proceed.
Investors would have been able to vote or change their vote right up until the General Meeting itself, so we will never be certain as to what the actual outcome would have been. However, from the feedback we had, we were able to take the decision to discuss a termination with the owners of ISS and we quickly reached the conclusion that we would not proceed.
NH
What would the votes have been?
It would not have been confirmed until the EGM itself, but early indications suggested that shareholder votes would not have reached the required threshold (of 75% in favour) for the acquisition to be approved.
It would not have been confirmed until the EGM itself, but early indications suggested that shareholder votes would not have reached the required threshold (of 75% in favour) for the acquisition to be approved.
NH
there you go
BE
Handy to have. Would be nice if that’s what the RNS said.
11:25AM
BE
Ok – that’s the risers done.
BE
(Only two now. BSkyB and G4S.)
NH
let’s look at the fallers
Barclays PLC (BARC:LSE): Last: 178.62, down 16.68 (-8.54%), High: 185.08, Low: 175.10, Volume: 42.36m
NH
investors not liking Bob’s fancy footwork
NH
in particular the £500m of hedges
NH
he used to flatter yesterday’s figures
BE
(@Swedes. Couldn’t disagree more. Big M&A has a terrible record for destroying value, and big shareholders have a terrible record of being Churchill dogs to whatever management wants. Management should be told “no” more often.)
BE
Well, yes.
BE
Barclays’ figures are a bit opaque.
BE
I’m not sure, if you’re a Barclays shareholder, you’ll be awfully surprised by that.
NH
no
NH
more of the same
NH
Earnings miss post hedging gain adjustments
On the conference call, management revealed that the majority of the £559mn hedging gains were in Q311. Adjusting for this, we find that the underlying PBT for the quarter was c £800m, below our estimates, both in the traditional banking operations and in BarCap. This represents a 0.7% pre-tax return on Basel III RWAs of £470bn and an effective RoTE of as little as 2%, assuming an 11% CT1 ratio and the impact of the levy.
NH
that’s from Nomura
NH
who surprisingly
NH
are still positive
NH
Barclays is still generating profits in a tough quarter for BarCap. The annualised nine-month return would be almost double the third quarter, though still below a likely cost of equity. Its traditional banking operations performed similarly to our expectations, even stripping out the hedging gain. We would prefer Barclays among the domestic UK banks given balance sheet risk at RBS and Lloyds. However, after the recent rise in the shares and following numbers that were below estimates on an underlying basis, some consolidation may be in order.
NH
Assuming BarCap generates profits midway between the first half and the second half run rate, or some £2.5bn in a full year, and that non BarCap businesses are sustained at their current run rate, plus loss elimination in the non-UK businesses, would imply group PBT of c £6bn. This would represent EPS of 27p and a 10% RoTE on current TBV. However, using a Basel III CT1 ratio of 11% would dilute the RoTE to 7%. Further loading the potential costs from the ICB recommendations would reduce this RoTE further; we would venture to as low as 4%. These figures illustrate the challenge the group will have in implementing measures to increase profitability to cost-of-equity levels and above, including to the 2013 target of 15%.
BE
Crutchley at UBS downgraded this morning.
NH
did he
NH
because of the hedge?
BE
Outlook, more than anything.
BE
Post Q3, we have modestly upgraded our full year estimates (+2%) but subsequent
years are broadly unchanged. While we exclude the pension fund deficit and value
of own credit from Barclays’ reported tangible book value as our basis for
valuation, a higher start point here has led to a modestly higher price target (215p
from 208p) but the more modest upside leads us to reduce our rating to Neutral.
years are broadly unchanged. While we exclude the pension fund deficit and value
of own credit from Barclays’ reported tangible book value as our basis for
valuation, a higher start point here has led to a modestly higher price target (215p
from 208p) but the more modest upside leads us to reduce our rating to Neutral.
BE
We expect 2012 to be a similar year to 2011 for BarCap. A consequence of this is
that we expect a more balanced source of earnings with BarCap c.44% of group
PBT in 2012. Moreover, we note that the trends within the Retail/Commercial
business were positive in Q3 in that income increased by c.£100m in both the UK
Retail Bank and Barclaycard but impairment in both divisions was below Q2
levels.
that we expect a more balanced source of earnings with BarCap c.44% of group
PBT in 2012. Moreover, we note that the trends within the Retail/Commercial
business were positive in Q3 in that income increased by c.£100m in both the UK
Retail Bank and Barclaycard but impairment in both divisions was below Q2
levels.
BE
And here are the funnies.
BE
The near £3bn gain on own credit has lifted the gross gains on own credit on the
balance sheet to c.£3.8bn equivalent to near 30p per share. This is included in
NAV but excluded from CT1. The BlackRock stake has been marked to the
September end valuation of $148 per share versus the current price of $162 ahead
of the lock-up expiry on Dec 1st. Gains will be a positive AFS and enhance book
but not CT1. We also estimate that the pension fund deficit is c.£3bn or 25p/share.
balance sheet to c.£3.8bn equivalent to near 30p per share. This is included in
NAV but excluded from CT1. The BlackRock stake has been marked to the
September end valuation of $148 per share versus the current price of $162 ahead
of the lock-up expiry on Dec 1st. Gains will be a positive AFS and enhance book
but not CT1. We also estimate that the pension fund deficit is c.£3bn or 25p/share.
BE
Our Barclays price target of 215p is derived from Dec-11E TBV, adjusted for the
own credit gain and pension fund deficit with a haircut applied for regulatory risk.
own credit gain and pension fund deficit with a haircut applied for regulatory risk.
NH
thanks for that
NH
while we are talking banks
NH
seen this?
