TheChek News Flow

Withdrawal by British Gas owner leaves just two potential bidders for failed energy group

Centrica, the owner of British Gas, has pulled out of the auction for failed energy provider Bulb, leaving the UK government struggling to achieve a competitive bidding process.

Bulb collapsed last November after natural gas prices soared and it failed to raise new money. The government stepped in to ensure its 1.6mn customers still received energy and had planned to sell the business by the end of July.

Centrica’s withdrawal leaves just two confirmed potential bidders — Octopus Energy, the fifth biggest supplier, and Masdar, an energy company from Abu Dhabi — according to people close to the deal. One option is that the two team up, with Masdar providing the cash, and Octopus, which has never made a profit, taking on Bulb’s customers, said one of the people.

Ovo, the sixth biggest energy company, has not ruled itself out of the bidding but the company announced thousands of redundancies earlier this year and is lossmaking, so would need to raise finance.

Closing bids are due this Thursday in a sales process that is being handled by Lazards.

Bulb’s insolvency is expected to cost the government at least £2.2bn, making it the biggest state bailout since Royal Bank of Scotland in 2008.

It is also racking up costs for consumers, with Bulb making an £886mn loss in the six months since nationalisation, according to reports from administrators released this week.

Scores of creditors, many of them small businesses, are owed £585mn and are unlikely to be paid. But Sequoia, an infrastructure fund, which is backed by Simple, Bulb’s parent company, is guaranteed to receive its original £55mn investment and has earned a £10mn dividend since November.

Interpath, the administrator to Simple, has charged £3.7mn, or £800 an hour for 4,646 hours, since Bulb collapsed. A further £2.5mn in legal fees, mostly to law firm Freshfields, has been partially paid and Lazards, which is handling the sale, is expected to receive £1.5mn 

Teneo, which is running the administration process, is expected to receive tens of millions of pounds.

Centrica’s decision not to proceed suggests the Department for Business, Energy and Industrial Strategy is hoping the purchaser may take on more of Bulb’s liabilities than the energy group would have wanted. In addition, Centrica may have had a steer from the Competition and Markets Authority that, as the largest household energy supplier, the regulator would be unlikely to want it to increase market share.

The National Audit Office has criticised energy regulator Ofgem’s handling of the crisis, which has seen 30 suppliers including Bulb collapse in the past year.

Customers of all suppliers will pay at least £96 a year, some of which has already been added to energy bills, to cover the cost of the failed businesses. This excludes the cost of bailing out Bulb, which is currently paid by taxpayers but will eventually be added to customer bills.

Hayden Wood, chief executive and founder of Bulb Energy, is still being paid the same £250,000 salary he received before the company’s rescue, and the company has employed Simon Stacey, a former N-Power executive, as finance director on an interim basis.

Teneo, Interpath, Centrica, Octopus, Lazard and Bulb declined to comment and Masdar was unavailable for comment.

Terri Burton wanted to do something special to mark her son’s high school graduation, so she bought him the car of his youthful dreams: a Volkswagen Golf GTI.

But the purchase was the start of a nightmare. Within months of getting the car, her son, who has autism, was stopped twice by police in their South Texas town because Carvana CVNA +10.06% (ticker: CVNA), the company that sold the car to Burton, hadn’t registered the vehicle in her name, she says.

It wasn’t until almost six months later that Burton learned the reason for the registration delay: Carvana couldn’t transfer the car’s ownership to her because the company—officially, at least—hadn’t owned the car.

Mark Ralston / AFP via Getty Images

Problems with the paperwork from Carvana’s earlier purchase of the car for resale were keeping it from getting official ownership, or title, to the vehicle, a Carvana customer-service agent explained in a tense phone call late last year that Burton, of Corpus Christi, recorded.

“It was horrible,” says Burton, whose son had panicked each time he was pulled over by officers suspicious of the temporary out-of-state license plates that Carvana had been issuing for the 2017 hatchback in lieu of providing permanent Texas ones. “This was my gift to my son, and they messed it up so bad.”

The Burtons were among thousands of families that purchased cars from Tempe, Ariz.–based Carvana during the pandemic, when the company thrived by taking on traditional dealers with a web-enabled, highly scalable approach to vehicle sales. Carvana’s used cars often arrive at customers’ homes with the same convenience as Amazon-delivered paper towels. Customers can also pick up cars from Carvana’s multistory glass towers, which are designed to dispatch vehicles like cans of soda from a vending machine and include ceremonial coin slots.

But as the economy has reopened, Carvana’s efforts to resume its torrid pandemic-era sales pace have been complicated by an inconvenient side effect of the growth: In its haste to seize market share from competitors, Carvana was selling cars faster than it could get them registered to their new owners.

