FT : German homebuilding collapse threatens wider economic damage

Wolfgang Schubert-Raab recalls when the boom times were so good that his firm could not build homes quickly enough.

“Back in 2021, before we’d even poured the first cubic metre of concrete, we’d already had offers on more than half the complex,” said the managing director of the Raab construction company. Two years on, the market for single-family dwellings is in what Schubert-Raab describes as a state of “completely collapse”.

Across Germany, homebuilders are facing such a sharp reversal in their fortunes that the downturn in residential construction is threatening to have broader repercussions across Europe’s largest economy.

Many have declared themselves insolvent, dampening Chancellor Olaf Scholz’s target of building 400,000 new homes a year to tackle a housing affordability crisis in several of the country’s largest cities.

This week, the federal government combined with state legislatures to intervene, unveiling a package of measures aimed at speeding up housebuilding by cutting red tape. Industry representatives view the response as a step in the right direction, but are concerned the measures are not strong enough and the rollout will be far too slow.

Tim-Oliver Müller, managing director of the German Construction Federation (HDB), said: “Based on past experience, we don’t believe that it will be implemented quickly. The federal structures are far too complex for that.”

After a decade-long boom fuelled by strong demand, cheap credit and low costs for raw materials, German builders are now facing what Gereon Frauenrath, managing director of construction company Frauenrath Group, describes as a “perfect storm”.


Raw materials are now more than 40 per cent more expensive than before the pandemic — the biggest surge in Europe. The credit-intensive sector must also grapple with 10 straight interest rate rises by the European Central Bank. While the country still has a shortfall of suitable homes, especially in the major cities, the higher cost of borrowing is pricing many prospective buyers out.

The result has been a devastating loss of confidence that has led to the country’s residential property market being among the worst performers in Europe.

House prices were down 10 per cent year on year in the second quarter, while the number of building permits issued has sunk far more quickly here than in the region as a whole. In October, 22.2 per cent of companies reported cancelled projects — the most since the Ifo think-tank began recording the figure in 1991.

“It’s getting worse all the time,” said Klaus Wohlrabe, head of surveys at Ifo. “In residential construction, new business remains very low and companies’ order backlogs are diminishing.” 


Construction output rose by more than 16 per cent between the first quarter of 2015 and the start of 2022. As demand soared on the back of low rates and relatively lax lending standards, house prices rose by 66 per cent, according to the EU’s statistics office Eurostat.

Now the troubles of the sector, which made up more than 5 per cent of GDP in 2021, is contributing to an outlook that has seen Germany fall to the bottom of the IMF’s rankings of leading economies.

Susannah Streeter, senior investment analyst at asset manager Hargreaves Lansdown, said: “Given that the real estate sector is a driver for growth in Germany, [the sector’s issues] don’t bode well.”

Firms whose fortunes are tied to residential construction are also feeling the strain.

Sabine Brockschnieder, managing director of the Baumann Group, which has built Germans’ bathrooms and kitchens for more than a century, says times have rarely been tougher.


“Smaller companies will face serious difficulties with the drop in sales and increased costs,” Brockschnieder said, adding that orders have fallen 15 per cent from a year ago.

Rising costs and weakened demand are expected to force Baumann to cut some of its 1,200 workers and put others on a furlough scheme.

“Unfortunately, we will be forced to part with the temporary workers we employ, because we expect next year to be even worse,” said Brockschnieder.

The industry believes the government should intervene to correct what many housebuilders see as a market failure.

They argue that, unlike in previous downturns in the 1990s or early 2000s, residents of large cities such as Berlin, Munich, Hamburg, Cologne and Frankfurt still face a shortage of affordable homes.

“The current conditions — much higher construction costs and an increase of interest rates — are scaring off investors and builders,” said Jörg Hegestweiler, chief executive of BKL Baukran Logistik, which sells and rents cranes to the construction sector.

In September, the industry agreed a 14-point action plan with the federal government that included a mix of tax benefits, attractive subsidy programmes, the lowering of energy-saving standards and simplification of planning and approval procedures.

Building minister Klara Geywitz said the package of measures unveiled on Monday would speed up the sector’s revival by lowering bureaucratic and legal hurdles for builders.

“In order for affordable housing to be built more quickly, we need more speed in planning, approval and construction,” she said. “The pact that the federal and state governments have now agreed on will ensure the necessary acceleration.”

Felix Pakleppa, managing director of ZDB, an association representing 35,000 construction companies, says the package of measures offers a “glimmer of hope” but more is needed.

“To be able to switch into acceleration mode, you first need new orders. And these are becoming fewer and fewer,” said Pakleppa, calling for the government to approve more of the measures agreed in September.

Schubert-Raab, who is also president of the ZDB, said firms still lack certainty.

“Our industry is not a greyhound track — it takes between two to three years for a property to go from the planning stage to being ready for occupancy,” he says. “People wanting to build need security. Without it, nobody will invest.”

FT : Alstom: the French train giant battling to stay on the rails

Alstom: the French train giant battling to stay on the rails
Maker of high-speed TGV trains needs to convince investors it can make Bombardier acquisition work

In 2021, Alstom hailed its acquisition of Canadian rival Bombardier’s train operations as a “unique moment” that would ensure the French company emerged a winner from a new golden age dawning on the global rail industry.

Less than three years later, the sound strategic logic of the €5.5bn deal has been overshadowed by a series of setbacks, the most recent of which has contributed to a cash crunch at the world’s second-largest train manufacturer.

Problematic contracts at Bombardier, together with a broader struggle to manage inventory and the production of its trains, forced Alstom early last month to slash its projections for free cash flow this year.

