Closing Market Summary: Indices Rise Along with Risk Appetite
The stock market ended the Wednesday affair on a higher note, rebounding from selling pressure in the opening hour. Factors impacting today's rebound included a positive reading of the ISM Services Index for June, a reversal in oil, softening in the dollar, and the outperformance of the heavily-weighted health care (+1.2%), consumer discretionary (+0.8%), and technology (+0.5%) sectors. The Nasdaq Composite (+0.8%) finished ahead of the S&P 500 (+0.5%) and the Dow Jones Industrial Average (+0.4%).
The major averages began the day on a choppy note as global bourses responded to implications from the United Kingdom's decision to leave the European Union. European indices led the losses as investors weighed reports from the U.K. that several real estate funds were halting redemptions due to liquidity concerns. Additionally, growing uncertainty in the Italian banking sector added to the negative bias in regional bourses.
U.S. equity markets shrugged off early weakness, responding in part to a better-than-expected reading of the ISM Services Index for June and a reversal in the biotechnology sub-group. The major averages extended their rebound through the afternoon as the minutes from the June FOMC meeting failed to rock the boat. The minutes indicated that the Fed will likely remain on hold, pending further economic data. Additionally, the central bank commented on the need to see the outcome of the Brexit referendum (the Fed meeting was held ahead of the vote) in order to better estimate the speed and path of interest rate normalization.
The benchmark index climbed in the final hour, testing and clearing resistance near the 2095/2096 price level. The S&P 500 (+0.5%) ended off its high with eight sectors trading in the green. The heavily-weighted health care (+1.2%) sector led consumer discretionary (+0.8%), and (+0.6%) energy. The remaining gainers finished with upticks between 0.2% (utilities) and 0.5% (technology).
In the health care space (+1.2%), biotechnology outperformed as the iShares Nasdaq Biotechnology ETF (IBB 266.24, +6.16) climbed 2.4%. In the ETF, Celgene (CELG 104.60, +4.35) gained 4.3% after signing a confidentiality agreement with Medivation (MDVN 62.33, +0.57). Additionally, Sanofi (SNY 41.23, -0.13) and Pfizer (PFE 35.86, +0.05) signed similar agreements, indicating that each could be exploring a potential transaction with Medivation. Elsewhere, Valeant Pharmaceuticals (VRX 23.06, +3.11) spiked 15.6% after Walgreens Boot Alliance (WBA 81.55, -1.97) announced during its conference call that it is pleased with its relationship with Valeant.
Retail names outperformed in the consumer discretionary sector (+0.8%), evidenced by the 1.5% gain in the SPDR S&P Retail ETF (XRT 42.29, +0.63). CarMax (KMX 50.45, +2.69) outperformed among specialty retailers, rallying 5.6%. Conversely, Netflix (NFLX 94.60, -3.31) ended lower by 3.4% after Jefferies downgraded the stock to "Underperform" from "Hold." This follows Netflix receiving a downgrade to "Hold" at Needham yesterday.
The economically-sensitive financial sector (+0.4%) finished modestly higher as banking names erased early losses. Wells Fargo (WFC 46.65, +0.44) and JPMorgan Chase (JPM 60.19, +0.64) ended the day higher by 1.0% and 1.1%, respectively. The two names began the day with respective losses of 0.7% and 1.1%. Real estate investment trusts were pressured through the session as risk appetite increased throughout the session.
The U.S. Dollar Index (96.05, -0.11) ended the day on a lower note as the euro and the yen gained ground against the buck. The euro/dollar pair ended higher by 0.2% (1.1103) while the greenback lost 0.4% against the yen (101.32). Separately, cable declined 0.7% (1.2931).
The Treasury complex finished on a mixed note as the yield on the 10-yr note ended flat at 1.37%.
Today's participation was above the recent average as more than one billion shares changed hands on the NYSE floor.
Today's economic data included the weekly MBA Mortgage Index, May Trade Balance, and June ISM Services:
- The weekly MBA Mortgage Index showed a seasonally adjusted increase of 14.2% in mortgage applications.
- The trade deficit widened to $41.10 billion in May from $37.40 billion in April.
- That was worse than the consensus, which expected the deficit to hit $40.00 billion.
- Exports were down $0.30 billion to $182.40 billion while imports increased $3.40 billion to $223.50 billion.
- The dynamic indicates some relative strength in the U.S. economy when compared to the rest of the world.
