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China Building World's First Supercomputer In Space Using AI-Powered SatellitesThe "Three-Body Computing Constellation" could rival the most powerful ground-based supercomputers once fully deployed.

Quick Reads

• China launched 12 AI satellites to create the first space supercomputer network.
• The satellites can perform 744 trillion operations per second in orbit.
• Long March 2D rocket successfully deployed the satellites into their orbit.

China is building the world's first supercomputer network in space, for which it launched 12 AI-powered satellites last week. The state-owned China Aerospace Science and Technology Corporation announced that the first of 2,800 satellites, part of its 'Star Computing' programme, were launched aboard a Long March 2D rocket and successfully deployed into orbit.

Each of the 12 satellites can process up to 744 trillion operations per second, having transfer rates up to 100 gigabits per second. The satellites are also equipped with a space-based AI model with eight billion parameters, capable of processing raw satellite data directly in orbit.

"The Long March 2D carrier rocket successfully sent the space computing satellite constellation into the predetermined orbit. The launch mission was a complete success," the agency said.

"The space computing satellite constellation is the first constellation of the 'Star Computing' program."

The "Three-Body Computing Constellation" will function as a space-based data processing network capable of computing vast amounts of information directly in orbit, without relying on any Earth-based infrastructure.

It will also be more powerful than any other supercomputer system on Earth, as it wouldn't need the costly cooling systems that Earth-based computing systems require. According to estimates by the International Energy Agency, data centres globally could consume more than 1,000 terawatt hours of electricity by 2026, which is equivalent to Japan's electricity use.

Currently, less than 10 per cent of the collected data by satellites is relayed to Earth, often with significant delays, according to a report in South China Morning Post. The new Chinese endeavour, however, aims to solve the limits of Earth-based data processing.

This is not the first instance of China announcing its ambitious plans for space. Earlier this year, Beijing unveiled plans to build the "Three Gorges Dam of Space" to harness limitless solar power.

This initiative involves deploying a massive solar array one kilometre wide in geostationary orbit, 36,000 kilometres above Earth, where it can collect solar energy uninterruptedly, unaffected by the planet's day-night cycle or weather conditions.

Donald Trump urged to target ‘lazy patent expansion’ in US drug bill push

Generics maker Sandoz says president should focus on tactic of ‘evergreening’ pricier products in his drive to lower costs

The chief executive of one of the world’s largest generic drugmakers has called on Donald Trump to tackle “lazy patent expansion” to cut the US drug bill, as the US president pushes to lower medicine prices for Americans. 

Richard Saynor, chief executive of Switzerland’s Sandoz, said he backed the intention of the administration’s “most favoured nation” policy — where it is seeking to cut prescription drug prices to the lowest level paid by other rich countries — but said more focus was needed on the plight of generic medicines, which make up 90 per cent of those used in the US.

Generic drugs, produced after a patent expires, are usually about 80 per cent cheaper than the branded versions. The US pays less for generic medicines than many European countries because of a concentration of buyers, leading to a situation where many drugmakers stop supplying the medicines, creating shortages. 

Saynor said branded drugmakers — also known as originators or innovators — had in the past decade doubled the number of patents they filed to protect their intellectual property, leading to lengthy and risky court battles for generics makers that delay the availability of their cheaper products. 

“At the moment, there is very little risk” for originators that are “evergreening” their products — the practice of making minor adjustments to a drug in order to secure new patents. “If you’re an innovator, you’re getting rewarded for making it harder and harder. And [patent] offices don’t get rewarded for revoking patents. They get paid for filing. So again, you have a system that is rewarding more and more patents.” 

Trump said last week he planned to cut drug prices “almost immediately by 30 per cent to 80 per cent”. The US paid about 3.2 times more for branded drugs than other developed countries in 2022, according to research by RAND Healthcare.

