TheChek News Flow

Le tout nouveau conseil d’administration de Lagardère se réunit ce vendredi au siège du groupe, rue de Presbourg, au pied de l’Arc de triomphe. Son PDG Arnaud Lagardère avait l’intention d’y présenter sa stratégie pour les diverses branches, mais la plupart des membres du conseil l’écouteront probablement d’une oreille distraite. Transformé cet été en société anonyme, Lagardère est en voie de démantèlement accéléré depuis l’annonce du rachat par Vivendi des 17,93% des actions détenues par Amber Capital, au prix de 24 euros par action.

Le fonds britannique ne s’en sort pas trop mal: présent au capital depuis 2011, il aurait acheté la plupart de ces titres entre 15 et 18 euros, et empoche la somme de 610 millions. De son côté, avec plus de 45% du capital, Vivendi doit lancer une OPA sur l’ensemble du groupe et convaincre les autres actionnaires de le suivre. Entré en 2006, quand l’action du groupe flirtait avec les 60 euros, le fonds souverain du ­Qatar est le grand perdant de l’affaire, mais il est peu probable qu’il joue les empêcheurs de tourner en rond.

Le PDG de LVMH compte récupérer certains actifs

Quant à Bernard Arnault, arrivé comme chevalier blanc d’Arnaud Lagardère en 2020, son sort demeure incertain. Il y a près d’un an, il avait acquis quelque 10 millions d’actions à un prix supérieur à 24 euros. A ce pécule s’ajoutent les 2,7 millions d’actions touchées avec la fin de la commandite dont il détenait 27%. Surtout, le PDG de LVMH compte récupérer certains actifs de l’empire.

Dans le camp Vivendi, dont les équipes ont déjà mis la main sur la station ­Europe 1, on murmure l’hypothèse de lui céder le pôle presse – Paris Match et Le Journal du dimanche. Mais Bernard Arnault pourrait aussi bénéficier d’une fusion entre Hachette et Editis, propriétés de Vivendi, qui sera contraint à des arbitrages par les autorités antitrust. Propriétaire de 9,5% de Madrigall, maison mère de Gallimard, le patron de LVMH pourrait profiter du grand chambardement à venir dans l’édition française pour constituer sa propre branche livre.

The fact that three more B-21s are now being assembled is a major indication of how fast the high-stakes bomber program is progressing.

full article attached

PwC didn’t include a going-concern warning in its annual report for the ailing property developer

Last year as China Evergrande Group’s EGRNF -11.25% stock and bond prices seesawed, it offered deep discounts to keep sales growing during the pandemic and the government effectively said it had borrowed too much.

Yet the property developer’s auditor gave it a clean bill of health in an annual report issued this spring.

Now, Evergrande is teetering on the edge of financial collapse, weighed down by an $88.5 billion debt burden and total liabilities in excess of $300 billion. The company has hired financial advisers, pointing to a likely restructuring, and Beijing is telling local officials to prepare for its potential downfall.

When Evergrande’s auditor, PricewaterhouseCoopers in Hong Kong, signed off on the company’s 2020 financial statements, it didn’t include a so-called going concern warning. These red flags from an auditor show that it has doubts about the company’s ability to stay afloat for at least 12 months.

A PwC spokesman declined to comment. Evergrande didn’t respond to a request for comment.

Global investors who own Evergrande’s dollar bonds were in the dark Thursday about whether the property giant would make a key interest payment, a major test of the developer’s ability to avoid a default.

Evergrande borrowed heavily to pursue an aggressive expansion strategy. It has so far failed to meet the “three red lines” laid down last year by Chinese authorities to limit the indebtedness of real-estate developers.

The most pressing financial issue at Evergrande is its near-term debt maturities. According to its most recent financial results, about 42% of Evergrande’s $88.5 billion in debt was due in less than a year. These figures don’t include Evergrande’s hefty liabilities outside of interest-bearing debt, such as the sums it owes to suppliers and contractors, or its tax liabilities.

The company averted a cash crunch last fall and it has emphasized as recently as June that it had never missed a payment on its debt.

But in the company’s financial statement for the first six months of this year, Evergrande’s board of directors expressed concerns about the company’s ability to pay its short-term obligations and its ability to continue as a going concern. The report, which was unaudited, was one of the company’s first serious admissions of its financial problems.

Concerns about the company’s financial health may not have been sufficient to trigger a going-concern notice in Evergrande’s 2020 annual report under U.S. and Hong Kong accounting rules. The bar to issue one of these is high, and there are often bankruptcies or reorganizations that aren’t preceded by a going-concern statement, academics said.

