TheChek News Flow

BNP's Real Capital Punishment Could Come From Clients

Rough justice: That's what plenty of European bankers and investors, not to mention the French government, feel BNP Paribas BNP.FR +0.84% is getting at the hands of U.S. authorities.

Investors weighing the potential of a fine of $10 billion or more for the French bank for allegedly breaking economic sanctions on Cuba, Iran and Sudan have more prosaic concerns: Will BNP be forced to raise more capital or suspend dividends, and will legal sanctions stop it earning its way out of a hole?

The answers may not be as bad as many fear. Investors might well breathe a sigh of relief at the certainty that comes with any final outcome.

So, political machinations aside, where would a $10 billion hit leave BNP? Core capital, backed out of its reported first-quarter fully loaded Basel III ratio, is €65.4 billion ($89.34 billion). At today's exchange rates and subtracting the €1.1 billion BNP has reserved, the hit from the fine would be €6.2 billion, excluding any tax adjustment. On risk-weighted assets forecast by Goldman Sachs analysts to be €630.5 billion at the end of 2014, BNP would be left with a capital ratio of 9.4%, beneath the 10% minimum it needs.

But the bank will make money this year. Analysts estimate €5.1 billion absent any litigation charges that could result from the U.S. action, according to FactSet. This gets the bank back to 10.2%.

That would be behind peers but not disastrous. However, to stay there BNP likely must scrap its dividend plans. Doing so would save €2 billion to €2.3 billion, although that would harm a stock that sports a dividend yield of 2.9%.

Putting payouts on hold also would bolster BNP's leverage ratio, a straight comparison of capital and total assets that regulators and investors like for its simplicity. Berenberg Bank analysts calculate the capital base for this ratio at about €72 billion, while consensus forecasts for total assets at the end of the year are €1.831 trillion.

With the same penalty and profit math, BNP's year-end leverage ratio would be 3.9%. That would be below many U.S. peers, but comfortably above a 3% minimum threshold. So BNP may be able to swallow a big fine without having to raise additional capital, a dilutive move.

But shareholders can't breathe too easy, for two reasons. First are Europe-wide "stress tests," due to be completed in August. Those could cause swings in BNP's risk-weighted assets and so its capital needs.

Second is the impact of any ban on transacting in the U.S. that could result from the charges. Goldman analysts take a sanguine view, saying the U.S. business is relatively small. They estimate the direct impact would be to cut 2016 earnings by 13%, leaving the bank trading cheap to the sector at 8.9 times 2016 earnings versus a 9.2 times average.

Yet that may underestimate the effect any ban could have on BNP's relationship with global corporate clients. If they take their business elsewhere, BNP will have a much tougher time earning its way back to real strength.

+------------------------------------------------------------------------------+

Siemens Bid for Alstom Energy Unit Not Serious: Sunday Telegraph 2014-06-08 10:10:30.773 GMT

By Lyubov Pronina June 8 (Bloomberg) -- German engineering co. not serious about bid for Alstom’s energy unit, The Sunday Telegraph reports today, citing unidentified sources. * Siemens conversations with French government designed to ensure if General Electric buys Alstom, it doesn’t gain too much of advantage * Alstom board has accepted GE’s EUR12.4b offer for its energy division * Siemens set itself a June 16 deadline to bid for its European industrial rival

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporter on this story: Lyubov Pronina in London at +44-20-3525-8784 or lpronina@bloomberg.net To contact the editor responsible for this story: Daliah Merzaban at +44-20-3525-3630 or dmerzaban@bloomberg.net

Fondazione Carige mandates Banca Imi to sell 10.9% stake in Banca at discount by 10 June

The board of Fondazione Carige, the financial institution that owns 29% of the listed Italian bank Banca Carige, has mandated Banca Imi to sell a 10.9% stake in the lender, reported Italian daily Il Sole 24 Ore, citing a statement by Fondazione Carige.

The report said that the discount is likely to be about 4-5% on the present share price. The item said that the sale is not likely to take place through the markets.

Fondazione Carige board is to meet on 10 June to approve its participation in Banca Carige's EUR 800m rights issue in order to maintain its stake at around 19% in the bank. The report added that if the sale of the 10.9% stake proves unsuccessful, Fondazione Carige will look instead to sell some of its rights options for the issue.

