TheChek News Flow

BEIRUT/LONDON/MOSCOW (Reuters) - The company that bought the ammonium nitrate which exploded in Beirut last August had possible links to two Syrian businessmen under U.S. sanctions for ties to President Bashar al-Assad, according to a report by a Lebanese journalist and London company filings.

Savaro Ltd, the trading firm which procured the chemicals in 2013, shared a London address with companies linked to George Haswani and Imad Khoury, according to the report by documentary film-maker Firas Hatoum, which aired on Lebanon’s al-Jadeed TV station this week.

Haswani, Khoury and his brother Mudalal Khoury have all been sanctioned by Washington for supporting Assad’s war effort. All three are joint Syrian-Russian nationals, according to the U.S. sanctions list and a database that gathers data from official Russian institutions.

The U.S. Treasury accused Mudalal Khoury in 2015 of “an attempted procurement of ammonium nitrate in late 2013”. It sanctioned his brother Imad a year later for engaging in business activities with Mudalal. Haswani was sanctioned in 2015 on charges of helping Assad’s government to buy oil from Islamic State militants, which he has denied.

In reviewing filings with Companies House, the UK’s companies registry, Reuters found that Savaro and Hesco Engineering and Construction Company Ltd, a firm subject to U.S. sanctions for its links to Haswani, both moved their corporate registers -- official company records -- to the same London address on June 25, 2011.

That address was also the registered office for IK Petroleum Industrial Company Ltd, in which Imad Khoury was a director, the filings show.

Dozens of companies can share listed addresses and such links do not necessarily prove company owners are connected. But it is rare for firms to move their registers, particularly to the same address on the same day, according to a Reuters review of filings by hundreds of companies.

Reuters located the agent which had helped register Hesco, but it did not respond to attempts to seek comment about Hesco’s relationship with Savaro. Reuters could not determine if Haswani controlled Savaro, which might have provided a possible indication of his involvement in the procurement of the ammonium nitrate which exploded in Beirut.

Imad Khoury denied links to Savaro. “There is a registrar in London, many companies are registered by it, not just mine,” he told Reuters. “I don’t know this Savaro.”

Mudalal Khoury said there was “no logic” behind laying blame for the Beirut explosion on a company registered at a London address where many others are also registered.

Reuters could not reach Haswani for comment. His son told Reuters in Moscow that his father was unlikely to comment on allegations of links to the chemicals because they are “total nonsense”.

CALL FOR INVESTIGATION

The findings about the possible links between Savaro and the Syrian businessmen have raised questions among some in Beirut over whether the ammonium nitrate, which is used for fertilizer but also explosives, may have been destined for Syria.

“We want this to be investigated,” Youssef Lahoud, a lawyer who represents around 1,400 victims of the blast, told Reuters.

“It may lead us nowhere or it may be the thread that unravels but we must follow up.”

Lebanese Justice Minister Marie Claude Najm told Reuters the report should be investigated, as with any other allegations related to the ongoing probe into the blast, which is in the hands of the investigating judge and is confidential.

The Companies House register identifies a Cypriot national, Marina Psyllou, as director and majority owner of Savaro since 2016. Psyllou told Reuters in an email on Friday that she does not manage or own Savaro. She did not respond to questions about Haswani.

The Beirut blast killed 200 people, injured thousands and destroyed entire neighbourhoods. Officials have said the chemicals went up in flames after being stored at the port in poor conditions for years.

The ammonium nitrate was loaded onto a ship called the Rhosus in Georgia, shipping records show, before making an unscheduled stop in Lebanon in late 2013. It never left, becoming tangled in a legal dispute. The Mozambican firm that ordered the nitrate, FEM, has said it ordered the shipment through Savaro Ltd.

LONDON (Reuters) - Britain’s government hopes to ease some lockdown restrictions in March as it presses ahead with Europe’s fastest rollout of COVID-19 vaccines, foreign minister Dominic Raab said on Sunday.