“It’s like the tornado warning horn going off 20 minutes after the tornado has leveled your town,” said Erik Gordon, a business professor at the University of Michigan. He added that he tells his investing students: “Don’t rely on the going-concern assessment to give you a warning in time to get out.”

Under U.S. accounting standards, the decision on whether a going-concern warning is needed is made initially by the company’s management. The auditor then makes a separate assessment and can decide to issue a warning, even if the management disagrees.

A going-concern warning doesn’t have to be issued unless it is probable—more likely than not—that the company will be unable to meet its debts as they come due over the next 12 months, the standards say. Even then, a warning can be avoided if the management can show it has a plan that will adequately deal with the potential cash crisis.

PwC’s opinion for Evergrande, based on Hong Kong audit rules, used a similar hard-to-fail assessment. The auditor’s test hinged on whether there was “significant doubt on the [company’s] ability to continue as a going concern,” the PwC opinion in Evergrande’s annual report said.

The Public Company Accounting Oversight Board, which oversees audits of U.S.-listed companies, said the fact a company goes under before a going-concern warning is issued doesn’t necessarily mean the auditor was at fault.

“The auditor is not responsible for predicting future conditions or events,” the regulator says on its website. It added that the absence of a going-concern warning “should not be viewed as providing assurance as to an entity’s ability to continue as a going concern.”

The number of going-concern opinions for U.S.-listed companies has fallen steadily since the financial crisis, from a peak of 3,358 in 2008 to 1,782 for 2019, according to research firm Audit Analytics.

The Chinese property giant’s debt load is teetering. Here’s a look at the crisis and the risks of a collapse.

The world’s stock and bond markets are closely watching China Evergrande Group, a Chinese property developer that is on the brink of missing payments on some of its debt. If not resolved, it threatens to become the largest debt default by a company in Asia, which could jolt investor confidence across markets globally. Beijing seems reluctant to bail out the company but is taking steps to limit the damage. Here’s a quick look at the company, its problems and the possible fallout.

Evergrande is an enormous—and heavily indebted—private-sector Chinese property developer and home builder that is close to defaulting on some of its billions of dollars in debt. The most urgent immediate deadline is Sept. 23, when the company has an $83.5 million interest payment due on some of its dollar-denominated bonds. Investors were in the dark Thursday about whether the company would make the payment. As of late afternoon in New York that day, bondholders hadn’t received the money, The Wall Street Journal reported. The company said Sept. 22 that it resolved an interest obligation on yuan-denominated bonds also coming due Sept. 23, but didn’t say whether it would pay in cash or other assets. If it misses the payment and can’t make good in 30 days, it could be declared in default.

Chinese authorities are asking local governments to prepare to step in—only at the last minute—if Evergrande fails to manage its affairs in an orderly fashion, an effort officials familiar with the discussions characterized as “getting ready for the possible storm,” The Wall Street Journal reported Sept. 23. The officials said local governments have been tasked with preventing unrest and mitigating the ripple effect on homebuyers and the broader economy, including by limiting job losses, ahead of a closely watched leadership meeting next year. The approach signals Beijing’s reluctance to bail out the debt-saddled property developer while bracing to cushion any economic or social fallout.

Evergrande had nearly $78 billion in revenue last year and hundreds of projects in more than 200 Chinese cities. For years it used borrowed money and presold apartments to aggressively amass land and develop projects. Along the way the company paid out billions of dollars in dividends to shareholders, including the equivalent of more than $5 billion over the past three years to founder, top shareholder and Chairman Hui Ka Yan.

Problems started to emerge last year when pandemic lockdowns hurt property sales for months, and they snowballed into concerns about a cash crunch last fall. Meanwhile, China’s efforts to crack down on borrowing by real-estate developers via limits known as the “three red lines” kept the company from taking on new debt. Cash is so short the company this summer started paying some suppliers with unfinished apartments instead of money. Its struggles sparked protests at its headquarters in Shenzhen.

How much does Evergrande owe?

The company had the equivalent of around $88 billion in outstanding debt at the end of June, about 42% coming due in less than a year. Its total debt burden is the most of any publicly traded real-estate management or development company globally, according to S&P Global Market Intelligence. Research firm Capital Economics estimates Evergrande also has sold an estimated 1.4 million apartments, worth $200 billion, that it hasn’t yet completed.

