13:12:41 RTRS - NORWAY'S OIL MINISTER SAYS STATOIL'S BOARD AND MANAGEMENT MUST ASSESS OVERALL FINANCIAL SITUATION WHEN DECIDING HOW TO MEET COMPANY'S CHALLENGES STL.OL
An Australian-owned company has emerged as a frontrunner to take on a UK taxpayer-owned mortgage business, Sky News learns.
Sky News has learnt that UK Asset Resolution (UKAR) is in advanced talks about an arrangement which would see its mortgage servicing unit transferred to a private sector operator under a long-term contract.
Sources said on Monday that Capita, the outsourcing giant, was in competition with an Australian-owned company to take on the UKAR Corporate Services division.
A Treasury insider said that HML, a division of Computershare, was the frontrunner to secure a deal although they cautioned that it remained finely balanced.
A decision about the outcome and the terms of an agreement could come as soon as this month, they said.
The mortgage servicing platform, which administers the Government's Help to Buy scheme, is seen as an attractive asset because of its technology capability and the prospect for it to take on a broader range of business across the banking industry.
If successfully concluded, a deal would follow the £13bn sale of Granite, a securitisation vehicle established by Northern Rock in 2001.
It would also come as ministers prepare for a review of options for a £17bn Bradford & Bingley loan-book, which if sold would be the largest such sell-off in UK history.
Mr Osborne hailed the Granite sale in November as "another major milestone in clearing up the mess left by the financial crisis", saying it was the largest-ever sale of financial assets by a British government.
"We are now clear that taxpayers will get back more money from Northern Rock than they were forced to put in during the financial crisis.
"The highly competitive process, unprecedented scale, and the fact that these mortgages have been sold for almost £300m more than their book value demonstrates the confidence investors have in the UK, which has only been made possible by the success of our long term plan," the Chancellor said.
However, the Granite sale has attracted the scrutiny of MPs, in relation to both the identity of the buyer - Cerberus, a US investor - and the nature of the protection for customers.
B&B was bailed out by the Labour government in September 2008, with Santander UK buying its retail deposit business and the bank's remaining assets and liabilities - principally comprising its mortgage book, personal loan book, headquarters and relevant staff, and treasury assets and its wholesale liabilities - taken into public ownership.
UKAR declined to comment on the prospective Corporate Services deal.
Time Warner’s loyal investors would support sale of company
It’s not just activist shareholders who want to see big changes at Time Warner.
Two of the New York media giant’s largest longtime investors are also running out of patience and would support a sale of all or parts of the company, The Post has learned.
Time Warner Chief Executive Jeff Bewkes was slated to meet with one of the company’s biggest investors last week as he tries to head off a potential proxy fight, sources said. He is scheduled to meet with another top investor this week.
“These guys want to see change,” referring to a sale, said one source with direct knowledge of the situation. “Everyone wants a change there.”
Time Warner declined to comment.
The face-to-face meetings come as activists circle the company. Already one well-known activist has taken a position in Time Warner, according to a source who declined to name the fund.
Several sources said they believe Carl Icahn, who waged a battle a decade ago to break up Time Warner, is buying up shares and will take another run at the company.
Icahn did not return calls seeking comment.
The Post reported last week that former Icahn protégé Keith Meister, the head of Corvex Capital Management, is building an activist position in Time Warner.
In 2006, Icahn unsuccessfully pushed then-CEO Dick Parsons and No. 2 Bewkes for a Time Warner breakup. After Bewkes rose to the top job two years later, he followed Icahn’s blueprint and spun off several of its businesses, including Internet unit AOL, Time Warner Cable and the Time Inc. publishing division.
While Bewkes has streamlined the company, he rebuffed a 2014 takeover bid from 21st Century that valued Time Warner at $85 a share.
Fox denied last week it had made a new offer to buy Time Warner, home to HBO, cable networks TBS and TNT and the Warner Bros. film studio.
