(City- AM) Litigation funder Bentham Europe plans a global shareholder claim aga

Litigation funder Bentham Europe plans a global shareholder claim against Volkswagen

Bentham Europe has announced it is coordinating a united shareholder action for some of the largest VW investors around the world.

Volkswagen's share price has collapsed from around €160 to under €100, while its market capitalisation has dropped by around €25bn (£18bn) since it emerged two weeks ago it had used software to deceive emissions tests in the US.

Bentham, a third-party litigation funder, said as a result of this, it is "in discussions with institutional investors worldwide to fund a shareholder action in Germany against Volkswagen," alleging breaches of the German securities law over an eight year period from 2007 to 18 September 2015, and had received world -wide interst from investors.

“The intention will be to instruct lawyers to commence the necessary proceedings as soon as possible,” the company said.

Under the German Securities Trading Act, shareholders are entitled to seek compensation or damages. Bentham invited shareholders who acquired at least 10,000 VW shares from 1 January 2007 to contact them about the claim.

Chief investment officer Jeremy Marshall said in a statement today:

“Shareholders – who saw billions wiped off the value of Volkswagen in 2 days – deserve more than just an apology for what appears to be long-running and concerted cheating of the system.”

Yesterday UK law firm Leigh Daymade made what is thought to be the first legal move against Volkswagen in the wake of the emissions cheating scandal, as the car giant admitted almost 1.2m UK cars may have been fitted with the cheat device.

The company said in a statement: "Step by step, affected customers will be contacted, with details of a process to get their vehicles corrected in the near future. In the meantime, all vehicles are technically safe and roadworthy."

Leigh Day is calling for a “full refund” for the costs customers paid, thinking they were buying clean diesel cars, as well as compensation for other related losses.

Most analysts agree the €6.5bn VW said it would set aside to deal with the costs of the scandal, which involves some 11m cars worldwide is not enough. VW could face a maximum fine from the EPA alone of $18bn (£11.9bn), which would almost wipe out its cash balance. Not surprising then that Betway are offering 20/ 1 odds that the company will cease trading by the end of 2016.

Meanwhile, German prosecutors said today they had not launched a formal inquiry against former VW chief executive Martin Winterkorn, contrary to what they announced on Monday.

The official press statement released on Monday by public prosecutors in Brunswick was “formulated incorrectly,” a spokesman said. No specific individuals are the focus at the moment in the prosecutors' investigation into the pollution-cheating scandal.

Complaints have been filed against Winterkorn, but there is no formal inquiry as yet.

NY Post : Does Ralph Lauren’s new CEO have the right ‘luxury pedigree’?