Trump signed an executive order that would give price targets to drug manufacturers and cut out intermediaries, allowing patients to buy medicines directly. He also said the US trade representative and Department of Commerce should probe countries that only allowed market access after significant price discounts. 

The administration has not yet planned any big changes to the generics market in the US. But the prospect of tariffs on pharmaceuticals, which are being investigated as part of a so-called Section 232 probe into whether imports threaten national security, would hit the generics industry hardest because they have thinner margins and are often reliant on manufacturing in India. 

Saynor said the administration should bring back a reward for generic drugmakers that gave them six months exclusivity after they launched the first generic version of a medicine, which helped compensate for the legal risk they are taking. 

He said branded drugmakers had created so-called authorised generics to capture this benefit themselves and used “patent thickets” to make it an “extremely expensive and complicated process to bring a product to the market”. 

Saynor also criticised the system of rebates that keeps gross prices high in the US, because many intermediaries, known as pharmacy benefit managers, profit from a system of discounts. He said the US was “addicted to rebates”, which had a “distorting effect” on pricing. 

Many essential medicines such as antibiotics and anaesthetics are generic. Saynor said it was important to have a conversation about “sustainability of supply”. “You know, we sell a pack of antibiotics for cheaper than a packet of M&Ms,” he added. “That’s offensive.”

Funding for ‘high-cost’ university courses to be cut in England

Education secretary says top-up support for subjects including media must be scaled back in ‘challenging’ fiscal situation

Capital funding for higher education will be slashed from next year with support diverted from certain subjects including journalism and media studies towards lab-based courses in the latest blow to England’s cash-strapped universities.

Education secretary Bridget Phillipson told the sector regulator on Monday that capital spending would be almost halved in 2025-26 to £84mn from a multiyear settlement equivalent to an annual allocation of £150mn.

The grant to help deliver high-cost subjects and access initiatives will be cut from £1.46bn to £1.35bn, Phillipson told the Office for Students.

An “extremely challenging fiscal” situation required compromises, Phillipson said, as she set out plans to target top-up funding for expensive courses in strategic sectors by removing support for media studies, journalism, publishing and information services.

Franchised providers will also be prevented from accessing student premiums under the plans.

The announcement comes less than a fortnight after the OFS warned that financial pressures had forced many providers to scale back planned capital investments, leaving some buildings at risk of becoming “unfit for purpose”.

Universities have warned that reforms to the graduate visa announced by the government last week will further exacerbate the financial crisis in higher education, as a growing number of providers cut courses and roll out redundancy programmes. 

Tim Bradshaw, chief executive of the Russell Group of elite research universities, said the cuts were “another blow” to a sector already facing “stark financial challenges”.

“Universities across the country are making efficiencies, but many are already facing difficult decisions to protect their long-term futures,” he said, adding that immigration reforms would make it more difficult to attract high fee-paying international students.

“A further squeeze on funding will undermine their ability to support the government’s efforts to deliver the industrial strategy, improve public services and achieve economic growth,” he added.

Vivienne Stern, chief executive of Universities UK, which represents the sector, said universities were already under “extraordinary financial pressure” in the face of declining international recruitment and rising employer national insurance costs.

“We need [the] government to work with us to stabilise the ship and put it back on an even keel. That is the opposite of what happened today,” she added.

Butter vs bullets: EU commissioner warns against funnelling farm funds to defence

EU farm chief Christophe Hansen says €387bn Common Agricultural Policy is vital for food security in 27-member bloc

The EU must not prioritise guns over butter in its defence spending spree and should refrain from redirecting funding reserved for farmers, the bloc’s agriculture commissioner has warned.

Christophe Hansen told the Financial Times that an increase in military expenditure should not come at the expense of the bloc’s €387bn Common Agricultural Policy (CAP), which accounts for a third of the EU seven-year budget.

“It is difficult to build a continent on an empty stomach,” Hansen said. “The current geopolitical situation shows us very clearly how important food security is in order to be less vulnerable to blackmail from third countries.”

