TheChek News Flow

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Macro :

- OPEC+ in Driver's Seat Again, Aiming to Put $90 Floor on Oil

- S&P Cuts UK 2023 GDP Forecast, Sees Moderate Technical Recession

- BofA’s Subramanian Says Wall Street Hasn’t Fully Capitulated Yet

- Goldman’s Top Oil Trader Anthony Dewell Departs for Millennium

- BofA Says Sell-Side Indicator Points More to ‘Buy’ Than ‘Sell’

- BNP Paribas Strategists Cut Europe Stocks Target on Profit Risk

- JPMorgan’s Kolanovic Says S&P 500 Outlook at Risk on Policy Woes

Keep an eye on :

- AF FP : Delta Could Take 10%-15% Stake in ITA Airways: Corriere

- ATL IM : Italy Regulator Approves Benetton, Blackstone Bid for Atlantia

- ATO FP : Atos Chairman Meunier to Step Down Next Summer: BFM Business

- BAKKA NO : Bakkafrost Prelim 3Q Total Harvest 24,900 Metric Tons

- BMPS IM : Italy Pledged Paschi Cuts to Get EU Backing for Sale Delay

- BMW GY : *BMW U.S. BRAND SALES UP 3.2%

- BRAV SS : Bravida Denmark Signs Framework Deal Worth About DKK200m

- COPN SW : Cosmo, Infectopharm Sign License, Distribution Pact for Winlevi

- CSGN SW : Wild Moves in Credit Suisse’s Default Swaps Cap Bank’s Bad Day

- GLPG NA : Galapagos Gets Positive CHMP Opinion for Jyseleca

- GRF SM : Grifols Names Steven Mayer as Executive Chairman

- LSG NO : Lerøy Seafood Cancels NOK123m Purchase of Licence Capacity

- MMT FP : Bertelsmann Decides Against Selling Stake in French TV Group M6

- MBTN SW : Meyer Burger Plans Ordinary Capital Increase of Up to CHF250M

- MOWI NO : Mowi Cancels Biomass Growth Purchase After Resource Tax Proposal

- PSH NA : Pershing Square Holdings Sept. Net Performance -4.5%

- P911 GY : Porsche 3Q US Retail Deliveries Up 8.5% Y/y

- PSM GY : ProSiebenSat.1 Media Names Bert Habets as Group CEO

- RTL LX : RTL Group to Keep Controlling Stake in Groupe M6

- SGO FP : Saint-Gobain Is Said to Launch Jewson Sale Despite Tough Market

- SIKA SW : Sika Sees FY Sales in Local Currencies Above +15%

- SKAB SS : Skanska to Build School in North Carolina for $78M

- TIT IM : Claro, Tim Brasil, Vivo Must Deposit BRL1.5B in Court: Valor

- VOD LN : *VODAFONE HIRES EVERCORE TO SELL SPAIN FIXED NETWORK STAKE:CINCO

- VOW GY : *VOLKSWAGEN 3Q AMERICAN VEHICLE SALES UP 12% Y/Y

White House action aimed at preventing China from making high-end semiconductors, sources say

The Biden administration is preparing new export controls on semiconductors and the machines to make them, the latest push in its effort to deny China the ability to make the fastest, most cutting-edge circuitry possible, according to people familiar with the situation.

The administration in recent weeks has already placed new restrictions on some U.S. exports of chips used for artificial-intelligence calculations and manufacturing equipment used to make some of the most powerful number-crunching chips.

But more export curbs are under consideration, including ones targeting high-end memory-chip manufacturing capabilities and advanced components that go into some of the most cutting-edge chip-making tools, according to the people familiar with the matter. Advanced quantum computing is another target under discussion, they said.

U.S. officials also have been considering adding more Chinese technology companies to the Commerce Department’s entity list, which bans exports to them without a license, The Wall Street Journal has previously reported.

The administration has been trying to line up key allies behind the effort, so that the U.S. isn’t the only country putting restrictions in place, the people said.

The administration’s actions could be announced as early as this week, one of the people said. Some details of the moves were previously reported by Reuters and the New York Times.

Joint export controls by the U.S., Japan, South Korea and European countries could significantly limit China’s chip industry because those countries hold a near-monopoly over production and sales of key equipment and software needed to make the most-advanced chips.