NH
Chen returns
NH
Our most recent hire Sandy Chen started at Cenkos today. Sandy has covered
banks for 18 years, most recently at Panmure Gordon, also at Collins Stewart,
Williams de Broe, Credit Suisse etc. He was one of the analysts who called the
banking crisis in 2007-2009, with key bear calls on Northern Rock, RBS and
others. For the past two years, Sandy has been a senior exec with a UK startup
bank, Walton & Co. He is on Bloomberg, e-mail is schen@cenkos.com and direct
line is 0207 397 8939
banks for 18 years, most recently at Panmure Gordon, also at Collins Stewart,
Williams de Broe, Credit Suisse etc. He was one of the analysts who called the
banking crisis in 2007-2009, with key bear calls on Northern Rock, RBS and
others. For the past two years, Sandy has been a senior exec with a UK startup
bank, Walton & Co. He is on Bloomberg, e-mail is schen@cenkos.com and direct
line is 0207 397 8939
NH
got sent it this morning
NH
Chen is back
NH
he made some very good calls back in 07/08
NH
heading to Cenkis
BE
Sandy Chen! Yes, he was a doom merchant at exactly the right time.
BE
Then didn’t he try to start his own bank?
NH
he did
NH
Walton & Co
NH
never got off the ground
NH
anyway
NH
moving on
Man Group plc (EMG:LSE): Last: 138.60, down 11.3 (-7.54%), High: 146.20, Low: 137.09, Volume: 6.17m
NH
it’s down again
NH
what is wrong with this stock
NH
it’s like it has some nasty disease
NH
and no one wants to touch it
BE
That’s a very good question. It just seems sick.
NH
(@Milky – we will be asking Chen. We hope he starts coverage of the sector very soon)
BE
Price more than halved in less than a year.
NH
was that after
NH
a big value destructive acquisition
NH
by any chance?
NH
one that shareholders supported
NH
to make a UK hedge fund champion
NH
or I am
NH
just making it up?
BE
By memory, GLG was bought when Man was 240p or thereabouts
BE
And on a 10% prospective yield.
BE
Anyway,there’s some more sellside ahead of results on …. Thursday, I think.
BE
None of it positive.
NH
go on
BE
We do not expect any
material surprises in the interim results given the company released its pre
close trading update on the 28 Septemeber. The key financials from the pre
close trading update, included AuM at end Sept of $65bn, H1 adjusted PBT
of $185m, H1 adjusted EPS of 7.5cents and net cash of $700m. The
company also committed to holding the dividend constant for the 9 months
ending 31 Dec 11 on a pro rata basis at 16.5c (22c full year).
material surprises in the interim results given the company released its pre
close trading update on the 28 Septemeber. The key financials from the pre
close trading update, included AuM at end Sept of $65bn, H1 adjusted PBT
of $185m, H1 adjusted EPS of 7.5cents and net cash of $700m. The
company also committed to holding the dividend constant for the 9 months
ending 31 Dec 11 on a pro rata basis at 16.5c (22c full year).
BE
Expect further decline in AuM at 1 Nov 2011: We expect AuM to have
declined further over the past month to c$63bn. We attribute the decline to
weaker investment performance (c-$1bn) predominately in AHL with some
offset from long only funds. We expect FX to add c$1.8bn due to
US$ weakness. On top of the $0.8bn de-gear on 1 October (as announced
in pre close) we estimate a further $0.8bn due to AHL weakness. Finally on
flows, this is more difficult to predict but we expect further net redemptions
due to the general risk aversion across the industry in October which we
believe could result in net redemption up to c$1bn.
declined further over the past month to c$63bn. We attribute the decline to
weaker investment performance (c-$1bn) predominately in AHL with some
offset from long only funds. We expect FX to add c$1.8bn due to
US$ weakness. On top of the $0.8bn de-gear on 1 October (as announced
in pre close) we estimate a further $0.8bn due to AHL weakness. Finally on
flows, this is more difficult to predict but we expect further net redemptions
due to the general risk aversion across the industry in October which we
believe could result in net redemption up to c$1bn.
BE
No exposure to MF Global: Man has confirmed that the company or its
wholly owned single managers have no counterparty exposure to MG Global.
wholly owned single managers have no counterparty exposure to MG Global.
BE
Valuation implying zero performance fees: The shares are trading on
FY12E PE of 8.4x or c7.3x (ex net cash) vs.sector on c11x. We accept there
remains downside risk to performance fees but even excluding all FY12
performance fees and net of cash the shares trade on c11.5x.
FY12E PE of 8.4x or c7.3x (ex net cash) vs.sector on c11x. We accept there
remains downside risk to performance fees but even excluding all FY12
performance fees and net of cash the shares trade on c11.5x.
BE
That’s Credit Suisse.
NH
thanks
BE
Who are long and wrong.
NH
and I loved they way
NH
Man rushed out a statement yesterday
NH
to tell us they have nothing to do with MF
NH
as if that was the reason for the decline
NH
talking of which
NH
MF
NH
have you read this
NH
it’s by Henry Blodget
NH
and it’s a great rant
NH
What happened to MF Global on Corzine’s watch was not just incompetence. It was spectacular recklessness. It was the equivalent of aiming a 747 filled with people straight at the side of the mountain and hoping that, just before you smash into it, the prevailing winds will shift and enable you to pull up.
And it’s not as if Corzine didn’t know the mountain was there. All of the Wall Street CEOs who bet their firms in the years leading up to the financial crisis–most of which were then saved by the government–at least had the excuse that they had never seen markets crash like that.
Jon Corzine had seen markets crash like that.
NH
unfortuntely
NH
it’s also wrong
NH
well sort of
NH
because
NH
Corzine isn’t dumb
NH
and this wasn’t just a massive directional bet
NH
on the Eurozone
NH
it was much, much more complex
NH
and to explain
NH
here’s Izy
IK
Hello
IK
Before I say anything, I just want to point out I am *not* in any way an expert when it comes to the repo market. I am just applying logic. Also I bothered to do a little reading about what repo-to-maturity (how the MF sov bond trades were classified) actually means.
NH
so
NH
explain to us the trade
NH
that destroyed MF
IK
So yes Neil is right. It’s not totally fair to call it a directional bet.