Disgruntled Carvana customers have long shared their gripes about registration delays and other issues—including late deliveries, undisclosed vehicle damage, and missing accessories—on online message groups and to the media.

Barron’s interviews with Carvana customers and former employees shed light on why registrations were delayed and how state regulators have tried to address the issue. The reporting reveals a company scrambling to address the problem, at one point forming an ad hoc unit known as the “undriveable-car task force.”

Carvana says many of the delays involved internal paperwork problems, including errors on title documents, missing documents from buyers, and slow work by third-party registration services and state motor vehicle agencies.

In other instances, though, including Burton’s, Carvana sold cars before it had title to the vehicles, an action that is illegal in many states where the company does business.

Carvana said in a response to questions for this article that very few of its customers experienced registration delays, and that only a small number of these delays were the result of the company selling cars before it had title.

The company says its record should be viewed in light of the many purchases and sales it makes, and the challenges of operating during the pandemic. Carvana sold more than 425,000 cars to retail customers in 2021, up 74% from a year earlier.

“Carvana, like many dealers over the past two years, has in limited instances encountered challenges processing title and registration paperwork for its customers after the sale,” the company says. “In a very small percentage of a very small percentage of instances, customers did not receive permanent license plates or transferred title within the time frame set forth by the respective states.”

Interviews with state officials and former Carvana employees show the issue is wider-reaching than the company suggests.

Burton and other customers, meanwhile, are lining up to challenge Carvana in a lawsuit filed in U.S. District Court in Pennsylvania that alleges some of the company’s customers went years without being able to legally drive vehicles they paid for. The suit, for which class-action status is being sought, identifies about two dozen potential plaintiffs.

And state regulators across the U.S. have been subjecting the company to suspensions or increased oversight over registration delays and its practice of issuing multiple temporary license plates from states where it has dealer’s licenses, instead of promptly providing permanent ones.

Carvana insists the lawsuit has “no substantive merit.” Its attorneys have sought the suit’s dismissal, arguing the claims should be handled through arbitration under plaintiffs’ original sales contracts with the company. A judge in Easton, Pa., is deliberating on whether to let the case proceed.

Carvana says the regulatory issues focus on a relatively small number of sales from 2020 and 2021. “We’ve had productive conversations with regulators in all of those states and feel very confident about our operations going forward,” it says.

The scrutiny comes at a difficult time for Carvana, which has seen flagging sales, steep losses, and a stock that’s down more than 90% from an August 2021 peak.

Carvana CEO Ernie Garcia III has vowed to slash some $125 million in spending, including laying off around 2,500 employees, or about 12% of the company’s staff, in May. At the same time, Carvana is rushing to turn its recent acquisition of Adesa U.S., the country’s second-biggest car-auction business, into a new leg of growth.

The $2.2 billion purchase, financed with high-interest debt, gives Carvana a national network of parking lots and garages that it says will be used to recondition hundreds of thousands more vehicles each year for resale.

Carvana was founded in 2012 as an online-focused subsidiary of DriveTime, a used-car business owned by Garcia’s father, Ernie Garcia II.

The elder Garcia grew DriveTime out of an earlier used-car company, Ugly Ducking, which he purchased in 1991, the year after he pleaded guilty to a felony bank-fraud charge related to the implosion of Charles Keating’s Lincoln Savings & Loan Association.

Prosecutors accused Garcia II of posing as a borrower on a fraudulent mortgage from Lincoln that generated bogus profits for the bank in return for getting a loan for his own real estate business. He was sentenced to three years’ probation. Garcia and his real estate business later filed for bankruptcy.

Garcia III, the son, spun Carvana off into its own business with himself at the helm in 2014. He and his father remain the company’s largest individual shareholders. The younger Garcia soon began erecting the company’s trademark “vending machine” towers in cities throughout the country.

Carvana went public on the New York Stock Exchange in 2017. The initial public offering valued the company at roughly $2 billion.

From its earliest days, Carvana emulated West Coast tech companies that aimed to disrupt established industries with new, online business models.

CEO Garcia openly compared the company’s approach with that of Amazon.com AMZN +3.58% (AMZN), and its motto for employees—“Your next customer may be your mom”—echoes the e-commerce giant’s customer-centric business ethos.

There were also quirky, Silicon Valley–style workplace perks. For their one-year work anniversaries, some employees were given Allbirds BIRD +1.35% —the woven wool sneakers favored by West Coast tech entrepreneurs—marked with the car dealer’s logo, a halo hovering over a sedan.