The U.S. has already engaged in diplomatic efforts to restrict Chinese access to machinery, including urging the Dutch government to block sales of critical equipment by ASML Holding NV.

The U.S. has long sought to limit the development of China’s semiconductor industry by placing companies on the Commerce Department’s export blacklist, including telecom giant Huawei Technologies Co. and its largest chip maker, Semiconductor Manufacturing International Corp. The clampdown intensified amid the trade wars of the Trump administration, and the Biden administration has largely picked up where its predecessor left off.

The semiconductor industry was born in the U.S. but has shifted outside of the country in recent decades, mostly to Taiwan, South Korea and China, a state of affairs U.S. officials and legislators see as a worrying national-security vulnerability. Advanced chips are increasingly a pillar of geopolitical power, underpinning both military systems and data-processing capabilities that drive modern economies.

As it places more restrictions on China, the Commerce Department is preparing to roll out tax breaks, factory-building grants and research funding to try to bring more of the semiconductor industry back to the U.S. The funding, worth nearly $77 billion in total, was passed by Congress in July and signed by President Biden in August.

Many of the expected actions the Biden administration is set to announce are likely to expand restrictions that it already has taken against individual companies, by making them apply industrywide, according to one of the people familiar with the situation.

For example, Nvidia Corp. disclosed in August that it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China. The U.S. imposed the requirement to address the risk that the products could reach the hands of military users, Nvidia said.

Bondholders are wary that the home-goods retailer could launch a debt exchange that hurts their interests, people familiar with the matter say

Bed Bath & Beyond Inc.’s bondholders are organizing, looking to protect their investments in the struggling retailer as it looks for ways to ease its debt during a slump in sales, according to people with knowledge of the matter.

Financing adviser Perella Weinberg Partners is working with holders of Bed Bath & Beyond’s unsecured notes due in 2024 ahead of debt talks expected to be held with the company, the people said.

Bed Bath & Beyond said in its second-quarter results last week it is considering launching a distressed exchange that would swap the outstanding bonds for new, longer-tenured debt or equity in the company, based on their trading prices.

But the transactions could take other forms or might not be launched at all, the company said in a securities filing last week. Bed Bath & Beyond didn’t respond to a request for comment Monday.

Perella Weinberg declined to comment. Bondholders are wary about a potentially coercive exchange deal that raises new secured debt but weakens other creditors’ claims on Bed Bath & Beyond’s assets, people familiar with the matter said.

The company said last week it had liquidity of about $850 million as of September, reflecting new loans it secured from its banks and from Sixth Street Partners after the quarter ended.

But the company likely faces another cash crunch unless it can reverse a drop in same-store sales, according to analysts. Last week, it reported a 28% drop in sales for the three months ended Aug. 27, with same-store sales declining 26%.

The company finished the quarter with $135.3 million in cash, slightly up from the $107.5 million it had at the end of its spring quarter, but significantly lower than $970.6 million a year earlier.

Retail analysts questioned the company’s ability to stem its cash burn despite its recent financings.

“We don’t expect Bed Bath’s turnaround will be successful and therefore expect the cash burn will continue” and amount to as much as $1.2 billion next year, according to a BofA Global Research report last week.

Bed Bath’s shares, which lost about 74% in the last six months, closed at $5.99 on Monday.

Swiss bank’s shares have tumbled to historic lows amid social media storm

Credit Suisse has spent the past few days battling social media rumours about the strength of its balance sheet and trying to convince investors and clients that its plummeting share price and spiking credit default swaps are not telling the true story of the bank’s health.

At the centre of the storm is a simple question that analysts and market commentators have been asking ever since Credit Suisse announced over the summer that it would strip back its investment bank and cut out SFr1.5bn of costs: How big will the capital hole actually be?

Last month analysts at Deutsche Bank estimated the drastic moves would leave the Swiss lender needing to find an additional SFr4bn due to restructuring costs, the need to grow other business lines and regulatory pressure to strengthen its capital ratios.

By Friday, analysts at Keefe, Bruyette & Woods were putting the figure at SFr6bn. They argued this would leave Credit Suisse, after asset sales, asking investors for SFr4bn of capital “to accommodate a clear growth plan and/or offset any unknowns such as litigation or client attrition fears”. 