Governments have started negotiations with the European Commission and the European parliament over the next trillion-euro budget, which runs from 2028. Brussels has put forward a radical overhaul that could see some current funds, including CAP, merged into one pot that would allow capitals to redeploy monies towards new priorities such as defence.

The commission is also bracing for a fight with member states over increasing national contributions to the budget as interest payments on the bloc’s unprecedented Covid-19 pandemic loans could eat up a fifth of annual spending.

The idea of pooling the CAP budget into a single fund along with regional spending programmes has met fierce resistance from the farming community.

The EU’s biggest farming lobby group Copa Cogeca said that it had prompted “unanimous concern across the agricultural sector” and that Brussels should also increase the CAP budget and index it to inflation.

Countries with vocal agricultural sectors, such as Ireland, have indicated that they would oppose a single fund if it involves the CAP.

Hansen said a single pot could mean “more synergies and that could be beneficial” but that it was “too early” to say what the size of the CAP would be, as member states had not agreed the level of their contributions.

He added that “we need a specific, commensurate budget for agriculture” and that “additional requirements”, such as for cutting emissions or improving biodiversity on farms “should come with additional financing”.

The agriculture sector has complained that Brussels has placed too many environmental demands on them in order to access CAP funding, which is currently doled out on a per hectare basis but with certain conditions attached.

Violent farmers’ protests last year led the commission to water down many of the conditions such as compulsory crop rotation and maintaining non-productive features such as hedges which support wildlife.

This week the commission proposed to exempt organic farmers from several of the environmental demands and make compliance less demanding.

Fears of being undercut by cheaper and less rigorously monitored imports was also a central complaint of last year’s demonstrators. Hansen said production standards were non-negotiable in the event of any EU-US trade deal, describing it as “politically risky” to open up the EU market to livestock raised using growth hormones.

He added, however, that there had been a boom in interest in the sector for deeper trade relations with countries such as Japan and that despite the EU’s high standards other countries were still keen to do business.

“The European market is a very strong market [and] is able maybe to pay better prices than other markets,” he said.

Will Trump’s tariff climbdown save the US from recession?

Markets cheered the deal with China. But away from Wall Street, confidence is plummeting and prices are on the rise

For Stonemaier Games, it will be a roll of the dice whether the US-China trade truce can save Christmas.

President Donald Trump’s deal with Beijing last week came just in time for the tabletop game publisher based in St Louis, Missouri, to plan orders for year’s end with its Shenzhen-based supplier at reduced tariff rates.

But the holiday production run will still be “much more modest than usual”, says Jamey Stegmaier, head of the privately owned company that produces strategy games such as Wingspan. “There’s too much uncertainty.”

The company has filed a lawsuit with 10 other small businesses to challenge Trump’s authority to impose tariffs. “There was no due process, just an agent of chaos raising tariffs from 20 per cent to 145 per cent in the span of one week,” Stegmaier adds.

On Wall Street, the memory of “liberation day” is fast receding, with the benchmark S&P 500 soaring back to near-record levels this year having recorded heavy losses after the disorder of April 2.

But for Main Street, the pain is set to endure, with the president’s haphazard approach to overhauling the global trading system harming confidence in an economy it was designed to help.

While April’s consumer price index rose less than expected, most economists believe the cost of goods will soon increase. Diane Swonk, chief economist at KPMG US, says last month’s reading could be “the last subdued inflation print for a while”.

And the trade tensions are not over yet. Another cliff edge in the president’s trade policy — a fresh 90-day deadline for talks with China after which tariffs could be pushed up again — has added to a climate of uncertainty.

“The market has overbought the deal,” says Steve Hanke, a Johns Hopkins University economist who worked as an adviser to Ronald Reagan. “Trump still thinks he’s running Trump Enterprises, not the US economy.”

