TheChek News Flow

China Sees First Domestic Corporate-Bond Default

A Chinese solar-equipment maker failed to meet interest payments on a bond, according to an official there, becoming China's first domestic corporate-bond default.

Liu Tielong, board secretary of Shanghai Chaori Solar Energy Science & Technology Co., said that it was in default. The heavily indebted company had warned on Tuesday that it wouldn't be able to meet interest payments totaling $14.7 million, citing a credit squeeze and its inability to raise enough funds to make the interest payments.

The default, though small in size, marks the first time a Chinese company has defaulted on a bond traded in the mainland, according to Moody's Investors Service.

After Hours Summary: SKUL +21.7%, EBS +7.4%, PNY +3.8%, NVTL -19.3%, BAXS -16.2%, ALSK -14.9% following earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: SKUL +21.7%, EBS +7.4%, KFY +4.5%, CMTL +4.3%, PNY +3.8%, IPWR +2.7%, PRTS +2%, JMBA +1.6%, COO +1.5%, XGTI +1.4%, FNSR +0.4%, BREW +0.2%, ARSD +0.2%, HRB +0.1%

Companies trading higher in after hours in reaction to news: SGMO +5.4% (mentioned positively by Jim Cramer; co's CEO made appearance on Mad Money), TRQ +4.8% (seeing reports that Rio Tinto is considering making a bid for the company), AUQ +2.9% (announced tender offer for any and all of its outstanding 3.50% convertible notes due 2016; announces offering of $300 mln senior notes due 2022), GOGO +1.7% (S.A.C. Capital disclosed 5.1% passive stake), ZBB +1.4% (announced NYSE MKT extended the co's compliance plan period to May 30, 2014), WCG +0.7% (disclosed reimbursement agreement with Georgia Department of Community Health)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: NVTL -19.3%, BAXS -16.2%, ALSK -14.9%, VMEM -14%, ALOG -12%, PRGS -11.6%, APP -8.9%, BNFT -8%, TNDM -6.8%, QTWW -6.4%, ZQK -5.1%, WTI -4.1%, AMBA -3.7%, GPS -3.6%, ASTI -2.8%, VNET -2.2%, QIHU -0.9%, LGP -1.1%, SPPI -0.9%, IDT -0.4%

Companies trading lower in after hours in reaction to news: APP -8.9% (announced it received a noncompliance notice from NYSE MKT; co also provided downside FY14 rev guidance), CDW -4.5% (commenced public offering of 10 mln shares of its common stock held by the selling stockholders), LEI -4.3% (announced it was notified by the NYSE MKT that the Company is not in compliance with one of the Exchange's continued listing standards), CKP -3.9% (announced delay in earnings release and conference call for Q4 and FY13), SWY -3.4% (co and Albertsons announced definitive merger agreement; Safeway shareholders expected to receive total value estimated at $40 per share), EAT -1.1% (announced Guy Constant has resigned as Executive Vice President, Chief Financial Officer and President of Global Business Development)

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Amcol Becomes Hot Commodity as Takeover War Escalates: Real M&A 2014-03-07 00:12:59.393 GMT

(For a Real M&A column news alert: SALT REALMNA <GO>.)

By Brooke Sutherland March 7 (Bloomberg) -- Traders are betting the hottest bidding war of 2014 isn’t over, even after Amcol International Corp. lured its sixth increased offer in three weeks. Minerals Technologies Inc. yesterday boosted its bid to $45.75 a share for the maker of clay used in everything from kitty litter and anti-aging skin cream to oil drilling. That topped French mineral producer Imerys SA’s latest proposal by 50 cents. No other U.S. takeover target valued at more than $1 billion has seen more public bidding activity this year, according to data compiled by Bloomberg. Amcol closed yesterday at $46.75, a sign some investors expect the battle to escalate. Buying Amcol, the Hoffman Estates, Illinois-based producer of bentonite, would give Imerys a stronger U.S. presence. The $7.1 billion company has room to sweeten its offer to about $48.70, according to Albert Fried & Co. For Minerals Technologies, Amcol would boost sales growth and help it expand into other materials, said CJS Securities Inc., which estimated the $1.9 billion company could bid about $50 if needed. Imerys and Minerals Technologies are “nickeling and diming each other to try and be the last man standing,” Todd Vencil, a Richmond, Virginia-based analyst at Sterne Agee Group Inc., said in a phone interview. “It’s driven by these two companies’ need to either find growth or be able to bring some of their own strengths to bear.” Representatives for Paris-based Imerys and New York-based Minerals Technologies declined to comment. A representative for Amcol didn’t immediately respond to a request for comment.

Sweetened Offers

Imerys said on Feb. 12 that it had agreed to buy Amcol for $41 a share, or about $1.6 billion including net debt. Minerals Technologies has since countered Imerys four times and removed financial contingencies. Imerys has raised its offer twice since the initial agreement and hasn’t responded to the latest Minerals Technologies bid, which is 1.1 percent higher than the French company’s March 4 proposal for $45.25. “This is a unique situation where they’re only raising by 25 or 50 cents at a time,” Daniel Rizzo, a New York-based analyst at Sidoti & Co., said in a phone interview. “It’s not like Minerals Technologies is blowing them away with this much higher offer. They’re only up 50 cents. That’s not going to make anybody walk away in my opinion.” The only other U.S. targets of similar or larger size to attract multiple bids this year were Time Warner Cable Inc. and Riverbed Technology Inc., according to data compiled by Bloomberg.