Now, with billions of euros wiped from the group’s market capitalisation in recent weeks, chief executive Henri Poupart-Lafarge is under mounting pressure to restore confidence in a company that has more than 80,000 employees and supplies trains in markets from Australia to Saudi Arabia.

As well as the perils sometimes hidden in acquisitions, the crisis at Alstom highlights the high-stakes challenge train manufacturers face in managing inventory, orders and cash flow at a time when many governments have championed busier railways as part of the answer to global warming.

“If Alstom had a problem, the whole of France would find itself pretty stuck,” given the company supplies most of the country’s trains and metros, said an executive at a rival manufacturer. “It can pose a major industrial risk.”

Alstom has said that the picture will improve as down payments on contracts trickle in, allowing the company to convincingly extol the benefits of a deal it struck not long after EU regulators quashed its planned merger with Germany’s Siemens.

But the immediate risk is that the group is stripped of its prized investment grade rating — a move that would strain its finances further. Poupart-Lafarge, a company veteran and one-time financial chief who has had the top job since 2016, faces some unenviable choices.

Analysts say the 54-year-old may have no option but to sell assets. Those at JPMorgan estimated that Alstom, now valued at about €5bn, needed a cash inflow of at least €1bn in the next 12 months to preserve its investment grade status.

Moody’s rates Alstom Baa3, just a notch above junk status. After Alstom axed its cash flow projections, Moody’s cut the French industrial group’s outlook to negative and said disposals looked necessary to ensure its ratio of gross debt to core profits heads towards 3.7 over the next 12 months, from above 4.5. 

“We need to see that pace,” Moody’s analyst Nathalie Tuszewski said of Alstom, which had €2.13bn in net debt at the end of March.


The punishment meted out by the stock market since last month’s disclosure is in part a reflection that it was not the Bombardier deal’s first red flag: shortly after completing the acquisition Alstom warned on disruptions to cash flow.

But the October revelations were “a major blow to management’s credibility”, according to Deutsche Bank analysts.

While Alstom does not have large bond or long-term loans maturing in the next two years, the maker of France’s high-speed TGV trains has drawn more on its short-term commercial paper facility in recent months, adding to its costs.

The alternative to selling assets, say bankers and analysts, is a highly dilutive capital increase.

“The market still thinks they need capital,” said one banker who advises on French equities listings, adding that the group could consider finding a big anchor investor that would help shield it from the vicissitudes of the stock market.

Just over an hour after issuing the warning and barely weeks into the job, Alstom’s finance chief Bernard Delpit sought to dispel investors’ fears, declaring: “I will state simply, an equity raise is not on the table.”

Alstom’s biggest shareholders are the Caisse de dépôt et placement du Québec pensions fund that took its stake as part of the Bombardier deal and now holds 17 per cent. French state-backed investment bank Bpifrance is the second-largest, with 7.4 per cent. Both declined to comment.

Alstom, which has been the second-worst performer on France’s blue-chip CAC 40 index since the start of October, is expected to give more information on its finances when it reports first-half results on November 15.

About a third of the €1bn hit to cash flows came from Bombardier, half stemmed from wider challenges in managing inventory and the rest from a drop in the number of down payments on contracts.

Created in the late 1920s and with roots in the eastern France’s Alsace region, Alstom had previously identified €7bn to €8bn of lossmaking contracts out of the €30bn backlog it took on from Bombardier. The company, which competes with the likes of Siemens, Hitachi and China’s state-owned CRRC, remains saddled with roughly a quarter of those.

But the problems revealed last month were from a UK contract called Aventra to build 443 electric trains. Some are already running on London’s new Elizabeth Line as well as for operators such as West Midlands Trains, but the programme has been beset by delays.

In the latest setback, some of Aventra’s customers are putting off taking delivery and paying for dozens of trains in part because they are struggling to recruit drivers for them, according to people familiar with the matter. Aventra will now not be completed until next year, the company has said.


While Alstom tries to resolve the Aventra debacle, the company has been struggling to manage inventories and it completed fewer trains than it had expected in the first half as it races to keep up with a record €87bn order book.

“You end up with trains that take up room, it’s costly. These are not mobile phones,” said one analyst who covers the industry. “And you ended up without the cash from the delivery and late penalties.”

What finance chief Delpit described as “lumpy” cash flows have long blighted the industry. Payments on contracts are not always predictable and can sometimes get snarled up in politics.

In the UK, Alstom’s nearly £2bn contract to build trains for the HS2 rail line is now in doubt after Prime Minister Rishi Sunak radically scaled back the project.

The lumpy cash flow problem has, according to one executive at a rival manufacturer, obscured the fact that rail is likely to be a big winner as governments encourage more people out of cars and on to trains as part of an effort to tackle climate change.

“It’s an industry right in the middle of a push to decarbonise and order books have never been as full, but shares have not followed,” the executive said.

Despite the share price slump, Alstom has suffered — and survived — bigger traumas. In 2004, it required a €2.2bn government bailout when faults with gas turbines it then manufactured threatened to sink the group.

A decade later, the company paid US authorities $772.3mn, then a record fine by the Department of Justice in a foreign bribery case, for giving backhanders via a middleman codenamed “Mr Geneva” “Mr Paris” and “Old Friend” to win contracts in Egypt, Indonesia and other countries.

Some analysts remain confident that the problems will prove fleeting. Last month, Alstom confirmed it was on track to hit other financial targets for its fiscal year to end March, such as sales growth of above 5 per cent and margins of up to 6 per cent. The company declined to comment further ahead of its results next week.

