Clear Channel Outdoor: Blackstone (BX) and TPG Capital may bid for CCO Europe assets, according to reports
Germany Sees No Need to Scrap Troika in Overseeing Greek Turnaround
The Role of the ECB, the EU and the IMF Can’t Be Unilaterally Changed Says Berlin
“In the [German] government there is no indication that it shouldn’t be retained,” government spokeswoman Christiane Wirtz said at a news conference.
Greece’s new finance minister, Yanis Varoufakis, has said Greece will no longer talk to the troika of inspectors, which has imposed economic overhauls on Greece since 2010.
Berlin said on Monday, however, the work of the troika is written into agreements, like the eurozone’s permanent bailout facility, the European Stability Mechanism, and “these things can’t just be changed unilaterally,” according to finance ministry spokeswoman Marianne Kothe.
The German government’s comments follow a report in German daily Handelsblatt that European Commission President Jean-Claude Juncker may change the way creditors negotiate with Greek officials by reforming the troika and potentially ending its official visits to Greece.
A Commission spokesman declined to “engage in any speculation or discussion on what might happen at some point” on Monday, but noted that Mr. Juncker has said in the past that the troika should be replaced by a more democratic instrument in the future.
Alexis Tsipras, Greece’s newly elected prime minister, will visit Brussels on Wednesday.
saw some Delta one guys, shorting the Dividend on BNP this morning @ 1.45, bbg consensus is indicating 1.50
BNP is supposed to announce dvd on the 5th of Feb (Thu)
see notes attached
Justice Department Investigating Moody’s Investors Service
Probe Looking Into Favorable Ratings on Mortgage Bonds Before the Financial Crisis
With its case against Standard & Poor’s Ratings Services nearing the finish, the Justice Department has turned its attention to another credit-rating firm under fire for issuing rosy grades on mortgage deals in the buildup to the financial crisis.
Justice Department officials in recent months have quietly met with multiple former executives of Moody’s Investors Service to discuss ratings of complex securities before the crisis, according to people familiar with the situation.
The Justice Department lawyers probing Moody’s are still in the early stages of their investigation, according to people familiar with the matter. It isn’t yet clear whether it will result in a lawsuit, the people said.
A Moody’s spokesman declined to comment.
In the recent wave of meetings, Justice Department officials, citing internal company emails, have pressed former Moody’s executives on whether the firm compromised standards to win business, according to people familiar with the matter. The main focus, as with the S&P case, has been on residential-mortgage deals from around 2004 to 2007, the people said.
Moody’s, a division of Moody’s Corp., and S&P, a unit of McGraw Hill Financial Inc., gave triple-A ratings to those mortgage deals, making it possible for even conservative investors to buy securities backed by subprime loans that later turned out to be risky. When the housing market collapsed, losses on those bonds spread everywhere and deepened the crisis, costing investors billions of dollars.
The Justice Department began looking into Moody’s as far back as 2010, the people said. But government lawyers held off on a Moody’s case as they pursued a lawsuit against S&P that eventually was filed in February 2013.
At the time, state and federal law-enforcement officials said they weren’t necessarily stopping with S&P, and were weighing potential action against Moody’s, too. Nearly two years later, the S&P case is close to wrapping up. An announcement of a more than $1.37 billion settlement among S&P, the Justice Department and more than a dozen states could come early this week, according to people familiar with the matter.
Based in New York, and the world’s second-biggest ratings firm behind S&P, Moody’s was a major issuer of triple-A ratings on residential mortgage-backed securities before the crisis.
On top of the Justice Department’s probe, the attorneys general from Connecticut and Mississippi also have lawsuits pending against Moody’s but they put their cases on hold while pursuing S&P. After the S&P lawsuit is resolved, Connecticut plans to again pursue the Moody’s case, according to a spokeswoman for George Jepsen, Connecticut’s attorney general. A spokeswoman for Mississippi Attorney General Jim Hood didn’t respond to request for comment.
Moody’s had “inadequate models and methodology” to gauge the risk of subprime mortgages and exhibited a “relentless drive” to win market share, said Phil Angelides , the former California state treasurer who led the bipartisan Financial Crisis Inquiry Commission, which included a case study of Moody’s in its 2011 report.
“What we found at Moody’s was very similar to the practices and conduct at Standard & Poor’s. The conduct and results were the same,” said Mr. Angelides. The 10-member commission concluded that credit-rating firms were “essential cogs in the wheel of financial destruction.”
