WSJ : Mall Landlord Gets Lucky With Fresh Lockdowns

Mall Landlord Gets Lucky With Fresh Lockdowns
Restrictions in Europe are bad for business but may help Unibail-Rodamco-Westfield to get backing for a controversial rights issue

Europe’s biggest mall landlord has an interest in talking down its business at the moment. New lockdowns in France and the U.K. could make it easier to persuade investors to approve an unpopular €3.5 billion, equivalent to $4.08 billion, rights issue instead of listening to activists.

Unibail-Rodamco-Westfield, URW -1.95% whose portfolio includes the Westfield malls in the U.S. and London, released much improved quarterly results on Sunday. The company collected 79% of the rent it was owed in the three months through September, up from just over half in the second quarter. Tenant sales also recovered during September at the company’s U.S. and European malls, although they were still down compared with the same month last year.

The improvement is a bit awkward for executives who are trying to convince investors to vote for the rights issue next week. A consortium of unhappy shareholders that own 5% of the stock, including the company’s former boss Leon Bressler and French billionaire Xavier Niel, argue that there’s no rush to issue equity—especially now that the shares are trading at a huge discount to the value of the company’s portfolio net of debt. URW admitted that it has “ample” headroom before it risks breaching debt covenants.


Investors, then, need to make a judgment call about whether URW will continue to have easy access to the bond market. The business must refinance around €3 billion of debt every year between now and 2025. Banks’ credit committees may also become skittish about rolling over a €9 billion credit line if the company’s liabilities remain as debt-skewed as they are today. Unibail is carrying net debt worth 12 times its earnings before interest, taxes, depreciation and amortization over the past year.

Meanwhile, Europe is locking down again: Nonessential retail will be shut for most of November in both France and the U.K., two big URW markets. The company has provisioned €40 million for rent relief due to the new measures. Repeated lockdowns make it harder for tenants to survive the crisis and the outlook for URW’s rental income grows more uncertain.

The company’s investors have had a terrible time. Over €20 billion of shareholder value has been destroyed since late 2017, half of it attributable to the Westfield purchase, the activists argue. Mr. Bressler bought the stock at around €120 in mid-2019 and it now stands at €34. His potential losses were compounded by a margin call, although all of the financing has been repaid.

URW’s current management team has lost a lot of credibility with investors, but they may get what they want. Perversely, the rapidly deteriorating retailing environment in Europe is strengthening the case for the rights issue.

FT : Beijing interviews Jack Ma over $37bn Ant IPO

Beijing interviews Jack Ma over $37bn Ant IPO
Four Chinese regulators call in Ant founder and 2 other executives for questions ahead of Thursday listing

The People’s Bank of China and three other Chinese regulators said on Monday that they had summoned Jack Ma, the founder of Ant, and two other executives for questions ahead of the company’s $34bn public offering, with shares due to start trading on Thursday.

In a brief statement on Monday, the PBoC, the China Banking and Insurance Regulatory Commission, the Securities Regulatory Commission and the State Administration of Foreign Exchange said they had “conducted regulatory interviews with Ant Group’s actual controller Jack Ma, chairman Eric Jing, and chief executive Simon Hu.”

There were no further details.

Mr Ma last month gave a speech in Shanghai criticising regulators in China and abroad over their excessive regulation of banking and financial technology.

Ant’s IPO in Shanghai and Hong Kong is expected to be the world’s biggest, after investors signed up for $37bn of shares. Last Thursday, the company’s bankers increased the offer after retail bids exceeded the value of shares on sale by more than 870 times. The expanded deal valued the company at about $316bn.

FT : Hedge fund GSA moves low-cost fund into high-fee markets

Hedge fund GSA moves low-cost fund into high-fee markets
Move poses challenge to rivals after GSA helped push down industry fees

GSA Capital has shifted some of its low-cost Trend Fund into products that trade off exchanges, a more opaque area of financial markets where hedge fund rivals have typically commanded much higher fees.

The Mayfair-based firm, one of London’s biggest computer-driven hedge funds, shook up the quantitative trading sector when it launched its $1.7bn Trend Fund in 2013 with a 0.5 per cent flat fee — a challenge to the industry norm at the time of charging 2 per cent management fees and 20 per cent of returns.