- On a year-over-year basis, exports were down 4.9% to $47.20 billion while imports declined 4.7% to $54.30 billion. The goods and services deficit declined 3.5% to $7.20 billion.
- The real goods deficit increased $3.60 billion to $61.10 billion, which will be a negative for Q2 GDP since it is above the first quarter average of $60.50 billion.
- The Non-Manufacturing ISM Report on Business (aka The ISM Services Index) increased to 56.5 in June from 52.9 in May. The consensus estimate was pegged at 53.3.
- The June report represented the 77th consecutive expansionary (i.e. above 50) reading and it was the highest mark of the year.
- However, the true test is likely to take place in the upcoming months as the index approaches a multi-year high near 60.0.
- The June improvement was driven by growth in most categories.
- Business Activity/Production increased to 59.5 from 55.1, New Orders increased to 59.9 from 54.2, Employment ticked up to 52.7 from 49.7, and New Export Orders improved to 53.0 from 49.0.
- Conversely, Prices slipped to 55.5 from 55.6 and Backlog of Orders declined to 47.5 from 50.0.
Tomorrow's economic data will include June Challenger Job Cuts and the June ADP Employment Change Report (consensus 152k), which will be released at 7:30 ET and 8:15 ET, respectively. Separately, weekly initial claims (consensus 268k) will cross the wires at 8:30 ET.
- Nasdaq Composite -3.0% YTD
- Russell 2000 +1.0% YTD
- S&P 500 +2.7% YTD
- Dow Jones +2.8% YTD
Sale of Germany's Hahn airport to Chinese firm close to collapse - Reuters News
06-Jul-2016 18:03:49
FRANKFURT, July 6 (Reuters) - The sale of loss-making German airport Frankfurt-Hahn to a Chinese investor appears close to collapse, the airport's local government owner said on Wednesday, after the buyer failed to make an initial payment last week.
"Talks in Shanghai seem to point towards a collapse of the sale to (China's) SYT," said Roger Lewentz, the interior minister for the federal state of Rhineland Palatinate, which is the airport's main owner.
The owners of Hahn, a former military base now used mainly by budget airline Ryanair RYA.I, had planned to sell an 82.5 percent stake to China's Shanghai Yiqian Trading Company (SYT).
However, Rhineland Palatinate said the company failed to make an initial payment last week, blaming a lack of Chinese regulatory approval for the money transfer.
Lewentz, alarmed by the missing payment, called on auditor KPMG to carry out due diligence on the buyer and dispatched a state secretary to China to investigate the company.
The secretary discovered in talks with Shanghai's municipal commission of commerce that SYT only contacted Chinese authorities for the first time on Tuesday, Lewentz said in a statement, adding no documents to seek permission for the money transfer had been filed.
Reuters has been unable to find contact details for SYT to seek a comment.
Lewentz said he continued to back the privatisation of the airport, despite criticism from opposition politicians over the handling of the sale.
Talks with two unidentified bidders have resumed, he said, without giving details.
If only Fed Governors and Presidents understood a little bit more about Monopoly, and a tad less about outdated historical models such as the Taylor Rule and the Phillips Curve, then our economy and its future prospects might be a little better off. That is not to say that Monopoly can illuminate all of the problems of our current economic stagnation. Brexit and a growing Populist movement clearly point out that the possibility of de-globalization (less trade, immigration and economic growth) is playing a part. And too, structural elements long ago advanced in my New Normal thesis in 2009 have a significant role as well: aging demographics, too much debt, and technological advances including job-threatening robotization are significantly responsible for 2% peak U.S. real GDP as opposed to 4-5% only a decade ago. But all of these elements are but properties on a larger economic landscape best typified by a Monopoly board. In that game, capitalists travel around the board, buying up properties, paying rent, and importantly passing “Go” and collecting $200 each and every time. And it’s the $200 of cash (which in the economic scheme of things represents new “credit”) that is responsible for the ongoing health of our finance-based economy. Without new credit, economic growth moves in reverse and individual player “bankruptcies” become more probable.
Tullow Oil plc Convertible Bond Offering - Initial pricing
NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933), OR IN OR INTO CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR IN ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Tullow Oil plc Convertible Bond Offering
6 July 2016 -Tullow Oil plc (the "Group", the "Company" or "Tullow Oil") announces the initial pricing terms of its offering (the "Offering") of $300 million of Convertible Bonds due 2021 (the "Bonds"), announced earlier today.