Shares of Time Warner closed Friday at $71.17, roughly where they were before 21st Century made its bid. The shares were trading as low as $65.52 just a week ago before shooting up on hopes that activists might force a sale.
Time Warner shares have been slumping, along with the rest of the media sector, on fears that cable-TV programmers won’t be able to command big rate hikes from distributors as more cable customers cut the cord. Traditional pay-TV is also facing growing competition from streaming services.
There is speculation that Amazon, which is ramping up its Prime video streaming service, would be interested in buying the content-rich Time Warner.
The situation could come to a head soon with all of Time Warner’s board seats coming up for election this year. Activists could spark a boardroom battle by nominating their own slate of directors, starting in late February, sources said.
That doesn’t give Bewkes much time to appease restless shareholders.
Nevertheless, Bewkes just re-upped his contract to stay on another three years — a sign that he has the backing of the board. His deal includes a “golden parachute” in the event the company is sold.
Conference post-view: Key takeaways, themes, sentiment, and investor survey results
Supply response key over next few months
We continue to believe it may take another few months to have greater confidence in the extent of the US supply response and whether it is sufficient. At the conference, the bulk of companies indicated
they plan to keep 2016 capital expenditures within cash flow or within cash flow after asset sales, and companies with existing 2016 guidance/commentary appear likely to reduce their guidance over the next
two months. So companies are directionally moving towards the mindset of $40/bbl oil or less when setting budgets (vs. $50/bbl in 4Q15); continued low oil prices are needed ahead of actual guidance.
Activity falling, but OFS deflation persists
With oil prices at low levels, oil service companies have limited visibility on how weak 2016 could be – land drillers predicted rig activity could fall another 10%-20% in the US and around 10% in the international markets. Offshore drillers project a drop of 10%-15% in jack-up/floater rig count in the coming 12-months. There was mixed commentary on services/product pricing with stabilization for pressure pumpers/land drillers and continued declines for offshore equipment/sand/well servicing.
Conference M&A datapoints mixed
Super majors (XOM, COP) noted the bid-ask spread as it relates to producer M&A is relatively wide, although XOM noted the spreads are showing signs of tightening. Among E&Ps, the need to take out
weaker balance sheet producers’ debt at a significant premium to current levels made M&A something that many viewed as less likely. Offshore drillers and midstream companies indicated potential
consolidation activity may pick up in the year ahead.
Equity issuance a double edged sword
Pioneer’s $1.4 bn equity offering (Jan 5) could open the door for others to test waters, particularly given credit market tightness. We believe other companies – particularly those seeking to avoid a credit rating
downgrade and/or those expecting oil prices to fall in 2017 – could look to issue equity. While this could help individual companies, it has increased investor concerns that financial stress is insufficient to bring
oil markets back into balance.
Sentiment is bearish NT; constructive LT
Investors are not calling for a sharp recovery in oil prices, though there is still an optimistic view that the oil market will begin to tighten in 2H 2016.
Buffett’s revenge
Services like Airbnb are altering the economics of the hotel business
FOR those exhausted by the festive season, now is the time to book a holiday. Hotels in New York’s Times Square cost four times more on New Year’s Eve than they do just a week into 2016; a room at the cheapest four-star property in Cancún in Mexico on December 31st was half as dear by January 7th.
The economics behind this price crash are simple: hotels are expensive to build and staff, and demand for them is seasonal. Only by ramping up prices at peak times can they be run profitably. But seasonality inflicts wider economic costs than eye-watering bills. Tourists find other destinations because rooms are full on their desired dates and, despite lower prices, inventory goes unused during the off-season. One-off events like sports tournaments, concerts and conferences can exacerbate the problem of mismatched supply and demand, by flooding cities with visitors for just a few days.