Now, it is pulling some of the Trend Fund away from conventional markets like currencies, bonds and equities, and is dabbling in interest rate swaps, said a person familiar with its strategy. It is also considering trading interest rate swaps in emerging markets, this person said. If successful, this strategy could force rivals to cut fees again. GSA declined to comment.

About one-quarter of GSA’s Trend Fund assets are now in alternative markets, around half of which is in interest rate swaps, while the fund has been trading some emerging market currencies for some time. The firm may also launch a separate fund focused on alternative markets in the future, said the person familiar with its plans.

As fees have fallen and returns from trend-following in major markets have waned, some quantitative firms have expanded into more niche or harder-to-access alternative markets, where they can charge higher fees.

These markets can include assets as diverse as German power, over-the-counter derivatives, cheese, sunflower seeds and cryptocurrencies — markets where added complexity may offer greater moneymaking opportunities.

Leda Braga’s Systematica Investments, Man Group’s AHL unit and Aspect Capital all run funds trading such alternative markets. Several years ago Doug Greenig, a former chief risk officer at AHL, also overhauled his hedge fund, Florin Court Capital, which had been trading mainstream markets, to focus solely on niche markets.

The low-fee approach by GSA, which was set up in 2005 through the spinout of the global statistical arbitrage desk from Deutsche Bank, may not work. Some industry insiders argue that the cost and complexity of trading and pricing some of these assets will make it challenging and require a higher fee.

The move also comes as alternative markets, which have yielded strong returns in recent years but which tend to be tougher to trade in, suffer during the coronavirus crisis.

AHL Evolution is down 1 per cent this year, having made more than 15 per cent last year, while Systematica’s Alternative Markets fund has lost 8.5 per cent, having gained about 27 per cent last year, according to figures sent to investors. However Gresham Investment Management’s Alternative Commodity Absolute Return fund is up about 8 per cent, helped by bets against some commodities earlier this year.

AHL’s $3.8bn Evolution fund, for instance, which trades alternative markets, has been charging clients a 2 per cent management fee and 20 per cent performance fee. That is in contrast to the wider hedge fund industry, where fees have been under pressure for years and where average management fees now stand at 1.37 per cent and performance fees are 16.37 per cent, according to data group HFR, the lowest levels on record.

GSA, which manages about $4bn in assets, grew its Trend Fund to more than $5bn at its peak, although like many trend-followers its performance has suffered and it has posted losses in recent years.

(MAKOR) FIRST VIEW - KIADIS PHARMA (KDS NA)

MAKOR FIRST VIEW - KIADIS PHARMA (KDS NA)



KIADIS PHARMA (KDS NA)                                     

First View  

The transaction today follows the announcement in July that SAN licensed KDS’ pre-clinical K-NK004 program for multiple myeloma. The move today will also enable SAN to “restock” its pipeline with promising cancer medications following the aging of some of its blockbuster products. KDS has a proprietary platform based on “off-the-shelf” cancer-seeking NK cells from a healthy donor as well as developing several therapies with the same technology which could lead to cheaper treatments across a range of cancer types. We remind that SAN also completed the acquisition of Principia Biopharma at the end of September.

The transaction has been unanimously approved by the KDS boards. SAN have also secured an irrevocable from Life Sciences Partners with c.18.3% shareholding.

SAN have said they expect to submit a request for the review and approval of the Offer Document at short notice. We anticipate that the Offer could be submitted to the AMF by early-mid Jan 21 and for the Offer to commence by late Jan-early Feb 21. We estimate the KDS EGM will be held in late Feb 21.

The requisite antirust/regulatory approvals have not been detailed but the companies have indicated that the combination is not expected to raise antirust concerns and we anticipate the approvals could be obtained in the first phase.

We think the significant premium and risks associated with any potentially negative announcements on clinical trials prior to the filing of the Offer could partly explain the current 6.70% spread. We also remind that under the Dutch Takeover Code, SAN have up to 12 weeks to submit the Offer Documentation for approval with the AFM. The certainty of funds statement is also not due until the filing of the draft documentation with the AFM. However, we view the agreement by SAN and KDS of the principal terms of a bridge loan facility in the aggregate amount of €28m to be provided by one of SAN’s wholly owned subsidiaries to KDS, to be entered into within five weeks from today (i.e. by 7 Dec) as a positive, indicating SAN’s commitment to the transaction.