In contrast with big Wall Street banks that have paid more than $100 billion to settle postcrisis lawsuits, credit-rating firms have mostly escaped the surge of legal scrutiny and regulatory changes.
But in the past year, the Securities and Exchange Commission approved new rules overseeing that industry. The SEC’s enforcement division, along with two states, won a $77 million settlement against S&P over postcrisis grades of commercial real estate and compliance issues. The Justice Department’s settlement with S&P would be the largest ever brought against a ratings firm.
Former Moody’s executives say the company adopted tighter controls and stricter guidelines around internal communication after previous run-ins with government investigators.
There was a 2001 settlement with the Justice Department’s Antitrust Division over the destruction of documents, amid a civil inquiry by the agency, leading to Moody’s pleading to one count of obstruction of justice and paying a fine of $195,000. Four years later, then-New York Attorney General Eliot Spitzer investigated Moody’s ratings on some mortgage-backed deals, former employees say.
Government lawyers targeted S&P nearly two years ago in a $5 billion fraud lawsuit. S&P had left a paper trail of emails and other internal communication, including a 2007 exchange involving S&P employees where one said a mortgage-bond deal “could be structured by cows and we would rate it.”
In the recent investigation, the Justice Department took aim at S&P despite ratings at Moody’s and Fitch “that were not dissimilar to S&P’s on many of the securities which defaulted in the 2009-2010 period,” Peter Appert, an analyst with Piper Jaffray & Co., said Thursday in a note to investors.
That could stem from ratings model errors specific to S&P or be because Moody’s or Fitch wrote fewer “incriminating” emails, Mr. Appert said.
But an S&P settlement “could embolden the [Justice Department] to institute suits seeking similar payments” from Moody’s and Fitch, he said.
RadioShack, Hedge Fund Hashing Out Auction Process
Court-Supervised Chapter 11 Filing of Electronics Retailer Bogged Down
RadioShack, which is running out of cash after reporting losses in each of the last 11 quarters, was aiming to file for Chapter 11 protection as early as Monday, the people said. But as of Sunday afternoon, the company and its advisers were still working out the details of an agreement with Standard General to serve as the so-called stalking horse at a court-supervised auction for RadioShack’s assets, some of the people said.
Standard General last year became the company’s largest shareholder and led a financing that helped RadioShack get through the holidays.
One scenario under discussion would have Standard General bid to buy a RadioShack with far fewer stores, one of the people said.
Workers at several RadioShack stores said the company has told them to help clear out many locations in February by shipping big-ticket smartphones to nearby stores and slashing prices on remaining inventory. The company operates roughly 4,300 stores in North America but has said it needs to close many of them.
RadioShack also hasn’t finalized the terms of a loan that would fund its operations during the restructuring, according to people familiar with the discussions.
Salus Capital Partners, which led a $250 million loan for RadioShack in late 2013, last month offered to provide a loan of $500 million to fund the retailer’s bankruptcy, The Wall Street Journal reported.
Items up for discussion include how many stores to close and milestones meant to protect lenders providing the bankruptcy financing, known as a “debtor-in-possession” loan, one of the people said.
As companies often do as they approach bankruptcy, RadioShack is trying to get some of its lenders and other stakeholders on board with a pre-determined course of action. Such agreements can ease a company’s trip through bankruptcy court, but they require the agreement of multiple parties that sometimes have conflicting agendas.
RadioShack and Salus have had a contentious relationship at times. The lender has prevented the company from ramping up its store-closing efforts, citing a condition in the 2013 financing that limits the company to 200 closings per year.
RadioShack last year announced plans to close as many as 1,100 stores, but Salus refused to sign off on the additional closings.
RadioShack, which employed 24,000 people late last year, warned in a December securities filing that it could be forced into bankruptcy court if it couldn’t raise new funds or get relief from lenders that have blocked its store-closing efforts.
The company said in the filing that it had $62.6 million on hand as of Nov. 1–$43.3 million in cash and $19.3 million in borrowing availability.
On Friday, RadioShack shares closed at 27.7 cents each, down 10.7%.
Hedge Fund Brevan Howard’s Fortunes Blighted by Billions in Outflows and Management Row
Macro Hedge Fund Treads a Rocky Road
For more than a decade, Brevan Howard traced a smooth upward path to become one of the most powerful hedge funds in Europe. In recent months, its fortunes have waned.
Its commodities fund was closed following a run of poor performance; assets under management dropped, with billions flowing out of its flagship fund in the second half of 2014; it posted its first-ever yearly loss and two of its co-founders locked horns in a high-profile legal dispute.