Meanwhile, Carvana’s custom-built headquarters in a Tempe business park includes a room known as “the library” with leather chairs, a wood-paneled ceiling, and book-lined shelves that slide away to reveal a cocktail bar in a secret nook. It was largely stocked with bottles from Costco’s in-house Kirkland brand, one employee says.

But Carvana’s biggest similarity with the tech start-ups may be its willingness to burn through cash in a race to displace old-line incumbents and outpace potential competitors. In its quarterly earnings reports, Carvana repeatedly posted net losses, even as Garcia assured investors that the company was forging ahead on a path toward profitability.

“We wanted to build a paradigm-shifting company,” he told analysts in May 2018, about a year after the company’s initial listing.

A couple of years later, as the coronavirus pandemic began rewiring the economy, Garcia was delivering on that promise. Car buyers across the country found themselves flush with stimulus cash they could put toward down payments on vehicles. Carvana’s online model was a perfect fit for quarantines and concerns about in-person contact.

During the three months ended June 30, 2021, as the country muddled through a second spring in the pandemic’s grasp, Carvana posted its first, and only, net quarterly profit. By that August, Carvana’s stock traded at $377, giving the company a market value of more than $60 billion, larger than older publicly traded peers CarMax KMX +7.19% (KMX) and AutoNation AN +4.15% (AN) combined.

In January of this year, Carvana announced the sale of its one-millionth car, casting the event as a key milestone in its quest to become the country’s largest auto retailer. CarMax, the current No. 1 auto dealer, sold more than 924,000 cars to retail customers in its latest fiscal year.

“Carvana’s mission is to change the way people buy and sell used cars by creating a transparent, simple, and enjoyable customer experience,” the company said at the time. “The auto industry is fragmented—and that means there’s ample room to grow.”

Shortly after Carvana opened its 28th vending machine tower in early 2021 near the Las Vegas Strip—there now are 33—JD Decker, the Nevada Department of Motor Vehicles’ chief lawman, was patrolling the desert metropolis when he stopped a car for driving with an expired temporary license plate from North Carolina.

The driver told Decker he’d been getting one temporary license plate after another from Carvana, and was waiting for the next one. He showed Decker a stack of expired temporary plates from around the country he’d burned through.

“He probably had about 10 different states represented,” Decker says. “He had the car for about a year and there was a problem with the title, so they just kept sending him temp tags from all over.”

Former Carvana employees say this was standard procedure by then: The company had started encountering delays in getting vehicles registered to its buyers, so it would use its dealer licenses across the country to issue temporary plates from multiple states to customers.

“You might end up with a Tennessee temporary plate for 45 days, then an Ohio temporary plate for another 30 to 45 days,” says a former senior member of the department at Carvana’s Tempe headquarters that responds to the most serious customer complaints, known as the executive resolution team.

“Customers would end up getting sometimes four to six different temporary plates from multiple states,” says the former staffer, who was laid off by the company after almost two years in April following a dispute over workplace accommodations for a disability. He asked not to be identified, citing ongoing litigation with the company over his dismissal.

Some of the sanctions levied by states in recent months cite the improper furnishing of temporary out-of-state plates. Carvana says it has “had a number of productive and helpful conversations with regulators across the country” on the topic of out-of-state plates and is “very confident in our processes going forward.”

By early 2021, Carvana was staffing up to deal with title issues. That’s when Thomas Hollingsworth joined what he was told was a newly formed titles department at the Tempe headquarters tasked with solving issues that were keeping cars from getting registered to their new owners.

Until he left the department for another role at Carvana that August, Hollingsworth—who has also since left the company—spent his days on the phone with banks, state motor vehicle departments, and former owners working to fix paperwork snags.

“I would come in at 7 a.m. and I would leave around 2:30 p.m., and the whole day was basically running through these titles,” he says.

During a period of heavy hiring that fall, Carvana established a new category of staffers called “paperwork specialists” to better manage the documents that flowed in and out of the company with the cars it bought and sold, says a former member of the auto dealer’s recruiting team.

The paperwork specialists were entry-level workers making $15 an hour who were sent out in the field after two weeks of rudimentary instruction, says the former recruiter, whose job was among those lost in the May layoffs and who asked not to be identified for fear of reprisal.

Carvana says it strongly disagrees with the recruiter’s characterizations on pay and training. “As a growing business with a novel model, we constantly create new roles and adjust existing ones,” the company says. “We’ve been fortunate to hire a number of great people in all roles.”

But Carvana’s sense of urgency surrounding the title-transfer issues may be most apparent in its formation of the undriveable-car task force in May.