Ralph Lauren Corp.’s stock price pulled back a day after soaring 13.6%, as analysts generally applauded the luxury brand’s decision to hire a man with mass-market retailing experience as its new president.
But at least one retailing expert cautioned that the reaction to the hiring of Stefan Larsson, the global president of Gap Inc. unit Old Navy, was too enthusiastic, given his lack of experience in luxury goods.
Ralph Lauren RL, stock was down about 2% midday Thursday.
“There’s a tremendous overreaction,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm. He questioned whether Larsson’s skills will transfer to the luxury retailer.
Larsson had been with Old Navy since 2012 and previously spent 15 years with fast-fashion retailer H&M. He replaces founder Ralph Lauren, who launched the eponymous company more than 48 years ago and turns 76 on Oct. 14.
Lauren, who is the company’s largest stakeholder, will stay on as executive chairman and chief creative officer. Larsson will report to Lauren.
“Ralph Lauren operates in a much more exclusive space,” Davidowitz said, noting that even the brand’s T-shirts and sweaters are of high quality. “Not saying he didn’t do a wonderful job [at Gap]. How does this apply to Ralph Lauren?”
Others see this as a big win for a luxury retailer that could use some shaking up.
Larsson turned around Old Navy by making it more of a fast-fashion retailer.
During his tenure, Old Navy had three consecutive years of profitable growth and added around $1 billion in sales, analysts at Nomura noted.
“Instead of finding someone with the right ‘luxury pedigree’ they [Ralph Lauren] have gone out and found an executive with a proven track record of driving growth and profitability,” said Liz Dunn, CEO and founder of Talmage Advisors. She called the move “forward-thinking.”
Earnings at Ralph Lauren, meanwhile, had disappointed investors in recent quarters. Business in the 2014 holiday season was hurt by an unexpected slump in traffic at its full-price and outlet stores, which felt the brunt of heavy discounting by rivals. The stock plunged 18% in just one day, its worst one-day drop in its history, on that news.
Even after Thursday’s leap, Ralph Lauren shares are down about 37% so far this year.
“Judging by his distinguished experience, we think Stefan Larsson, in his role as Ralph Lauren CEO, will bring a new creative angle, deep supply chain and global operational knowledge, as well as a focus on increasing speed to market,” said Cowen and Co. in a note.
While Cowen analysts said they believe the company won’t be quick to make big changes, some of the more immediate issues, such as with inventory and cost management, could be addressed.
Another question had been who would succeed the company’s founder.
“Succession at Ralph Lauren has been a key question over the past several years, and we are encouraged by this announcement as it removes significant uncertainty,” wrote Nomura in a note. “With significant transition already underway at the company, as the Ralph Lauren Corporation has also implemented a new global brand management organizational structure, we believe Mr. Larsson’s outside perspective on product and vision should prove quite valuable to the company.”
Still, Lauren was clear that, even with the new addition, he would remain a company leader.
“The Ralph Lauren Corporation is the company I founded, nurtured and love,” Lauren wrote in a memo, obtained by BuzzFeed and confirmed by a company spokesperson. “I will continue to lead it today as I have for almost 50 years. I am not stepping down, nor am I stepping back. I am stepping up.”

>>> Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay T

Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt

Earlier today, Macquarie released a must-read report titled "Further deterioration in China’s corporate debt coverage", in which the Australian bank looks at the Chinese corporate debt bubble (a topic familiar to our readers since 2012) however not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with "uncovered debt", or those which can't even cover a full year of interest expense with profit.
The report's centerprice chart is impressive. It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would write it, have an EBIT/Interest < 1.0x.
As Macquarie notes, looking at the entire universe of CNY22 trillion in corporate debt, the "percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample."
To be sure, both the size (the gargantuan CNY22 trillion) and the deteriorating quality (the surge in "uncovered debt" companies) of cash flows, was generally known.
What wasn't known were the specifics of just how severe this bubble deterioration was for the most critical for China, in the current deflationary bust, commodity sector.
We now know, and the answer is truly terrifying.
Macquarie lays it out in just three charts.
First, it shows the "debt-coverage" curve for commodity companies as of 2007.One will note that not only is there virtually no commodity sector debt to discuss, at not even CNY1 trillion in debt, but virtually every company could comfortably cover their interest expense with existing cash flow: only 4 companies - all in the cement sector - had "uncovered debt" 8 years ago.
Fast forward to 2013 when things get bad, as about a third of all corporations are now unable to cover their annual interest expense, even as the total addressable corporate debt has soared to CNY4 trillion for just the commodity sector.
And then in 2014, everything just falls apart. Quote Macquarie, "more than half of the cumulative debt in this sector was EBIT-uncovered in 2014, and all sub-sectors have their share in the uncovered part, particularly for base metals (the big gray bar on the right stands for Chalco), coal, and steel."
Compared with the situation in 2013, while almost all sub-sectors did worse in 2014, but things appear to have worsened faster for coal companies as more red bars have moved beyond the 100% critical level for EBIT-coverage.
It means that last year about CNY2 trillion in debt was in danger of imminent default.
The situation since than has dramatically deteriorated.
So are we now? Macquarie again: "Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime."
In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can't even generate the cash to pay down the interest on their debt, let alone fund repayments.
We fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.