The country, which also has Europe’s highest COVID-19 death toll, has been under national lockdown since Jan. 5, with schools closed for most pupils, non-essential businesses shut and people ordered to work from home where possible.

“What we want to do is get out of this national lockdown as soon as possible,” Raab told Sky News television.

“By early spring, hopefully by March, we’ll be in a position to make those decisions. I think it’s right to say we won’t do it all in one big bang. As we phase out the national lockdown, I think we’ll end up phasing through a (regional) tiered approach.”

Prime Minister Boris Johnson has set a target of vaccinating the oldest age groups, the clinically vulnerable and frontline workers - roughly 14 million people - by the middle of February.

He has said that England can consider easing lockdown restrictions from that time if all goes smoothly.

The Sunday Times said that British ministers had settled their differences to back a three-point plan that could lead to some lockdown restrictions being lifted as soon as early March.

Areas will have restrictions eased once their death rate has fallen, the number of hospital admissions drops and some people aged between 50 and 70 are vaccinated, the newspaper said.

It quoted ministers as saying they were prepared to resist pressure from health advisers to delay the changes until most people are vaccinated, a process that could take until the autumn.

A spokesman in Johnson’s office declined to comment on the report.

The head of England’s public health service said the vaccination programme had made “a very strong start” but a quarter of people hospitalised were aged under 55, younger than the priority target groups.

“It’s not going to be the case that on Valentine’s Day or the 15th of February, with one bound we are free. But, equally, I don’t think we will be having to wait until the autumn,” Simon Stevens told BBC television, referring to the easing of restrictions.

“This is going to be a progressive improvement as we get more coronavirus vaccination supply.”

Criminal proceedings against Greg Kelly raise questions about governance and the alliance with Renault

Tokyo District Court’s Room 104 is a large, high-ceilinged vault which has witnessed the unravelling of some of the country’s most complex corporate scandals. Over the past four months, it has been dominated by a man who isn’t even there.

Carlos Ghosn, the former Nissan chairman who fled from Tokyo to a home and university position in Lebanon over a year ago, has escaped trial in Japan. That ordeal falls instead to his former right-hand man, Greg Kelly, who, for want of the same outsized music box and ex-Green Beret exfiltration squad that helped Mr Ghosn escape, has been in court since September. There he has fought charges of helping mastermind an $88m understatement of his former boss’s pay. Conviction could in theory see the American lawyer jailed for 15 years. The outlook for Nissan and its alliance with France’s Renault is not much more cheerful.

Four months into Mr Kelly’s Ghosnless trial, it has become plain how the prosecutors, working with the plea bargains of key figures and the co-operation (and sometimes dramatic appearances) of senior Nissan executives, intend to use the absent bogeyman. 

Mr Ghosn, whose domineering character as a business leader has been fleshed out with every witness statement, has been cast as a greedy, irresistible corporate tyrant. His demands, in this narrative, were never to be questioned; the executives on the receiving end of them, according to what they themselves said in court, wore their compliance as millstones. Mr Kelly is fighting as the proxy for an absent dictator made to loom menacingly over Room 104.

The tyrant-depicting strategy makes sense, but comes with a double risk. For the prosecutors, the danger — more obvious with each new witness from Nissan’s ranks — is that their selection of Mr Kelly as the sole non-Ghosn arrestee looks political. In their descriptions of assiduous or fearful service to a dictator, Nissan executives have, at the very least, admitted knowledge of the pay-concealing mechanism now under the microscope. Their freedom from prosecution jars with how seriously the court is being asked to take the very existence of the scheme and its corruption of corporate morality.

But arguably the greater risk is to Nissan’s efforts to make an unambiguous success of its post-Ghosn era. Since Mr Ghosn’s and Mr Kelly’s arrests in 2018, the Japanese carmaker’s governance standards and failure to place checks on its once-superstar leader were always going to be savaged. But the in-court strategy is now creating and committing to the public record a forensic account of just how dysfunctional that governance was. It might not be so bad were it not that Mr Ghosn rescued Nissan from oblivion and indisputably led the company into a golden era. But the more the Ghosn-era top echelons of Nissan decry him, the more they seem to suggest that the company, by nature, requires a dictator to succeed. By implication, it is also at sea without one.