Brevan is headed by Switzerland-based billionaire Alan Howard and cemented its reputation by making big gains during the credit crisis. Mr. Howard, 51 years old, who was born in England, ranked 12th in a recent list of the greatest hedge-fund managers compiled by LCH Investments NV, with net gains of $17.4 billion since his fund’s inception.
Brevan is part of a group known as macro hedge funds, many of which have struggled in recent years. Macro funds bet on bonds, currencies and other assets and try to predict major shifts in financial markets. But macro funds have found it tough to identify big trends to bet on, partly because of central-bank policies aimed at kick-starting global growth, said Sam Diedrich, who manages about $1.1 billion at Pacific Alternative Asset Management Co. LLC and invests in macro funds.
Quantitative easing “has created a low-volatility environment where currencies didn’t move and rates didn’t move,” he said.
Brevan’s run of redemptions is particularly significant because the fund has in the past been viewed as one of the most attractive in the world. Its “one in, one out” policy limited the number of investors that could become clients.
Recently, though, the flow of money has mostly been out of Brevan’s flagship Master fund. While Brevan keeps a tight grip on its numbers, the fund suffered a long run of outflows in the second half of last year, according to calculations by The Wall Street Journal, based on investor letters. Investors withdrew a net $4.2 billion between the end of May and the end of December, according to the Journal’s data.
The firm’s total assets, including the Master fund, dropped to $32.8 billion at the end of December from $37.3 billion at the end of May.
Performance has also dropped off sharply. Brevan’s Master fund posted eye-catching gains of more than 20% both in 2007 and 2008, benefiting from correct bets on interest-rate and currency movements, among other trades. But in 2012 and 2013, the fund recorded only small gains of 3.9% and 2.7% respectively, according to investor letters reviewed by the Journal. In 2014, for the first time in the Master fund’s 12-year history, it recorded a loss of 0.8% after making incorrect bets on Japanese equities and U.S. bond yields.
During the first half of last year, Brevan shifted gears, reducing its exposure to equity and currency markets and returning to a greater focus on trading interest rates—the specialty of its founders.
Brevan’s other funds have also encountered problems. It closed the $630 million Brevan Commodities Strategy fund, the Journal reported in November, after the fund was hit with big losses as a result of incorrect bets on oil prices.
Brevan Howard co-founder Alan Howard in Beverly Hills, Calif. ENLARGE
Brevan Howard co-founder Alan Howard in Beverly Hills, Calif. PHOTO: PRENSA INTERNACIONAL/ZUMA PRESS
Meanwhile, Mr. Howard got into a public spat with Brevan co-founder Chris Rokos over a noncompete agreement. The two settled the dispute out of court, though not before some of the inner workings of the firm were exposed in court filings. The dispute was resolved last month and Mr. Howard agreed to invest in Mr. Rokos’s new fund.
Investors globally continue to put money into hedge funds, according to Hedge Fund Research. The sector as a whole attracted net inflows of $76.4 billion last year, the highest level since 2007.
Some investors say the tide could be about to turn in favor of macro funds, which could benefit from divergent monetary policy and different growth trajectories in Europe, Japan and the U.S., for instance.
One bright spot for Brevan Howard was that it avoided the carnage that wreaked havoc in other parts of the hedge-fund industry last month when the Swiss National Bank unexpectedly removed its long-standing cap on the Swiss franc. The Journal reported that Brevan, which had been profiting from a negative bet on the Swiss franc against the dollar, cut this back shortly before the SNB’s surprise move. Brevan’s Master fund gained 0.8% in the week to Jan. 16, taking gains for this year to 1.9%.
Brevan’s flagship fund gained around 3% in January, said a person familiar with the matter. Its smaller, computer-driven fund that bets on market trends made double-digit gains last year and is up again this year.
TUI France in exclusive talks to sell Corsair to Air Caraibes
French tour operator TUI France is understood to have initiated exclusive talks for the sale of its airline Corsair, French daily La Tribune reported. The report cited union sources as saying said the head of Corsair and TUI France Pascal de Izaguirre announced during a works council last week that the preferred bidder, Air Caraibes, asked to be granted the exclusivity for the sale.
Another unsourced report from daily Les Echos claimed that discussions with other potential buyers such as Air Contractors or IAG could however still be ongoing. The report added that a sale could be finalised soon.
La Tribune, Les Echos
Germany Stands To Be Big Winner of Much-Opposed ECB Stimulus
Country’s Export Dominance Puts Germany Economy In Strong Position to Reap QE’s Benefits
The ECB’s program, unveiled in January in an attempt to shake the eurozone out of its economic torpor, drew cheers from many investors, politicians and businesspeople from the region and around the world.