(Nomura) Calendar 3Q15 preview

Beer M&A; weather considerations in beer and soft drinks

* 3Q outlook
In this report, we preview the upcoming calendar 3Q15 beverages results. On 8 September, we revised our estimates; updating for recent forex and macroeconomic volatility (Revisiting FX). We expect mixed 3Q reporting across the space with key themes: Beer M&A, mixed weather impact, emerging market (EM) macroeconomic and currency volatility, and improving momentum in spirits. In US soft drinks, strong pricing continues and KO remains our key Buy (USD 53 TP), given a strong self-help story.

* Spirits slow earnings recovery, pressure for corporate activity at Diageo
In spirits, Diageo (Buy, 2,000p TP) has already confirmed robust underlying trading in the first two months of the fiscal year, we still see pressure for the company to create value by spinning off either beer or Reserve Brands, although we now think a merger deal with SAB is unlikely. For Pernod (Buy, EUR 110 TP), we do not regard 1Q a key positive catalyst but we still see medium-term upside potential, in both spirits recovery and the opportunity for Cuban Rum in the US.

* Beer – largely M&A-driven
With the end-game in beer consolidation becoming visible (see our note: Bringing a Brahma to the brai), M&A is the key focus of the beer sector. We expect mixed 3Q reporting; Constellation (Neutral, USD 130 TP) will likely report strong beer shipments vs soft comps, while we see improving momentum into 3Q at Heineken (Neutral, EUR 72 TP) given easy comps in Europe and favourable weather. ABI (Neutral, EUR 103 TP), SAB (Buy, 4,000p TP) and Carlsberg (Neutral, DKK 525 TP) will likely be negatively affected by EM macroeconomic and forex volatility. Given poor weather in GB, we have cut our F16E EBIT for C&C Group to EUR 109m (vs consensus of EUR 114m). For TAP (Neutral, USD 82 TP), the opportunity to buy out the 58% stake in MillerCoors from SAB remains in focus; however, we believe benefits are largely in the share price.

* Soft drinks – weather variations
Britvic (Buy, 830p TP) is due to report its F15 results on 25 November. Although GB trading in fiscal 4Q will likely be held back by unfavourable weather, the company is cycling easy comps in 4Q and we see limited risk to F15 EBIT guidance of GBP 164 to GBP 173m (NE: GBP 169m). Although we remain cautious on Coca-Cola Hellenic (Reduce, 1,250p TP), we expect the company to report a strong 3Q helped by good weather in central Europe and soft comparatives. KO remains our key Buy (USD 53 TP), given a strong self-help story; we maintain our Reduce rating on PEP (USD 81 TP).

>>> It's the worst ever golden week, say Hong Kong retailers --> -ve Luxury

It's the worst ever golden week, say Hong Kong retailers



Numbers are down in luxury shops and pharmacies as mainland tourists flock to other destinations amid economic woes and a stronger dollar

The "golden week" holiday lost its lustre on its first day yesterday, with some retailers describing it as "the worst ever".

Tsim Sha Tsui, Mong Kok and Causeway Bay - popular shopping districts which used to be clogged with suitcase-wielding mainlanders - were remarkably quiet on the first day of the National Day break.

On Canton Road in Tsim Sha Tsui, the usual long queues outside luxury stores were gone.

More than 10 high-end jewellery stores along Haiphong Road were quite empty, with staff outnumbering customers.

Pharmacies faced the same problem. Mr Yeung, who owns Min Sui Medicine Shop on Haiphong Road and Canton Road, said it was the worst "golden week" he had ever seen.

"I just made a few thousand dollars of sales this morning. It is a 70 per cent slump. Worse still, it has just started," Yeung lamented.

Tourism in Hong Kong has slumped for the first time since 2009 on the combined effect of mainland visitors preferring alternative regional destinations and a stronger Hong Kong dollar against other Asian currencies. The government has also blamed a string of protests against mainland shoppers and parallel traders for scaring off visitors.