Last week’s court appearance of Hari Nada, the whistleblower and former head of legal affairs, added two important dimensions to that problem. While Mr Ghosn may have provided Nissan with the tyrant it now lacks, the trial of Mr Kelly worryingly confirms that the former boss’s diplomacy and skill disguised how fundamentally unbalanced the Renault-Nissan alliance was.

Mr Ghosn’s motive for the pay-concealing scheme, alleged Mr Nada (but disputed by Mr Ghosn), was driven by a fear that if the true scale of his pay were revealed under disclosure rules introduced in 2010, that would play fatally with Nissan’s partner and 43 per cent shareholder, Renault. That fear was amplified, said Mr Nada, by concern that closer scrutiny of his financial affairs would arise from the Renault and Nissan alliance’s steady advance towards a merger. Mr Nada’s explanation reinforces the sense at Nissan that Mr Ghosn, in scrambling to hide from Renault what he was making from Nissan, had been able to profit more from the Japanese side of the alliance than from the French. That Japanese sense of resentment still sours the relationship. 

The more that the complex machinations of Messrs Ghosn and Kelly are described in Room 104, the more is revealed about how dependent the whole structure was upon the energy, wiles and alleged subterfuge of its Brazilian-Lebanese supremo. It might work as a prosecutorial strategy. But neither Nissan nor Renault benefits from the idea that these qualities also guaranteed the smooth running of an alliance upon which they both still depend.

pdf attached.

State investments to fuel growth are amplifying slowing growth in productivity, an IMF report finds

A surge in state investments has helped lift the Chinese economy from the effects of Covid-19, but likely has worsened one of its deepest weaknesses: low productivity.

Beijing has pulled off a robust economic recovery since early last year, when authorities locked down much of the country to combat the coronavirus epidemic. But the rebound has been unbalanced. It relied heavily on government expenditures and state-sector investments, while private spending remained weak.

That is amplifying a trend of declining growth in productivity—or output per worker and unit of capital—in the world’s second-largest economy, according to a new report by the International Monetary Fund. By the measure of average productivity across sectors, a gauge of overall economic efficiency, China’s economy is only 30% as productive as the world’s best-performing economies like the U.S., Japan or Germany, the report shows.

This poses a challenge to the leadership’s goal of elevating China into the ranks of rich nations and lifting its living standards.

“China has done most of the traditional public investment it can. It’s facing a shrinking labor force. So, where will lasting income growth come from?” said Helge Berger, the IMF’s mission chief for China. “Productivity.”

Since former leader Deng Xiaoping heralded an era of “reform and opening up” in the late 1970s, China’s economy grew by double-digit percentages most years for decades. Factories and workers also produced more efficiently, thanks to a gradual introduction of market-oriented policies and technological advancement.

However, productivity growth has declined markedly in recent years as the state sector gets bigger, crowding out private firms that tend to be nimbler and more profitable.

“The pandemic has added to the many interconnected financial vulnerabilities already present before the crisis,” the IMF report said, adding that the state’s support is prolonging the economic life of nonviable and low-productivity state-owned companies.

The IMF estimates productivity at Chinese state firms at about 80% of private firms.

The productivity slowdown traced back to the 2008 global financial crisis, when the government initiated a massive stimulus program to prop up economic growth, and accelerated further under President Xi Jinping.

The IMF estimates that annual productivity growth averaged just 0.6% between 2012 and 2017, a sharp decline from an average of 3.5% in the previous five years. The downward trend likely has continued, according to the fund, as China’s economic growth has weakened further.