But with the share price near an 18-year low, Poupart-Lafarge, who last month left Delpit to try to reassure the market in the immediate aftermath of the warning, has some damage to repair.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Clean-energy stocks are collapsing

Cover:
-Clean-energy stocks are collapsing. Their performance has been the worst in years, triggering related stock valuations to shed tens of billions of dollars and endangering America’s environmental goals. Car makers such as General Motors and Ford Motor have delayed plans to roll out electric vehicles. Offshore wind developers are canceling or delaying their projects and even residents of climate-conscious states like California, are buying fewer solar panels for their roofs. The fallout has caused 76 of the 77 stocks in the Invesco WilderHill Clean Energy ETF—a green-power benchmark—to fall for the past three months (the one stock to rise is a tiny fuse maker). The ETF itself is down 32% since the start of the year, compared with a 14% gain for the S&P 500

Interview:
-This week, Barron’s ventures into the realm of behavioral psychology and its connection to finance; because, it features an interview with Simeon Siegel, a senior analyst at BMO Capital Markets. Siegel has spent 15 years covering retailers and brands, winning accolades from investors and the media for his sharp observations about companies and consumers:
“I love anything that appeals to the emotional nature of spending,” he says. “When a company can turn a want into a need, and cause you to spend way more than you planned—that’s fascinating to me.” The timing of the interview is not coincidental, given that overspending is often on display during the fast approaching holiday shopping season and he also shared his thoughts on TJX Cos and Nike.

Tech Trader:
-Nintendo is changing from a simple videogame maker to a dominant entertainment conglomerate. Nintendo’s success is multifaceted: from game sales to theme parks and movie adaptations. Over the past week, Nintendo reported solid profit growth for the first half of its fiscal year and beat guidance thanks to robust game sales from its latest Mario and Zelda releases. Nintendo raised its fiscal 2024 net profit guidance to JPY 420B yen (about $2.8B) from JPY 340B. It also increased its forecast for software units to 185M million from 180M. But, Nintendo also announced that it’s developing a live-action movie based on its hit videogame franchise, The Legend of Zelda. The film will be co-financed by Nintendo and Sony Pictures Entertainment, with Sony
SONY

The Trader:
-Mercury Systems shares fell 12% to $32 after the company reported a quarterly adjusted earnings of $2 million, down 94% from the previous year and below forecasts for $29M. Revenue was $181M, down 20% versus the consensus estimate. Mercury Systems, a small-cap defense company, has a unique aerospace and defense business, producing electronics and chips found in high-tech military programs like F-35 fighter jets, Predator unmanned aerial vehicles, and Patriot surface-to-air missiles. The company has been investing in research and development and acquiring subsystems, which carry higher sales and profit margins but are more complex than its previous products.
-The energy sector's recent downturn contrasts with the robust fundamentals of individual oil stocks, highlighting the importance of trusting the market. Mid-cap US oil-and-gas companies meet Barron's criteria for growth, value, and momentum. Take Diamondback Energy, whose operations are concentrated in the West Texas Permian Basin. Shares trade for around seven times expected earnings over the coming year—versus 18 times for the S&P 500
—while analysts model earnings-per-share growth of 16% in 2024, four points better than the index. And Diamondback stock has outperformed the S&P 500 both this year and during the market pullback that began in August. The same is true of Targa Resources, Range Resources, and Southwestern Energy.

Features:
-Moody's Investors Service has lowered the US's credit rating from stable to negative, citing the federal deficit as a key driver. The firm retained its top AAA rating for US credit, unlike other major credit rating firms. Moody's said the downside risks to the US' fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strengths. The agency also highlighted political polarization within US Congress as a concern, as it raises the risk that successive governments won’t reach consensus on a fiscal plan to slow the decline in debt affordability.
-Koch Industries, a company that focuses on zero-emissions, recently launched a unit called Koch Strategic Platforms (KSP) to invest over $1B in start-ups targeting lithium, batteries, and lithium-battery systems. In 2021, the market was enamored with electric vehicles and special-purpose acquisition companies (SPACs). KSP made nearly a dozen green investments through SPACs, providing a glimpse into the investing of America's second-largest private company. However, since early 2021, KSP's picks have posted an average loss of 58% on a cap-weighted basis. The profitable buyout of one firm, REE Automotive, has also seen a 67% loss on average. KSP was disbanded in November, and its holdings were sold to other Koch portfolios. Most investors have lost money on clean-energy stocks since early 2021, with the iShares Global Clean Energy exchange-traded fund down 56% due to rising interest rates and changing prices.

Europe:
-Organized labor has returned to the US, with successful strikes by the United Auto Workers and Hollywood writers and actors. However, 2023 has seen a shift in labor unrest in Europe, with the UK experiencing a post-Margaret Thatcher peak in February and Germany shutting down for a one-day "megastrike" in March. As autumn approaches, the winter-spring labor actions have been successful, with German postal workers receiving an average 11.5% pay increase in March and U.K. teachers receiving 6.5% in July. These union successes have rippled across economies, with wage hikes running at 7% to 8%. Governments have also taken direct action to cushion citizens from inflation, with Germany spending 2% of GDP on energy costs in 2022 and France and Italy each subsidizing 1% each.