"We are not welcome in the city, right? I don't want to be labeled a locust," said mainland tourist Ms Li, who came to the city on a day trip from Guangzhou.

The sparse crowds surprised a Singaporean couple who visit the city annually.

"It used to be so packed and suffocating. I have no idea where the people have gone," said Mrs Ong.

The chairman of the Travel Industry Council, Michael Wu Siu-ieng, said earlier that the number of mainland tours to Hong Kong had dropped 10 per cent this year mainly because of weakening Asian currencies, which prompted mainland tourists to visit alternative destinations.

Ocean Park expected a 10 to 20 per cent drop in patrons during the holiday due to the decline in the number of visitors to the city.

The hotel industry, however, saw some light in the tourism downturn. The Hotels Association said rooms were 70 per cent booked yesterday, with 90 per cent reported for today and Saturday - in line with figures for last year.

"Most rates were slashed by 15 per cent to boost last-minute bookings. Some hotels even offered complimentary breakfasts or dinners," said association chairman Victor Chan Kok-wai.

The National Day holiday coincides with the Mid-Autumn Festival this year. By taking three extra days off, mainlanders can enjoy an 11-day break from September 27 until next Wednesday.

The Immigration Department said over 700,000 people passed through border control points up until 10pm yesterday.

In an article in the Post today, commerce minister Greg So Kam-leung said the government was studying suggestions for promoting more than just shopping and dining in Hong Kong. He pointed to the need to publicise arts, culture and even hiking trails in a bid to attract different types of visitors.

He also hoped the West Kowloon Cultural District and the revitalised Old Central Police Station Compound, which would open to the public from next year, would provide a welcome boost and new variety for visitors.

(GS) European Telco : High yield pain, long-term gain; CL Buy Altice, LBTY off C

High yield pain, long-term gain; CL Buy Altice, LBTY off CL, still Buy

* High yield sell-off deepens; spreads now in the 78th% percentile
Over the past week the sell-off in high-yield bond markets has accelerated.
HY spreads over five-year U.S. Treasuries are now c.660 bp vs. c.500 bp in
June. Historically, spreads have fallen to c.300 bp in a benign macro
environment and spiked to c.900 bp in a ‘typical’ recession. In the context
of a positive macro outlook for DMs, GS credit strategists argue that the HY
market is now oversold. But given the recent sell-off, we believe it is worth
evaluating downside scenarios in case debt markets weaken further.

* Higher cost of debt would weigh on LT FCF, NT multiples
We focus on highly levered Altice (pro-forma 2016E ND/EBITDA 4.7x) and
Liberty Global (5.0x). Near-term re-financing risk is minimal, with longtenured
debt maturities of 7/8 years, respectively, and primarily fixed-rate
debt. However, wider HY spreads imply increased long-term funding costs,
while in the near term both stocks could de-rate pro-rata with the change in
marginal funding costs, as was the case in 2008/09.

* Evaluating risk-reward in a downside scenario
We stress-tested our forecasts for a downside scenario in which the market
extrapolates long-term funding costs of c.9%-10% (vs. 5%-6% today), and
equity FCF yields consequently rise to c.10%-11%. LBTY would see the
greatest implied impact on 2020E FCF/sh (-c.35%) as it has a limited tax
shield, although buybacks at a lower stock price could be an offset. The
impact on Altice FCF would be -20%, given its very rapid de-leveraging.

* Altice (CL Buy): A de-leveraging story with limited LT downside
We see risk-reward as attractive and reiterate our CL Buy post the sell-off
around the recent equity placing. We estimate 6% downside to c.€16/sh in
a recessionary scenario, and 76% upside to c.€30/sh if the current growth
concerns pass and ATC executes on restructuring. We lower our 12m price
target to €30 from €37 to reflect the current higher cost of capital.

