Gapping up
Select oil/gas related names showing strength:
- RDS.A +1.7%, BP +1.2%, CVX +0.6%, SLB +0.6%, USO +0.5%, XOM +0.5%
Other news:
- ENOB +142.2% (announces that the FDA has accepted a Pre-IND request for a potential functional cure or treatment of HIV)
- ITOS +51.3% (Iteos Therapeutics and GSK announce development and commercialisation collaboration for EOS-448)
- ETTX +23.5% (completed the Second Closing and issued 6,268,975 shares of Common Stock and 6,268,975 Warrants to Innoviva (INVA) for an aggregate gross purchase price of approximately $12.5 million)
- BTX +11.8% ( intends to acquire Novellus Therapeutics)
- AVXL +9.7% (reported that ANAVEX2-73 (blarcamesine) and ANAVEX3-71 (AF710B) are featured in a new peer-reviewed publication)
- NVAX +9.6% (reports its COVID-19 Vaccine demonstrates 90% overall efficacy)
- FLGC +8.5% (signed a Letter of Intent to acquire 100% of the outstanding equity interests of Switzerland based Koch & Gsell and its wholly-owned hemp brand, Heimat)
- ESTE +6.1% (acquired working interests in assets it operates located in southern Gonzales County, Texas from four separate sellers)
- SRNE +6% (announces that UK's regulatory agency, MHRA, has cleared Sorrento's COVI-DROPS product candidate for a Phase 2 efficacy trial)
- CANO +5.3% (acquires University Health Care for $600 mln; raised FY21 guidance)
- NKTX +5.3% (elects CEO Paul Hastings as Chair of the Board for the 2021-2022 term)
- FMTX +4.6% (appoints John E. Bishop, Ph.D., to the leadership team as senior vice president and chief technology officer)
- HGEN +2% (submits Lenzilumab Marketing Authorization to UK's MHRA)
- SWAV +1.5% (announces CMS approval for Transitional Pass-Through payment for C2 Coronary IVL device)
- GBT +1.3% (receives Promising Innovative Medicine in UK for Voxelotor)
Analyst comments:
- NVGS +4.1% (upgraded to Outperform from In-line at Evercore ISI)
- AUTL +3.6% (upgraded to Buy from Hold at Jefferies)
- CMG +2.4% (upgraded to Strong Buy from Outperform at Raymond James)
- ENLC +1.8% (upgraded to Outperform from Mkt Perform at Raymond James)
- CQP +1.5% (upgraded to Buy from Neutral at Goldman)
- CRSP +1% (upgraded to Neutral from Sell at Citigroup)
Early premarket gappers
- Gapping up:
- NVAX +5.8%, SRNE +4.7%, SWAV +2.3%, RDS.A +2%, BP +1.7%, WPG +1.2%, QDEL +1.1%, SLB +1.1%, EBS +0.8%, XOM +0.7%, USO +0.7%, MEDP +0.5%, XLE +0.5%, OIH +0.5%
- Gapping down:
- HTBX -3.1%, ASND -2.5%, GFI -1.9%, GDX -1.6%, AG -1.3%, GOLD -1.2%, GLD -1.1%, IAG -1.1%, NEM -0.9%, VXX -0.8%, SLV -0.7%
CLOs draw in new support after showing resilience
Hedge fund Diameter lines up 6 launches of loan-backed debt vehicles after $250m seed funding
One of Wall Street’s hottest hedge funds has pulled in a quarter of a billion dollars from a small group of investors seeking out returns from an obscure corner of capital markets: collateralised loan obligations.
Diameter Capital, which posted a 24 per cent gain in its main hedge fund last year, intends to use the seed money to structure and sell its first six CLOs, which bundle together risky company loans and use them to back interest payments on slices of new debt, each with different levels of risk and return.
The asset class nestles just on the fringe of markets, dominated by specialists, but demand is now rising more broadly. The combined $250m investment in Diameter from alternative asset managers Apollo Global Management and Corbin Capital, and the pension fund of renewable energy company Babcock & Wilcox, also hints at a shift towards the mainstream.
“CLOs have survived the market swoon intact,” said Bret Leas, who runs Apollo’s structured credit business. “Therefore the asset class continues to gain more widespread acceptance. It’s no longer niche.”
Part of the allure for investors is that the CLO market offers a way to improve returns now that low interest rates have made higher-yielding assets scarce.