While the détente has cut the chances of a serious recession, the US president’s handling of the trade war could continue to cast a shadow for the rest of 2025, unwinding years of stellar growth and raising the prospect of a bout of stagflation that would leave policymakers at the Federal Reserve in a tough position.

Concerns have been intensified by the decision of Moody’s to strip the US of its triple A credit rating, as it warned federal deficits will widen to almost 9 per cent of GDP by 2035, up from 6.4 per cent last year.

The anxiety extends to every economy tied to the US. Valdis Dombrovskis, the EU’s economics commissioner, tells the FT the global trade war has had “quite a sizeable negative impact” on its own forecasts, which revealed a sharp downgrade to the global growth outlook. It “creates negative confidence effects which affect first and foremost investment decisions”.

The US-China deal “undid a decent amount of the damage”, says Jason Furman, economist at Harvard University who worked in Barack Obama’s Council of Economic Advisers. “But we’re still going to get a bunch of inflation, we’re still going to get slower growth. And we still don’t know how this play is going to end.”

The relief among global investors following US Treasury secretary Scott Bessent’s agreement with Chinese vice-premier He Lifeng in Geneva a week ago is understandable.

At its height, the chaos pushed the effective US tariff rate at close to 26.8 per cent — the highest since 1903, according to the Yale Budget Lab, and ushered in a month-long freeze in US-China trade.

A collapse in transpacific shipping volumes led retailers to warn of empty shelves — and the president to tell US children to content themselves with “two dolls instead of 30” this festive season.

US companies responded by throttling production.

Church & Dwight, makers of Arm & Hammer baking soda and Trojan condoms, said it would sell or shut down its Flawless hair remover, Spinbrush electric toothbrush and Waterpik showerhead businesses to mitigate a “significant portion” of its exposure to tariffs, which it estimated at $190mn over the next 12 months.

Even longtime supporters of Trump’s pro-US manufacturing policies were rattled.

“On January 1, I felt good. Trump had a pro-business, pro-manufacturing plan and I was positive,” says Harry Moser, president of the Reshoring Initiative, an organisation that supports US companies’ efforts to bring production back home. “On April 2, I felt he had complicated the issue and gone way too high on most of the countries, including our allies.”

At meetings of finance ministers in Washington last month, Bessent began attempts to steer the US administration towards a détente. The Treasury secretary tried to reassure his counterparts the period of peak instability had passed, participants said.

That culminated in the agreement that averted a hard decoupling of the Chinese and US economies as they slashed respective tariffs by 115 percentage points for 90 days. Hopes for trade pacts with other countries were buoyed by an earlier US-UK accord.

Yet even as the dust settles, companies and investors are still warning of enduring damage.

The average US effective tariff rate remains at 17.8 per cent, according to the Yale Budget Lab, more than seven times the 2.5 per cent level Trump inherited going into his second term.

The US-China tariffs “are still much higher than they were a few months ago, as are the tariffs from many other countries”, says Karen Dynan, an economist at the Peterson Institute and a former chief economist in the US Treasury under Obama. “So you still have tariffs putting a meaningful amount of strain on consumers and businesses.”

Despite few expecting a return of levies as high as 145 per cent, the president’s barriers on Chinese products still look set to lead to higher prices at US retailers.

Many helped stave off some price increases by frontloading imports ahead of April 2, but that advantage is expected to dissipate quickly.

Walmart, the largest retailer with more than $550bn in US sales, warned of more expensive back-to-school supplies and holiday gifts later this year. “Even at the reduced levels, the higher tariffs will result in higher prices,” said chief executive Doug McMillon in an earnings call. (Responding in a social media post, Trump urged Walmart to “EAT THE TARIFFS and not charge valued customers ANYTHING”.)

The Yale Budget Lab says the average US family would pay $2,800 more for the same basket of products purchased last year, should tariffs remain at their current level, with lower-income homes more exposed.