Evergrande is an enormous company embedded across China’s financial system and economy, which relies heavily on property for growth and jobs. In theory, a collapse could chase investors away from other publicly traded developers, setting off a chain of defaults. It also could sour Chinese consumers on buying property at a time when sales are already slowing sharply, stranding investments and wiping out wealth. A collapse could also undermine the economic activity and jobs created by Evergrande and its downstream suppliers. Beijing has an extraordinary degree of control over banks and other key actors, so Wall Street analysts are generally betting the worst-case scenario of a Lehman Brothers-like crisis can be avoided.

Many investors have expressed concerns about the Chinese government’s lack of communication about its plans. Analysts at Goldman Sachs said a continued absence of a clear message from Beijing could pose “notable downside risk to growth.” Given wide use of property as collateral for loans to companies and local governments, a deep and widespread drop in prices, however unlikely, could threaten the financial system, Barclays analysts wrote.

Analysts think it could. Chinese home sales weakened over the summer, with a drop of nearly 20% by value in August from a year earlier. Construction starts are down, and shares of other property developers have already been hit. To head off further damage, the government faces the challenge of ensuring Evergrande customers get the homes they bought.

Analyst is charged by federal prosecutors in Manhattan with making trades ahead of larger OppenheimerFunds purchases or sales

A former quantitative analyst for a global asset manager was charged with securities and wire fraud for allegedly using nonpublic information to commit insider trading that netted him more than $8.5 million in profit, according to a complaint unsealed Thursday in federal court.

The analyst, Sergei Polevikov, who worked at OppenheimerFunds Inc., is accused of operating a front-running scheme in which he would use his wife’s personal brokerage account to buy or sell stock in advance of large pending purchase or sale orders by his employer on behalf of its clients.

The alleged scheme took advantage of small price movements that generally happened during and following the firm’s purchases, according to the U.S. attorney’s office for the Southern District of Manhattan.

Mr. Polevikov, 48 years old of Port Washington, N.Y., was also charged with investment company fraud. He was arraigned Thursday afternoon. A judge set bond at $1.5 million.

A lawyer for Mr. Polevikov said her client was surprised by the charges, and intends to defend against them vigorously.

“The government has it wrong,” said the lawyer, Brooke Cucinella.

A spokeswoman for Invesco Ltd. IVZ 2.31% , which acquired OppenheimerFunds in 2019, said Invesco provided federal investigators with information in connection to the probe and will provide any additional assistance requested by the government. Mr. Polevikov left the firm a few months after Invesco’s acquisition, according to the complaint and his LinkedIn profile.

Mr. Polevikov faces up to 20 years in prison on the securities and wire-fraud charges, according to prosecutors. The Securities and Exchange Commission on Thursday also filed a lawsuit against Mr. Polevikov and his wife, seeking the return of his alleged illicit profits and civil penalties.

As an analyst, Mr. Polevikov had access to real-time information of pending trades in the fund’s internal system, according to prosecutors.

In trading on Jan. 22, 2018, he scored $96,358 in profits after using his wife’s account to buy and sell 400,000 shares of stock in Brazilian banking giant Itau Unibanco Holding SA, according to the complaint. Shortly after he purchased the stock, the complaint says, the fund bought nearly 8 million shares of Itau Unibanco, causing the share price to increase slightly. Mr. Polevikov sold his shares during the price fluctuation, according to the complaint.

The personal account of Mr. Polevikov’s wife shows about 2,800 instances of trading that followed a similar pattern, federal investigators said.

Mr. Polevikov carried out the alleged scheme between 2014 and 2019. During those years, he signed documents affirming he abided by his employer’s code-of-ethics policy and restrictions on personal trading by workers, which federal regulators require. Mr. Polevikov didn’t disclose his wife’s account to his employer, despite disclosing other personal accounts to his employer, prosecutors said.

Sneaker giant says production problems in Asia and trans-Pacific shipping delays will weigh on sales

The Covid-19 pandemic has caught up with Nike Inc. NKE 1.36% The sneaker giant’s revenue growth is being limited by supply-chain disruptions that have slowed the production and delivery of shoes and other goods around the world.

Nike on Thursday reported revenue of $12.25 billion for the quarter ended Aug. 31, up 16% from a year earlier and essentially flat with the June quarter. The results were below expectations of Wall Street analysts, who had expected revenue to reach $12.47 billion.

Nike executives said consumer demand for the company’s products remains strong and its fiscal first-quarter sales would have been even higher if not for supply-chain issues. They warned that production problems in Vietnam and Indonesia would hurt the company’s short-term outlook.