The item added that Fondazione Carige previously sold a stake in Banca Carige in May at EUR 0.4 a share.

Source Il Sole 24 Ore

SSAB intention to buy Rautaruukki may have hit the rocks

Sweden's steel giant SSAB intent to buy the Finnish steel company Rautaruukki may have hit the rocks, according to Talouselama. In its unsourced analysis, the Finnish language piece wrote that SSAB's offer was originally scheduled to expire on May 12, and the transaction was conditional based on SSAB acquiring more than 90% of Rautaruukki.

The schedule turned out to be hopeless, the piece wrote. Rautaruukki has more than 40 000 shareholders and its ownership is fragmented badly. The Swedish company extended its offer time on 9 May, because it failed to get sufficient number of shares. Rautaruukki's next notification must be made at the time when shareholders representing 66.7% of shares have approved the acquisition. The new announcement did not come by Wednesday, even though 18 owners is enough to gather up to 72.7% stake.

The sluggishness means that the deal has not gone according to SSAB's plans. Only three weeks is left till the offer expires.

Source Talouselama

Centrica and Qatar government have no comment on talk of Qatar bid; in discussions about other projects

Centrica CEO Sam Laidlaw and Qatar’s energy minister Mohammed bin Saleh Al-Sada declined to comment on suggestions of a Qatar bid for the listed UK-based energy company, The Daily Telegraphreported. The article noted that Centrica’s share price gained 1.5% yesterday, 6 June in London on rumours that the Qatar government was looking to acquire a major shareholding in Centrica or that Qatar was mulling a takeover offer for the company.

Al-Sada said, however, that Qatar and Centrica were talking about some UK-based energy projects, the item continued. The report noted that Centrica and Qatar Petroleum International (QPI) in 2011 inked a co-operation agreement, while Centrica and Qatargas agreed a GBP 4.4bn (EUR 5.4bn) deal for the supply of liquefied natural gas.

The item went on to quote Centrica’s head of upstream operations, Mark Hanafin, who said Nebras, an overseas investment company set up by the Qatar Investment Authority, QPI and Qatar Electricity and Water Co., was talking to Centrica about gas-fired electricity generation facilities in the UK.

Centrica has begun a sale process for three gas-fired plants, but also plans to upgrade older gas plants at a cost of up to GBP 150m, the report continued.

A market report in the Financial Times said Centrica is continuing to buy back its own shares, suggesting that the company has nothing to disclose that would be price-sensitive.

Separately, Hanafin said Centrica might seek bolt-on buys in Canada, according to The Daily Telegraphreport.

Centrica's market capitalisation stood at GBP 16.91bn at the close of trading in London on Friday.

Source Daily Telegraph, Financial Times

Uber value hits $18.2bn on fundraising

Uber, the taxi app intent on conquering the world, has raised $1.2bn in capital to value the four-year-old San Francisco-based company at $18.2bn, an increase of about $8bn in just weeks. The company said it would raise as much as $1.4bn as strategic investors continued to pile in. Institutional investors, mutual funds and private equity, as well as venture capital investors, have funded the company.