The proposed Convertible Bond Offering will further diversify Tullow Oil’s sources of funding and the proceeds will be used for general corporate purposes and to fund capital investment in the Group’s assets in West and East Africa.The Bonds are issued at par and will have a coupon of 6.625% per annum payable semi-annually in arrear on 12th January and 12th July in each year, with the first interest payment date being 12th January 2017. The Bonds will be convertible into fully paid ordinary shares of the Company (the "Ordinary Shares"). The initial conversion price will be set at a premium of 30% above the volume weighted average price of an Ordinary Share on the London Stock Exchange between opening and closing of the market on 6th July 2016 converted at the prevailing USD:GBP spot rate.
Settlement is expected to take place on or about 12th July 2016 (the "Settlement Date").
Ian Springett, Chief Financial Officer of Tullow Oil commented:
"We are very pleased with the result of this bond offer which reflects the confidence that the market has shown in the Group’s business and financing strategy. The high level of demand has enabled us to strengthen our balance sheet and diversify our sources of capital."
It is intended that an application will be made for the Bonds to be listed on a recognised stock exchange (as such term is defined in section 1005 of the Income Tax Act 2007) prior to the first interest payment date (expected to be 12th January 2017) – expected to be the Channel Islands Stock Exchange.
Barclays Bank PLC and BNP Paribas are acting as Joint Global Coordinators and Joint Bookrunners (the “Joint Global Coordinators”). Crédit Agricole CIB, J.P. Morgan, Natixis and Société Générale Corporate & Investment Banking are acting as Joint Bookrunners (together with the Joint Global Coordinators, the "Joint Bookrunners"). ABN AMRO, BofA Merrill Lynch, DNB Markets, ING, Lloyds Bank, Nedbank Limited, London Branch, SMBC Nikko, Standard Chartered Bank and The Standard Bank Of South Africa Limited are acting as Co-Lead Managers for the Offering.
This press release does not constitute or form part of any offer or solicitation to purchase or subscribe for or to sell securities and the Offering of the Bonds is not an offer to the public in any jurisdiction.
For further information contact:
Tullow Oil plc
London
+44 20 3249 9000Investor Relations
Chris Perry
James ArnoldMedia Relations
George Cazenove
Citigate Dewe Rogerson
London
+44 20 7638 9571Martin Jackson
Grant RingshawMurray Consultants
Dublin
+353 1 498 0300Pat Walsh
Joe Heron
Notes to editors:
Tullow Oil plc
Tullow is a leading independent oil & gas, exploration and production group, quoted on the London, Irish and Ghanaian stock exchanges (symbol: TLW). The Group has interests in over 120 exploration and production licences across 22 countries which are managed as three Business Delivery Teams: West Africa, East Africa and New Ventures.
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The latest Yahoo offers are due tomorrow, with the final round expected in two weeks
Yahoo suitors will offer up their third round of bids tomorrow, according to sources close to the situation, yet another sluggish step in the endless process that has become the sale of the former Silicon Valley powerhouse.
Remaining bidders — including Verizon and a group headed by Quicken Loans’ Dan Gilbert — have been told that the final selection process will take place around July 18.
For those just tuning in: Gilbert, who is fresh off a big win after his Cleveland Cavaliers bested the Golden State Warriors in the NBA finals, has the financial backing of Warren Buffett. The effort by Verizon, the telecom giant that has long been considered the front-runner for Yahoo, is being led by AOL head Tim Armstrong.
Those bids and others from private equity players such as TPG have ranged from about $3.5 billion to over $5 billion, depending on whether patent and real estate assets are included.
That’s obviously quite low — especially compared to the recent fast and furious $26 billion sale of LinkedIn to Microsoft, which included a number of other bidders. More to the point, it’s not much more than Yahoo CEO Marissa Mayer has paid out for a spate of largely unsuccessful acquisitions in her four-year tenure.
It will be interesting to see how activist shareholder Starboard Value — whose leader Jeffrey Smith now has several Yahoo board seats — will react to what are essentially subpar offers for the company. He had pushed for the sale and now is presiding over what could be a very tepid one.
While some involved have predicted that the low, low prices offered might cause no sale to happen at all, Yahoo shares have jumped several dollars in the last month as investors anticipate the eventual deal. In addition, rumors of more buyers entering the scene continue to circulate, such as the notion that SoftBank (owner of Yahoo Japan, in which Yahoo holds a big stake) could make an offer now that former Googler Nikesh Arora has left. He was pushing for an end to large annual fees that Yahoo was paid by the Japanese company for its ownership in the asset, but was against any bid.