Samantha Berger, another former member of the executive resolution team, says three of her colleagues were pulled aside for specialized vehicle-registration training early that month and given a “giant spreadsheet” of cars.

The cars were ones that Carvana had been keeping on the road with temporary plates that were now expiring, leaving them to languish, undriveable and parked outside new owners’ homes, says Berger, who wound up leaving the company days later, shortly before the layoffs.

Asked about the undriveable-car task force, Carvana says that its “internal teams have done an incredible job solving unprecedented business process challenges associated with a global pandemic in real-time.”

From his perch in Carvana’s titles department, Hollingsworth says he was able to see where the company’s process went wrong: Sometimes cars got sold off its lots around the country before document handlers in Tempe had time to finish getting the cars’ titles transferred to Carvana.

No states are known to have sanctioned Carvana over the practice of selling vehicles without holding title, but in multiple states where Carvana does business—including Texas, Pennsylvania, Michigan, and Illinois—regulators say it’s illegal in most cases to do so.

While some traditional used-car dealers concede it isn’t unheard of to sell vehicles before holding title, most do so only sparingly, and only if they’re sure they’ll obtain title quickly enough not to cause registration delays for their buyers, according to Jonathan Chariff, CEO of the South Motors auto group in Miami. Florida requires dealers to possess a vehicle’s title, or some other evidence of ownership, before making a sale, a state motor vehicle department spokesman says.

Carvana says that “for a limited time period, Carvana offered a small percentage of cars for sale prior to receiving the paper certificate of title,” but that “when viewed in totality, the cars for which the paper certificate of title hadn’t arrived at time of sale were a very small percentage of Carvana’s sales.”

Furthermore, Carvana says it only sold cars without a title “in the states where such practice is permissible.” However, customers in states where it is illegal tell Barron’s that they learned from Carvana that it sold them cars without holding the titles.

Those customers include Burton, the Texas woman who bought the Volkswagen hatchback for her son.

Another Carvana customer, Melody Postoy of Glendale, Ariz., another state where the practice is barred, traded in her Lexus for a later model in late December. About 2½ months later, the last of the temporary plates Carvana provided her expired, leaving her unable to drive the car, she says.

She spent hours on the phone with customer-service agents who offered constantly shifting excuses for why Carvana had been unable to get her registered as the vehicle’s owner.

One agent attributed the problem to difficulties with title transfers across state lines. Postoy says this surprised her, since a vehicle history report she reviewed showed that the car had always been registered in Arizona.

In April, when Carvana agreed to reclaim the vehicle for a refund, the agent Postoy spoke with to arrange pickup offered a different excuse. “They told me they were having issues getting ahold of the title,” Postoy says.

When asked about such anecdotes in states where vehicles may not be sold without holding title, Carvana said it didn’t want to discuss specifics of its legal analysis.

Even in states where selling vehicles without title isn’t prohibited, registration delays have caused problems for Carvana’s customers.

One potential plaintiff in the proposed class-action suit, a hospital lab assistant in North Carolina named William Stalls, bought a 2012 Hyundai Sonata from Carvana in January 2021. Over the next 12 months, Stalls was issued temporary plates from Georgia, Tennessee, Arkansas, and Arizona, the lawsuit alleges.

While driving with one of those plates, police pulled him over for speeding and found in a database that the car was still registered to a prior owner, according to the complaint.

“Despite Stalls showing the officer his sale paperwork and explaining he was waiting for permanent tags from Carvana, Stalls was arrested and confined to jail for eight hours before posting bond,” according to the suit.

An attempt to reach Stalls was unsuccessful. Attorney Robert Cocco, who filed the lawsuit, declined to comment on the case. Asked about the Stalls case, Carvana reiterated that the lawsuit had no merit.

In February, a month after celebrating the sale of its first one million cars, Carvana disappointed investors with an earnings report that showed sales flattening in the fourth quarter of 2021 after their pandemic-era boom.

“It is an understatement to say a lot has changed about our environment,” Garcia said three months later in his employee letter announcing layoffs.

Inflation was squeezing consumer savings, car prices had soared, and the company was dealing with mounting debt as a result of its Adesa acquisition.

Carvana was also facing scrutiny from state motor vehicle agencies over the company’s failure to meet vehicle registration deadlines and the use of out-of-state permits by its customers.

Early this year, Pennsylvania officials suspended the company’s license to issue temporary permits at its two vending-machine towers in that state, in Philadelphia and near Pittsburgh, citing late document submittals, “improper issuance and verification of temporary Pennsylvania plates in other states,” and other violations, Pennsylvania Department of Transportation spokesman Diego Sandino said in an email.