Chinese products being sold in the US have already seen marked increases in retail prices, according to analysis of high-frequency data from PriceStats by Alberto Cavallo of Harvard Business School.

But it is not only tariffs that are pushing costs up. The scrapping on May 2 of the so-called “de minimis” exemption, which meant importers could bring in products from China worth less than $800, not only free of duties but with next to no paperwork, is set to further add to prices and limit choice.

“What we ended up doing with de minimis is we turned supply chains into fast food — you expect it fast and cheap. As a consumer, we just get on the internet and say, ‘I want to order this shirt, I want to pay the lowest price possible, and I want it tomorrow night’,” says Bernie Hart, vice-president of customs at global logistics firm Flexport. “We’re slowly turning that off.”

The change is already weighing on corporate thinking. AlphaSense data compiled for the Financial Times showed the number of analysts’ calls mentioning de minimis shot up from five for the whole 2024 to 28 times over the past 30 days alone.

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After the Geneva talks, the tariff rate was also lowered on goods worth less than $800, but importers still face a stack of paperwork that for many small businesses will prove nigh on impossible to fulfil.

“The level of granularity that is expected is quite high,” says Brie Carere, executive vice-president and chief customer officer for FedEx to analysts last week. “So there’s not just an immediate financial barrier. There is an audit, a compliance barrier.”

Even so, many US companies believe the scrapping of the de minimis exemption will help them in the long run by hurting Chinese ecommerce rivals such as Temu and Shein more than themselves.

“Duty-free ultrafast fashion that has flooded the US market over the past few years undoubtedly put some pressure on our price competitiveness,” said James Reinhart, chief executive of online thrift store ThredUp on its latest analysts’ call. “We believe the closure of the de minimis exemption is likely to cause higher prices for these goods and to reduce production volumes.”

Government officials say the US economy — the standout global performer since the pandemic — remains strong.

In recent weeks, Bessent has claimed Trump’s plans to make his 2017 tax cuts permanent and deregulate housing, energy and finance will, together with tariffs, usher in a “golden age”.

Arthur Laffer, an economist best known for the eponymous “Laffer curve” which holds that lowering tax rates can increase the revenue raised, says extending the 2017 cuts, which Congress is expected to do over the course of the summer, would produce “spectacularly wonderful” results for the US economy.

Others disagree, saying the measures raise the prospect of a fiscal crisis. Moody’s said the extension would add more than $4tn to US deficits over the next decade, citing it as part of the reason for downgrading its credit rating.

Laffer — an adviser to several Republican US presidents, including Richard Nixon, Reagan and Trump — believes the administration will eventually lower tariffs to levels that boost free trade.

“There’s a good chance that we’re at a transformational moment in time,” Laffer tells the FT. “It’s not all worked out. We have a long way to go. But it looks brighter and brighter every single day from my perspective.”

Yet while the hard data show little signs of damage from tariffs so far, surveys of business and consumer confidence point to a dour mood. The University of Michigan’s closely watched sentiment measure hit its second-lowest level on record in May and showed even Republicans were souring on Trump’s economic policies.

Misty Skolnick, co-owner of Uncle Jerry’s Pretzels, a small, family-owned bakery operating out of Pennsylvania, says sales are already down as the chaos of April 2 creates a “ripple effect” throughout the economy. “People are unsure of what’s happening,” she says. “Spending money on an artisanal pretzel isn’t necessarily at the top of their mind at this time.”

Many economists still predict anaemic growth.

“The impact on consumer and business sentiment has been very negative, [hitting] capex and spending decisions in the coming months,” says Nikolay Markov, an economist at Pictet Asset Management, who is still forecasting a 1.1 per cent expansion in 2025, less than half last year’s level of 2.8 per cent. “There’s an upside but not to the extent that we need to upgrade now.”

Whether or not higher prices become baked into businesses’ and households’ calculations of future inflation will be crucial in determining if the Fed will feel able to cut interest rates from their current level of between 4.25 to 4.5 per cent.

