TheChek News Flow

Link : {http://reut.rs/1yjWTHa}

When Altice originally bid for Oi's Portuguese operations in October, the cable and telecoms firm planned to raise mainly dollar bonds solely at Altice International, according to the sources.

Altice International includes the company's cable and telecoms assets in far-flung geographies such as Israel and the Dominican Republic. The other half of the business is Altice France, which holds its French assets.

The listed holdco, Altice SA, sits above both of these businesses.

But Altice had to raise its offer to beat a rival bid from private equity funds Apax and Bain in December, while lowering the earn-out portion of the deal. This raised the cash consideration from around EUR4.5bn to nearly EUR5.7bn, according to the sources.

In order to fund this increase, the company will now have to raise a significant amount of debt at the Altice SA holdco, as it did on the record-breaking Numericable-SFR deal in April.

The company's management are now priming the market to expect 65% of the deal to be funded at Altice International and 35% at Altice SA, according to an investor.

He added that this could be problematic for some investors, as Altice's management indicated that holdco issuance would be infrequent when Numericable acquired SFR in April.

LOAN SURPRISE

Plans have also shifted to include a new leveraged loan deal alongside bonds at Altice International, according to a banker on the deal.

"Most of the market had assumed the deal was going to be all-bond, so this may take some people by surprise," he said.

Altice International has tapped the leveraged loan market before, raising a US$1.034bn term loan B in July 2013. That came during a nasty bout of volatility, forcing the company to drop a planned euro tranche and price at a significant discount.

The new loan is expected to include a euro tranche, however.

"The fact Altice was primarily an Israeli business was a stumbling block for European CLOs last time, but now the company is 70% in Western Europe this should not be a problem," the banker said.

The rejigging of the deal reflects recent shifts in the market. Raising long-dated dollar bonds and swapping them back into euros was hugely attractive back in October, but the dollar market has sold off somewhat since then.

At the same time, the differential between issuers' euro and dollar tranches has widened. Dutch cable company Ziggo raised a euro bond at a yield 125bp tighter than its dollar bond on Wednesday, for example.

This has made the benefit of raising funding in dollar bonds more marginal, pushing Altice to split its funding across multiple markets.

JP Morgan is set to lead the Altice SA holdco bonds while Goldman Sachs will lead the Altice International opco bonds.

Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley have underwritten the debt raising, which is still dependent on a approval from Portugal Telecom SGPS shareholders at a vote on January 22.

Altice did not respond to a request for comment

EXCLUSIVE-More unit IPOs an option for evolving GlaxoSmithKline GSK.L NOVN.VX PFE.N - RTRS

16-Jan-2015 09:47

Offering for HIV business may be model for future moves

Consumer more tenable as standalone business after Novartis deal

GSK CEO says consumer health M&A could get interesting

But substantial consumer change unlikely for three years

By Ben Hirschler

LONDON, Jan 16 (Reuters) - GlaxoSmithKline GSK.L could consider more partial public share offerings for component units as it evolves in the coming years, potentially pointing to a break-up of the group if this offers value to shareholders.

Chief Executive Andrew Witty told Reuters the group's large consumer health business would be more viable as a standalone operation following the conclusion of a $20 billion asset swap with Novartis NOVN.VX, especially if it bought additional assets.

While nothing is planned for the near term, Witty said the options for changing the structure of the group were considerable and management would be very pragmatic.

Britain's biggest drugmaker announced plans in October for an initial public offering (IPO) of a minority stake in its HIV business, ViiV Healthcare, which could serve as a model for future moves, he said.

"Post-Novartis, particularly if we did more transactions in the consumer space, the idea of the consumer company being a standalone consumer powerhouse is much more tenable," Witty said in an interview.

GSK is forming a consumer health joint venture (JV) with Novartis, as well as buying vaccines and selling cancer drugs. The deal is expected to close in the first half of 2015 and Novartis has an option to sell its JV stake to GSK after three years.

"It is pretty unlikely anything substantial can happen until after that point, so this is all very much in the world of strategic theory rather than tomorrow morning's press release," Witty said.

The willingness to embrace change comes at a testing time for the company and as other drugmakers, most notably Pfizer PFE.N, also debate the case for break-ups.

ROUGH RIDE

GSK had a rough ride in 2014, after being fined nearly $500 million for bribing Chinese doctors and suffering a bigger than expected fall in sales of its ageing but still top-selling lung drug Advair.

A new chairman, Philip Hampton, will take over in September but management is not waiting around to shake things up, given investors’ concerns about an underperforming share price. In addition to the spin-off of ViiV, GSK is also cutting costs by a further 1 billion pounds ($1.5 billion). (Full Story)

Despite high-profile setbacks with an experimental heart drug and a cancer vaccine, Witty is confident GSK still has a compelling new drug pipeline, which augurs well for the core pharmaceuticals business.

The company has 129 distinct pharmaceutical research milestones pending in 2015, ranging from first-in-man tests of new drugs to numerous clinical trial results to potential regulatory approvals.