For a bank whose market capitalisation has shrunk to SFr10bn in recent weeks following a 25 per cent share price drop, the prospect of going cap in hand to investors, who have already had to weather losses from scandals like Archegos and Greensill, seems increasingly daunting.

Senior executives within the bank — which has said it will unveil a detailed plan for its stripped-down investment bank by the end of the month — are adamant a capital raise would be a last resort.

“I want to be clear, we have not sounded out investors for capital,” said one banker who spent the weekend calling top clients and counterparties trying to reassure them of the bank’s financial health.

“We will be doing asset sales and divestitures just so we can fund this very strong pivot we intend to achieve towards a stable business.”

The bank plans to sell parts of its investment bank — potentially including its prized securitised products business — which analysts said could raise up to SFr2bn.

Credit Suisse managers had been forced into the charm offensive following a spike in spreads on the group’s credit default swaps last week, which indicated investors were becoming increasingly bearish on the group. Over the weekend social media and web forums were awash with rumours about the bank’s imminent collapse.

By Monday it had become clear the bank’s communication campaign had failed to calm jittery markets. Traders and investors rushed to sell Credit Suisse’s shares and bonds while buying CDSs.

Credit Suisse’s five-year CDS soared by more than 100 basis points on Monday, with some traders quoting it as high as 350bp, according to quotes seen by the Financial Times. The bank’s shares tumbled to historic lows of below SFr3.60, down close to 10 per cent when the market opened.

The two issues that appear of most concern to investors and social media commentators are the bank’s capital position, which reflects its ability to absorb losses, and its liquidity levels, which would be put to the test in periods of short-term stress. The bank insists that neither present a risk.

At its last quarterly results in July, Credit Suisse reported a common equity tier one ratio, which reflects its financial resilience, of 13.5 per cent, well within its target of 13-14 per cent for this year. That is up from 11.4 per cent in 2015 and 12.9 per cent in 2020, and equates to SFr37bn of capital.

Compared to other European banks, Credit Suisse has a similar CET1 ratio to the likes of UBS, HSBC, Deutsche Bank and BNP Paribas.

On top of that, the bank has SFr15.7bn of additional tier one capital, which is raised from issuing so-called “contingent convertibles” bonds — or cocos because they can be converted into equity in times of stress.

Credit Suisse raised $1.5bn of AT1 capital over the summer, with a bond offering that paid 9.75 per cent. While at the time the issuance looked pricey, the bank has since been downgraded by several credit agencies and the bond is currently trading at a 12.5 per cent yield.

In addition, at its last financial results, the bank had SFr44.2bn of “gone concern capital”, which is additional capital required by the Swiss regulator to absorb losses without triggering a bankruptcy.

“We would need to burn through SFr97bn of capital before anything happens to clients or employees,” said a Credit Suisse executive, toting up the CET1, AT1 and gone concern capital. “UBS burnt through billions in the financial crisis and got bailed out. This is not Credit Suisse today.”

Comparisons were also drawn over the weekend to the sharp sell-off in Deutsche Bank’s debt in 2016, when concerns that the German bank would have to skip some coupon payments on its capital bonds drove sharp moves in the CDS market.

“We would be wary of drawing parallels with banks in 2008 or Deutsche Bank in 2016,” said Citigroup analyst Andrew Coombs.

“The market appears to be pricing in a highly dilutive capital raise. We do not think this is a foregone conclusion, so would argue Credit Suisse is a buy for the brave at these levels.”

When it comes to the bank’s liquidity levels, Credit Suisse has a liquidity coverage ratio of 191 per cent, which is significantly higher than most of its peers. The ratio is a reflection of the amount of highly liquid financial assets the bank holds that can be used to meet short-term obligations.

“From our perspective, looking at company financials at the end of the second quarter, we see Credit Suisse’s capital and liquidity position as healthy,” said JPMorgan analyst Kian Abouhossein.

By the end of Monday, the bank’s shareholders appeared calmed by the reassuring messages sent by analysts, even if there were also increasingly loud calls for the unveiling of the new strategic plan to be brought forward. At the close of the market in Zurich, Credit Suisse shares had recovered to roughly where they had started the day at SFr4.