Total issuance of CLOs in the US this year is running at a record pace around $70bn, according to data from S&P Global Market Intelligence, with the total market now sitting at $770bn outstanding, according to Citi. The bank predicts it will grow to $850bn by the end of the year.
“It is a source of return in a world where there are not many obvious returns,” said Craig Bergstrom, chief investment officer at Corbin, who noted Diameter’s record as part of the $8.5bn investment manager’s decision to invest. Once interest has been paid to debt investors in the CLO, whatever is left flows through to the equity holders that have provided seed capital.
CLOs have been viewed sceptically in the past. Before the pandemic struck, regulators had expressed concerns that they had facilitated risky lending with weaker standards, and that they could lay the groundwork for a future credit crisis.
But CLO participants now feel vindicated, arguing that a strong rebound from the depths of the coronavirus-induced fall in markets has proved the resilience of the structure and offered comfort to cautious investors, even if critics still point to the large amount of assistance provided by the Federal Reserve that helped all credit markets — from bonds to loans — recover.
Even CLO equity investors, most exposed to the default of underlying issuers, largely ended 2020 with positive, single-digit returns, according to multiple industry sources.
“CLOs have come out pretty unblemished,” said Scott Snell at credit fund Tetragon, which invests in both the debt and equity of CLOs. “If liquidity had not been provided by the Fed, CLOs would have been more adversely impacted but it also would have been more challenging for all markets, not just CLOs.”
Eager to capitalise on the demand, a host of fund managers has sought to enter the market or expand their business.
As a result, some market participants expect consolidation among CLO managers. There are 135 CLO managers in the US, according to Citi, with 50 of them managing less than $2bn. Industry veterans say that depending on the fees charged and the size of the team, it typically takes $2bn to $3bn in assets to break even.
However, few M&A deals have emerged with both new and existing managers seemingly preferring tie-ups akin to Diameter’s.
Diameter’s launch follows York Capital ceding control of its CLO business to a new entity called Generate Advisors earlier this year, partnering with Kennedy Lewis Investment Management who will provide a $200m equity contribution to future deals. Kayne Anderson in January raised $600m in a fund to invest in the equity of both its own and other managers’ CLO deals.
This is Apollo’s fifth partnership, starting with an equity financing for CLO manager Gulf Stream in 2011, with three others in between.
“We preferred to build something ourselves that we can infuse with our DNA as opposed to buying a business that’s struggling on another platform,” said Scott Goodwin, who co-founded Diameter with Jon Lewinsohn. The pair met while working at credit fund Anchorage roughly a decade ago, starting Diameter in 2017. Investing across credit markets, it has become known as one of the most prolific hedge funds in recent years.
Goodwin’s first boss working at Citi was Jim Zelter, now co-president of Apollo. Both Goodwin and Lewinsohn also had a long-held relationship with John Zito, Apollo’s deputy chief investment officer, cemented after Apollo supported Diameter’s entry into issuing collateralised debt obligations.
“A lot of people talk about it but there has been very little CLO M&A,” said Leas at Apollo. “The price sellers expect to be paid is not typically attractive to firms like ours when we can just either issue our own deals or seed other managers. A tie-up is a far more likely way to launch a CLO manager these days.”
Unhedged: We’re all bears on the dollar now
Whither (or is it wither?) the buck
It is hard to find a foreign exchange analyst or an investor on Wall Street who is not bearish on the dollar. That may be reason enough to expect the currency to rise, but let’s consider the bear case first. Most often, it is grounded in the US’s “twin deficits”.
First deficit: current account. The US buys a lot more stuff from the rest of the world than the world buys from the US. That difference has to be financed; as a matter of mathematical identity, there has to be an inflow to match that outflow. There could be inflows in the form of, for example, direct foreign investment in US real assets or, as is more often the case, investment in US securities, most often our sovereign bonds (we do make a lot of them, after all).
There is a limit to this, theoretically. At some point, the interest on all those bonds would consume the entire US budget. And that limit gets a little closer if the US also has a second deficit, in its budget, because it is spending loads of money on other stuff, like transfer payments, aircraft carriers, or whatever. Here are where the twin deficits stood as of 2020. They almost surely have gotten worse since (via the Fed):
At some point, the buyers of all those bonds will look at a chart like this and demand higher interest payments. But let’s suppose (just suppose) that the US government is also intervening to keep the rates on its bonds low. What is going to fix the imbalance then?