Emerging Markets:
-No update this week

Commodities:
-No update this week

Streetwise:
-This week, Jack Hough speaks to David Herro, longtime manager of the Oakmark International fund, about this. Herro sees much value in European stocks. What gives Herro confidence in European stocks now is the comparison with bond yields. Hero likes Lloyds Banking Group, an insurance marketplace associated in America with sometimes dubious reports of celebrity body-part coverage. Herro also likes Bayer. Bayer has had a new CEO since June, American drug executive Bill Anderson, who promises a business shake-up and increased cash flow. “He’s just what the doctor ordered,” says Herro. Shares are 6.5 times earnings.

>>> Weekend Papers Summary

Weekend Papers Summary

FINANCIAL TIMES
-Wall Street traders and brokers are preparing to mitigate the impact of a ransomware attack on China's largest bank, which disrupted US Treasuries trading in the $25T market. The compromised systems forced ICBC Financial Services to send trading data to BNY Mellon.
-Israel's invasion of Gaza has resulted in over 11,000 deaths and a humanitarian catastrophe, raising alarm among the US and Palestinians. The US has backed Israel, but the situation is uncharted territory. Israel has launched the most devastating assault on Gaza since withdrawing in 2005, causing further strife for the civilian population and potential resurgence of Hamas.
-Moody’s has lowered its outlook on the US’s credit rating to “negative” from “stable”, pointing to a sharp rise in debt servicing costs and “entrenched political polarization”.
In a Friday update, the rating agency said that the change to its outlook reflected increasing downside risks to the US’s fiscal strength, which “may no longer be fully offset by the sovereign’s unique credit strengths”.
-The White House said Biden and Xi Jinping would meet in the San Francisco Bay area on Wednesday before they attend APEC. Washington and Beijing are trying to renew efforts to stabilize relations amid rising tensions over issues including Chinese military activity near Taiwan and US efforts to stop China from securing cutting-edge US technology.
-US secretary of state Antony Blinken worries that the Israeli armed forces are killing too many Palestinians. Blinken was speaking, during a visit to India, on Friday after Palestinian officials said the Israeli military had struck hospitals in the north of Gaza, where thousands of people have been sheltering from Israel’s bombardment of the besieged strip.
-After six months of strikes, the actors’ union declared an end to its record 118-day strike, directors, producers, publicists and actors started racing to make up for lost time. On Friday, directors began trying to reassemble far-flung casts to resume shooting on films that were halted in the spring. With actors now able to promote movies again, plans were activated for stars to appear at glitzy premieres and marketing campaigns leading into the awards season.
-Belgian hydrogen start-up Tree Energy Solutions said on Friday it would build a $4B plant in Quebec to produce synthetic natural gas with green hydrogen, as Canada tries to compete with the US in a race to secure cleantech investment. TES Canada will develop the project in Quebec, producing 70,000 tonnes of green hydrogen a year by 2028, among the largest committed in Canada to date.
-Three secretive, family-owned Texas oil companies have been thrust into the spotlight. Mewbourne Oil, Endeavor Energy Resources and CrownRock are the biggest privately owned producers in the Permian Basin of Texas and New Mexico, the engine room of America’s oil industry. These three companies have become prime acquisition targets.
-Chancellor Olaf Scholz has admitted Germany is struggling to sign defense contracts because of uncertainty over the government’s commitment to future funding plans even as he pledged to “guarantee” hitting NATO spending targets for the next decade and a half. Addressing military officials, industry executives and think-tanks at a conference organized by the defense ministry on Friday, the chancellor said he recognized the urgent need for his government to clarify its security spending plans in the medium and long terms.

NEW YORK TIMES
-Gaza City hospitals are caught in deadly crossfire. As they fight Hamas, Israeli forces are “close in” on hospitals. The chief U.S. diplomat said “far too many Palestinians have been killed.”
-Israel has lowered the Oct. 7 death toll estimate to 1,200.
-Harvard, Columbia and Penn have pledged to fight antisemitism on campus. Columbia suspended two pro-Palestinian student groups.
-The Tunnels of Gaza: a maze of tunnels extends below the Gaza Strip, allowing Hamas fighters to stay out of sight and smuggle weapons and goods.
-Violence in the West Bank escalated to nearly four times its level before Oct. 7, leading to more than 175 deaths.
-Israel is considering a deal for Hamas to release all civilian hostages in Gaza, officials say.
-President Emmanuel Macron of France mourned civilian deaths and urged an Israeli cease-fire.
-Chris Christie, the former governor of New Jersey who is running for president, will travel to Israel.
-Thousands of pro-Palestinian protesters calling for a cease-fire shut down traffic in Midtown Manhattan.
-Germany’s stifling of pro-Palestinian protests is pitting its historical guilt against freedom of speech.
-The FBI has seized NYC Mayor Eric Adams’s phones as campaign investigation intensifies. Agents took the New York mayor’s devices amid an investigation into whether Turkey’s government funneled money to his campaign, people close to the matter said.
-Brianna Suggs, whose home was raided by the FBI, was an unusual choice to run Eric Adams’s campaign fund-raising.
-With Sen. Joe Manchin Out, Democrats’ Path to Holding the Senate Is Narrow
While Democrats will be on defense in many races, Republicans face some messy primaries and a recent history of extreme candidates who have lost key contests.
-Before world leaders arrive, San Francisco races to clean up. The Asia-Pacific Economic Cooperation conference comes at a pivotal moment for the city as it struggles to rebound from the pandemic.
-Treasury Secretary Janet Yellen said the US wanted a “healthy economic relationship” with China.
-Representative Elise Stefanik filed an ethics complaint attacking the judge presiding over Donald Trump’s civil fraud trial.
-Hollywood actors to start voting Tuesday on contract deal. The SAG-AFTRA board voted on Friday to send the agreement with studios to its members for a ratification process that will end in early December.