IK
Because it was actually a trade designed to take advantage of the EFSF guarantee
IK
and pocket some cheap financing via playing the repo spreads.
NH
an arb then?
IK
First, here’s a nice definition of what a repo-to-maturity trade actually is
IK
The standard repo is an overnight loan
that continues day-to-day until terminated by either party.
There are also term repos, in which a definite loan term is
stated. The most obvious term repo is the repo to maturity,
where X Co. agrees to repurchase the securities at the
moment they mature and the repurchase price is the
redemption price at maturity.
that continues day-to-day until terminated by either party.
There are also term repos, in which a definite loan term is
stated. The most obvious term repo is the repo to maturity,
where X Co. agrees to repurchase the securities at the
moment they mature and the repurchase price is the
redemption price at maturity.
IK
In the repo to maturity, X Co. has lost the ability to
make or lose money as the underlying securities
fluctuate in value, assuming the issuer of the
securities is able to repay the loan at maturity.
While that assumption may be reasonable in repos
of Treasury securities, the financial market distress
of 2008-2009 shows that the assumption may not be
reasonable when a private issuer, such as AIG, GM
or Lehman Brothers is involved. Most people think
that a repo to maturity of Treasury securities is a
sale, not a loan, for tax purposes, but the treatment
of repos to maturity of securities by private issuers
is not clear.
make or lose money as the underlying securities
fluctuate in value, assuming the issuer of the
securities is able to repay the loan at maturity.
While that assumption may be reasonable in repos
of Treasury securities, the financial market distress
of 2008-2009 shows that the assumption may not be
reasonable when a private issuer, such as AIG, GM
or Lehman Brothers is involved. Most people think
that a repo to maturity of Treasury securities is a
sale, not a loan, for tax purposes, but the treatment
of repos to maturity of securities by private issuers
is not clear.
IK
X Co. also loses control during the period covered
by a term repo. An open question, however, is how
extended a term repo of Treasury securities must be
before the holder of the repo will be treated as a
seller on account of the various indicia of
ownership it forfeits during the period of the term
repo.
by a term repo. An open question, however, is how
extended a term repo of Treasury securities must be
before the holder of the repo will be treated as a
seller on account of the various indicia of
ownership it forfeits during the period of the term
repo.
NH
(@JSDRAM – that’s also true. Where was the risk management on this punt)
NH
with you so far
IK
To explain more simply, it’s basically a way of being able to cash in on the full value of the bond early… (having bought it for a discount)
NH
so
NH
like
NH
going to cash converters?
NH
ahead of getting paid?
IK
yeah, a little bit. The cash converters give you the loan, because they know ultimately your pay cheque will cover the liability
NH
so
NH
he takes a massive position in eurozone debt
NH
repos
NH
hopes to make turn on the arb
NH
what goes wrong?
IK
He buys the bonds cheap, but is able to raise cash for them as if they were held for maturity.
IK
early on.
IK
because the person he is lending the bonds to, has struck an agreement that ensures Corzine uses the proceeds of the bond’s maturity to repurchase the bond.
IK
If Repo rates are low, this can be doubly attractive, as it can create an opportunity to borrow money at cheaper than market rates.
NH
but then he gets margin calls?
NH
and the whole thing unravels?
IK
in essense — as long as the bonds payout — you should be covered
IK
Your risk is a) default before the bonds mature
IK
b) that the counterparty ups the margin because the value of the bonds falls
IK
But really and truly, margin calls should be accounted for in VaR calculations (i would imagine)
NH
but not in this case?
IK
Though a downgrade might also trigger the terms and conditions
NH
fascinating stuff
IK
and up the margin
NH
so
NH
Corzine swung the bat
NH
with a trade much more complex
NH
than we first imagined
NH
and lost
IK
But generally speaking, providing there are counterparties in the market willing to finance Italian bonds, (and there should be if you have a good credit rating) you should be able to refinance
IK
Which begs teh question
IK
did the counterparties (aka pawnbrokers) demand to unravel these trades
IK
Though I have no idea about the technicalities in term repos
NH
thanks for that
NH
worth doing some more oon
IK
in a regular repos there’s usually a counterparty can usually cut and run at a day’s notice
IK
yeah – i think so. I mean i’m not saying this was in any way risk free
IK
It clearly wasnt
NH
thanks Izy
NH
right bryce
IK
no problem
NH
we should move on
NH
to the most ludicrous rumour
NH
I have heard
NH
in a long long time
BE
Aha! Ludicrous rumours.
11:49AM
NH
Steady yourself
Marks And Spencer Group PLC (MKS:LSE): Last: 314.20, down 7.7 (-2.39%), High: 321.40, Low: 312.10, Volume: 3.31m
NH
550p a share bid
NH
coming from China
BE
Er ………..
NH
hang on
NH
Shanghai Bailian Group
NH
which has been described to me as either
NH
the Chinese Wal-Mart
NH
or a Chinese cross between John Lewis and Sainsbury
NH
or this
NH
by one of our correspondents
NH
Big dept store and supermarket group, state owned, leaden
management
management
BE
Hang on. Someone directed me to a website earlier.
BE
http://www.2334.tradebig.com/
BE
So – pants.
BE
They’re big in pants.
NH
I think that might be a JV site
NH
I found another
NH
anyway
NH
why on earth a Chinese company would want to pay 550p a share for M&S
NH
is well beyond me
BE
No. I can’t really see the logic here.
BE
A new market for their own pants, perhaps.
BE
Insourcing.
BE
But it’d be a big price to pay. For pants.
BE
We should also note, since we’re on M&S …..