The Fed’s vice-chair, Philip Jefferson, said on May 14 that he had “adjusted down . . . expectations for economic growth this year” in the wake of the tariffs, which he predicted would fuel price growth if sustained.

How much of the tariff-based price shock will stick will also depend on whether companies feel that their customers will be willing to stomach higher prices.

The April CPI release showed signs of a fall in so-called discretionary spending — an indication that Trump’s policies might already be weighing on demand. Airlines and hotel room rates fell outright, while the cost of sporting events slumped by more than 12 per cent month on month.

Julie Drews, co-owner of beer specialists The Brew Shop, in Arlington, a prosperous suburb close to Washington, believes it could be difficult to pass on additional costs at a time when their customers have already faced wave after wave of inflation following the pandemic.

“I don’t want to raise prices again,” says Drews. “I can feel that people are still feeling sensitive.”

Vance Sine, a manager at retailer California Electric Supply, thinks his suppliers might leave him with little choice. “It almost seems like a cash grab — since everyone is increasing the prices, they jump in,” says Sine, whose business is in the city of Chula Vista, near the Mexican border.

For now, the sense of uncertainty persists. “There will be relief over the easing of tariffs, but [importers] cannot carry on as if nothing has happened,” says Peter Sand, of shipping data firm Xeneta. “If we have learnt anything in the past few months, it is to expect the unexpected.”

Nippon Steel lifts US Steel investment pledge to $11bn in push to secure deal

Japanese suitor is also promising to add thousands of jobs in bid to win over Donald Trump

Japan’s Nippon Steel has quadrupled its investment pledge in US Steel over the next few years in a major push to win over President Donald Trump and gain approval for the politically fraught takeover.

Nippon, whose bid for the American company was blocked by his predecessor Joe Biden and opposed by Trump on the campaign trail, has bumped up its capital commitment to $11bn by 2028, according to two people familiar with the matter.

The Japanese company has also promised to add tens of thousands of jobs over a period of years, the two people added.

The deal’s enterprise value remains $14.9bn, but the investment commitment is four times as big as the $2.7bn pledge reiterated by the Japanese steelmaker in January. The pledge includes $1bn to build a new steel mill, on which a further $3bn is expected to be spent after 2028, the people added. Reuters first reported the development.

During a meeting with Japanese Prime Minister Shigeru Ishiba in February, Trump said Nippon Steel had abandoned the acquisition but would “invest heavily” in the Pittsburgh-based steel producer. People close to Nippon Steel said it had not given up on making a full acquisition.

The efforts to push through Nippon Steel’s proposed takeover come as Japanese negotiators are seeking to lower a 24 per cent tariff on the country’s imports into the US introduced by the Trump administration. Japanese officials signalled their intent last week to hold out for a better agreement.

Since the transaction was first agreed in late 2023, it has been paralysed by national security and political concerns. Biden, Trump and then vice-president Kamala Harris all expressed worries about or outright opposed the deal on the presidential campaign trail, following stiff opposition from the United Steelworkers, America’s largest industrial union.

In April, Trump ordered a new national security review of the proposed transaction by the Committee on Foreign Investment in the US, which is set to conclude on Wednesday.

The same committee failed to reach a consensus under the Biden administration in December, with the former president then blocking the deal at the beginning of this year.

The takeover agreement stipulates the two companies must close the transaction by mid-June, meaning that a final blessing from the White House would be needed in a matter of weeks. “This should increase the chances Nippon is successful in acquiring US Steel,” said Christopher LaFemina, an analyst at Jefferies.

The two companies had sued the Biden administration, accusing it of blocking in order to serve the former president’s “personal political agenda” in the run-up to the election. The companies and the US government subsequently asked an appeals court to pause the litigation until June 5. Nippon is on the hook for a $565mn break fee if the deal collapses.