State firms operate in all sectors of the Chinese economy, and they have seen their share of the economy grow. In 2018, total assets at those firms were valued at 194% of China’s gross domestic product—higher than in the early 2000s and “several orders of magnitude larger than in any other country,” the IMF said, based on the latest data available.

These state firms can often obtain loans at low interest rates, while private companies usually have a hard time getting banks to lend to them—despite the government’s repeated pledges to make financing more available. Still, state firms remain less profitable than private ones, and a higher share of state companies lose money, according to the IMF.

To catch up to advanced economies like the U.S., the fund said, Beijing will have to carry out long-promised state-sector reforms, such as improving state companies’ efficiency.

Mr. Xi had set out some ambitious goals to revamp the state sector soon after he came to power in 2012, including increasing its contributions to the country’s social safety net. However, “Beijing remains far from realizing” these goals, according to a Jan. 12 report by the China Dashboard, a research project between consulting firm Rhodium Group and the Asia Society Policy Institute, a think tank. A case in point, notes the report: More than 70% of the dividends state firms pay were reinvested back into the firms, not used for social spending.

Most recently, the government has also stepped up efforts to assert control over private businesses, especially those in the technology sector, a move that analysts say could further damp productivity growth.

A major push on state-sector reform, the IMF projects, could more than double annual productivity growth in the next five years to about 1.4% from 0.6%. This 0.8 percentage-point productivity improvement then would lift overall GDP growth by the same scale as well—for example, to 6% in 2022 from 5.2%, as estimated by the IMF.

Among the fund’s recommendations: ensuring a level playing field between private and state-owned firms, phasing out implicit financing guarantees for state companies, allowing nonviable state firms to be restructured or exit the market, and improving corporate governance at the remaining state companies.

The IMF cautioned that it is important to implement the changes step-by-step. For instance, given that state-owned corporate borrowers have long enjoyed implicit guarantees from the government that their debts will be paid off in the event of default, China’s banking and overall financial system would have to be strengthened first to make sure it is prepared for possible failures of state companies.

“We’re not saying do this overnight,” Mr. Berger says. “But we say, continue to work towards it, because that will help sustain income growth in the future.”

The newly formed auto maker, called Stellantis, to start trading Monday in Europe and Tuesday in New York

Fiat Chrysler FCAU -4.93% Automobiles NV and Peugeot-maker PSA Group PUGOY -5.70% cemented their trans-Atlantic merger Saturday, creating Stellantis NV, a global auto-making giant that executives say will have the heft needed to compete in a fast-changing industry.

The deal, first agreed to in late 2019 and approved earlier this month by shareholders, comes as the global car business is rapidly shifting to new technologies, such as electric vehicles, and battling upstarts trying to upend everything from the way cars are engineered and built to how they are sold.

Stellantis, derived from Latin term meaning “to brighten with stars,” ranks as the world’s third-largest auto maker by sales, according to 2019 figures, the latest available. At Friday’s close, it was worth more than $51 billion. The newly formed car company plans to start trading under the ticker symbol STLA on the Paris and Milan stock exchanges Monday and in New York on Tuesday.

Stellantis will have a major presence in North America and more than a quarter of the market in Europe, selling vehicles through a massive collection of brands, ranging from American names like Jeep and Ram to Peugeot, Citroën and Opel in Europe and Maserati and Alfa Romeo on the luxury end.

In a turbulent year for many global manufacturers, executives at FCA and PSA pushed forward with the merger, saying the challenges posed by the Covid-19 pandemic have only reinforced the need for the combination. They estimate the tie-up could eventually produce $6 billion in annual cost savings, in part by consolidating the two companies’ engineering and parts purchasing to drive larger economies of scale.

Still, the auto sector has a spotty record with megamergers and many of Stellantis’s rivals, including General Motors Co. , are moving in the opposite direction, retrenching from money-losing regions and shrinking their global operations to be more nimble.

Carlos Tavares, the PSA chief now leading Stellantis, faces numerous challenges in fitting these two companies together, including underperforming factories, lagging brands and an ailing China business.

