TheChek News Flow

Greek officials have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, highlighting the parlous state of Greek finances, but were told that no rescheduling was possible.

According to officials briefed on the talks by both sides, Athens was persuaded not to make a specific request for a delay to the Fund, which is owed almost €1bn in two separate payments due in May.

Although Athens was rebuffed, the discussions, which occurred in private earlier this month, are a sign that the Greek government is finding it increasingly difficult to scrape together enough money to continue to pay wages and pensions while meeting its debt payments to external lenders.

Yields on Greek bonds soared on Thursday following the news, with yields on three-year paper rising 134 basis points to 25.10 per cent, the highest since the country’s restructuring. Its 10-year yields climbed 45 basis points to 12.18 per cent.

Officials representing Greece’s creditors are unsure whether Athens will be able to make the payments in May. Even if they do, they are certain that the matter will come to a head by June, before much larger payments on bonds held by the ECB start coming due.

IMF officials have repeatedly said that a rescheduling of repayments can only come as part of a completely renegotiated new bailout programme. Were it to miss a payment, Greece would become the first developed economy to go into arrears at the Fund, something only counties like Zaire and Zimbabwe have done in the past.

Greece informally raised the precedent of delaying IMF payments by at least one other developing country a generation ago in the 1980s. But IMF officials stuck to their guns saying that none of the underlying problems had been solved by payment delays.

One source briefed on the approach said the proposal was to “reshuffle the repayment schedule for the IMF loan over the coming months,” allowing the new Greek government led by Alexis Tsipras to have the money to pay bills for pensions and public sector salaries while negotiating with European creditors over payment of the next tranche of bailout loans.

The government, which must repay more than €9bn to the IMF this year relating to its first bailout in 2010, is locked in a two-month-long stand-off with its bailout creditors to release some of the remaining €7.2bn in its current €172bn bailout in order to make those payments.

Eurozone creditors have refused to release the funds unless Athens comes up with a more complete list of economic reforms and a credible plan for implementation, but talks over what those reforms should include have stalled and EU officials have publicly said no deal is likely at the next meeting of eurozone finance ministers, which is scheduled for next week.

Even if negotiations go well and start again in earnest, EU officials are privately sceptical that the technical work allowing the release of the money will be complete by the eurogroup meeting of 11 May, the day before the IMF payment is due.

EU finance ministers now openly talk about the possibility that no deal is possible, which could lead to a Greek default and potentially an exit from the euro.

Olivier Blanchard, IMF chief economist, also highlighted the increasing possibility of a Greek exit from the eurozone, saying this week that for the rest of the eurozone a Greek exit “would not be smooth sailing, but it could probably be done”.

PARIS, 16 avril (Reuters) - Deutsche Bank a franchi en hausse les seuils de 5% du capital et des droits de vote du groupe Renault RENA.PA dans le cadre d'une opération d'options conclue avec l'Etat français, a fait savoir jeudi l'Autorité des marchés financiers (AMF).

Deutsche Bank détient 17.847.662 actions Renault, représentant autant de droits de vote, soit 6,04% du capital et des droits de vote du groupe, selon l'avis de l'AMF.

L'Etat avait fait savoir la semaine dernière qu'il avait décidé d'acquérir temporairement jusqu'à 4,73% supplémentaires du capital de Renault pour augmenter ainsi sa participation jusqu'à 19,74% et s'assurer de disposer de droits de vote double à l'issue de la prochaine assemblée générale du groupe, contre l'avis du conseil d'administration de Renault et de son PDG Carlos Ghosn. (Full Story)

Selon l'avis de l'AMF, Deutsche Bank a cédé à l'Etat des options de vente portant sur 14.000.000 actions Renault, soit 4,73% du capital et des droits de vote de la société, et l'Etat a cédé à Deutsche Bank des options d'achat portant sur autant d'actions du groupe automobile, soit 4,73% du capital et des droits de vote de Renault.

Les options de vente sont exerçables au prix par action de 90% du cours de référence de l'action Renault au 7 avril 2015 et les options d'achat au prix par action de 110% par action du cours de référence de l'action le même jour.

Le dénouement des options interviendra de manière échelonnée à l'issue d'une période de six mois, entre le 7 octobre et le 28 décembre 2015. L'Etat et Deutsche Bank ont déclaré agir séparément et sans concert entre eux vis-à-vis de Renault.