The large spread is likely due to the fact that the Offer only becomes irrevocable once it is filed/approved by the AFM. However, in our view, the relatively small size of the deal makes the overall deal price rather inconsequential for SAN and we assume the spread will continue to remain wide until the publication of the definitive Offer Documentation.

 

 

The gross spread is currently €0.37 (6.70%), annualizing to 14.91% assuming a 15 April 21 settlement date. 

 

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • TEN -4.3%, USFD -3.1%, HZNP -1.8%, MPC -0.7%

Other news:

  • JNCE -29.1% (provides update on vopratelimab program; plans not to expand EMERGE trial ) VIX -3.5% (trading lower with US futures on the rise)
  • GEO -2% (files mixed securities shelf offering)
  • BIOX -1.2% (files for 7,469,488 share common stock offering by selling shareholders) .

Analyst comments:

  • OLLI -1.3% (downgraded to Underweight from Overweight at Wells Fargo)
  • SAP -0.7% (downgraded to Neutral from Buy at UBS)
  • APTV -0.5% (downgraded to Hold from Buy at The Benchmark Company)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • CWH +7.6%, NLSN +6.1% (also divests its Global Connect Business to Advent International for $2.7 bln), EL +5.6%, LITE +5.5%, BCC +4.9%, HSIC +4%, AMCX +3.5%, EGRX +2.9%, CLX +2.3%, IAA +2%, CDW +1.5%, LDOS +1.2%, FE +1%, WM +1%, MPLX +0.9%, LL +0.6%

Select index ETFs showing strength:

  • DIA +1.5%, SPY +1.2%, IWM +1.2%, QQQ +0.8%

Other news:

  • DBVT +72.7% (announces filing and validation of Marketing Authorization Application for Viaskin Peanut by EMA)
  • DNOW +13.5% (announces that Dick Alario has stepped down from his short-term role as Exec Vice Chairman)
  • NIO +10.6% (reports October deliveries increased 100.1% yr/yr)
  • LI +7.5% (reports deliveries of 3,692 Li ONEs in October, representing a steady increase compared to September)
  • XPEV +7% (reports October deliveries increased 229% yr/yr to 3040 vehicles)
  • RYTM +6.3% (reports results from Phase 3 clinical trials of Setmelanotide published in The Lancet Diabetes & Endocrinology)
  • DNKN +6.2% (to be acquired by Inspire Brands for $106.50 per shar)
  • GCO +3.5% (announced that Melvin Tucker, senior vice president and CFO has resigned his position, effective November 27, 2020, in order to pursue an opportunity outside of the Company, and will assist in ensuring a smooth transition)
  • GRWG +2.7% (to acquire The GrowBiz)
  • NRZ +2.4% (authorized the repurchase of up to $100 million of the Company's preferred stock)
  • SNY +2.1% (to acquire Kiadis Pharma for EUR308 mln)
  • CSTL +1.7% (announces commercial launch of DecisionDx DiffDx-Melanoma)
  • EVA +1.5% (increases quarterly distribution to $0.775/unit from $0.765/unit) GM +1.4% (appoints Paul Jacobson as CFO, effective December 1)
  • NVS +1.4% (reports positive results from a Phase IV study showing superior tolerability and efficacy of Aimovig)
  • BDX +1.2% (receives order for more than nine million 15-minute COVID-19 Antigen Tests from Dutch Ministry of Health)
  • IMUX +1.1% (announces 200 patients enrolled in its phase 2 CALVID-1 Trial of IMU-838 for the treatment of moderate covid-19, allowing for main phase 2 efficacy analysis to proceed)
  • TLSA +1% (initiates clinical trial with Covid-19 patients in Brazil with nasally administered Foralumab)

Analyst comments:

  • HEAR +4.6% (upgraded to Outperform from Neutral at Wedbush)
  • PLT +3.7% (upgraded to Overweight from Neutral at JP Morgan)
  • UAA +3.3% (upgraded to Buy from Hold at Stifel)
  • WYNN +3% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • JRVR +2.7% (upgraded to Buy from Neutral at Compass Point)
  • COP +1.4% (upgraded to Buy from Neutral at BofA Securities)