But in Germany, Europe’s largest economy and one of the Continent’s healthiest, the decision was met with disapproval from political leaders and the public alike. That is even though the country’s export dominance, well-capitalized banks and strong labor markets provide its economy the best conditions in Europe to channel the central bank’s easy-money policies into borrowing, spending and output.
The president of Germany’s traditionally conservative central bank, Jens Weidmann, says the ECB’s massive stimulus would fail to address the eurozone’s debt and competitiveness problems. The program, he warns, would take pressure off countries such as Italy and France to revamp their labor markets and push through other economic overhauls. Chancellor Angela Merkel , as well as much of German media and industry, has stressed the same point.
Germany’s opposition, in part, reflects the economic disparity that has complicated the ECB’s task of formulating a single monetary policy for 19 mismatched countries. It also highlights a persistent philosophical disagreement between Germany and most of its fellow eurozone members about how to tackle the crisis that broke out in 2010.
Berlin’s experience with overhauling its own rigid labor market and trimming the welfare state in 2003, and the long and relatively robust recovery that ensued, have played a key role in its insistence that other eurozone governments do the same.
Benefits of the stimulus may pale against long-term risks, critics in Germany say. “It’s not necessary to flood the entire eurozone in order to fight fires in individual countries,” says Karl-Ludwig Kley, chief executive of German pharmaceutical company Merck KGaA.
“Germany has always had a long-term horizon and has been more critical about the second- and third-round effects” of policies, says Dirk Schumacher, senior European economist at Goldman Sachs . “Others have tended to say: ‘Let’s deal with the side effects later.’”
Given the growth-boosting effects expected from the ECB’s quantitative easing—from rising stock and property prices to easier credit conditions and higher exports—Germany’s opposition has left some economists perplexed.
“It’s a big puzzle,” says Prof. Marcel Fratzscher, head of the Berlin-based DIW Institute for Economic Research and one of the few prominent German economists to welcome the ECB’s announcement.
German markets have applauded the ECB’s move. The DAX index of blue-chip listed companies has appreciated by almost 10% this year and almost 5% since the quantitative-easing program was unveiled last week.
Anticipation of the bond-purchase program has driven a massive rally in German government bonds. Ten-year yields, which were above 1% as recently as late September, touched a record low of just below 0.3% the day after the ECB meeting. Yields are negative up to maturities of five years, meaning investors are effectively paying Germany to borrow.
Stimulus plans have also had a dramatic impact on the euro. The currency has fallen more than 15% against the dollar in the last six months to trade at around $1.13—a development that will help German exporters.
In a theoretical model assuming a 10% fall in the euro against a basket of other currencies, the eurozone’s $13 trillion economy would gain 0.3 percentage points of growth, Carsten Brzeski, economist at ING Bank, estimates.
But the effects would vary widely. Germany and the Netherlands, which export extensively outside the eurozone, would see the biggest boosts—0.5 percentage points or more to growth in gross domestic product—while the weaker economies of Spain and France would benefit less.
Economists at Nomura see Germany benefiting about twice as much as France from the euro depreciation. With foreign trade accounting for more than 70% of German GDP, exports are vital to the country’s wealth.
According to Gert Peersman, a professor of economics at Ghent University, a 2% rise in the amount of assets the ECB holds raises German GDP by around 0.3%, about twice the effect that Spain and Italy are expected to experience. The reason: Germany’s banks are better capitalized than many of their European peers, allowing them more leeway to lend.
German households, too, seem better positioned to channel the ECB’s largess into new spending. In January, consumer confidence hit a 13-year high according to data released Wednesday by research group GfK, while it was flat in France and well below its long-term average.
Other German asset classes also stand to benefit. Property prices in Germany fell between 2001 and 2007 but are now rising by up to 10% a year in some cities and with household debt low, they could go further.
German critics of the ECB object that those rising asset prices will have a limited effect. Just over half of German households own their homes, according to the Organization for Economic Cooperation and Development, well below the 71% European average. While low-yielding government bonds remain popular, stock ownership is falling.
That is part of the reason why many Germans oppose stimulus plans. “Essentially, the bottom 60% of wealth and income distribution have their savings on their savings accounts,” Prof. Fratzscher says. “Given the current interest rates, building wealth is impossible for them.”
SWISS JAN PMI MANUFACTURING: 48.2 V 50.6E (lowest since Oct 2012)
- Prior revised lower from 54.0 to 53.6