The suspension at the Philadelphia location is active until August, Sandino says. The location near Pittsburgh is suspended for three months after it comes into compliance, which as of late May it hadn’t yet done.

The Pennsylvania actions came in response to “temporary technical operational challenges that have since been corrected,” Carvana says. “This does not impact our ability to sell cars in Pennsylvania.” The company is still able to issue temporary license plates in the state through a third-party licenser, it says.

Issues related to late title transfers and the use of out-of-state plates have also resulted in increased oversight in Illinois, where the company was forced to cease business entirely for about two weeks in May. A suspension in a North Carolina county ended in January, though the company remains on probation in another North Carolina county. Carvana’s license is also on probation in Michigan over registration issues.

“Carvana is confident in and proud of our current title and registration operations,” the company says. “We have productive conversations with regulators in every state where we operate and are very confident that our current operations are designed to meet state standards.”

Even Carvana’s home state of Arizona has clamped down on the company’s operations after officials there received more than 80 complaints about the company over a four-year period, says Arizona Department of Transportation, or ADOT, spokesman Bill Lamoreaux.

The complaints revolved around “such issues as missing, delayed, and altered title and registration documents, contract discrepancies, significant odometer discrepancies, and incomplete emissions at the time of sale,” Lamoreaux says.

Carvana often used temporary license plates from Arizona, according to customers and former employees. The state allowed car dealers to issue temporary plates even for sales that occurred in other states, according to Lamoreaux. Last month, Arizona canceled that program after discussions with Carvana, he says.

Lamoreaux declined to provide further details, citing open investigations into Carvana’s registration practices.

“ADOT tries to accommodate businesses like Carvana with their unique online business model as best we can,” Lamoreaux says. “But for consumer protection, we need to make sure that all car dealers operating in Arizona are following state laws.”

Bank for International Settlements calls for more aggressive action from world’s central banks

Leading economies are close to “tipping” into a high-inflation world where rapid price rises are normal, dominate daily life and are difficult to quell, the Bank for International Settlements warned on Sunday.

In its annual report, the BIS, the influential body that operates banking services for the world’s central banks, said these transitions to high-inflation environments happened rarely, but were very hard to reverse.

Diagnosing that many economies had already embarked on the process, the BIS recommended that central banks should not be shy of inflicting short-term pain and even recessions to prevent any move to a persistently high-inflation world.

Agustín Carstens, BIS general manager, said: “The key for central banks is to act quickly and decisively before inflation becomes entrenched.”

Central banks around the world have started to raise rates quickly in response to soaring inflation, with the US Federal Reserve leading the pack, but the action taken so far does not satisfy the BIS.

In its report, the bank said that there was a deep, “inherently stagflationary” shock hitting the world from higher commodity prices, supply chain bottlenecks and shortages stemming from Russia’s invasion of Ukraine.

This had increased the prices of the goods and services that households noticed the most, reinforcing the salience of price rises.

“We may be reaching a tipping point, beyond which an inflationary psychology spreads and becomes entrenched. This would mean a major paradigm shift,” the report stated.

Such a shift would mean leaving behind a world where prices have been generally stable, with some things getting cheaper and others more expensive. In this benign world, central banks have been able to ignore temporary surges in oil or natural gas prices because “economy-wide inflation [is] less noticeable [and] also less relevant”.

After a move to a high inflationary period, “price changes are much more synchronised and inflation is much more of a focal point for the behaviour of economic agents, exerting a major influence on it”.

Inflation is at multi-decade highs in several economies, including the US, eurozone and the UK. The BIS was worried the leading economies of North America, Europe and many emerging markets were near a tipping point. Consumers had noticed price rises, large increases had become broad across most goods and falling real wages would generate attempts to recoup the losses.

Ignoring price rises was no longer rational for consumers, the BIS said, which reinforced the danger of a shift to a high-inflation world.

“As inflation rises and becomes a focal point for agents’ behaviour, behavioural patterns tend to strengthen the transition,” it added, predicting companies would fight to prevent profit margins being squeezed and workers would defend their wages. The length of most contracts would tend to shrink, it added, because parties on both sides could not guarantee price levels in future.

To bring down inflation, the BIS said, “some pain will be inevitable”, but it said ultimately the difficulties of entrenched inflation “far outweigh the short-term ones of bringing it under control”.

“This puts a premium on a timely and decisive response,” it told its member central banks, even if none could be certain that they had moved into a high-inflation environment.

The BIS added: “The overriding priority is to avoid falling behind the curve, which would ultimately entail a more abrupt and vigorous adjustment. This would amplify the economic and social costs of bringing inflation under control.”