The dollar can help: if it falls, everything in the US — its securities, its exportable goods, its companies — go on sale for the rest of the world. That draws assets in, keeping the accounts in balance. In a country where the books are wildly out of whack, the dollar can be the counterweight.
Don Rissmiller of Strategas summed up the point bluntly to me. When you have a major imbalance like the US has, “you have to get poorer, either locally or globally”. But, he cautions, none of this has to happen quickly. As a global reserve currency, and as a safe place in a crisis, the US currency remains “the cleanest dirty shirt,” among the global currencies. This was clear at the beginning of the pandemic, when the dollar rose with demand for safe assets. Here is the DXY dollar index:
Rissmiller also points out that if the dollar is going to fall, it has to fall against something. But what? While the US is one of the world leaders in vaccinations and growth, he says, capital seems likely to keep flowing towards dollar assets. But this could change, he says, as the rest of the world catches up, and we might end up with 2017-style synchronised global growth, sending capital out towards the rest of the world for better returns.
Currency traders often talk about the “dollar smile”. This refers to the fact that the dollar rises at the two ends of the US growth spectrum. If the US is outgrowing the rest of the world, then the dollar rises as capital flows to America. If US growth is particularly sluggish, as it was in March of 2020, then that probably means the whole world is in poor shape, meaning that US assets become an attractive safe haven, driving the dollar up again. It is in the middle of the growth spectrum, where the US is fine, but not world-beating, that the dollar tends to weaken. Rissmiller is arguing, in essence, that we could be heading back to the middle of the smile.
Calvin Tse, a Citigroup FX analyst, is a long-term dollar bear, too, but not because of the twin deficits. He thinks the appeal of US Treasuries will endure. “What’s happened over the past decade, ever since the financial crisis, is a rip in equity prices, resulting in a big build-up in global wealth. Investors are very long risk, and they need safe assets in their portfolios to offset that.” In this excellent chart he shows how global savings and risk assets have shot up, but safe assets have not kept pace:
Furthermore, as the Japanese and German central banks have bought up more and more of their own sovereign bonds, US Treasuries have become an increasing slice of that proportionally smaller store of truly safe assets:
Tse sums up: “When risk sells off, as it did in March of 2020, nothing makes money but AAA sovereign assets, but there are not many AAA assets out there.” As a result, he expects “perpetual” high demand for Treasuries.
Like Rissmiller, he thinks what may ultimately weaken the dollar is a resurgence of global growth, but he thinks the model here is not 2017 but the early-to-mid-2000s. Back then global economic activity rose and, just like today, a long bull market in equities driven by US tech companies was receding into the rear-view mirror. Again, we’re looking at that low, middle bit of the dollar smile.
If the dollar is going to weaken, how should investors position themselves? The traditional answer is that stocks that report in US dollars, but generate a big chunk of their revenues abroad, should see their profits rise as the dollar falls. Tech companies are the classic choice. Commodities companies’ products are priced in dollars, so they too will see higher revenues if the dollar weakens. But in the case of tech stocks, currently trading at somewhat dizzying valuations, it is worth considering this chart from Rissmiller’s colleague at Strategas, Jason Trennert:
Price/earnings valuations tend to fall when the dollar weakens. This makes sense. If a coming period of global growth does, in fact, draw capital towards risks elsewhere in the world, what is going to happen to the prices of tech stocks, which have after all had a tremendous bull run?