“The trickiest part of every merger is when you have to mix all of the cultures,” said Carla Bailo, president of the Center for Automotive Research and a former co-worker of Mr. Tavares at Nissan Motor Co.

The 62-year-old Mr. Tavares is known in automotive circles for his success in turning around faltering businesses. When he first arrived at Peugeot from Renault in 2013, the company was bleeding cash. Within six years, he transformed it into one of the most profitable European car companies with PSA posting an operating margin of 8.5% in 2019. He later revived Opel and Vauxhall, two once-struggling European brands that PSA purchased from GM in 2017.

At PSA, the turnaround was largely achieved by pulling back on profit-damaging sales discounts and pushing the company to be hypervigilant about costs. He also trimmed the workforce without closing plants, negotiating new union agreements and eliminating jobs through buyouts.

It is a formula, some analysts say, he is likely to apply at Stellantis, which employs about 400,000 workers globally.

One of Mr. Tavares’s largest undertakings will be melding the two auto makers’ manufacturing operations, which together comprise nearly 50 factories globally—many of them operating at well below capacity, according to data provided by research firm LMC Automotive. He also needs to reinvigorate the business in China, where the two companies’ combined sales now account for less than 1% of a market that sold 20 million vehicles last year, and fix Fiat Chrysler’s money-losing operations in Europe.

On electric vehicles, Stellantis will be under pressure to match the investment being poured into the technology by competitors, like GM, which plans to spend $27 billion through 2025 on electric and self-driving cars.

While Fiat Chrysler and PSA have worked to expand plug-in offerings and secure battery supplies, the marketplace is becoming increasingly competitive with both traditional car companies and well-funded startups getting ready to release a wave of new electric models this year.

Stellantis plans to divert the bulk of the $6 billion in projected yearly savings to developing electric vehicles and other costly technologies. But first it must tackle areas of overlap in manufacturing and vehicle lineups, without closing plants and eliminating brands as executives have promised, a task that industry analysts say could be tricky as car companies continue to confront depressed sales during the pandemic.

Ms. Bailo says Mr. Tavares, a Portugese-born auto fanatic who spends many weekends racing cars, is likely to take time to assess the business and get to know his counterparts at Fiat Chrysler before making any major changes.

“He’s not the kind of leader who gives you a target and says, ‘Go find a way to meet it,’” she said. “He’s much more hands-on than the typical leader.”

Inheritor of Edmond de Rothschild private bank had taken a back seat to wife Ariane

Benjamin de Rothschild, chairman of the holding company for the Franco-Swiss private bank and asset manager Edmond de Rothschild, has died of a heart attack at the age of 57, the group announced on Saturday.

De Rothschild had already stepped back from the day-to-day running of the financial business he inherited from his father Edmond, leaving it in the hands of his energetic wife Ariane, while he pursued his passion for high-speed yacht racing and cars. 

“He has a great distance, a completely different temper,” she once told the FT. “I admire it because I can’t. I have to be totally hands-on.”

The group described Benjamin de Rothschild as a “visionary entrepreneur, passionate about finance, speed, sailing and automobiles, wine enthusiast [and] active philanthropist”. 

He leaves behind a family business created in 1953 that now has SFr173bn ($194bn) of assets under management. As well as wealth management, the group is involved in corporate finance, private equity and property. It employs 2,600 people at 32 locations across the world.

Cynthia Tobiano, deputy chief executive, said Edmond de Rothschild’s business would not be affected by Benjamin’s sudden death. 

“Obviously they discussed and took long-term decisions at the family holding level with him, but at the bank level Ariane is chairing the board, and with the executive committee designing and executing the strategy.” Edmond de Rothschild, based in Geneva, was taken wholly private in 2019. 

Ms Tobiano added: “Covid is a catalyst to go even further and faster on digitalisation when you can’t meet clients face to face.” 