NY POST
The FBI seized Mayor Eric Adams’ electronic devices early this week as part of a federal probe into his campaign fundraising, The Post has learned. The feds seized the electronics — which included at least two cellphones and an iPad — in connection to an investigation into whether Hizzoner’s 2021 campaign colluded with the Turkish government and others to direct money into his mayoral effort, sources told The Post after the news was first reported by the New York Times. Adams’ campaign attorney Boyd Johnson said the mayor was cooperating with federal authorities and had already reported that a review found “an individual had recently acted improperly.”
-Internal data from Boeing, was published online on Friday by Lockbit, a cybercrime gang which extorts its victims by stealing and releasing data unless a ransom is paid. The hackers in October said they had obtained “a tremendous amount” of sensitive data from the aerospace giant and would dump it online if Boeing didn’t pay a ransom by Nov. 2.
According to a post on Lockbit’s website, the data from Boeing was published in the early hours of Friday morning. The files, which Reuters has not independently verified, mostly date to late October. In a statement, Boeing confirmed that “elements” of the company’s parts and distribution business had experienced a cybersecurity incident. “We are aware that, in connection with this incident, a criminal ransomware actor has released information it alleges to have taken from our systems,” Boeing said. “We continue to investigate the incident and will remain in contact with law enforcement, regulatory authorities, and potentially impacted parties, as appropriate.”

FT : Oil majors call on Washington and Brussels to intervene in LNG dispute

Oil majors call on Washington and Brussels to intervene in LNG dispute
Shell, BP and Edison accuse Venture Global of worsening EU gas crisis by refusing to honour multibillion-dollar contract

Shell and BP have asked Washington and Brussels to intervene in a bitter dispute with Venture Global LNG, warning the company’s refusal to honour a multibillion-dollar liquefied natural gas supply contracts threatens Europe’s energy security.

In correspondence seen by the Financial Times, the oil majors accuse the US LNG provider of “misconduct” for withholding cargo agreed under long-term supply contracts and instead selling LNG on the spot market.

Shell alleges Venture Global’s “opportunistic” action has enabled it to reap an $18bn windfall because of a spike in gas prices following Russia’s invasion of Ukraine while denting its ability to meet critical energy supply needs in Europe.

The accusations have sparked a war of words, with Venture Global branding as “outrageous” the companies’ “request for interference” from the governments in binding contracts.

The supermajors, alongside Spain’s Repsol and Italy’s Edison, are among several foundation customers embroiled in contract arbitration with Venture Global. Foundation customers agree long-term contracts that help LNG providers attract financing to build their projects.

The European energy groups are all seeking to force the US company to deliver the contracted cargo or pay financial penalties under a process that could take years.

The call for intervention from the joint EU-US Task Force on energy security — set up after Russia’s invasion of Ukraine to spur US gas exports to Europe — marks a significant escalation of the dispute. The body is headed by senior officials, including Ditte Juul Jørgensen, director-general for energy at the European Commission, and Amos Hochstein, US President Joe Biden’s senior adviser on energy.

Shell said in a letter to the officials seen by the FT: “Such short-sighted, unprecedented conduct sets a concerning precedent that could erode market confidence and delay investment in the US LNG export infrastructure that is still critically needed to support Europe’s energy security.”

The letter authored by Steve Hill, executive vice-president of Shell Energy, and dated October 27 urges the task force to press Venture Global to cease its “unjustifiable and damaging” actions and honour its long-term supply agreements.

A separate letter from BP concurred with Shell’s position. “Venture Global’s conduct has shaken confidence in the trustworthiness of American LNG suppliers at a critical time,” wrote Carol Howle, BP’s executive vice-president of trading and shipping.

In its own letter to the officials, dated November 10, Venture Global said it was “honouring its contractual obligations to its long-term customers in strict conformity with its long-term contracts”.

“It is nothing more than the latest in a series of unsuccessful attempts to bully an industry newcomer into waiving its contractual rights in order to increase their own profits beyond recent record highs,” Mike Sabel, the company’s chief executive, and Bob Pender, co-chair, wrote.

Venture Global’s first LNG facility, Calcasieu Pass, located on the Gulf coast in Louisiana, commenced producing LNG in January 2022 and exported its first cargo two months later. But the company argues it has not yet started full commercial operations and is not obliged to supply foundation customers until the commissioning is completed.

It has declared “force majeure” on its contractual commitments on the grounds that the facility’s power supply equipment needs repair.

Shell said the company’s excuse does not withstand scrutiny, as the facility has delivered more than 200 cargo shipments to customers. The nearly 600-day commissioning period for Calcasieu Pass defies industry standards, it added.

In its letter, it alleges Venture Global’s conduct “threatens to undermine the very objectives” of the task force, which is to boost Europe’s energy security. Venture Global retorted that as one of the few companies to successfully finance, commercialise and build capacity it has been “integral” to the increase of US gas exports.

Edison has also written to the task force requesting it “use all of its powers” to force Venture Global to supply the cargo. It accused the company of “profiteering” at the expense of European customers.

Edison cites a report by Wood Mackenzie which forecast Venture Global stands to gain $17.5bn from the short-term market sales, compared to $2.8bn it would receive under long-term contracts with foundation customers.

“This issue is no longer a private dispute between companies,” said Edison in a letter seen by the FT. “Rather it is exacerbating an energy crisis affecting the lives of everyday European citizens. It can no longer be overlooked.”