In addition to promising treatments, there are also high hopes for the enlarged vaccines business, which will be boosted by the inclusion of meningitis shots from Novartis.

However, pressure on drug prices from governments and insurers is a growing risk, and the new GSK emerging from the far-reaching deal with Novartis could change its identity in the years ahead.

The entire drugs sector is undergoing major upheaval at present, reflected in a wave of deal-making as companies seek to build up in areas of strength, while jettisoning businesses where they lack critical mass.

With more mergers and acquisitions predicted for the industry as a whole, GSK will continue to eschew big, pricey drug deals, Witty said.

Next week the potential sovereign QE announcement (22 January) at the ECB meeting, and Greek elections (25 January) are likely to be two of the most important events of the year.

We expect the ECB to announce government bond buying of between EUR 500 and EUR 700bn over 18 months. The crucial issue is whether the ECB will manage to create an “open ended” feel to its program.

December CPI inflation was weaker than expected, at 0.5% yoy. Given the continued fall in oil prices, we now see it reaching a trough in February at 0.1%.

We discuss the main conditions that we think any new Greek government will have to meet in order to avoid tail risks. We argue that there is room to improve Greece's adjustment program, but that this will depend to a large extent on the political will to implement key reforms.

Week ahead calendar - see attached

IEA Slashes 2015 Forecast Increase in Non-OPEC Oil Supply

Price Recovery May Not Be Imminent But Signs Are Mounting That Tide Will Turn, Agency Says

The decision taken by the oil cartel in November to abandon its traditional role of stabilizing the market and maintain its output in the face of falling prices has proved divisive even within the group. Oil prices, already under pressure from surging U.S. production and sluggish demand, tanked following the group’s decision and are now down more than 50% since June.

Oil prices ticked higher Friday, following steep losses this week. On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $46.86 a barrel, up 1.4%. March Brent crude on London’s ICE Futures exchange rose 1.2% to $48.84 a barrel.

The sharp drop in oil prices is also hitting non-OPEC producers. Companies are slashing capital expenditure and the number of rigs drilling and drilling permits in the U.S. has already decreased, suggesting that supply pressure could ease in the coming months.

“A price recovery—barring any major disruption—may not be imminent, but signs are mounting that the tide will turn,” the IEA said in its closely watched monthly oil market report, as it slashed its forecast for the increase in non-OPEC oil supply this year by 350,000 barrels a day. The knock-on effect of that is an expected increase of 300,000 barrels a day in demand for OPEC’s oil this year to 29.2 million barrels a day.

Still, oil production from the U.S. is expected to remain robust this year, with supply growth slipping by just 80,000 barrels a day, according to the IEA. Oil output from Canada and Colombia is expected to weaken slightly more, adding to the easing in supply growth.

Meanwhile, OPEC’s oil output continues to exceed demand projections and the group’s own output ceiling of 30 million barrels a day. According to the IEA, OPEC production rose by 80,000 barrels a day in December to 30.48 million barrels a day, marking its eighth straight month above the group’s official output target.

rate cap, which it introduced in late-2011. The SNB has also cut interest rates by

50bp. Swiss financial markets have reacted strongly to events with Swiss equities

(SMI) trading c10% lower intra-day. Near-term volatility is likely across all Swiss

assets as investors digest what has been a surprise move by the SNB. This note

considers the investment case for Swiss equities over the coming 12-18 months in a

post-cap environment and also suggests implications for equities elsewhere in

Europe. We think the pull-back in Swiss equities presents an opportunity for

investors to buy the dip and we think that the net impact is positive for the rest of

European equities.

* When they wake up tomorrow morning, and following today's moves, Swiss

investors can choose between negative deposit rates (cash), 10-year bond yields

currently trading below 0.1% or an equity market with a dividend yield of c3%. For

equities to be the wrong asset allocation decision over the next 1-2 years we believe

that investors need to believe in: 1) a prolonged Swiss earnings recession, 2)

widespread Swiss dividend cuts, 3) global recession/deflation, 4) external systemic

shock. None of these scenarios is our base case. While we would expect near-term

moves to remain volatile, we, therefore, see today’s market moves as presenting an

opportunity for investors to re-load, buy the dip or add to existing positions.

* A stronger CHF is going to present an immediate hit to Swiss corporate earnings, as

suggested by our Banks, Capital Goods and Luxury Goods teams, amongst others,

but we believe that share prices have quickly priced in a significant portion of this.

We therefore see today's fall as an opportunity for fresh capital to raise exposure.

Given the lack of yield/return opportunities in other asset classes, there is no need

for investors to take on equity benchmark risk. This makes the ongoing case for

secure income/high cash generating stock opportunities in the Swiss market.