Two branches of the extended Rothschild family finally settled a dispute over the name three years ago, with Paris-based investment bank Rothschild & Co and Edmond de Rothschild unwinding cross-shareholdings and agreeing not to use the Rothschild name by itself in branding. 

Last year Sergei Bogdanchikov, former head of Russia’s Rosneft, accused Edmond de Rothschild of engaging in a kickback scheme that pilfered millions of dollars from his investment fund and ultimately cost him more than $100m. The private bank declined to comment on the continuing case. 

In recent years, however, Benjamin de Rothschild was more focused on the family’s sailing sponsorships than on the business, including a campaign under way now for Gitana team’s high-speed, hydrofoiling trimaran to win the Jules Verne trophy by breaking the world record for circumnavigation under sail — which is currently just under 41 days. 

Victory in that challenge, said Ms Tobiano, “would be a great legacy, and one he would have loved”. 

Private financing boost for food delivery app ahead of long-awaited stock market debut

Deliveroo’s valuation shot up to more than $7bn in a new fundraising, in a sign confidence is growing among the food delivery app’s investors ahead of its long-awaited stock market debut.

The new private financing for one of London’s most prominent internet groups is the latest illustration of the frenzied investor appetite for high-growth companies, even as some analysts warn that tech valuations are becoming overstretched.

It suggests that Deliveroo’s backers believe its valuation can exceed $7bn in an initial public offering, which the company has for the first time publicly confirmed is in the works, after a blockbuster listing from US-based delivery app DoorDash last month.

Deliveroo said early on Sunday that it had raised $180m in new funding from existing investors, led by Durable Capital Partners and Fidelity Management, valuing the eight-year-old company at more than $7bn, without including the new funds raised. That is almost double its 2019 price tag, reported to be between $3-$4bn, when Deliveroo raised $575m from investors including Amazon.

Amazon’s funding did not close until August last year after an investigation by the UK’s competition regulator. Deliveroo was forced to take out a short-term £198m loan in 2019, when losses grew by a third to £317.7m.

Since then, pandemic lockdowns have supercharged the online food delivery business, more than doubling Deliveroo’s revenues in the UK and Ireland and pushing it into operating profitability during the second and third quarters of last year.

Will Shu, Deliveroo’s co-founder and chief executive, said the funding would “help us continue to innovate” in areas such as grocery delivery and its Editions network of “ghost kitchens”, which allow restaurants to expand delivery coverage without providing in-house dining. “We are really pleased our shareholders see the opportunity and growth potential ahead of us,” Mr Shu said.

Durable Capital, based in the affluent Maryland town of Chevy Chase, is also an investor in DoorDash and Affirm, two of the hottest tech IPOs of recent weeks, according to PitchBook, which tracks private investment.

“I have been impressed with the [Deliveroo] team’s ability to spot opportunities, innovate and adapt to changes in the market,” said Henry Ellenbogen, managing partner and chief investment officer at Durable Capital. “The online food delivery market is nascent and underpenetrated. We believe Deliveroo has the potential to become a much bigger company over time.”

Deliveroo has not yet indicated whether its listing, which could come as soon as April, will take place in London or New York, amid concerns that Brexit has dented London’s IPO appeal.

Last month, DoorDash saw its share price almost double on its first day of trading in New York. While DoorDash’s valuation rose above $60bn last week, its shares have been volatile, falling by almost 10 per cent on Friday without any obvious catalyst.

The difficulty in pricing new tech listings has caused some companies, including Roblox, to reconsider their IPO plans. However, European internet groups including Auto1, InPost and Moonpig have all indicated their intention to float in recent weeks.

Deliveroo’s new fundraising comes as it faces renewed competition in its London backyard from Just Eat Takeaway.com, Europe’s largest online food delivery group. Jitse Groen, chief executive of the food delivery group, said last week he would “make life very, very, very complicated for the competitors” in London by undercutting them on delivery prices and investing heavily in a new courier network.