The shareholders’ meetings in Omaha, a Midwestern American city, of Berkshire Hathaway, a financial conglomerate, provide a good illustration. In 1980 12 people showed up to the first one, including the firm’s boss, Warren Buffett. These days, the gathering draws some 40,000, the equivalent of nearly 10% of the city’s population. Omaha’s few hotels have built their business models around this surge, jacking up prices to as much as $400 a night and imposing three-day minimum stays around the one-day event. This has outraged the frugal Mr Buffett, who has threatened to move the conference to Dallas.
Happily, home-sharers have begun to offer some competition. In the three weeks before the 2015 meeting, 1,750 Omaha residents added new properties to Airbnb—the equivalent of three Omaha Hiltons, the city’s biggest hotel. That brought the number of Airbnb listings in the city to 5,000, of which 76% were occupied on May 1st at an average price of $209. Moreover, Airbnb hosts only charged 60% more during the meeting than in days before and after. The surge at hotels was 200% or more.
Omaha may be an exceptional case, but it reflects a trend. Across the 31 specific events for which Airbnb shared data, the number of listings rose by 19% in the three preceding weeks. Three times as many stays occurred during the period of the events as in the weeks before and after. Even cities where supply has expanded slowly are seeing more stays. Airbnb bookings during the Volta art fair in Basel, Switzerland, last year were 268% higher than during the neighbouring weeks, even though listings rose by only 6%.
The Airbnb figures do not spell the end of extortionate hotel prices. Spare-room rentals and hotels are not perfect substitutes: many visitors want the service and convenience of a hotel. Room rentals, naturally, have more of an impact in smaller cities than in big ones, which can more easily absorb an influx of visitors. Airbnb’s turnover in Paris during the 2015 French Open tennis tournament rose by a mere 4%.
But by easing temporary supply squeezes, room rentals may change the economics of the hotel business, at least in smaller cities. If hotels can no longer double their prices when demand peaks, that could drive weaker properties out of business. Those that stay afloat may need to increase rates at other times of year, which could further depress off-season travel and hurt complementary businesses such as restaurants and taxis. Conversely, more room rentals should also mean that more money flows directly to residents every time small cities stage a tourist-magnet event. (Airbnb passes on around 85% of guests’ total payments to hosts, whereas hotels spend just 30-35% on labour.) At the margin, that might increase municipal governments’ appetite to host such events. Omaha 2024, anyone?
* Bearishness on the sector is reaching new highs. New year but same volatility and China macro uncertainties. The luxury sector underperformed the market by 15% in the last three months, the short interest has risen for almost all our stocks in 2015, bearishness among the sell side is nearing all-time highs and the sector P/E de-rated to a c.10% premium to European equities. We believe a poor 4Q and slow growth in 2016 are now partly baked into expectations but we still see downside risk to our +4% organic sales growth forecast in 2016e, broadly in line with current consensus.
* Pressure on the cost base may be moderating. We remain structurally negative on the sector and we are not yet calling the end of the earnings downgrade cycle. That said, we see encouraging signs as management teams start taking actions to better control costs. Hiring freezes are in place and net store closures are now common practice. In addition, rent inflation is moderating to mid-single digits, more in line with sales trends.
* The sector remains highly cash generative. Investors no long receive better growth by investing in Luxury vs. European equities. But, do get exposure to long-term cash return optionality. Balance sheets are strong as we estimate a net cash position at sector level by 2016 and FCF generation should improve as capex spend declines, despite margin pressure. We believe Hugo Boss and Hermes have attractive cash return potential.
* LVMH up to Neutral, reiterate Underperform on Burberry and Kering. Demand recovery is unlikely to rescue the sector so defensive attributes and well-managed cost bases will be the order of the day for luxury stocks in 2016. We think Burberry is structurally challenged and we should see further earnings downgrades. Kering has performed well on expectations of a recovery in Gucci thanks to new products but we expect a slower relaunch and further pressure on Gucci margin. We upgrade LVMH to Neutral in a note published today