A person familiar with the situation described the latest development as “Trump trying to get everything he can out of the negotiation process”. 

The company and its advisers have tried to propose various structures in order to meet that demand, including one where investment in the US by the Japanese group would increase its equity position over time. However, say people familiar with the matter, such proposals have so far been rebuffed.

Nippon’s vice-chair Takahiro Mori has made numerous US trips over the past several months in the hopes of securing an agreement. Last week, he visited Washington, Indiana and Pennsylvania, according to a person familiar with the matter.

“Multinational companies now understand that the formula for getting Trump’s favour is to float big numbers,” said Todd Tucker, industrial policy and trade director at the Roosevelt Institute think-tank.

He cautioned that “the key hold-up to the deal has always been” whether Nippon can make its investment pledges enforceable under the terms of a steel industry labour contract, which usually includes specific investment schedules for certain facilities. 

US Steel and Nippon Steel declined to comment. The White House did not immediately respond to a request for comment.

Traders dump Casino debt as fears grow over troubled grocer

Investors cool on retail chain a little over a year after a restructuring led by billionaire Daniel Křetínský

The value of French grocer Casino’s debt has slumped to deeply distressed levels, as fears grow that continued weak earnings could trigger a breach of its loan covenants next year.

Casino, which has lost market share to rivals in France’s crowded food retail sector, has come under renewed pressure from debt markets in recent weeks, with traders now quoting a €1.4bn secured loan at 61 cents on the euro.

The deep discount to face value suggests lenders are braced for the prospect of steep losses, little over a year after Casino concluded a bruising restructuring in which more than €5bn of debt was wiped out and exchanged for equity. 

Casino’s previous owner, Jean-Charles Naouri, built the retailer into a global player with a series of highly leveraged takeovers. It owned a large portfolio of supermarkets and hypermarkets in France, coupled with an international business stretching from Asia to Latin America.

But after years of struggling under heavy debts, which left Casino starved of investment, the retailer was forced to capitulate and agree to a comprehensive debt restructuring in 2023, which saw Czech billionaire Daniel Křetínský take control.

The French supermarket group, which reported sales of almost €9bn last year, has a market value of less than €250mn. Its gross debt stood at €2bn at the end of 2024.

Clément Genelot, an equity analyst at Paris-based investment bank Bryan Garnier, wrote in a recent note that there were “still no signs of commercial recovery” at the cash-burning retailer and that the need for more capital from Křetínský, who owns a 53 per cent stake, cannot be ruled out.

A person close to Křetínský said he “always had in mind” that a second capital increase could be needed. The person added that while this could prompt negotiations with creditors, it would not entail a full-blown debt restructuring.

Several restructuring advisers told the Financial Times that they were actively seeking mandates with Casino’s different classes of creditors for any potential discussions, however.

Casino declined to comment.

Distressed debt investors said Casino’s weak earnings have driven fears of a looming covenant breach. The retailer’s auditors in March noted that a breach may lead lenders to request “immediate repayment” of their loans, some of which have cross-default clauses that could impact Casino’s other debts.

As part of last year’s restructuring Casino agreed to a set of strict covenants on the €1.4bn secured loan and a separate €711mn credit line from banks, which it has to comply with from September. Failing to do so could spark a further renegotiation of its debt. 

One of these terms dictates that the ratio of net debt to earnings in its core business must be below 8.34 times. Casino reported that this leverage ratio stood at 14.6 times at the end of March, up from 4.9 times a year earlier, as a result of its declining profits.

Genelot said Casino should still be able to comply with its debt terms by the end of the year, but there was a “high risk” of a covenant breach next year.

Rating agency Fitch has ranked Casino’s secured loan at CCC-, putting it in a bracket that indicates “substantial credit risk” where “default is a real possibility”.

Casino boasted a strong investment-grade credit rating a decade ago, while its owner Naouri was a stalwart of the French elite, widely lionised for his business acumen.