FT : Housing market downturn pushes UK estate agents to consolidate

Housing market downturn pushes UK estate agents to consolidate
Shrinking market offers opportunities for larger players looking to move into lettings

Acquisitions have helped solidify Connells’ position at the forefront of the UK’s property market as the country’s largest network of estate agencies, according to chief executive Richard Twigg.

With 80 local agencies to its name after a string of takeovers including one of its biggest rivals Countrywide in March 2021, Connells is just one of a number of major property companies eyeing fresh acquisitions in a UK market trending towards consolidation.

“We remain acquisitive and seek to buy inherently good businesses,” Twigg told the Financial Times, adding that the downturn in sales presented more opportunities for large groups with strong balance sheets and big cash reserves to acquire smaller rivals.

Consolidation in the UK’s residential property market has accelerated in the past year as higher rates have hit sales and put pressure on smaller independent agencies.

“When markets are tougher, smaller [and] less successful businesses may look to sell,” Twigg said.

Foxtons, London’s largest letting agency, underlined that trend when it snapped up residential estate agency Ludlow Thompson on Tuesday for £10mn.


Like Connells, Foxtons has expressed its ambition to buy up rivals as it seeks to expand its letting business in the sales slowdown.

Other deals include last month’s sale of Chestertons, one of the UK’s oldest estate agents, to European real estate services and technology group Emeria, also for £10mn. 

One week earlier US-based real estate company CoStar revealed that it had tabled a £100mn bid for UK property portal OnTheMarket, which sent rival property site Rightmove’s shares down 12 per cent on the day.

Purplebricks, the online estate agent that promised to disrupt the market by undercutting traditional agents, also sold its business for just £1 to another online estate agency Strike after its turnaround plan hit a wall.

Since experiencing a pandemic boom, house prices have slumped as higher rates have sent mortgage costs up and purchases tumbling.

A study by property portal Zoopla has estimated that UK house sales are set for their slowest year since 2012, driven by a year-on-year drop of 28 per cent in mortgage-backed sales.

Although UK house prices recently increased for the first time since March, as sellers opted to put fewer properties on the market, the 1.1 per cent increase between September and October still leaves prices down 3.2 per cent compared with October last year.

This weakness in the sales market has pushed groups towards lettings, which have been made more profitable by rising rents.

These have been forced up by higher rental demand after buying became too expensive for many.

Rents in the UK climbed in July at the fastest pace on record, rising 5.3 per cent in the 12 months to July, the largest annual percentage increase since the Office for National Statistics started publishing the data in 2016.

Rents shot up 5.5 per cent in London in July, another record rate since the data series for the capital began in January 2006.

Groups such as Foxtons have since used acquisitions as a way to expand into the lettings market. 

Foxtons chief executive Guy Gittins said: “We know that operating within the M25 there are 3,600 estate agencies; it's a highly fragmented market. That highly fragmented market for us is an opportunity for consolidation.”

Following its Ludlow Thompson acquisition, Foxtons said that it “is now a lettings focused business, with over 70 per cent of group revenue derived from lettings”.

Richard Donnell, executive director of research at Houseful, which owns the property portal Zoopla, added: “When it comes to investing for growth, the focus tends to be on lettings.

“It’s all about predictability of income stream. The lettings market is well suited to that narrative.”


Gittins said looking for “non-cyclical recurring revenue from lettings” had been an important pivot for Foxtons in recent years.

Older, independent agency owners are also more tempted to sell in a more challenging market, according to some property executives.

While acquisitions are largely opportunistic and aimed at increasing market share, the ability to gather more data on consumer behaviour and historic market trends has also provided larger groups with an incentive to expand through deals.

“When we make these acquisitions, we’re also buying old historic data that we’re able to place into our Foxtons’ business to generate even more opportunities,” Gittins said, highlighting Foxtons’ enhanced speed to market and ability to tailor offerings to better meet customer needs.

Twigg said that acquisitions have helped Connells achieve “enhanced offerings for customers and a growth of intelligence” having increased the amount of data it can analyse.

“Greater investment in software, data and automation of processes is going to deliver better experiences for the consumer and will support the profitability of the sector,” Donnell said.

He added that greater data capabilities achieved through consolidation may benefit consumers, who still have a large number of independent agents to choose from, but will now also have access to personalised offers from larger groups.

The ever-changing regulatory nature of the lettings industry is another aspect that makes scale an advantage. While Foxtons has 10 employees working purely on compliance, smaller rivals sometimes struggle to afford one, Gittins said.

“Lettings is a complex and involved process,” Donnell added. “It’s about embracing technology and software to drive efficiencies because once you’ve built the platform, you can put more into it, it’s just more efficient.”

FT : ‘The death knell’: how tycoon behind Chrysler Building and Selfridges was f

‘The death knell’: how tycoon behind Chrysler Building and Selfridges was forced out
Austrian property billionaire René Benko this week lost control of his luxury development company Signa

For months, rumours around the financial health of Austrian property giant Signa had been swirling. So its founder René Benko did one of the things he did best: he threw a party. 

Champagne flowed under the Christmas lights at the ultra-luxurious hotel Interalpen in Telfs, high above Innsbruck, the capital of Tyrol in western Austria where Signa is based, and the billionaire’s birthplace.

Boney M, the disco sensation known for 1970s hits such as Daddy Cool and Rasputin, regaled employees. And a defiant Benko gave a speech. 

People present said the entrepreneur sought to project an image of strength that promised an even more lucrative future than the past had delivered for his sprawling property empire.

But in the end the rumours caught up with Benko — a charismatic businessman who made his first billion before the age of 40.