>>> Up
* Atlantia Raised to Buy at Bestinver; PT 19.50 euros
* Big Yellow Group Raised to Neutral at Kempen & Co
* Close Brothers Raised to Hold at Investec; PT 1,530 pence (+)
* Grifols Raised to Buy at Deutsche Bank; PT 30 euros
* Heidelberger Druck Raised to Buy at LBBW; PT 2 euros
* Holcim PT raised from 69 CHF to 73 CHF at Morgan Stanley
* K+S Raised to Buy at Commerzbank; PT 15 euros
* L'Oreal PT Raised to 405 euros from 370 euros at Deutsche Bank
* Nordea Bank Raised to Add at AlphaValue
>>> Down
* Campari Cut to Market Perform at Bernstein; PT 10.20 euros
* CRH Cut to Equal-Weight at Morgan Stanley; PT 45 euros
* Diageo Cut to Market Perform at Bernstein; PT 3,550 pence
* Diageo ADRs Cut to Market Perform at Bernstein; PT $189.50
* Investor AB Cut to Hold at SEB Equities; PT 202 kronor (+)
* Kungsleden Cut to Neutral at Kempen & Co; PT 115 kronor
* Pernod Ricard Cut to Market Perform at Bernstein; PT 186 euros
* Remy Cointreau Cut to Underperform at Bernstein; PT 122.50 euros
* Sanne Group Cut to Sector Perform at RBC; PT 925 pence
>>> Initiation
* Aker Carbon Capture Rated New Buy at Citi
* Grupo Ecoener Rated New Buy at CaixaBank BPI; PT 7 euros
* Katek Rated New Buy at Hauck & Aufhaeuser; PT 35 euros (+)
* Oatly Group ADRs Rated New Buy at Guggenheim; PT $32
* Oatly Group ADRs Rated New Neutral at JPMorgan; PT $24 (+)
* Restore Rated New Buy at Investec; PT 580 pence (+)
>>> Call
* Aker Carbon Capture Has Potential Longer-Term, New Buy at Citi
* K+S Upgraded as Higher Potash Price to Boost Profit: Commerzbank
* Oatly Group Well-Positioned But Outlook Priced In, Analysts Say
- Carnival Plc (POH1 TH) +3.5%
- BT (BTQ TH) +3.3%
- Phoenix Group (1BF TH) +3%
- Nel (D7G TH) +2.4%
- Vodafone (VODI TH) +2%
- Imperial Brands (ITB TH) +1.9%
- Nibe (NJB TH) +1.7%
- Rio Tinto (RIO1 TH) +1.5%
- Ubisoft (UEN TH) +1.3%
- Video Game Fest E3 Kicks Off With Starfield, Elden Ring Teasers
- Rolls-Royce (RRU TH) +1.3%
- Mowi (PND TH) -1%
- OMV (OMV TH) -1.1%
- Repsol (REP TH) -1.3%
-
Telefonica (TNE5 TH) -1.3%
- Telefonica Gives Spain 5G Contract to Nokia, Ericsson: Expansion
- Rational (RAA TH) -1.6%
- Fortum (FOT TH) -1.7%
- Ferrari (2FE TH) -1.7%
- Ferrari Cut to Sell at Goldman; PT $207
-
Philips (PHI1 TH) -1.9%
- Philips Sees Increase of EU250m in Costs Linked to Parts Issue
DAX:
- None
MDAX:
- K+S (SDF TH) +1.5%
- K+S Upgraded as Higher Potash Price to Boost Profit: Commerzbank
- Aixtron (AIXA TH) +1.2%
- Hannover Re (HNR1 TH) +0.8%
- Hannover Re May Reintroduce its Special Dividend, CFO Tells B-Z
- Zalando (ZAL TH) +0.8%
- Nordex (NDX1 TH) +0.8%
- Evotec SE (EVT TH) -0.7%
SDAX:
- SGL (SGL TH) +2%
- LPKF (LPK TH) +1.9%
- Bilfinger (GBF TH) +1.4%
- Metro (B4B TH) +1.3%
- Borussia Dortmund (BVB TH) +1.3%
- Instone Real Estate (INS TH) -1.1%
OVHcloud dit à nouveau préparer son introduction en Bourse
OVHcloud annonce sa prochaine introduction en bourse. Le calendrier n'est pas fixé. Le bénéfice brut avant impôts s'élève à 255 millions d'euros pour un chiffre d'affaires de 632 millions d'euros en 2020.
PARIS (Reuters) - Le groupe français OVHcloud, premier fournisseur européen de services d'informatique dématérialisée, a annoncé lundi dans un communiqué un projet d'introduction en Bourse sur Euronext Paris, sans toutefois fournir de calendrier précis.
Interrogé lundi matin sur Radio classique sur l'éventualité que cette IPO se déroule à l'automne, le directeur général d'OVHcloud Michel Paulin, a répondu par l'affirmative.
"Oui, (c'est prévu) pour cet automne, toujours selon la formule consacrée, sous réserve" des conditions du marché et de la validation de l'Autorité des marchés financiers (AMF), a-t-il souligné.
L'entreprise familiale avait déjà dit en mars dernier avoir entamé des préparatifs en vue d'une cotation, deux jours avant qu'un incendie ne détruise un de ses centres de données - un désastre qui a soulevé des inquiétudes quant à sa capacité à ouvrir son capital.
Elle a reconfirmé ses projets lundi et a divulgué pour la première fois un bénéfice d'exploitation annuel, précisant que son bénéfice avant intérêts, impôts, dépréciation et amortissement (EBITDA) s'élevait à 255 millions d'euros en 2020.