U.S. official says the ban aims to punish Russia for invasion of Ukraine

The U.S. will join other leading countries in banning Russian gold imports, broadening a sanctions regime against Moscow as an international summit is set to begin Sunday, according to a U.S. official.

The move, coming as part of the Group of Seven meeting in the Bavarian Alps, is the latest part of an effort to punish Russia for its invasion of Ukraine, the official said, noting that gold is a major Russian export commodity after energy.

“The U.S. has rallied the world in imposing swift and significant economic costs on Russia to deny (President Vladimir) Putin the revenue he needs to fund his war,” the official said. “President Biden and G-7 leaders will agree to announce an import ban on new gold from Russia.”

Moscow’s aggression in Ukraine will be a focus of the three-day summit. Russia has been hurt economically by various sanctions. But it still sells energy to China, India and other countries not participating in the sanctions effort, and higher commodity prices have helped offset some of the impact of sanctions.

On Tuesday, the U.S. Treasury Department will enforce the ban on new gold imports in an attempt to “further isolate Russia from the global economy,” the official said.

Other G-7 members haven’t publicized their stance on the ban, and U.S. officials didn’t elaborate on the specific timing of an official announcement. A spokesman for the German government, which currently holds the G-7 presidency and hosts the group’s summit, didn’t immediately respond to a request for comment.

Russia’s central bank holds more than 2,000 metric tons of the precious metal, worth roughly $140 billion and representing the world’s fifth-largest stash, according to the World Gold Council.

Analysts say the ban could push up the haven metal’s prices, which have been sliding so far this quarter because of higher interest rates and a stronger U.S. dollar. Those declines come despite the inflation rate reaching its highest level in four decades.

Investors prize gold for its stability in times of turmoil, expecting it to hold value even when other assets decline.

The ban on Russian gold is “only going to make the supply a little bit tighter, which should put a floor on what’s happening to gold,” said Mike Boutros, a strategist at DailyFX. Russia accounts for roughly a tenth of the global supply of gold.

A White House spokesman, John Kirby, declined to specify which actions against Russia would come. “There will be some announcements,” he told reporters aboard Air Force One as President Biden flew to Germany on Saturday. “There will be some muscle movements.”

Oaktree Capital’s co-founder is turning aggressive after sharp market sell-off

The time is right to snap up “bargains” in the financial markets following the widespread sell-off, according to Howard Marks, one of the world’s most formidable distressed debt investors.

“Today I am starting to behave aggressively,” the founder and co-chair of Oaktree Capital, said in an interview. “Everything we deal in is significantly cheaper than it was six or 12 months ago,” he added, highlighting drops in the prices of high-yield bonds, leveraged loans, mortgage-backed securities and collateralised loan obligations.

The main gauge used to measure junk US corporate debt has registered a loss of just under 13 per cent this year, its largest since the financial crisis in 2008, according to Ice Data Services.

Prices of loans offered to lowly rated corporate borrowers have fallen more than 5 per cent and are trading on average at 93.27 cents on the dollar, levels last seen in November 2020 just before Covid-19 vaccine breakthroughs were reported, data from S&P and the Loan Syndications and Trading Association showed.

Marks said Los Angeles-based Oaktree did not make investment decisions based on macro forecasts — such as how high inflation would rise or whether there would be a recession — nor try to time the market.

“I think the idea of waiting for the bottom is a terrible idea,” he said. Assets could get cheaper than current valuations “in which case we’ll buy more”.

Marks, 76, co-founded Oaktree in 1995 with a strategy of investing in “good companies with bad balance sheets” and has built the company into a $164bn powerhouse of debt investing. The company does not publicly disclose its financial performance.

His career has been founded on making big bets when and where others are unwilling to do so, and he sets out his investment views in a popular series of memos, whose regular readers include Warren Buffett.

“We’re more aggressive if we think . . . bargains are rife,” he said. “And we are more defensive if we think the market is elevated and investor behaviour is imprudent.”

Over the past year, Marks has advocated positioning on the more defensive side. “I thought asset prices were reasonable given where interest rates were, but I thought interest rates would go up, which meant prices would go down.”

Financial markets have sold off as the Federal Reserve has begun to sharply raise interest rates, piling pressure on treasurers across the globe. Borrowing costs have shot higher, with yields on highly rated corporate debt in the US averaging 4.72 per cent this week, double the level at the end of 2021.

For riskier groups rated junk by the major credit rating agencies, yields are now above 8.5 per cent, up from 4.32 per cent.