The portfolio he built has been dismantled as the group sold off stores and subsidiaries to reduce overheads and service its debt — although it has retained its valuable domestic network of inner-city stores, trading under brands including Monoprix and Franprix.

Strong demand for secondary offering in Hong Kong expected to lift amount raised to $5.3bn

Shares in leading Chinese battery maker CATL soared more than 16 per cent on their first trading day in Hong Kong after the world’s biggest listing so far this year.

The secondary offering raised at least $4.6bn, with the amount set to rise to $5.3bn if an option allowing underwriters to sell more shares than planned is exercised.

It is among the largest offerings in Hong Kong by Chinese companies already listed on the mainland in recent years, with CATL also quoted in Shenzhen.

Founder Robin Zeng banged a gong to celebrate the start of trading at the Hong Kong stock exchange. He was joined by Hong Kong financial secretary Paul Chan and the deputy mayor of the coastal city of Ningde in south-eastern China, where the company has its headquarters. 

CATL was not satisfied with being “just a battery component manufacturer”, Zeng said on Tuesday, adding that the company was poised to be the “pioneer” of the zero-carbon economy.

CATL is the world’s largest electric-vehicle battery group. A supplier to Tesla, BMW and Volkswagen, the cash-rich company had sought an offshore listing to raise non-renminbi funding for its overseas expansion, notably a $7.3bn factory in Hungary.

The listing had the support of American banks, while a US asset management firm was a key investor, despite the geopolitical tensions swirling around the deal.

In January, the battery maker was added to a Pentagon blacklist of companies believed to have ties to the Chinese military, although it has denied any such links.

A Republican lawmaker in April urged JPMorgan Chase and Bank of America to halt work on the listing, in a warning sign of the politicisation of such capital markets deals. The US lenders remained as lead bankers on the transaction, along with state-backed China International Capital Corporation and China Securities.

Demand was boosted by global investors’ growing shift out of American assets, including the US dollar, according to analysts. 

Market participants suggested the listing played a role in pushing up the Hong Kong dollar exchange rate earlier in May as investors in the offering bought Hong Kong dollars and speculators bet on it to rise, forcing the Hong Kong Monetary Authority to intervene and buy almost US$17bn to hold down the exchange rate.

“We are in this kind of unique scenario, where you have a well-known company issuing new shares, also at a time when you have a macro factor where investors want to diversify away from the US dollar-related assets,” said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas. 

Analysts and deal participants said they believed heightened demand enabled CATL to price at the top end of HK$263 a share — only a roughly 7 per cent discount to the price at the close on Monday in Shenzhen. Chinese “A-shares” on mainland exchanges typically trade at a double-digit percentage premium to their “H-share” equivalents in Hong Kong, and initial public offerings are usually priced at a discount to entice buyers.

Wang Shuguang, a management committee member at Chinese brokerage CICC, said CATL’s successful debut would encourage more leading Chinese companies across various sectors to pursue listings in Hong Kong.

“The A-share market provides robust liquidity and higher valuations,

while Hong Kong’s market enables flexible financing,” Wang said. “By leveraging both, companies can access diverse financing options and boost the financial agility of their global operations.”

Chinese oil company Sinopec, the Kuwait Investment Authority sovereign wealth fund and Asian fund Hillhouse Investment invested before the shares went public as so-called cornerstone investors. They were joined by US-owned Oaktree Capital Management and Lingotto, an investment vehicle backed by the Italian industrialist Agnelli family, as well as units of two Chinese state-owned groups, Postal Savings Bank of China and insurer Taikang Life. 

One person familiar with the deal told the Financial Times that other US investors chose to wait to invest until after the listing in order to reduce scrutiny from Washington. 

Meanwhile, many onshore American investors will not have access to the shares, given the listing was filed under a “Reg S” rather than “144A” regulation under US securities law. This exempts CATL from some disclosure obligations and means US investors without offshore accounts are barred from investing