Le ministre des Finances Michel Sapin a défendu jeudi matin la position du gouvernement en expliquant que l'Etat voulait peser dans Renault mais ne souhaitait pas diriger le groupe à la place de ses dirigeants. (Full Story) Le groupe a convoqué jeudi en fin d'après-midi un conseil d'administration extraordinaire en réponse à la montée au capital de l'Etat. (Full Story)

Investors in Alcatel expected a premium and some cash as part of the Nokia offer. Although they did not get either of these, the prospect of owning part of the new Nokia is better than some might think, in our view

- The terms of Nokia's offer were not as good as expected by investors, with Alcatel shareholders owning 33.5% of the new entity vs expectations for about 40%. 

This would value Alcatel at €4.1 using the Nokia share price of €7.5 – in-line with our base case price target – thus with no premium, while Nokia takes control of Alcatel.

- While the terms have disappointed Alcatel shareholders, the prospect of owning part of the new Nokia could prove more compelling than at first sight. 

Our pro-forma models for Nokia published today suggest that the deal should be 25% accretive in 2017 – and the share price of Nokia has certainly not reacted to that kind of positive outcome. We also found that should Nokia's enlarged networks business rerate to the same EV/sales multiple as Ericsson, this would imply 15% upside to the current Nokia share price. In a separate note we upgrade Nokia from Equal-weight to Overweight. We acknowledge that owning a long-dated restructuring story with a patent story on the side is not as exciting as the idea of Michel Combes driving Alcatel ex Wireless into a phase of growth. However, a recommended deal such as this, including endorsement from the French President, is unlikely to meet with any obstacles to completion.

- Nokia shares are not pricing in the better earnings prospects or the strong product positioning of the new enlarged group. 

We previously thought that Nokia's product portfolio was too narrow with only wireless and no exposure to the US. With Alcatel, the new Nokia has the full gamut of world-class products in wireless, IP routing, optical and access, not the patchy product portfolio of the old Alcatel-Lucent or Nokia Siemens.

Our commodities team has lowered the near- and long-term iron ore price forecasts to $47/$37/$33 FoB Aus in 2015/16/17 and LT 2015 real to $39/t.

Steel production and apparent demand in China are negative yoy as a shift away from investment-led infrastructure spending has reduced demand, which combined with a focus on reducing air pollution has seen apparent domestic demand for steel down 6.2% yoy through to end March 2015.

Our supply analysis suggests that Rio, BHP, Vale, Anglo and FMG will deliver enough supply to meet all seaborne demand with the majority of this below $40/t FoB cash cost. The implication is that there is no need for prices to rise and higher cost producers will likely cease trading.

1) risky talk of trough multiples, and 2) dividends are not covered and offer limited share price support 1) With c.250mn t more supply on the way and China’s steel demand in negative territory for 2015, putting iron ore names on trough multiples (implying future price recovery) is risky in our view. With no upside to prices on our long-term iron ore price, we see little chance of material improvements in earnings from current levels. 2) Dividends don’t backstop shares when they are not covered by free cashflow our analysis shows. At iron ore under $40/t, we estimate that BHP, Rio Tinto and Anglo would be unable to cover their dividends and Kumba would have to suspend its.

We downgrade Anglo and Kumba to Sell, from Neutral, and reiterate our Sell on Rio Tinto. We also downgrade BHP to Neutral, from Buy, and remove it from our Conviction List. Our main thesis for all is the same – we see an inability to cover dividends from FCF on our commodity price deck, yet they trade at a significant premium which we believe is unwarranted.

On our price outlook Glencore is the only large-cap name that can cover its dividend with FCF, has no iron ore and more exposure to preferred base metals, its marketing division provides more stable cashflow and it has a stable credit outlook – it is our preferred name. On to CL Buy, from Neutral.

Une réunion du conseil d’administration aura lieu ce jeudi. L’attitude de Nissan sera déterminante.

Piqués au vif, Carlos Ghosn et Nissan vont-ils sortir l’arme nucléaire ? Une semaine après avoir été mis devant le fait accompli de la montée de l’Etat français au capital de Renault , le PDG du constructeur automobile a convoqué ce jeudi un conseil d’administration extraordinaire. L’intitulé de l’ordre du jour – « évolution de la composition de l’actionnariat et conséquences sur l’alliance » – ne souffre d’aucune ambiguïté.