Geographic Expansion

Amcol would increase Imerys’s revenue by about 20 percent and bolster its U.S. presence, according to Arnaud Palliez, a Paris-based analyst at Raymond James Financial Inc. He estimated total cost savings and revenue benefits of about $70 million. “Amcol is present in a number of markets where Imerys is not present,” Imerys Chief Executive Officer Gilles Michel said during a Feb. 12 conference call. “That offers a lot of opportunities for new developments on both sides.” “And it is probably, in my opinion, a good idea for a company like ours or whoever to invest in U.S.-based assets at this point in time of the economic cycle,” he added. Economists project U.S. gross domestic product will expand 2.9 percent this year, compared with 1.1 percent for the euro area, according to estimates compiled by Bloomberg. Imerys got about 23 percent of its revenue from North America in 2012, compared with 52 percent from Europe.

Imerys Potential

Assuming synergies of about $50 million, Imerys could offer up to about $48.70 a share before the deal starts becoming dilutive to shareholders, according to Sachin Shah, a special situations and merger-arbitrage strategist at New York-based Albert Fried. Acquiring Amcol will help Minerals Technologies diversify beyond products including precipitated calcium carbonate, limestone and talc, said Daniel Moore, a White Plains, New York- based analyst at CJS Securities. The company can also cut costs and streamline operations at Amcol to boost profitability, similar to what it’s done with its own business over the last few years, Moore said. Minerals Technologies forecast about $50 million in initial cost savings, with the chance to squeeze out more over time. With about $506 million in cash to put toward a bid, the company has the ability to boost its offer to about $50 a share, or 44 percent more than Amcol’s average stock price in the 20 days before the bidding war began, according to Moore.

Strategic Fit

“It’s a very good strategic fit for Minerals Technologies and in the hands of that management team, we’re likely to see much better utilization of assets,” the analyst said. “At least up to a point, to probably that $50 level, I think shareholders would be generally enthusiastic.” Imerys risks overpaying if it continues to compete with Minerals Technologies, said Palliez of Raymond James. “We are now at kind of the limit in terms of the price they can offer,” Palliez said in a phone interview. “I would not like to see them making a new bid.” With the stock already $1 higher than the latest offer price, investors may not have much to gain by wagering on a new bid, even if one materializes, said Keith Moore of Stamford, Connecticut-based MKM Partners LLC. Even so, in bidding wars this hot, strategic needs can outweigh financial analysis, he said. “Sometimes they’re going to pay a price that doesn’t necessarily relate to past deals -- they’re willing to pay up for it,” Moore, an event-driven strategist, said in a phone interview. “You recognize you might lose some here but who knows. You’re taking a flier.”

For Related News and Information: Minerals Technologies Raises Offer for Third Time in Amcol Fight NSN N20QKY6TTDSI <GO> Imerys to Buy Amcol for $1.6 Billion to Add Industrial Clays NSN N0VIL66VDKHV <GO> Amcol acquisition news: ACO US <EQUITY> TCNI MNA <GO> Real M&A columns: NI REALMNA <GO> Top deal stories: DTOP <GO>

--Editors: Whitney Kisling, Beth Williams

To contact the reporter on this story: Brooke Sutherland in New York at +1-212-617-0448 or bsutherland7@bloomberg.net

To contact the editor responsible for this story: Beth Williams at +1-212-617-2307 or bewilliams@bloomberg.net

Asian Market Update: RBA Gov Stevens sees the $0.90 line as "too high" for AUD; Investors weather-weary ahead of Feb jobs report

***Economic Data*** - (AU) AUSTRALIA FEB AIG PERFORMANCE OF CONSTRUCTION INDEX: 44.2 V 48.2 PRIOR (2nd month of contraction; 6-month low) - (JP) JAPAN FEB OFFICIAL RESERVE ASSETS: $1.29T V $1.28T - (MY) MALAYSIA JAN TRADE BALANCE (MYR): 6.4B V 9.1BE

Market Snapshot (as of 04:30 GMT): - Nikkei225 +0.3%, S&P/ASX +0.2%, Kospi -0.1%, Shanghai Composite flat, Hang Seng -0.2%, Mar S&P500 flat at 1,877, Apr gold -0.1% at $1,350, Apr crude oil +0.2% at $101.77/brl

***Highlights/Observations/Insights*** - RBA Gov Stevens caused the biggest ripple in the currency markets in an otherwise quiet pre-NFP trading session. Speaking before the House of Representatives of Economic Committee, Stevens saw the $0.90 as a critical threshold where AUD becomes too high. Stevens further acknowledged wage growth has slowed and unemployment rate will edge high yet, but also affirmed there is no need to lower rates at this time, expressing some more concern about the dangers of overheating property markets. Stevens also noted the recent GDP data does not change the RBA's assessment that domestic economy is running below trend.