The valuation has soared from about $3.5bn last year, when Google’s VC arm and TPG, the private equity group, led a $258m investment in the company. Travis Kalanick, Uber’s chief executive and co-founder, said it was just the beginning of the “Uber story”. The app, allowing users to summon a vehicle ranging from a limousine to a regular car, is available in 128 cities in 37 countries around the world. It has also talked of expanding into deliveries and other services. Uber’s new price tag makes it worth almost as much as WhatsApp, the messaging service bought by Facebook for $19bn, and more than the $10bn valuation placed on Airbnb and Dropbox in their recent capital raisings. This is despite wavering in the valuations of high-growth tech stocks on public markets, which have punished companies such as Twitter and Workday. Early stage talks with investors valued Uber at about $10bn just weeks ago, according to several people familiar with the discussions. Uber is expected to use the money to fuel its rapid expansion and head off threats from rivals Lyft, Sidecar and Hailo. The $18.2bn includes the $1.2bn raised, giving it a pre-fundraising valuation of $17bn. The company takes a share of the fee for every ride. Financial details leaked last year suggested customers spent more than $1bn on journeys in 2013, with about $200m going to Uber. Uber has faced criticism over its “surge pricing” tactic, which can see customers pay up to seven or eight times the standard price in very busy periods, leading to battles with regulators around the world. As it expands to new cities, it has also confronted the local taxi industry which has fiercely challengedagainst its operations. With our growth and expansion, the company has evolved from being a scrappy Silicon Valley tech start-up to being a way of life for millions of people in cities around the world - Travis Kalanick, Uber chief executive Uber drivers in Brussels were threatened with fines of €10,000, while a Berlin court ruled in favour of the local taxi association by saying the drivers should be classified as rental car businesses not taxis. “With our growth and expansion, the company has evolved from being a scrappy Silicon Valley tech start-up to being a way of life for millions of people in cities around the world,” Mr Kalanick said. “This ‘Uber’ way of life is really a reflection of our mission to turn ground transportation into a seamless service and to enable a transportation alternative in cities that makes car ownership a thing of the past.” Fidelity Investments led the fundraising with $425m with BlackRock, the world’s largest fund manager by assets under management, putting in $175m. The firms will distribute their holdings across several of their mutual funds. Wellington Management also contributed, according to sources familiar with the deal. Traditional fund managers have scrambled to gain access to pre-IPO deals in recent years, particularly since the US Jobs Act allowed companies to stay private for longer. BlackRock’s recent investments include Turn, an advertising technology company, and Lending Club, a peer-to-peer lender; Fidelity was a pre-IPO investor in Facebook. Kleiner Perkins, a Silicon Valley venture capital firm, also participated in the funding round. Bill Gurley, an Uber board member and partner at Benchmark Capital, which was an early investor in the company, said the “rather unusually high valuation” was because some “intelligent” investors liked what they saw in Uber’s financials. “From our perspective, we’re very lucky with its growth trajectory. Of all the companies we’ve been involved with only eBay has anything like the same type of trajectory,” he said. “It is pretty remarkable and rare.”

HMRC proposes major reform to tax on trusts HM Revenue & Customs has proposed limiting the amount that individuals can transfer tax-free into trusts in an attempt to clamp down on the use of multiple trusts to avoid inheritance tax. The tax authority has proposed a separate allowance, termed a “settlement nil-rate band” and equivalent to the nil-rate inheritance tax band, that each settlor could allocate to trusts over their lifetime.

Carolyn Steppler, private client tax partner at EY, said the changes would “result in considerably more new trusts falling into the inheritance tax net, increasing the total inheritance tax payable by trustees.” Inheritance tax can currently be minimised by using multiple trusts, so long as the assets in each do not exceed £325,000. There is no limit on the number of trusts that anyone can set up. Under the proposed new rules, a couple would only be able to set aside £650,000 tax-free through the use of trusts. “This doesn’t mean that trusts will no longer be an attractive way to pass on family wealth, but [these changes] will affect those who use multiple trusts to minimise tax,” said Tina Riches, national tax partner at Smith & Williamson. Assets transferred into trusts are removed from an individual’s estate, and so are ineligible for IHT, which is charged at a marginal rate of 40 per cent above the nil-rate threshold. Tax calculator Taxation is never that exciting, but you might be surprised to see where all this tax waste comes from, and how easy it can be to remedy Any amounts above this threshold that are put into trusts are subject to an “entry charge” at a rate of 20 per cent. A further “periodic charge” of 6 per cent is levied on each 10-yearly anniversary of the assets entry into the trust, and an “exit charge” is payable when assets are removed. Combined, these charges are intended to levy equivalent levels of taxation over a generation as a one-off inheritance tax payment upon transfer of assets. In reality, however, the very wealthy may end up paying much less tax by setting up any number of trusts, each with a value lower than the nil-rate band. Should HMRC’s proposals come into force, Ms Riches said there would be likely to be an increase in use of gifts to pass down family wealth. Gifts are exempt from IHT provided the benefactor lives for at least seven years after the gift is made. If he or she should die within this time, IHT is payable on a sliding scale. HMRC’s proposed reforms are open for consultation until August 29.

Family Dollar: Carl Icahn 9.4% active stake in FDO; intends to have conversations with mgmt

"The Reporting Persons intend to seek to have conversations with members of the Issuer's senior management and board of directors to discuss the Issuer's business and strategies to enhance shareholder value, which may include the pursuit of operating initiatives or the exploration of strategic alternatives. The Reporting Persons may also determine to seek shareholder board representation if appropriate."