L'entreprise n'a pas fourni de chiffre comparable pour 2019.
Son chiffre d'affaires était de 632 millions d'euros en 2020, en hausse de 5% par rapport à l'année précédente, selon des informations fournies plus tôt aux journalistes.
A titre de comparaison, Amazon Web Services, la branche de services d'informatique dématérialisée d'Amazon, leader dans le secteur, a fait état d'une croissance annuelle de ses ventes de 30%.
Amazon, Azure de Microsoft et Google Cloud se partagent une grande partie du marché.
OVHcloud a fait savoir qu'elle avait enregistré une croissance annuelle moyenne de ses revenus supérieure à 20% sur les dix dernières années.
L'incendie, qui fait encore l'objet d'une enquête, a perturbé les activités de millions de sites internet, mis hors ligne des portails d'agences gouvernementales, de banques, de commerces et de médias, selon des experts du milieu.
Basée à Roubaix, OVHcloud emploie 2.450 personnes et compte 32 centres de données dans le monde sous la houlette, depuis 2018, de Michel Paulin, ancien cadre dirigeant de l'opérateur télécoms SFR.
OVHcloud a souvent été présenté par les responsables politiques français comme une alternative européenne aux géants américains du secteur, mais le groupe peine à rivaliser avec ceux-ci en termes de part de marché et de moyens financiers.
Les fonds de capital-investissement américains KKR et TowerBrook Capital Partners contrôlent, depuis un investissement combiné de 250 millions d'euros en 2016, 20% des parts de la société. La famille Klaba détient le reste.
Carlos Ghosn Fallout: American Father, Son Plead Guilty to Role in Escape
Michael and Peter Taylor were accused by Japanese authorities of helping spirit the former Nissan chief out of Japan on a private jet
TOKYO—Americans Michael Taylor and Peter Taylor pleaded guilty in Tokyo on Monday to the charge of helping former Nissan Motor Co. NSANY -1.46% chief Carlos Ghosn escape Japan in a box aboard a private jet in late 2019.
Michael Taylor, a 60-year-old former Green Beret, and his son Peter Taylor, 28, were extradited to Japan from the U.S. in March. They were arrested in Massachusetts in May 2020. The Taylors were accused of aiding the escape of a criminal, an offense that carries a maximum penalty of three years in prison.
Mr. Ghosn, who had been living in Tokyo while awaiting trial on charges of financial misconduct, escaped the country in late December 2019. He is living in Lebanon, which doesn’t have an extradition treaty with Japan.
The Taylors and a third alleged accomplice, Lebanese-American George Zayek, arrived in Japan shortly before Mr. Ghosn’s escape, according to American and Japanese court records.
The younger Mr. Taylor met Mr. Ghosn on the day before and the day of the escape, the court records say, while the elder Mr. Taylor and Mr. Zayek flew to Japan on the day of the escape aboard a private jet carrying a pair of black concert equipment boxes. They later used one of the boxes to smuggle Mr. Ghosn aboard the jet, the records say. Mr. Zayek hasn’t been arrested and is believed to be in Lebanon, where he is also a citizen.
The jet flew to Turkey, where Mr. Ghosn switched to another private plane that carried him to Beirut. In February, the two pilots who flew Mr. Ghosn to Turkey from Japan and a manager for the jet charter company that lent the aircraft were found guilty by a Turkish court of people smuggling. The judge gave each a suspended sentence of four years and two months.
Before their arrival in Japan, lawyers for the Taylors argued that they had not committed a crime under Japanese law and said they wouldn’t receive a fair trial in the country. Their lawyers cited the long periods of interrogation in Japan during which the accused can’t have their lawyer present, a system that critics call hostage justice.
Japan’s justice ministry and prosecutors have denied that they pressure people into making confessions. Defense attorneys aren’t allowed to be present during interrogations because it would interfere with the prosecutors’ work, according to the ministry.
Mr. Ghosn has said he is innocent of all the charges against him and fled Japan because he couldn’t get a fair trial.
In an interview in Beirut in May, Mr. Ghosn declined to comment on the Taylors’ role in his escape. “I don’t want to make anyone’s life more difficult than it is today, particularly when they are suspected of having helped me,” he said.
Mr. Ghosn said it wouldn’t surprise him if the Taylors made statements in line with Japanese authorities’ view of the case, but he would view such statements as made under duress.
“How can you trust a statement made by a person in a hostage justice system?” Mr. Ghosn said.