Il s’agira, pour les 19 administrateurs du constructeur français, de discuter de la montée soudaine, annoncée la semaine dernière, de l’Etat français au capital du constructeur. Via l’acquisition de 14 millions de titres, soit environ 4,73 % du capital, pour un montant compris entre 814 millions et 1,23 milliard d’euros, l’Etat pourrait détenir jusqu’à 19,74 % du capital du constructeur, contre 15,01 % aujourd’hui.

Pour Bercy, l’objectif de cette manoeuvre surprise est d’arriver devant l’assemblée générale de Renault, le 30 avril prochain, avec suffisamment de poids afin d’ imposer la mise en place de droits de vote double, prévus par la loi du 29 mars 2014, dite loi Florange, qui vise à renforcer l’actionnariat de long terme. Pour cela, les actionnaires devront repousser, la résolution numéro douze proposée par le conseil d’administration de Renault, qui vise à déroger à la loi, en appliquant le principe « une action égale une voix ».

L’allié japonais, contrôlé à 44,3 % par Renault, détient 15 % du capital du constructeur français, mais ne dispose d’aucun droit de vote, afin d’éviter toute position d’autocontrôle. Alors même qu’il a, pendant des années, fourni l’essentiel des profits de Renault et qu’il pèse deux fois plus que son actionnaire français, le constructeur nippon pourrait juger que la future position de l’Etat français est la goutte d’eau qui fait déborder le vase. Il pourrait alors exiger un renforcement de son poids dans l’alliance, qui pourrait intervenir par plusieurs leviers, par exemple une baisse de la participation de Renault en dessous des 40 % via une cession de titres, la dilution de Renault via une augmentation de capital de Nissan ou d’autres actions capitalistiques. Et in fine, contrer en Assemblée générale l’Etat français et peser davantage dans l’alliance. Autant de scénarios aux conséquences très lourdes, auxquels ne veulent pas croire plusieurs acteurs. Dans tous les cas, les cartes sont entre les mains de Carlos Ghosn..

Germany’s finance minister virtually ruled out a deal next week that would release bailout funds to Athens, increasing the possibility that Greece could go bust as soon as May.

Wolfgang Schäuble’s comments were the first in public by a senior eurozone policy maker to dash hopes of an agreement at a meeting of finance ministers in Riga on April 24. But they echo sentiments made in private for several days by senior officials involved in the negotiations.

“Nobody expects that there will be a solution,” Mr Schäuble said of next week’s meeting.

Officials said technical talks between Greek authorities and the country’s bailout monitors on the ground in Athens, while more constructive than last month, have barely moved forward in the past week and raised questions as to whether a deal is likely even at next month’s eurogroup meeting.

Without a deal at that meeting of eurozone finance ministers, scheduled for May 11, Athens would probably default on a €747m payment owed to the International Monetary Fund on May 12.

Standard & Poor’s, in downgrading Greek debt further into junk territory on Wednesday, said without a deal by mid-May, Athens was likely to be unable to pay creditors. The yield for Greece’s three-year bonds issued last year hit a new high of 24.6 per cent on Wednesday.

Speaking in New York on the eve of the spring IMF meetings in Washington, Mr Schäuble blamed the radical-left Syriza-led government for destroying all the improvements made by previous administrations under the bailout programme and said a new agreement remained out of reach.

“Nobody has any idea how we can agree on an even more ambitious programme,” he said. “You can’t spend hundreds of billions . . . in a bottle without a bottom.”

Athens is desperately trying to release some of the remaining €7.2bn in its €172bn international bailout but must agree and legislate new reforms before the eurogroup will approve such payments. The two sides are locked in a two-month-old stand-off over what reforms should be included in the package to release the funds.

An adviser to Alexis Tsipras, Greek prime minister, signalled that the government may have to hold a national referendum on how to proceed if the talks remain deadlocked.

“We may consider the possibility of holding a referendum if the talks reach an impasse,” said Alekos Flambouraris, a minister and long-time political mentor to Mr Tsipras. “In decisions of historic importance, it’s not a bad thing to consult the Greek people.”