NH
yes, there seems to be a mind meld going on
NH
analysts lowering forecasts
NH
Here’s Merrill
NH
Reducing EPS forecasts by 4-5%; PO cut from 320p to 300p
As market leader in UK clothing, M&S is amongst the most exposed to the tough
trading conditions we are seeing in UK apparel. The Autumn/Winter season
appears to have got off to a challenging start and we expect to see a more
promotional industry environment, with retailers looking to clear unsold inventory,
particularly in the higher margin outerwear/knitwear categories. As such we have
reduced our H2 LFL sales estimate for General Merchandise from +2% to flat and
have cut our PBT/EPS forecasts by 4-5% for this year and next. We are around
5% below consensus for this year and closer to 10% below for next year. Owing
to the relative outperformance of M&S’ lower margin Food business and a lower
likelihood of significant markdown recovery in H2, we see a high risk of M&S
changing its full year gross margin guidance of +0-50bp (BofA MLe -20bps yoy).
Following our earnings downgrades our revised PO is 300p down from 320p,
based on DCF analysis.
As market leader in UK clothing, M&S is amongst the most exposed to the tough
trading conditions we are seeing in UK apparel. The Autumn/Winter season
appears to have got off to a challenging start and we expect to see a more
promotional industry environment, with retailers looking to clear unsold inventory,
particularly in the higher margin outerwear/knitwear categories. As such we have
reduced our H2 LFL sales estimate for General Merchandise from +2% to flat and
have cut our PBT/EPS forecasts by 4-5% for this year and next. We are around
5% below consensus for this year and closer to 10% below for next year. Owing
to the relative outperformance of M&S’ lower margin Food business and a lower
likelihood of significant markdown recovery in H2, we see a high risk of M&S
changing its full year gross margin guidance of +0-50bp (BofA MLe -20bps yoy).
Following our earnings downgrades our revised PO is 300p down from 320p,
based on DCF analysis.
NH
General Merchandise – share gains flattening out
Disaggregating macro from weather effects is always tricky, but we remain
concerned that M&S is at risk of alienating some of its core shoppers by raising
prices too much on continuity lines and by chasing the younger shopper too
aggressively. Meanwhile capex and opex intensity remains high which is putting
pressure on ROCE – we estimate this will fall from 12.5% to 11.5% 2010-12E.
Disaggregating macro from weather effects is always tricky, but we remain
concerned that M&S is at risk of alienating some of its core shoppers by raising
prices too much on continuity lines and by chasing the younger shopper too
aggressively. Meanwhile capex and opex intensity remains high which is putting
pressure on ROCE – we estimate this will fall from 12.5% to 11.5% 2010-12E.
NH
Food more resilient but lower margin
We think M&S’ food business has held up much better, particularly as M&S’
comps have been tougher than the industry average in recent months. We believe
Food’s resilient performance has been due to some basic executional
improvements, continued innovation and as M&S has improved the quality of
some of its core lines in Food and GM, which we expect it to talk about next week.
We think M&S’ food business has held up much better, particularly as M&S’
comps have been tougher than the industry average in recent months. We believe
Food’s resilient performance has been due to some basic executional
improvements, continued innovation and as M&S has improved the quality of
some of its core lines in Food and GM, which we expect it to talk about next week.
BE
Hm. Quite aggressive, one week ahead of results.
BE
Likewise HSBC
BE
Which has downgraded.
BE
Interim results preview: While next week’s update will increase focus on the impact of
unseasonably warm weather on Q2 general merchandise (GM) sales (we estimate -3%),
H2 is contingent on lower underlying consumer demand evident since the calendar halfyear.
We expect this to impact FY12e earnings via lower GM sales/increased margin
investment in price. Any reduction in discretionary spending, weather-related or
otherwise, will have a longer-lasting effect, as UK households adapt to challenging macro
conditions through lower spending/increased propensity to save. For largely UK-centric
retailers, we prefer those stocks with increased exposure to high-growth online/-
international channels to market.
unseasonably warm weather on Q2 general merchandise (GM) sales (we estimate -3%),
H2 is contingent on lower underlying consumer demand evident since the calendar halfyear.
We expect this to impact FY12e earnings via lower GM sales/increased margin
investment in price. Any reduction in discretionary spending, weather-related or
otherwise, will have a longer-lasting effect, as UK households adapt to challenging macro
conditions through lower spending/increased propensity to save. For largely UK-centric
retailers, we prefer those stocks with increased exposure to high-growth online/-
international channels to market.
BE
HSBC vs consensus: Accordingly, and not withstanding the potential upside in
shareholder value that we continue to believe is achievable under CEO Marc Bolland’s
turnaround plan over the long term, we cut our FY12-13e PBT by 3-9% on revised FY12e
GM LFL sales growth estimates (now +0.3% from +1.7%) and flat GM LFL for FY13e
(vs +2% previously). We already assume the low end of the management guidance range
on gross margins. Our revised PBT forecasts sit 1-8% below consensus expectations. Our
revised FY12e earnings assumptions imply a H1 PBT of GBP312m (vs consensus at
GBP314m; range: GBP307-323m), a yoy decline of 11%.
shareholder value that we continue to believe is achievable under CEO Marc Bolland’s
turnaround plan over the long term, we cut our FY12-13e PBT by 3-9% on revised FY12e
GM LFL sales growth estimates (now +0.3% from +1.7%) and flat GM LFL for FY13e
(vs +2% previously). We already assume the low end of the management guidance range
on gross margins. Our revised PBT forecasts sit 1-8% below consensus expectations. Our
revised FY12e earnings assumptions imply a H1 PBT of GBP312m (vs consensus at
GBP314m; range: GBP307-323m), a yoy decline of 11%.