* For non-CHF based investors, today’s sharp fall in the SMI has been more than

covered by respective currency moves, e.g. US$ investors have made a good

return today on the SMI, providing they were not hedged. How will the investment

case for the Swiss equity market look tomorrow morning for them? We show that the

SMI bears an uncanny likeness to the US equity market in terms of high price/book

and equally high/impressive RoE. Before currency-induced EPS downgrades, Swiss

equities also traded on the same 2016E P/E (14.5-15x) and had the same 2014-

16E EPS growth profile as US equities, but with a >50% higher DY. We can also

now add strong currency to that list of similarities. So, while near-term EPS

downgrades present headwinds, if much of that has been priced in today’s moves

then we see Swiss equities as offering similar attractions to US equities from here.

* Additionally, and more importantly, we don't think that today's moves detract from

our overall barbell strategy across European equities. This barbell is exposed to

stocks/sectors which offer a combination of attractive fundamentals with liquidity

support through two main groups: 1) surplus FCF with strong balance sheets, where

the potential for corporate re-leveraging (bottom up QE), especially with ECB QE in

place, offers upside optionality to investors; 2) "reasonable and secure" yield stocks/

sectors which can see direct and indirect beneficiaries of ECB QE (top down QE) –

this includes sectors with high DY and surplus FCF such as Insurance and

Telecoms, as well as likely beneficiaries of further €/US$ weakness such as stocks

with operating leverage or surplus FCF/strong balance sheets and high US

exposure. Overall, we would prefer to own these two themes than Swiss equities

since we want exposure to the liquidity “kicker” which we see from either corporate

re-leveraging (bottom-up) or from QE (top-down).

* Europe gaining momentum: flows to EU equity funds are improving from low levels and turning up (Chart 1) after big $24bn outflows in Sep-Nov’14…tailwind for European equities

* EM & HY still out-of-favor: outflows from EM equity, EM debt and HY bond funds most dire since May/Jun’13 taper tantrum (Chart 2)…but HY showing signs of life with first inflows in 7 weeks

>>> Asset Class Flows

* Equities: $2.7bn outflows ($1.8bn outflows from mutual funds vs $0.8bn ETF outflows)

* Bonds: $6.9bn inflows (largest in 9 weeks) (Table 1)

* Precious metals: $0.3bn outflows (7 straight weeks)

* Money-markets: $8.4bn outflows

>>> Equity Flows

* EM: 9 straight weeks of redemptions ($2.8bn) (Table 2); EM flow trading rule shows that 4-week outflows = 1.0% of AUM. Flows have been bearish but not enough to trigger contrarian “buy’ signal for EM equities (Chart 4)

* US: $1.7bn outflows (outflows from both ETF’s and mutual funds)

* Japan: chunky $2.0bn inflows

* Europe: modest $0.2bn inflows; momentum improving

>>> Fixed Income Flows

* 56 straight weeks of inflows to IG bond funds ($5.1bn)

* HY bond funds eke out first inflows in 7 weeks (albeit a small $0.2bn)

* 6 straight weeks of outflows from EM debt funds ($1.1bn)

* 27 straight weeks of outflows from bank loan funds ($0.7bn) (Chart 3)

* 17 straight weeks of inflows to muni funds ($0.4bn)

* 13 straight weeks of inflows to MBS funds ($0.7bn)

* $2.2bn inflows to govt/tsy funds (largest in 12 weeks)

* Europe gaining momentum: flows to EU equity funds are improving from low levels and turning up (Chart 1) after big $24bn outflows in Sep-Nov’14…tailwind for European equities

* EM & HY still out-of-favor: outflows from EM equity, EM debt and HY bond funds most dire since May/Jun’13 taper tantrum (Chart 2)…but HY showing signs of life with first inflows in 7 weeks

>>> Asset Class Flows

* Equities: $2.7bn outflows ($1.8bn outflows from mutual funds vs $0.8bn ETF outflows)

* Bonds: $6.9bn inflows (largest in 9 weeks) (Table 1)

* Precious metals: $0.3bn outflows (7 straight weeks)

* Money-markets: $8.4bn outflows

>>> Equity Flows

* EM: 9 straight weeks of redemptions ($2.8bn) (Table 2); EM flow trading rule shows that 4-week outflows = 1.0% of AUM. Flows have been bearish but not enough to trigger contrarian “buy’ signal for EM equities (Chart 4)

* US: $1.7bn outflows (outflows from both ETF’s and mutual funds)

* Japan: chunky $2.0bn inflows

* Europe: modest $0.2bn inflows; momentum improving

>>> Fixed Income Flows

* 56 straight weeks of inflows to IG bond funds ($5.1bn)

* HY bond funds eke out first inflows in 7 weeks (albeit a small $0.2bn)

* 6 straight weeks of outflows from EM debt funds ($1.1bn)

* 27 straight weeks of outflows from bank loan funds ($0.7bn) (Chart 3)

* 17 straight weeks of inflows to muni funds ($0.4bn)

* 13 straight weeks of inflows to MBS funds ($0.7bn)

* $2.2bn inflows to govt/tsy funds (largest in 12 weeks)