The remarks by Mr Flambouraris to Greek television raised hopes in Brussels that Mr Tsipras was looking for a way out by getting the approval of a plebiscite to change direction and agree to some of the tough reform demands being made by the bailout monitors.

Several senior officials have privately argued that Mr Tsipras should abandon the far left of his Syriza party and embrace more moderate centre-left groups to form a coalition that could implement new reforms.

Some observers in Athens agreed, saying Mr Flambouraris’s remarks suggested that the premier’s inner circle of advisers were seeking a way to isolate the Left Platform, the party’s radical faction, which supports a “Grexit” from the euro rather than making concessions to the EU and IMF on fiscal and structural reforms.

Opinion polls show an overwhelming majority of Greeks in favour of remaining in the euro. According to one poll published last week, 82 per cent of respondents would back membership of the single currency if it came to a vote.

The Burkard family has a nerve. They want to sell their 16 per cent stake in Sika, the Swiss coatings and adhesives maker to France’s Saint-Gobain for SFr2.75bn – a great fat premium. Fair enough. But their stake, held through a holding company, carries 52 per cent of Sika’s voting rights. They are, in effect, selling the company. The premium for the proletarian public investors with 84 per cent of the shares? Null, or possibly zéro – if the deal does not stultify in a Swiss court.

Conveniently for Saint-Gobain, Sika’s articles of association state that a buyer of more than a third of its voting rights is not obliged to buy out the other shareholders. Sika’s board says this provision was granted to the family. Sika treats their holding company SWH’s signature of a deal with Saint-Gobain as a change of ownership and wants to limit its voting rights. The family disagrees. It contends that SWH will remain a shareholder in Sika since Saint-Gobain is buying SWH. No change of ownership has happened yet.

SWH defeated an attempt at this week’s annual shareholder meeting to remove the clause releasing Saint-Gobain from making a full offer. For its part, SWH tried to replace Sika chairman Paul Hälg and two board members to ease its deal through. But the board blocked it by restricting SWH’s voting rights to 5 per cent. SWH says this is illegal. A court must decide whether that restriction was legal.

In spite of the drama, Saint-Gobain, a company with double voting rights itself, is still committed, even if other Sika investors and managers could be a tricky to live with after the acquisition.

Sika’s board and investors fret that control is being snatched from under their noses without so much as an offer, let alone a premium. Mr Hälg and investors can talk up Sika’s stand-alone case, bemoan value destruction, sow fear about the cuts Saint-Gobain will need to make to defray the price paid (Saint-Gobain says there will be no job cuts) and question the industrial logic all they like. But the court will note that the board and investors have gone along with the feudal voting structure for years.

This spat could drag on for years as Sika investors, short changed by the family they trusted, try to block a deal that denies them equal treatment. If the Burkards and Saint-Gobain pull off their deal, it will set an awful precedent for companies with two-speed voting structures. But they will have done it because the rules let them.

Airbus has just published its AGM documentation (AGM on 27th May) – in this, the company seeks authorisation to buy back up to 10% of the company's issued share capital, in order to give management the "flexibility to review capital allocation options going forward, in particular with regard to using proceeds from divestments and to returning a portion to shareholders". We would note that this is not a declaration to repurchase 10%, but gives management the potential to do so if deemed appropriate.


At FY2014 results, Airbus announced that it would be reviewing its capital allocation in the light of the planned disposals (Dassault stake, plus parts of ADS) and the reduction of technical risk over the next year or so (as it works through the challenges of the A400M and A350 ramp-up) should be matched by a reduction in the financial buffer that the company has through its net cash position.


We estimate thatif they initiate a 10% buy-back at current prices, using cash funding, it would cost about €4.9bn and give about 9-10% earnings accretion (given the very low yield on cash). Although we value Airbus on EV/EBITA and so see little change to our fair value (Equity value increases, but cash position decreases), we expect the stock to be up.


Our €72 price target is based on DCF using $/€ of 1.15, 68% cash conversion, 22.9% CAGR profit growth from 2015e, 9%WACC, which implies 15.4x 2015EV/EBITA and €76. We apply on top a 5% discount for potential A350/A380 problems. The very strong 5 year profit growth is in part from the underlying growth in profitability as the A350 moves from loss to profit, but also from the very strong tailwind from FX.