BE
Valuation: Our revised 12-month target price of 360p, down from 450p, is the average of
our peer group PER (310p) and the intrinsic APV fair value (410p), the latter discounted
20% (previously zero) to reflect an as yet unproven recovery strategy, and the pace of that
recovery, given the commitment to invest an extra GBP300m p.a. in the business over the
next three years, which we estimate will rely on just about every spare penny of surplus
FCF generation in the period. Our new target price implies a potential return of 10.8% and
places M&S on a 2012e CY PE of 10.6 versus a 5-year historic 1-year fwd av. PER of
12.8, justified on short-term earnings concerns. The potential return is below the 12.5%
required to warrant an Overweight rating under our research model. We downgrade our
rating to Neutral from Overweight, despite recent share price underperformance but on
de-risked earnings estimates.
our peer group PER (310p) and the intrinsic APV fair value (410p), the latter discounted
20% (previously zero) to reflect an as yet unproven recovery strategy, and the pace of that
recovery, given the commitment to invest an extra GBP300m p.a. in the business over the
next three years, which we estimate will rely on just about every spare penny of surplus
FCF generation in the period. Our new target price implies a potential return of 10.8% and
places M&S on a 2012e CY PE of 10.6 versus a 5-year historic 1-year fwd av. PER of
12.8, justified on short-term earnings concerns. The potential return is below the 12.5%
required to warrant an Overweight rating under our research model. We downgrade our
rating to Neutral from Overweight, despite recent share price underperformance but on
de-risked earnings estimates.
NH
thanks for that
NH
(@Mo06. We care. Yellow card)
11:55AM
BE
Ok – while Izy holds Complex Finance 101 on the right …..
BE
… which makes me want to lie under the desk with a wet flannel on my forehead ….
BE
We should move on.
BE
FTSE now down 3.3%.
NH
yes
NH
looking ugly
NH
time for
NH
BE
Down 180 points at 5364.
BE
That’s nearly October gone all gone in two days.
NH
I repeat
NH
how does anyone trade this market?
NH
even the smug macro guys
NH
who called October right
NH
and were betting on further gains
NH
because the media
NH
were bearish on the Eurozone bailout fudge part 9
NH
are now wearing losses
NH
anyway
NH
to Greece
NH
and the vote
NH
here’s what Fitch makes of it
NH
It is highly uncertain what would be the consequences of a no vote. In light of the prolonged and difficult negotiations between the Greek government and the ‘troika’ of the IMF, European Commission and ECB, securing agreement on a new package could prove unobtainable. Given the heavy debt repayment schedule in the first quarter of 2012, without continuing external financial support, a coercive and potentially disorderly sovereign default could follow.
NH
and here’s something a little more detailed
NH
from
NH
Nomura
NH
So what happens in the case of failure? As a period of high political uncertainty is likely to follow in Greece, it could get to the point where Greece loses support from the EU and the IMF. It could run out of money at some point in January 2012 if no tranche is paid after the November one. The Greek government would then stop being in a position to pay its civil servants and would most certainly default on its debt (there is a €14.5bn bond maturing in March 2012).
NH
For Greek debt bondholders, how big a change is this from previous expectations? GGB bondholders are already likely to be expecting at the very least a 50% haircut, possibly up to 100%, according to the terms of the agreement between European leaders and the IIF last week. Policymakers are determined to make it a 50% or 100% “choice” for GGB holders, and we have no reason not to take seriousely Angela Merkel and Nicolas Sarkozy if they agree on this. This 50% face value reduction can easily amount to a 60% to 70% NPV loss for bondholders, if not more, depending on the terms of the exchange, which have not been finalised yet. Still following these announcements, we think there must be a strong likelihood that CDS are triggered, at the very least to “punish” the holdouts.
BE
(@MoO6: second yellow. Please stop trolling.)
NH
And since we are there and the goal is to provide debt relief to Greece, why not force a very low recovery rate and actually target more debt relief if the “voluntary” participation is too low? In other words, under the terms of last week’s PSI, a CDS trigger should already be considered a very distinct probability, the best bondholders can hope for is a 50% face value reduction (possibly a 70% NPV loss), while we think a much lower than 50% face value outcome and an effective recovery closer to zero is reasonably possible as well. And all this was due to happen by January 2012.
NH
Against these expectations, which must have been priced in by the markets since last week, the prospect of a disorderly default of Greece increases the likelihood of a very low recovery rate and of a CDS trigger. But the difference between a “70% NPV loss – possibly 100%” and “100%” does not strike us as being of a systemic nature. The funding the EU and the IMF would not provide to Greece as a result of a breakup of the relationship can be very well used to cover its effect on affected financial institutions across Europe. As for the”example” that this sets for the rest of Europe, when the people in the rest of Europe will see the damage that a no in the referendum creates in Greece if the EU/IMF removes its support (civil servants and pensions stop being paid), why assume that Greece will be an inspiring case?
NH
gloomy stuff eh
BE
Quite so. Here’s Citi.
BE
We agree with the Finnish Minister that when it comes to the referendum, it
de facto would be a decision on the euro membership of Greece. If Greece were to
decline the conditions of the second Greek bailout package, there would be no support from the Troika. In that case Greece is likely to run out of funding quickly and would probably move into a disorderly default procedure. As Greek banks would run out of collateral, they would also lose the funding of the ECB. As a consequence, Greece would probably be forced to leave the Monetary Union.
de facto would be a decision on the euro membership of Greece. If Greece were to
decline the conditions of the second Greek bailout package, there would be no support from the Troika. In that case Greece is likely to run out of funding quickly and would probably move into a disorderly default procedure. As Greek banks would run out of collateral, they would also lose the funding of the ECB. As a consequence, Greece would probably be forced to leave the Monetary Union.
BE
“disorderly default”
NH
So what’s G’Pap doing here
NH
has he flipped
NH
lost it?
NH
or is this a calculated gamble
NH
that might pay off?
BE
Dunno.
BE
I’ll turn to Citi again …
BE
While parliamentary support for Mr. Papandreou has been shrinking in recent months,
he still has a chance of passing the vote of confidence. If he does, in contrast to
June when Papandreou thought about calling a referendum, we believe that it is more likely that the government would go ahead with it. In our view, the outcome of the referendum would be uncertain, but the government will probably highlight the link of the outcome to Greece’s euro area (and probably EU) membership.
he still has a chance of passing the vote of confidence. If he does, in contrast to
June when Papandreou thought about calling a referendum, we believe that it is more likely that the government would go ahead with it. In our view, the outcome of the referendum would be uncertain, but the government will probably highlight the link of the outcome to Greece’s euro area (and probably EU) membership.