On Wednesday, nearly a year after that party, Signa, one of Europe’s highest profile luxury property developers with assets worth as much as $27bn, announced it was urgently restructuring. In the process, Benko was forced out of the boardroom by his minority co-investors. 

Signa is not a household name, but many of its assets are: the Chrysler building in New York, London department store Selfridges, its Berlin equivalent KaDeWe, and countless other high-value developments in some of the most expensive metropolitan real estate in the world.

Quite what the scale of Signa’s debts are remains unclear. They run into the billions, according to two people familiar with the company’s balance sheet. 

According to one Signa document seen by the Financial Times, Signa Holding — the central hub of the corporate network — was due to pay back €1.3bn in borrowing this year alone. 

The company’s ownership structure is complex: Many Signa debts, including hundreds of millions lent by European banks, on a scale that has concerned the ECB, are collateralised directly against individual properties, according to two Signa lenders. Others are not. 

Benko’s foundation is still the majority owner through a network of trusts and holding companies in Austria, Liechtenstein and offshore, according to Signa. But it has become clear in recent months, as the need to raise fresh capital became ever more desperate, that some of his co-investors have grown unhappy with the way he was running the business.

That Signa’s investors include some of the wealthiest families in Europe is a testament to Benko’s skills as a salesman and networker — and to the years in which the group was an irresistible moneymaking machine. 

The shareholder book reads like a Who’s Who of European capitalism: among them are France’s Peugeot family; Tetra Pak’s Rausings; logistics magnate Klaus Michael-Kühne; Roland Berger, founder of the eponymous international management consultancy; Swiss chocolate group Lindt & Sprüngli’s chair Ernst Tanner; Austrian industrialist Hans Peter Haselsteiner; and pet food tycoon Torsten Toeller. Even the heirs of Austrian formula 1 racing legend Niki Lauda own shares.

The man brought in to mediate between their needs, and to hold, for now, Benko’s voting rights, while trying to shore up Signa’s finances, is the German restructuring expert Arndt Geiwitz. His last big project was helping to restructure and save Lufthansa in 2020.

“The aim is to find long-term solutions, and that’s why it is both responsible and necessary to initiate a comprehensive consolidation for the company now,” Geiwitz said in a statement on Wednesday. On Friday, Geiwitz, 54, announced the appointment of Ralf Schmitz as “chief restructuring officer” for the group.

“The aim is to draw up a plan for the main steps of the restructuring by the end of November and present it to the shareholders,” Geiwitz said. “All areas of the Signa Group must be put to the test.”

Signa declined to comment for this article. Benko could not be reached for comment. 

Geiwitz said he believed the quality of Signa’s underlying assets was sound. But he might not avoid financial pain: the executive must either raise fresh capital or sell assets in a commercial real estate market strained by higher interest rates and undiminishing office vacancies.

Then there is the problem of large unfinished projects such as the Elbtower in Hamburg — inaugurated by Germany’s current chancellor Olaf Scholz while still mayor of the city — and the Lamarr luxury department store development in Vienna, both of which were launched before the property downturn.

Geiwitz’s more immediate issue however could be a €200mn private bond issued by Signa is due for repayment at the end of this month.

Financial regulators are racing to determine the extent of the possible financial damage and who would be hurt. The ECB last year started asking European banks to report their exposures to Signa, and has since stepped up its surveillance, according to the Frankfurt institution’s officials. In August, the ECB told lenders to begin setting aside provisions for possible losses.

Austrian banks are particularly exposed, chiefly Raiffeisen, the country’s largest lender, according to financial regulators.

The Vienna-based lender has sought to reassure its business partners and shareholders over its exposure to the property group. Much of its lending is secured against properties it says overcollateralise its exposure.  

A spokesperson for RBI said it could not comment on client matters. 

The Thai Central Group, which co-owns some of the most valuable properties in the Signa stable, such as the Chrysler building in New York and British department store Selfridges, may emerge as a possible buyer.

A cash-hungry Signa may find itself willing to accept a lowball offer to bail it out, one person close to Signa said.

In his native Austria, meanwhile, Benko’s troubles are being picked over with glee by some.

The 46-year-old has long been a fixture of the society scene in Vienna, cultivating celebrities and politicians. Officials close to the former chancellor Sebastian Kurz jokingly called Benko “Mr 64 metres”, in reference to the yacht in the Adriatic they sometimes found themselves invited aboard.

One high profile annual event was his Törggelen — a traditional November-time festival celebration from Tyrol that Benko imported to Vienna and turned into a sumptuous society fixture.

But Benko’s prominence also made him a target. While no charges have been brought, he is being investigated as part of a sprawling Austrian probe into government corruption. Signa’s Innsbruck headquarters were raided by Austrian police last October.

Public anger has also mounted over Benko’s business tactics. Two major European retail chains he bought, Germany’s Galeria Karstadt Kaufhof and Austria’s Kika/Leiner were placed into bankruptcy in the past year.

In 2018, Benko bought a quarter of Austria’s biggest newspaper, the tabloid Kronen Zeitung — and made it clear he wanted more control. That put him into conflict with the majority owner — the Dichand family, of whom Christoph Dichand is also the paper’s editor.

It was the Krone, as it is known, that was the first to reveal Benko was gone from the empire he built. “This is the death knell,” it declared.

FT : Novo Nordisk’s obesity drug cuts risk of death by 18%, trial data shows

Novo Nordisk’s obesity drug cuts risk of death by 18%, trial data shows
Wegovy found to have ‘quite profound’ effect on reducing risk of heart attacks, says pharma group

Novo Nordisk’s weight-loss drug Wegovy cut the risk of death by 18 per cent in a trial that the Danish pharmaceutical company hopes will convince more health systems and insurers to pay for the treatment. 