* Liberty Global (Buy): Off CL on VOD deal delay; remains attractive
We remove LBTYA from our European Conviction List, but remain Buy
rated, as the termination of talks with Vodafone pushes out M&A catalysts.
We still see attractive longer-term risk-reward, with 18% potential
downside to $36/sh vs. 55% upside to $68/sh. We lower our 12m price
target to $60 (from $70) given a higher WACC and delayed M&A benefits.

>>> Europe : Brokers Upgrades & Downgrades - 2nd of October 2015

>>> Up
*BANZAI RAISED TO BUY VS ACCUMULATE AT BANCA AKROS
*COLOPLAST RAISED TO NEUTRAL AT JPMORGAN
*DEUTSCHE BANK RAISED TO MARKET PERFORM AT KBW
*DIALOG SEMI RAISED TO BUY VS HOLD AT COMMERZBANK
*FAGRON RAISED TO BUY FROM HOLD AT KBC; PT RAISED TO EU26
*GAS NATURAL RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*GFK RAISED TO BUY FROM HOLD AT LBBW
*GREENCORE RAISED TO ADD VS HOLD AT PEEL HUNT
*LEGRAND RAISED TO BUY VS NEUTRAL AT ODDO
*LIONTRUST ASSET MANAGEMENT RAISED TO BUY VS ADD AT NUMIS
*LUFTHANSA RAISED TO BUY VS HOLD AT HSBC
*POLAR CAPITAL RAISED TO HOLD VS REDUCE AT NUMIS
*RWE RAISED TO HOLD VS SELL AT SOCGEN
*SAIPEM RAISED TO NEUTRAL VS SELL AT BANCA AKROS
*SCHRODERS RAISED TO BUY VS ADD AT NUMIS
*SDL RAISED TO HOLD VS SELL AT PEEL HUNT
*STANCHART RAISED TO BUY AT MAYBANK KIM ENG
*TRINITY MIRROR RAISED TO BUY VS HOLD AT PANMURE GORDON
*VOESTALPINE RAISED TO NEUTRAL VS SELL AT UBS
*YOUGOV RAISED TO BUY VS ADD AT NUMIS
*ZURICH INSURANCE RAISED TO BUY VS HOLD AT BANKHAUS LAMPE

>>> Down
*ANGLO AMERICAN CUT TO SECTOR UNDERPERFORM AT CIBC
*BAYER CUT TO NEUTRAL VS BUY AT BRYAN GARNIER
*BBVA CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*DS SMITH CUT TO HOLD VS BUY AT JEFFERIES
*HENKEL CUT TO NEUTRAL VS OUTPERFORM AT EXANE
*MANZ CUT TO HOLD VS BUY AT BANKHAUS LAMPE
*PADDY POWER CUT TO HOLD VS BUY AT PEEL HUNT
*RYANAIR CUT TO HOLD VS BUY AT HSBC
*TELEKOM AUSTRIA CUT TO HOLD VS BUY AT HSBC
*VOLKSWAGEN CUT TO HOLD VS BUY AT BAADER HELVEA


>>> PT Change

>>> Initiation
*CLIPPER LOGISTICS RATED NEW HOLD AT CANTOR; PT 265P
*DEUTSCHE WOHNEN RATED NEW NEUTRAL AT CREDIT SUISSE
*GRAND CITY PROPERTIES RATED NEW OUTPERFORM AT CREDIT SUISSE
*LEG IMMOBILIEN RATED NEW NEUTRAL AT CREDIT SUISSE
*METRO RESUMED AT HOLD AT DEUTSCHE BANK; PT EU27
*ROYAL UNIBREW RATEDN NEW BUY AT NOMURA; PT DKK290
*VONOVIA RATED NEW UNDERPERFORM AT CREDIT SUISSE

>>> Call
>> Stock
*LIBERTY GLOBAL REMOVED FROM GOLDMAN SACHS CONVICTION BUY LIST