BE
If Papandreou does not pass the confidence vote, we expect that in the upcoming
elections, the opposition parties will form a new government. In that case a
referendum is unlikely to take place.
elections, the opposition parties will form a new government. In that case a
referendum is unlikely to take place.
BE
In any case, uncertainty about political developments in Greece will be on the
agenda in coming weeks. And similar to Greece, we may see more signs of fatigue in implementing the austerity measures in other countries.
agenda in coming weeks. And similar to Greece, we may see more signs of fatigue in implementing the austerity measures in other countries.
NH
Merkel
NH
and Sarko
NH
must be hopping mad
NH
over this
NH
http://translate.google.com/translate?sl=el&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http://news.in.gr/greece/article/%3Faid%3D1231135469
NH
although this report
NH
claims he tried to tell them
BE
It’s an odd circumstance, for Europe to be brought back into crisis because of the application of the democratic process.
NH
and in Greece
NH
of all places
NH
According to The News, the Prime Minister had a brief idea of the two leaders that will lead to a referendum instead of early elections requested by the opposition. It is not known whether Ms Merkel and Mr Sarkozy prevented him or advised otherwise.
As is apparent, however, by reports in German media, and the reactions of government officials, show surprise.
According to the source of the chancellery, George Papandreou had spoken several times in recent months about a potential referendum, but encountered strong opposition in the Angela Merkel and other European leaders. “We thought, that he persuaded,” said the source Step chancellery and added: “The facts, unfortunately, we refute.”
As is apparent, however, by reports in German media, and the reactions of government officials, show surprise.
According to the source of the chancellery, George Papandreou had spoken several times in recent months about a potential referendum, but encountered strong opposition in the Angela Merkel and other European leaders. “We thought, that he persuaded,” said the source Step chancellery and added: “The facts, unfortunately, we refute.”
NH
shall we move on?
NH
I had something from Gary Jenkins
NH
I want to share
NH
he’s at Evo Securities
NH
and I hope
NH
he makes ti through the cull
NH
We should also keep an eye open for what is going on in the US on the budget
front. The Joint Select Committee on Deficit Reduction has a 23 November
deadline to find budget saving of $1.5trn over the next decade. The committee
holds a public meeting today. Most of its discussion has been behind closed doors
with few indications of how close they are to an agreement.
front. The Joint Select Committee on Deficit Reduction has a 23 November
deadline to find budget saving of $1.5trn over the next decade. The committee
holds a public meeting today. Most of its discussion has been behind closed doors
with few indications of how close they are to an agreement.
NH
Back in August S&P downgraded the US to AA+ with a negative outlook and at
the time stated that the rating could be lowered further “if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures
during the period result in a higher general government debt trajectory than we
currently assume in our base case.”
the time stated that the rating could be lowered further “if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures
during the period result in a higher general government debt trajectory than we
currently assume in our base case.”
NH
We described the S&P rating as a weak AA+ at the time and unless an agreement
is reached on the deficit it could be argued that the US has failed on two out of
three of S&P’s conditions; budget reductions less than that agreed to and a fiscal
outlook that has deteriorated due to the weakened economic outlook (though the
weaker economic outlook has improved the cost of servicing debt, S&P’s third
criteria). Still looks like a weak AA+ on those criteria and the lack of an
agreement by the 23rd could still tip the balance though it remains to be seen
whether S&P wants to fuel controversy again.
is reached on the deficit it could be argued that the US has failed on two out of
three of S&P’s conditions; budget reductions less than that agreed to and a fiscal
outlook that has deteriorated due to the weakened economic outlook (though the
weaker economic outlook has improved the cost of servicing debt, S&P’s third
criteria). Still looks like a weak AA+ on those criteria and the lack of an
agreement by the 23rd could still tip the balance though it remains to be seen
whether S&P wants to fuel controversy again.
NH
In August Moody’s confirmed the Aaa rating, but assigned a negative outlook
following the debt-ceiling standoff. The negative outlook came as it warned of
the risk of a downgrade if “(1) there is a weakening in fiscal discipline in the
coming year; (2) further fiscal consolidation measures are not adopted in 2013;
(3) the economic outlook deteriorates significantly; or (4) there is an appreciable
rise in the US government’s funding costs over and above what is currently
expected.” Moody’s statement gives the US a little more time to get its finances
in order and while a failure to reach an agreement this month will be credit
negative is unlikely to cause an immediate downgrade from Moody’s. Fitch has
the US at AAA with a stable outlook.
following the debt-ceiling standoff. The negative outlook came as it warned of
the risk of a downgrade if “(1) there is a weakening in fiscal discipline in the
coming year; (2) further fiscal consolidation measures are not adopted in 2013;
(3) the economic outlook deteriorates significantly; or (4) there is an appreciable
rise in the US government’s funding costs over and above what is currently
expected.” Moody’s statement gives the US a little more time to get its finances
in order and while a failure to reach an agreement this month will be credit
negative is unlikely to cause an immediate downgrade from Moody’s. Fitch has
the US at AAA with a stable outlook.
NH
back to stocks then
12:07PM
BE
Ok – what of Bumi?
NH
well
NH
the Bakrie Brothers
NH
the billionaires with serious cash flow issues
NH
have sorted one debt issue out
NH
they have managed to find another Indonesia coal billionaire
NH
to buy half of their stake in Bumi
NH
at a 46% premium to last night’s closing price
NH
that’s right
NH
they have found someone to buy a stake
NH
at a massive premium
NH
even though they are a distressed seller
NH
neat eh
NH
and they can use the proceeds to pay down
NH
that big loan from Credit Suisse
NH
£1.3bn
NH
thats been called in
BE
Right. It’s time for application of the wet flannel to the forehead again.
BE
Why’s this coal miner paying a 46% premium?