Yahoo held what could be its final annual shareholder meeting last week. There, Mayer had nothing to say about the sales process but did note that her turnaround efforts continue to show promise. We’ll see results of that contention on July 19, a day after the final pick could be named, when Yahoo is most likely to announce its second-quarter earnings.
If those results are bad, as expected, it won’t be good; hence the impetus to get some outcome before those financials are out there and stinking up the place.
What else? Not much, but in this ongoing soap opera, you never know. Perhaps some news will come out of the annual Allen & Co. event taking place in Sun Valley this week— although it is highly unlikely, given that the Kabuki montage of shorts-wearing moguls being licked up and down is pretty much all the coverage you get from there. In any case, many of the Yahoo bidders, except apparently not Mayer, are expected to attend, so perhaps there will be some chatter around the billionaire campfire.
Aker BP deal could presage more PE interest in the Norweigan Shelf, bankers say
Last month’s Aker BP ASA deal could set the stage for additional private equity interest in the Norwegian Continental Shelf (NCS), said two industry bankers.
Under the 10 June deal, BP’s [LON:BP] BP Norge unit is to be combined with the Norwegian operations of Det Norske [STO:DETNORO] to form Aker BP for USD 140m in cash, working capital adjustments, and 30% equity.
The combination would create a USD 5.9bn company by enterprise value focused on the NCS, and is expected to close in 3Q16 pending shareholder and regulatory approval.
Private equity is increasingly interested in the region given the profitability of assets relative to those located in the UK, a third banker said. Cash-strapped oil and gas companies currently operating in the NCS face decommissioning liabilities to cut costs that could bring them to the sellers table, the first banker said.
The commodities rout creates an opportunity for PE vehicles like Neptune Oil & Gas, the first banker said. Neptune was launched by Carlyle Group, CVC and industry veteran Sam Laidlaw in 2015, with the aim of targeting acquisitions of up to USD 5bn (GBP 3.8bn). The fund could be the kind of well-capitalized fund that answers difficulties faced by current operators, the banker reasoned.
While the fourth banker noted oil and gas leveraged buy-out could be tough to finance in the current environment, the second banker argued several funds were targeting NCS assets.
BP noted that its sale process for BP Norge drew cash offers from several private equity funds. The company opted for the equity-for-asset structure instead of a cash payment to realize upside from the deal, BP CEO Bob Dudley said on a conference call.
However, BP Aker’s deal structure may make it an exception, the first and second bankers noted. Many NCS operators trade at a discount to NAV, creating an opening for PE funds to make acquisitions, the first banker said.
Leading NCS producers include Total [EPA:FP], Statoil [STO:STLO], ExxonMobil [NYSE:XOM], Shell [LON:RDSA], Eni [BIT:ENI], and ConocoPhillips [NYSE:COP]. Other producers generating lower volumes than the new Aker BP include DEA, BASF’s [ETR:BAS] Wintershall, Engie [EPA:ENGI], OMV [VIE:OMV], Dong Energy [CPH:DENERG], Centrica Energy [LON:CAN], Lundin Petroleum [STO:LUPE], Petroro and Hess [NYSE:HES].
L1 Energy’s DEA has a NCS profile, which could make it an ideal target for PE interested in the region, said a fourth banker. The Hamburg, Germany-based exploration and production company ranks just below a combined Aker BP in terms of millions of barrels of oil per day of production, according to the companies’ presentations. The company might attract significant interest, the fourth banker noted. DEA posted nearly 50% EBITDA margins on EUR 2bn in external sale revenues in 2014, the most recent figure provided.
Lundin Petroleum could also be a candidate for an NCS divestiture, the third banker said. The group might be open to a recapitalization given a similar deal with Statoil [STO:STLO] last month, the third banker said. Lundin sold a stake that increased Statoil’s holding to 20.1% in exchange for equity stakes in oil assets and a USD 64m cash payment.
Lundin currently trades at a 6.9% discount to a SEK 160/share risk adjusted NAV/share calculated by a Bank of America in a March analyst note.
Other NCS producers facing decommissioning liabilities could also see interest from PE funds, the first banker said, declining to specify further targets. Oil majors capable of funding liabilities have largely taken a pass on additional investment in the shelf, the first banker added.
Lundin and DEA did not respond to requests for comment. Neptune was not immediately available for comment.