- Ukraine/Crimea/Russia standoff remains tense in the 24 hours after Crimea parliament formally approved secession and announced it would put the matter to a Mar 16th referendum vote. Pres Obama and Russia's Putin held another hour-long phone session but remain far apart in their positions - US continues to maintain Russia is in violation of Ukraine's sovereignty and would oppose Crimea independence vote, while Russia still deems Ukraine's new govt as illegitimate in making demands regarding the peninsula. Separately, Ukraine press has speculated that Fri-Sun will see a "high chance" of an assault by Russian troops on Ukraine bases in Crimea.

- Chinese press headlines of note: - PBoC adviser Chen: China trust product default risks are under control - Xinhua - PBoC may gradually expand Yuan trading band with a series of small but incremental steps in 2014 - Sec Journal - According to Deovolente Realty Co, Shanghai pre-owned home sales for Feb: 11.6K units (2-year low), -18.9% m/m, -20.4% y/y; Avg price fell 4% m/m to CNY19.6K/sqm - Shanghai Daily - China Commerce Min sais he was confident 7.5% GDP target would be achieved despite overnight remarks that 7.2-7.3% range would be the more realistic estimate.

- Fed's Lockhart said it would be reasonable to anticipate a soft jobs report for February given the "winter's wrath", but also voiced support in continuity of the pace of taper, suggesting only a serious drop-off in activity would merit change. Fed's Plosser also said the bar to change the pace of the taper is high, even though the near-term trend of economic growth has been reduced by the GFC to 2.0-2.25%. Plosser also said it will take a couple of months before weather-related factors are filtered out from US economic data.

***Fixed Income/Commodities/Currencies*** - (US) Weekly Fed Balance Sheet Total Assets Week ending Mar 5th: $4.17T v $4.16T prior; Reserve Bank Credit: $4.13T v $4.12T prior; M1: +$14.8B (first rise in 3 weeks) v -$18.8B prior; M2: -$8.2B (first decline in 7 weeks) v +$35.9B prior; M1 and M2 percent change at seasonally adjusted annual rates for last 13 weeks y/y: M1 y/y change: 8.8% v 8.6% w/w; M2 y/y change: 5.6% v 5.6% w/w - (CN) Daily Shibor fixings: O/N: 1.9948% v 2.0547% prior (2nd consecutive decline, lowest since Feb 27th); 1-week: 2.4030% v 2.4860% prior (2nd consecutive decline, lowest since June 2012) - (AU) Australia MoF (AOFM) sells A$800M in 3.25% 2018 Bonds; avg yield: 3.3869%; bid-to-cover: 4.58x - (JP) BOJ offers to buy ¥110B in JGB with maturity lower than 1-yr and ¥180B in JGB with maturity over 10-yr as well as ¥2.0T in T-bills

***Equities*** US markets: - CMTL: Reports Q2 $0.32 v $0.26e, R$85.5M v $80.3Me; +4.3% afterhours - HRB: Reports Q3 -$0.78 v -$0.08e, R$199.8M v $531Me; cites delayed opening of IRS e-file; -3.4% afterhours - SWY: Safeway and Albertsons Announce Definitive Merger Agreement at approx $40/shr ($32.50/shr in cash and other considerations); -3.6% afterhours - GPS: Reports Feb SSS -7.0% v +1.0%e; -4.8% afterhours - APP: Reports prelim FY13 Rev $634M v $642Me; Feb SSS -5% v +5% y/y, cites recent cold weather; -8.9% afterhours - PRGS: Reports prelim Q1 $0.27-0.28 v $0.31e, R$74-75M v $81.5Me; -11.7% afterhours - NVTL: Reports Q4 -$0.16 v -$0.08e, R$65.3M v $74.6Me; -18.6% afterhours

Notable movers by sector: - Consumer staples: China Modern Dairy 1117.HK +0.8% (positive profit alert) - Financials: Sinolink Securities 600109.CN +6.0% (Feb Op results); Haitong Securities 6837.HK +2.4% (Feb Op results); CITIC Securities 6030.HK +1.0% (Feb Op results); China Vanke 000002.CN -0.3% (FY13 results); Ping An Bank 000001.CN +0.2% (FY13 results) - Industrials: Xuzhou Handler Special Vehicle 300201.CN +2.8% (Q1 guidance); BYD Company 1211.HK +4.0% (E6 model selected into subsidy list); Great Wall Motor 2333.HK -3.7% (Feb auto sales); Boart Longyear BLY.AU -3.4% (S&P Downgrade) - Technology: Eternal Asia Supply Chain Management 002183.CN +3.0% (invests in supply chain management business) - Healthcare: Shenzhen Neptunus Bioengineering 000078.CN +10.0% (progress in anticancer drug) - Telecom: NTT DoCoMo 9437.JP -0.6% (CFO comments) - Energy: Tap Oil TAP.AU -1.1% (to sell oil, gas blocks)