NH
well
NH
this guy
NH
Samin Tan
NH
seems to know them
NH
he’s tried to deals before
NH
and he’s also agreed to hold his new stake
NH
in a vehicle jointly managed with the Bakries
NH
to me
NH
this looks like a very cosy deal
NH
no real change to shareholder register
NH
someone has massively overpaid
BE
But it’s a very cosy deal with a publicly listed company.
BE
This Borneo Lumbung thing.
BE
Is down 15.5%.
NH
yep
NH
shareholders don’t like the deal
NH
or the market doesn’t
NH
hang on
NH
there’s a good piece on Reuters
NH
about the deal
NH
(Reuters) – Indonesia’s Bakrie Group is selling a 23.8 percent stake in London-listed Bumi Plc (BUMIP.L), its joint venture with financier Nathaniel Rothschild, to coal miner PT Borneo Lumbung Energi (BORN.JK) in a $1 billion deal to avoid a loan default.
The deal with Borneo, which is backed by Indonesian billionaire businessman Samin Tan, would help Bakrie pay off the bulk of an $1.35 billion loan and extricate itself from a debt crunch that has weighed on the share price of the world’s largest thermal coal exporter Bumi Resources (BUMI.JK).
NH
The deal was sealed after Glencore (GLEN.L), the world’s largest diversified commodity trader, dropped out of talks on refinancing the Bakrie loan.
It also marks the second time Tan, a former partner at accounting firm Deloitte, has negotiated to buy a stake in Bumi, having failed to strike a bold deal in 2006.
Tan succeeded this time, with PT Borneo confirming the agreement in a statement, adding that the total consideration of $1 billion valued Bumi plc’s shares at approximately 10.91 pounds each at the date of the announcement. That translates to a 6 percent premium to the last 6-month volume-weighted average price, and would be payable in cash.
“The biggest haircut in this deal has been taken by the Bakries,” said a source with direct knowledge of the deal. “They have lost half their stake in Bumi Plc.”
NH
don’t agree with the last bit
NH
but at least
NH
Bumi shareholders
NH
haven’t got into bed with Glencore
NH
and given up further marketing rights to their coal output
NH
that’s the positive here
NH
in a funny sort of way
NH
anyway
NH
here’s some more comment
NH
Sources close to the deal told Reuters earlier that talks between the Bakrie Group and Swiss-based Glencore, the previous frontrunner, fell through because lenders were not comfortable with the structure of the proposal.
Glencore had been looking for additional marketing rights over Bumi’s coal in return for lending Bakrie $800-$900 million.
“We think it is net positive for Bumi not having to incur higher marketing costs from allocating greater volumes to the trader,” said Singapore-based UBS analyst Andreas Bokkenheuser in a note to clients.
NH
that’s from Reuters
NH
and here is
NH
Liberum
NH
Bumi PLC’s 47% shareholder Bakrie Group has sold 23.8% of its stake to PT Borneo Lumbung Energi & Metal for US$1bn. The transaction values Bumi at £10.91/shr or a 46% premium to yesterday’s closing price. The reason for the sale is to allow the Bakries to meet repayment of a US$1.3bn loan due to Credit Suisse. This is a positive equity catalyst for Bumi as it removes fears that the Bakries may have to place shares to raise funds. The transaction will not split Bumi’s register since Bakrie and PT Borneo will own 47.8% via their “jointly and equally owned investment vehicles” therefore Bumi will still have a single blocking shareholder, but it does reduce the influence of a single family group. This deal also confirms speculation over recent days that Glencore (BUY) had missed out or walked away from acquiring a stake in Bumi, which could have been a coup for Glencore.
BE
Oh – and here’s a quick line from Nomura
BE
What does the acquisition value imply?
The US$1bn acquisition implies share price of Bumi plc of ~GBP10.91
per share which represents a premium of 1) ~46% to the closing price of
Bumi plc on October 28, 2) ~45% to the last 20-day volume-weighted
average trading price of Bumi plc and 3) ~5% premium to the last 6
month volume-weighted average trading price.
The US$1bn acquisition implies share price of Bumi plc of ~GBP10.91
per share which represents a premium of 1) ~46% to the closing price of
Bumi plc on October 28, 2) ~45% to the last 20-day volume-weighted
average trading price of Bumi plc and 3) ~5% premium to the last 6
month volume-weighted average trading price.
BE
BORN’s rationale
BORN highlights three reasons to invest in Bumi plc: 1) to diversify
product portfolio, 2) to have a stake in a world class thermal coal asset,
and 3) to have access to growing thermal coal market.
BORN highlights three reasons to invest in Bumi plc: 1) to diversify
product portfolio, 2) to have a stake in a world class thermal coal asset,
and 3) to have access to growing thermal coal market.
BE
Our view
We don’t think this transaction is positive for BORN because 1) BORN
gearing would go up from 1% to 86% on our estimate, 2) as the balance
sheet becomes stretched, we are concerned on the funding for
development of the Telakon block, and 3) we don’t expect any significant
cash flow from Bumi plc to justify the investment.
We don’t think this transaction is positive for BORN because 1) BORN
gearing would go up from 1% to 86% on our estimate, 2) as the balance
sheet becomes stretched, we are concerned on the funding for
development of the Telakon block, and 3) we don’t expect any significant
cash flow from Bumi plc to justify the investment.
NH
4) to help his friends
NH
is that one missing?
NH
wow
NH
look at the gearing
NH
sweetheart deal
BE
I think it’s fair to say that BORN shareholders are not pleased.
BE
Can they block this?
BE
Hang on.
NH
there’s one BORN every minute
NH
sorry I will get my coat
BE
NH: yellow.
NH
red probably
BE
Ok. So it needs 75% approval of Borneo’s shareholders at the EGM to be held on 15 Dec
NH
Tan
BE
And PT Republik Energi & Metal (owned by Samin Tan and Surjadinata Sumantri)
owns 73% of Borneo
owns 73% of Borneo
NH
yes
NH
I was just going to say that
NH
excellent
BE
What a stitch up.
NH
lovely to see all this stuff being played out through a UK listed company
NH
talking of which
NH
seen this?