Meanwhile in Australia, an ABC business journalist who had sent a widely circulated tweet on Saturday suggesting that a large international investment bank was “on the brink” had deleted the post and his employer said it had reminded him of its social media guidelines.

A former Pentagon advisor says the most likely culprits behind the Nord Stream pipeline blasts are the United States and Britain, and that the attack was carried out to prevent Germany from bailing on the war in Ukraine.

Retired US Army colonel Douglas Macgregor made the comments during an appearance on the Judging Freedom podcast.

Macgregor said a process of elimination rules out Germany, because they are dependent on Nord Stream for their energy security, while it also served no benefit for Russia to have sabotaged its own infrastructure.

“Would the Russians destroy their own pipeline? 40 percent of Russian gross national product or gross domestic product consists of foreign currency that comes into the country to purchase natural gas, oil, coal and so forth. So the Russians did not do this. The notion that they did I think is absurd,” Macgregor said.

Referring to Polish MEP Radoslaw Sikorski’s infamous deleted tweet in which he wrote, “Thank you, USA,” Macgregor noted, “Who else might be involved? Well the Poles apparently seem to be very enthusiastic about it.”

However, citing reports that more than 500 kg of TNT had been detected in both explosions, the former Pentagon advisor suggested only the United States and British Royal Navy had the capability to pull off the attack.

“Then you have to look at who are the state actors that have the capability to do this. And that means the Royal Navy, the United States Navy Special Operations,” said Macgregor.

“I think that’s pretty clear. We know that thousands of pounds of TNT were used because these pipelines are enormously robust. You have several inches of concrete around various metal alloys to move the natural gas. So it’s not something that you could simply drop a grenade down at the end of a fish line and disrupt. That means it takes a certain amount of sophistication,” he added.

Macgregor suggested that the motive behind the attacks was to prevent Germany from bailing on the Ukraine war after Berlin began “to give the impression that they were no longer going to go along with this proxy war in Ukraine.”

“I’m hesitant to say ‘we know it must have been Washington’. I can’t say that because we just don’t know. But it’s very clear that we have foreclosed Berlin’s options. Berlin was drifting away from this alliance. [Chancellor] Olaf Scholz said ‘I’m not sending any more equipment, I won’t send any tanks’. Now he’s in a bind because the United States has simply robbed him of the option of bailing out. Who’s going to supply him gas and oil and coal and everything else if he bails out? Where does he turn now? And remember, the Germans, who are facing terrible consequences at home refuse to restart nuclear power plants,” the former official said.

As we previously reported, the CIA warned Germany of potential attacks on gas pipelines in the Baltic Sea weeks before Nord Stream 1 and 2 were targeted.

Both Joe Biden and Undersecretary of State for Political Affairs Victoria Nuland asserted that Nord Stream 2 wouldn’t be allowed to operate if Russia attacked Ukraine.

German group says licensing demands have made timetable unrealistic despite bids backed by billionaires

Bertelsmann has called off the auction of its French television broadcaster M6 despite receiving several “attractive” bids backed by billionaires after regulatory demands left too narrow a window to complete the sale.

The decision by Europe’s biggest media group to abandon the sale is another setback for chief executive Thomas Rabe after his first choice of selling M6 to larger French broadcaster TF1 fell through because of opposition from competition regulators.

Rabe’s back-up plan was a quick-fire auction that began last week. But an obstacle soon emerged — M6’s broadcast licence is up for renewal next year which would require any sale to be completed before the registration date in January.

Rabe said given the uncertainties it was right for Bertelsmann’s RTL to hold its stake in M6, which remains profitable. “We have tested the market and received attractive offers, but the timetable is too tight because of the licence renewal process and thus legal risks are too high,” he said.

Recent bidders for M6 included the Czech investor Daniel Křetínský; a joint offer from telecoms billionaire Xavier Niel and the Silvio Berlusconi-backed conglomerate MediaForEurope. A consortium of French entrepreneurs including maritime transport tycoon Rodolphe Saadé, Stéphane Courbit of FL Entertainment, and investor Marc Ladreit de Lacharrière also bid.