Oaktree, which sold itself to Canadian infrastructure group Brookfield at a near $8bn valuation in 2019, is one of the oldest specialists in chasing companies for unpaid debts. Marks said that while he expected the number of corporate bankruptcies to increase — following a period in developed markets where abundant cheap money from central banks has kept them low — he did not think this would reach double-digit levels like it did in previous crises.

“The hotter the environment, the more people look at something like crypto and they go from saying it’s possible it will work to it’s sure it will work. And that’s when you get in trouble.”

He admitted he “did not know enough about cryptocurrencies to know if it’s going to work or not” but said he was sceptical because it was impossible to value them: “I believe that assets that don’t have cash flow don’t have intrinsic value . . . a good part of the value has to be conceptual and future oriented.”

Oaktree’s most high-profile recent deals have been in China, where it seized two crown jewel real estate projects from property developer Evergrande after it defaulted on $1bn of loans from Oaktree. Marks said Oaktree had not yet sold the two sites — Project Castle in Hong Kong and “Venice” on the mainland — but that “the process is going as it should. We’re in control of the assets, and we’re very optimistic”.

Marks said that Beijing’s zero-Covid policy was hurting Shanghai’s ambitions as a global financial centre: “you can’t put an economy into a coma and expect vigorous activity.” 

Companies have taken advantage of low interest rates to lock in cheap financing during the pandemic, he said.

The bulk of Oaktree’s assets are managed in credit strategies but it also has much smaller divisions in real assets, listed equity and private equity. Marks questioned whether the average private equity fund could consistently outperform listed markets, and said leverage contributed a large part of the sector’s returns.

“Maybe the best private equity funds really do outperform, or maybe the rest do so in brief periods,” he said. “But you can’t talk about private equity outperformance over the long term based on the average private equity firm and the research that I’ve seen. Yes, private equity has produced very good returns in the last few bullish years. But given their leverage, shouldn’t that be expected in such a period?”

Until this year, and barring a sharp sell-off at the start of the pandemic, US equities were in a decade-long bull market, which Marks said had bred complacency. “When things are going well, people don’t worry about the downside. And they push into new areas that they have never been in before.”

He pointed to areas such as private assets, where mainstream investors in stocks and bonds have expanded, some with seemingly little concerns for matching fund liquidity with the underlying assets. “That’s bull market behaviour,” said Marks. “But when you get withdrawals in an illiquid market with declining values, those funds melt down.”

Marks argued the same psychological dynamics had driven investors into cryptocurrencies.

Le premier vol d'Ariane 6 est à nouveau reporté, à 2023. Une cadence d'escargot qui laisse le groupe d'Elon Musk sans véritable concurrence.

Il est des hasards de calendrier qui font mal. Le 13 juin, le patron de l'Agence spatiale européenne Josef Aschbacher officialisait dans une interview à la BBC le nouveau retard d'Ariane 6: le premier vol du lanceur européen, jusqu'alors espéré fin 2022, est désormais prévu en 2023. Le même jour, le grand rival californien SpaceX obtenait du régulateur américain de l'aérien, la FAA, un premier feu vert très attendu pour les premiers vols orbitaux de son lanceur géant Starship/Super Heavy, fusée de près de 120 mètres conçue pour les missions martiennes. Après une enquête de plusieurs mois, la FAA conditionnait quand même cette autorisation à la mise en place de 75 mesures de protection de l'environnement au sein du pas de tir de Boca Chica (Texas) de SpaceX. Des engagements que le groupe d'Elon Musk ne devrait pas avoir trop de mal à tenir.

SpaceX qui rit, l'Europe spatiale qui pleure? La différence de dynamique est effectivement frappante. Depuis le début de l'année, le champion californien a réalisé 26 tirs de son lanceur réutilisable Falcon 9, soit un par semaine. Arianespace, lui, n'avait effectué qu'un lancement, celui d'un Soyouz russe en février. Un second tir, le premier lancement d'Ariane 5 de l'année, était prévu le 22 juin. Cette cadence d'escargot s'explique aisément: l'Europe n'a quasiment plus de lanceurs à tirer. Ariane 6? Elle affiche trois ans de retard sur son calendrier initial. Ariane 5? En fin de vie, elle n'est plus produite et ses cinq derniers lancements affichent complet. Quant au lanceur russe Soyouz, longtemps tiré de Guyane, il n'est plus disponible depuis l'invasion russe en Ukraine.

Pression maximale

Plusieurs opérateurs satellites, clients d'Arianespace, se retrouvent ainsi dans le flou. Même situation pour l'armée française, dont le satellite espion CSO-3, qui devait être lancé à la fin de l'année 2022, est pour l'instant cloué au sol, en attente d'une fusée disponible. "Nous avons 11 lancements à recaser", précisait le patron d'Arianespace, Stéphane Israël, lors du Paris Air Forum le 7 juin.