NH
FTSE Consults the Market on the Minimum Free Float Requirements for UK Incorporated Companies in the FTSE UK Index Series
NH
London, 1 November 2011: FTSE Group (“FTSE”), the award winning global index provider, today announces that it is undertaking a market consultation on the minimum free float requirements for UK incorporated companies in the FTSE UK Index Series.
NH
As part of the ongoing process to refine the Ground Rules of FTSE indices and achieve the highest possible standards in index design, FTSE regularly consults the market on changes to the rules to ensure that the indices continue to meet investors’ requirements. In July of this year, FTSE consulted the market on a number of topics relevant to the construction of the FTSE UK Index Series and the FTSE Global Equity Index Series.
The market consultation on the eligibility requirements for UK incorporated companies in the FTSE UK Index Series (which includes the FTSE 100 and FTSE All-Share Index), will invite market participants from all sections of the investment community to submit their views on the minimum free float requirement for index inclusion.
NH
The current ground rules for both the FTSE UK Index Series and the FTSE Global Equity Index Series stipulate a minimum free float of 15% for a company to be eligible for inclusion in either index series (there is an exception for very large companies). However, in respect of the UK Index Series, FTSE has received a number of requests to raise the minimum free float requirement for a company to 25%; this float would be consistent with the minimum required by the UK Listing Authority for a company to obtain a premium listing. FTSE will consult on this proposal, and also on whether exceptions should be granted in those circumstances where the FSA has itself granted an exception for a premium listing.
The proposed minimum free float of 25% would apply only to UK incorporated companies. Companies incorporated outside of the UK are already subject to a higher free float threshold of 50%. If the consultation leads to a change in the rules, any FTSE All-Share stocks with less than 25% free float will be grandfathered to allow them time to increase their free float.
BE
(ROTR: the comment handler appears to have crashed once more. Apologies.)
NH
The results of the market consultation and any proposed changes to the UK Index Series Ground Rules will be presented to the FTSE Policy Group in December 2011. The FTSE Policy Group’s decision on whether to ratify any proposed changes to the Ground Rules will be final.
NH
so
NH
there you go
NH
FTSE
NH
worried about all this overseas stuff
NH
with a limited free float listing over here
NH
and it’s consulting to see what people think
NH
about time
BE
That would’ve stymied Glencore.
Glencore International PLC (GLEN:LSE): Last: 420.50, down 17.5 (-4.00%), High: 427.25, Low: 417.25, Volume: 3.62m
BE
Which might have saved investors a few bob.
BE
Unless they’d be offering some kind of IPO waiver based on lock-ups coming off.
NH
they should except that
NH
in my view
NH
right
NH
given that comment functionality
NH
has fallen over
NH
we should end this session now
NH
no point going on
NH
Le Point reports that following a phone call with Merkel, Sarkozy to hold a crisis meeting with his ministers at the Elysee, at 5:00 p.m.
NH
thought I would add that
NH
oh
NH
looks like we are back up
NH
shall we end with UK GDP?
BE
Sure. Why not. A bit of Royal Wedding to cheer us all up.
BE
0.5% in the third quarter
BE
Better than hoped.
NH
and that will be as good as it gets
NH
for ages
NH
annd ages
NH
and ages
NH
Howard Archer
NH
was on good form
NH
post the release
NH
The good news is that UK GDP growth came in slightly above expectations at 0.5% in the third quarter.
The bad news is that this performance overstates the underlying strength of the economy and this is likely to be as good as it gets for some time to come. Growth was clearly lifted in the third quarter by the making up of some activity lost to one-off distorting factors in the second quarter.
We expect the economy to essentially stagnate in the fourth quarter
of 2011 and the first quarter of 2012, before slowly improving. We see GDP growth at 0.9% overall in 2011 and expect a similar outturn in 2012.
NH
On the face of it GDP growth of 0.5% in the third quarter looks a reasonable performance. However, this undoubtedly overstates the underlying health of the economy. It is evident that there was some boost to growth in the third quarter from the making up of activity that was lost to a number of “one-off” disruptive factors in the second quarter (working day lost to Royal Wedding, manufacturing supply-chain disruptions resulting from the Japanese tsunami, money spent on Olympic ticket sales but not yet counting towards growth etc). Most recent data and survey evidence portray an economy that is struggling hugely, and it looks to be in serious danger of stagnating or even worse in the fourth quarter, as is highlighted by manufacturing activity contracting in October at the fastest rate since mid-2009.
NH
We expect the economy to essentially stagnate in both the fourth quarter of 2011 and the first quarter of 2012, and certainly would not rule out modest contraction as consumers struggle markedly in the face of squeezed purchasing power and rising unemployment, fiscal tightening continues and exports are pressurized by slower global growth. It is also likely that many businesses will trim their investment plans
NH
more gloom
NH
this is even start to depress me
NH
and I am one of the most pessimistic people I know
BE
Yes. Likewise. You are.
NH
RTRS-NOMURA’S <8604.T> NEW $1.2 BLN COST-CUTTING PLAN TO LEAD TO MORE THAN 700 ADDITIONAL JOB CUTS, MOSTLY IN EUROPE-SOURCE
NH
more doom
BE
Wow.
BE
They could stop moving offices every three years. That might save a few dollars.
NH
let’s hope the bees making it
NH
I’d hate to see the hive
NH
thrown off the top of the building
NH
right
NH
a straight red for Milky
NH
and we can end this session
NH
zap
Warning to rude and abusive commenters – your ability to comment will be terminated immediately and permanently, without warning. Henceforth, FTAlphaville has instituted a One Strike and You Are Out policy. We’ve had enough. We are going to clean up these pixels once and for all.
BE
For the rubbish old “economists/light bulb” joke? Fair enough.
BE
And to the rest of you ….
BE
Thanks for your participation.
NH
yes
BE
Apologies for the small technical outage
BE
Though you should be used to those by now.
BE
We’ll see you all back here tomorrow.