Bertelsmann decided to abandon the process because it was unable to address how a new buyer would renew M6’s licence before it expires in May. Under French rules, the main shareholder would need to formally apply by January, which would be too tight a timetable for the sale of the business to be completed.

The initial bids came in around €20 per share, which would have valued Bertelsmann’s 48.3 per cent stake in M6 at around €1bn-€1.2bn. Some of the bidders had been pressing the seller to protect them from the risks implied by the licence renewal process.

Rabe was in Paris on Friday to meet regulators and officials in the Élysée Palace to see if they would alter the schedule or introduce some flexibility into the licence renewal process, but he was rebuffed, said a person familiar with the matter.

Rabe’s strategy has long been to build “national media champions” that have the scale to hold their ground against global streaming services such as Netflix and Disney. But it is unclear how that could be achieved without regulators dropping objections to tie-ups between the biggest national broadcasters.

“We have been a loyal shareholder of M6 for 35 years, and we will continue to be. We’ll seek opportunities to build a media group of size to compete with US platforms,” Rabe added. “M6 is very well run, has achieved record results last year and has significant strategic value as demonstrated.”

Schroders, BlackRock and Columbia Threadneedle impose restrictions on redemptions from institutional real estate funds

Three UK asset managers have said they are unable to handle heavy demand from investors seeking to withdraw from property funds, in another sign of how an accelerating decline in government bond prices is forcing pension funds to reallocate holdings.

Schroders said it will make some redemptions originally due on Monday as late as July next year, while Columbia Threadneedle said volatile market conditions had forced it to switch from daily to monthly payouts. At the same time, BlackRock also imposed new restrictions on withdrawals.

This once again highlights how funds based on hard-to-sell assets struggle when the volatility that has stalked stocks and bond markets all year pushes investors to demand cash back in a hurry.

A liquidity crisis in the UK last week, sparked by plunging gilts prices, has worsened the situation for some asset managers, with defined-benefit pension schemes, which are major investors in UK institutional real estate funds, rapidly selling a broad range of assets to meet demands for collateral.

“It’s a fairly feeble market and you’ve thrown in some volatility. Shifting to monthly redemptions [from daily] reduces your need to firesale assets,” said one adviser to property funds.

Calum Mackenzie, investment partner with Aon, the pension consultants, added, “I think this is part of a longer-term trend by pension funds to [cut risk] by selling off the less liquid assets . . . This trend is now being exacerbated by last week’s short-term liquidity rush by pension funds.”

UK pension funds have been cutting real estate holdings for several months as rising interest rates and slowing activity have weighed on the property market. Tumbling prices of UK government debt have also increased the proportion of funds’ portfolios in real estate, prompting some to reduce their exposure.

These forces have intensified at a point when conditions in private markets including equity, real estate and credit, are already fraught. A sharp deterioration in lending conditions has made it difficult to get deals done in unlisted assets, according to industry participants.

The £2.7bn Schroders Capital UK Real Estate fund received redemption requests worth £65.3mn in the second quarter of this year, which were due to be paid by October 3. Schroders has paid £7.8mn towards meeting the withdrawal requests and said the outstanding balance would be deferred until “on or before” July 3 next year, in line with rules that allow it to push back redemption requests 24 months.

“It is expected that the deferred redemptions will be paid following successful completion of future asset disposals,” said Schroders.

It is in the process of selling Jubilee House, a tower block redevelopment in Stratford, east London, that it bought in 2013 for £11.9mn. Schroders has signed a contract to sell it for £63mn in a deal that is expected to be completed by April 2023.

Columbia Threadneedle has also introduced new arrangements for redemptions for the £2.3bn Threadneedle Pensions Pooled Property fund, which means investors will be able to make withdrawals on a monthly basis rather than daily, citing “liquidity constraints resulting from the recent market volatility and a subsequent increase in redemption requests”.

BlackRock, the world’s largest asset manager, has also imposed redemption restrictions on the £3.5bn BlackRock UK Property fund after receiving significant withdrawal requests in the second quarter.

These restrictions echo previous crises when asset managers imposed “gates” to prevent investors from making withdrawals from daily traded property funds in the wake of the Brexit vote and during the early months of the coronavirus pandemic in 2020. In both of those instances, professionals valuing assets held by the fund struggled to put an accurate price on commercial real estate projects.