“We’re not immune to the global supply-chain headwinds,” Nike finance chief Matthew Friend said on a conference call. He said the company lost 10 weeks worth of production in Vietnam due to lockdowns there after a surge in Covid-19 cases and that it is taking an average of 80 days to move products from Asia to North America, or twice as long as before the pandemic.

More than half of Nike’s footwear and about a third of its apparel manufacturing occurs in Vietnam, where local authorities recently extended a lockdown until at least Oct. 1.

Nike executives said they expected flat revenue growth in the current quarter, which ends in November, due to the impact of the factory closures and longer transit times. Earlier this year, Nike’s sales surged on pent-up demand from consumers for sneakers and athletic attire.

Vietnam’s lockdown started over the summer, when apparel sellers usually start stocking up for the year-end holiday season. Supply-chain issues could be compounded as orders pile up and flood international freight, analysts said.

A group of more than 80 shoe and apparel companies, including Nike, sent a letter to President Biden in mid-August urging him to speed up U.S. vaccine donations to Vietnam. The health of the U.S. apparel industry is “directly dependent on the health of Vietnam’s industry,” the group said in the letter. The U.S. has delivered six million vaccine doses to Vietnam since July.

“Over the past 18 months, we’ve demonstrated our ability to manage through turbulence,” Nike Chief Executive John Donahoe said Thursday. “And that’s what we’ll continue to do as we navigate through these current supply-chain issues. We’ll focus on what we can control.”

Nike executives said the company’s inventories heading into the holidays are low and it will take several months to get back to full production. The company is shifting some production out of Vietnam and using air freight to avoid bottlenecks at ocean ports.

Nike’s net income for the August quarter was $1.87 billion, up 23% from the year-earlier period. Earnings per share were $1.16, exceeding what analysts had projected.

Nike’s direct-to-consumer sales led the company’s revenue growth. Direct sales were $4.7 billion, up 28% from a year earlier.

In the early months of the pandemic, Nike closed stores but continued to pay its workers; meanwhile, it doubled down on digital sales to reach consumers confined to their homes. Before the pandemic hit, the sportswear giant had been beefing up its direct-to-consumer business through its own website and stores.

Supply-Chain Crunch, Chip Shortage Focus of White House Meeting

Biden administration urges companies to volunteer information about their supply chains

WASHINGTON—Auto makers, technology companies and semiconductor producers met Thursday with Biden administration officials amid a global chip shortage, as the federal government pitched a program for companies to reveal more information about their supply chains.

The goal is to “understand and quantify where bottlenecks may exist,” the White House said in a statement after the meeting. Commerce Secretary Gina Raimondo asked business leaders to respond to the voluntary request for information in the next 45 days.

Companies that participated in the White House talked included Apple Inc., Ford Motor Co. , General Motors Co. , Intel Corp. , Medtronic, Samsung Electronics Co. , Stellantis NV and Taiwan Semiconductor Manufacturing Co.

The administration is also ratcheting up what it calls an early-alert system to mitigate semiconductor plant shutdowns related to the spread of Covid-19’s Delta variant. U.S. diplomats to countries in Southeast Asia including Malaysia and Vietnam will be asked to work with governments to keep factories running while ensuring Covid-19-related worker protections are in place, officials said.

The chip crisis has squeezed a range of industries, from auto manufacturing to consumer electronics and medical equipment, causing prices to rise for consumers. Short-term solutions have been elusive.

Supply hasn’t kept up with pandemic-induced changes in work and entertainment habits and demand for devices such as tablets. U.S. auto makers, which cut chip orders at the onset of the pandemic only to see rising demand from other industries, have been forced to slow or cease assembly lines. The price of new and used cars has risen.

The issue of transparency came up during an April meeting that Mr. Biden held with auto and tech executives. Auto makers sought insight from chip makers on how many semiconductors will be available and on setting production schedules. Chip manufacturers sought a clearer picture of actual demand, hoping to avoid so-called ghost orders, which can be canceled.

The White House is pressing Congress to provide funding for bipartisan legislation known as the Chips for America Act, designed to encourage domestic semiconductor investment. While the Senate approved $52 billion in June, the House hasn’t taken action on the measure.

The U.S. has lost ground on semiconductors to Japan, South Korea, Taiwan and China. The Semiconductor Industry Association said the U.S. share of global semiconductor manufacturing fell to 12% in 2020 from 37% in 1990. China and others have provided subsidies to global competitors, making it harder to attract new plant construction in the U.S.