Martin Holst Lange, executive vice-president of development at Novo Nordisk, said new data showed in more detail how the drug was “incredibly powerful” in tackling cardiovascular risk. 

Lange said that payers would be interested in the impact the drug had on mortality and expensive conditions, pointing to the “quite profound” effect it had in cutting the risk of heart attacks by 28 per cent. 

In August, initial data from the Select trial sent shares in Novo Nordisk up as much as 16 per cent, as investors became excited that the results could win over any health systems and insurers reluctant to cover the new class of weight-loss drugs. Wegovy has a US list price of more than $1,300 a month.

The full data was announced on Saturday at an American Heart Association congress and published in the New England Journal of Medicine. 

The results were published at the end of a week when Eli Lilly received US Food and Drug Administration approval for its obesity treatment Zepbound, which will compete with Wegovy, and AstraZeneca entered the race for a weight-loss pill after a partnership deal with Chinese biotech Eccogene.  

Novo Nordisk’s trial studied more than 17,600 people aged above 45 with obesity who had cardiovascular disease, but not diabetes. About 458 patients taking a placebo died during the trial, compared with 375 people taking Wegovy, representing an 18 per cent reduced risk of death.

There was a 15 per cent decline in the risk of death from cardiovascular causes specifically, though the numbers did not quite meet the bar for statistical significance. 

The paper comes after the preliminary results showed that patients who took Wegovy had a 20 per cent lower chance of suffering a cardiovascular event such as a stroke or heart attack than participants who received a placebo. 

Lange said the trial also showed the drug had an impact on other conditions such as kidney disease. Last month, Novo Nordisk ended a trial designed to monitor the effect of Ozempic, a diabetes drug that contains semaglutide, the same active ingredient as Wegovy, on chronic kidney disease because the early results showed it was likely to be very successful. That data will be published in the next couple of months. 

“I expect to see really, really interesting and exciting data on the impact of semaglutide on chronic kidney disease,” Lange said.

FT : Telecom Italia boss defends KKR deal as only way to secure group’s future

Telecom Italia boss defends KKR deal as only way to secure group’s future
Board accepted €22bn offer for fixed-line phone and internet network despite objections from biggest shareholder Vivendi

The chief executive of Telecom Italia has argued the group’s proposed €22bn deal to sell part of its business to KKR is the only way to ensure its future, despite objections from its biggest shareholder Vivendi.

In his first interview since a nine-month negotiation over the deal ended, Pietro Labriola said: “It’s not like we’ve suddenly pulled a rabbit out of a hat . . . the group has discussed the network sale at least five times since 2013.”

Telecom Italia’s board this week accepted the offer for its fixed-line phone and internet network, which would be split from its services business.

French media conglomerate Vivendi, which had sought a more than €30bn price for the deal, has said the board’s decision was “unlawful” without a shareholder vote. It is now threatening the company with legal action but Telecom Italia’s lawyers told analysts on Thursday that no complaint had been lodged yet.

“The board of directors, including representatives of our largest shareholder, unanimously approved an industrial plan which envisaged a sale of the network as a way to deleverage the company, and that’s exactly what we did,” Labriola told the Financial Times.

The deal will allow junk-rated Telecom Italia to cut its debt from the current €26bn to €14bn and has prompted rating agencies Fitch, S&P and Moody’s to place the group in review for a rating upgrade this week. 

“In the past it was easier to take a wait-and-see approach,” Labriola said, adding: “Now, with our interest payments rising, it was no longer possible.”

Telecom Italia’s interest payments have risen to €1.3bn in the nine months to September, wiping out its margins over the period. 

In 2022, it took a €2bn impairment charge after issuing three profit warnings in 2021, the last one right after KKR’s first €33bn offer, which envisaged taking the company private and led to the ousting of Labriola’s predecessor. 

The reshaping of the company has often pitted management against Vivendi — which has spent €4bn since 2015 to build a 24 per cent stake. Telecom Italia’s share price has fallen from €1 per share in 2015 to the current €0.26 and Vivendi has had to write down its investment twice.

“We took the company apart and put it back together like a Lego set multiple times to see if there were other ways forward and there weren’t,” said Labriola. 

He added that the group had also considered a demerger as well as selling other assets, including its profitable Brazilian operations, to reduce its debt. “But those weren’t viable plans . . . Brazil is where 30 per cent of our [earnings] come from,” said Labriola.

“Of course, we also looked at keeping the network and selling the services company, but the truth is that it wouldn’t have solved our debt problem and there wasn’t a queue of buyers beating down the door.”

Telecom Italia’s consumer business includes certain coverage and customer migration commitments with Fibercop, the company that is 37.5 per cent owned by KKR and that operates the last mile of the telecoms network in Italy. Any potential buyer would have had to take on such commitments weighing on the valuation, according to Labriola.  

He also rejected criticism that shareholders had not been given a vote on the KKR deal, saying this was not required because “Telecom Italia’s corporate purpose will not change”.

“It’s like saying that a restaurant’s business purpose changes if the owner sells the property in which the restaurant is located [while continuing to operate it],” he added. 

“Our bylaws don’t require us to own the infrastructure.”

However, he offered angry shareholders an olive branch: “Let’s sit down and talk,” he said, suggesting any legal action would be a distraction from business.

“This [deal] is not just a financial operation, it will finally give us the opportunity to invest both within our company and outside, which is pivotal amid the current transformation within our sector,” he said.