L'entrée en service d'Ariane 6 apparaît d'autant plus urgente que le lanceur européen a décroché, le 5 avril dernier, une commande géante de 18 lancements pour la constellation de satellites Kuiper d'Amazon. "Il n'y a plus de marge, ni de plan B: tout échec du premier tir serait catastrophique", résume Arthur Sauzay, auteur de plusieurs rapports sur l'Europe spatiale pour l'Institut Montaigne.

La pression est donc maximale sur Ariane-Group, maître d'œuvre d'Ariane 6. L'industriel franco-allemand doit mener de front deux campagnes de tests d'une importance capitale: les essais dits "combinés" d'une Ariane 6 sur son pas de tir à Kourou, prévus ces prochaines semaines; et les tests à feu de l'étage supérieur de la fusée, sur le site du DLR (l'agence spatiale allemande) à Lampoldshausen, au nord de Stuttgart. Ces derniers, prévus début 2021, n'ont toujours pas commencé.

Total compensation, with stock, rose 48.1 percent for the fashion company’s top executives, including Howard Smith who left under a cloud.

Ralph Lauren Corp. pushed through the pandemic, continuing to elevate its brand and court younger consumers — and senior executives saw top-dollar pay days last year in the process.

“This year, our teams around the world delivered strong results that exceeded our expectations with growth across every brand, channel, category and region – demonstrating their agility and strength amid an environment that remained challenging,” said executive chairman and chief creative officer Ralph Lauren and chief executive officer Patrice Louvet in a joint letter to shareholders filed with regulatory authorities.

Sales bounced back from the worst of the pandemic, increasing 41 percent to $6.2 billion for the year ended April 2.

For his efforts, Lauren saw his compensation rise 45.6 percent to $24.9 million. That included $12 million in incentive pay and a salary of $1.8 million. His package also included stock awards that were valued at $11 million, although the full value of share-based compensation will ultimately rely on the company’s Wall Street performance.

Louvet’s package increased 53.8 percent to $18.6 million, including $7.9 million in incentive pay.

The five executives named in the fashion company’s proxy statement logged total compensation of $68.9 million — an increase of 48.1 percent from a year ago.

That top tier included Howard Smith, who was chief commercial officer, but resigned at the end of the year after an investigation found he had “violated the company’s code of business conduct and ethics and other policies.”

The nature of the exact violations was never revealed, beyond the vague reassurance from the firm that they were “unrelated to the company’s financial reporting and business performance.”

A source told WWD when the departure was revealed that the violations were not related to either sex or money, but instead reflected multiple incidents of “misjudgment.”

Still, Smith, a 19-year veteran of the company, was allowed to walk away with a significant pay package.

His compensation rose 28.2 percent last year to $12.3 million, including incentive pay of $3.2 million.

The restaurant is permanent, but will operate seasonally.

RIVIERA BOUND: On a global expansion kick this year, Caviar Kaspia is to open in Saint-Tropez, France, on July 1. The permanent, but seasonal, restaurant will be operated by the Annie Famose Group and located on the first floor of the Tour du Portalet in the port area.

Previously the home of Kinugawa for the past three years, the space has been renovated in “Art Deco Tropézienne” style, according to Kaspia, describing it as a “glamorous boudoir overlooking the Mediterranean.” It is to open from 7 p.m., offering cocktails on the terrace including the new Oyster Independent, composed of vodka, oyster leaf, sea foam and a garnish of caviar. A deejay is to accompany diners late into the night.

As with all Kaspia locations, expect turquoise tablecloths and napkins, minaret-shaped ashtrays – and that famous caviar-topped potato on the menu.

The fashion crowd’s favorite Parisian restaurant, located on Place de la Madeleine since 1952, is marking its 95th anniversary this year.

Caviar Kaspia Group, headed by chief executive officer Ramon Mac-Crohon, recently opened locations in São Paulo and Dubai — and coming soon are Los Angeles, New York City and London.

Annie Famose, formerly an alpine ski champion, operates more than 30 restaurants with her two children, David and Sarah Bremond, in a range of jet-set locations including Saint-Tropez, Megève, Courchevel , Saint-Barthélemy, Biarritz and Avoriaz.

Caviar Kaspia was founded by Arcady Fixon, a Russian refugee fleeing the Bolshevik Revolution, who ultimately became a French citizen. Out of nostalgia for the Motherland of his youth, he decorated his eatery in pre-Revolutionary style, decorated with artifacts he collected over the years, including a crystal seal once belonging to Tsar Nicolas II.