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American Family Mutual Insurance Co, S.I. -- Moody’s assigns Baa1 senior note rating to AmFam Holdings, outlook stable

·14 min read
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Rating Action:

Moody’s assigns Baa1 senior note rating to AmFam

Holdings, outlook stable

2 March 2021

Company plans to issue senior unsecured notes

New York, March 2, 2021 – Moody’s Investors Service has assigned a Baa1 rating to a proposed

offering of senior unsecured notes by AmFam Holdings, Inc., a subsidiary of American Family

Insurance Mutual Holding Company (together with all subsidiaries, American Family). The company

intends to use the net proceeds to repay borrowings from the Federal Home Loan Bank of Chicago,

some of which were incurred to finance the recent Bold Penguin acquisition, and for general

corporate purposes. The notes are being offered to qualified institutional investors under Rule 144A/

Regulation S of the Securities Act of 1933. The rating outlook for AmFam Holdings is stable.
In the same action, Moody’s affirmed the A1 insurance financial strength (IFS) rating of American

Family Mutual Insurance Company, S.I, which also has a stable rating outlook.
RATINGS RATIONALE
According to Moody’s, the ratings reflect American Family's established personal lines business in

the Midwest, its growing national presence driven by its acquisition strategy, and its sound balance

sheet with conservative financial leverage and a high-quality fixed income portfolio. The group's

mutual ownership structure further supports its credit profile, aligning the interests of policyholders

and owners.
Tempering these strengths are the group’s weak but improving personal auto underwriting results,

and its exposure to convective storms as well as New Madrid earthquakes given its concentration

in the Midwest. American Family also faces intense competition in personal lines from the largest

national carriers. Given its mutual structure, American Family cannot readily access the equity

capital markets.
American Family is among the top 10 US personal lines insurers and has strong brand recognition,

particularly in the Midwest. The group has completed a number of acquisitions in the past several

years, which has expanded its distribution channels and product offerings but increased its

integration risk. The rating agency expects American Family to report improved auto combined ratios

for 2020 based on reduced vehicle usage and lower accident frequencies during the pandemic,

partly offset by premium relief provided to policyholders.
American Family’s proposed note issuance will increase its financial leverage, with the offsetting

benefit of extending its debt maturity profile. Moody's expects the group to continue its opportunistic

acquisition strategy while maintaining conservative financial metrics.
The three-notch spread between AmFam Holdings’ Baa1 senior unsecured debt rating and the A1

IFS ratings of its lead P&C subsidiary is consistent with Moody's typical US notching practices.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade of American Family’s ratings include: (i) increased scale and

expansion of its geographic footprint with continued strong capitalization and earnings, (ii) combined

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ratios, including catastrophes, consistently at or below 95%, and (iii) financial leverage below 15%,

and earnings coverage above 8x.
Factors that could lead to a rating downgrade include: (i) combined ratios consistently above

102%, (ii) erosion of policyholders’ surplus by more than 5% over a 12-month period, (iii) large

acquisition(s) with heightened financing and integration risk, or (iv) financial leverage above 25% and

earnings coverage less than 4x.
Moody’s has assigned the following rating:
AmFam Holdings, Inc. – senior unsecured at Baa1.
Outlook Actions:
AmFam Holdings, Inc. – outlook is stable.
Moody’s has affirmed the following rating:
American Family Mutual Insurance Company, S.I. – insurance financial strength at A1.
The rating outlook for American Family Mutual Insurance Company, S.I. remains stable.
The principal methodology used in these ratings was Property and Casualty Insurers

Methodology published in November 2019 available at

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_1187352

. Alternatively, please see the Rating

Methodologies page on www.moodys.com for a copy of this methodology.
Wisconsin-based American Family writes auto, home, commercial, and a small amount of life

insurance. On a consolidated GAAP basis, the group generated $13 billion in revenues and

$404 million in net income in 2020. Consolidated GAAP members' equity was $10.6 billion as of

December 31, 2020.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see

the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure

form. Moody’s Rating Symbols and Definitions can be found at:

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_79004

.

For ratings issued on a program, series, category/class of debt or security this announcement

provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or

note of the same series, category/class of debt, security or pursuant to a program for which the

ratings are derived exclusively from existing ratings in accordance with Moody's rating practices.

For ratings issued on a support provider, this announcement provides certain regulatory disclosures

in relation to the credit rating action on the support provider and in relation to each particular credit

rating action for securities that derive their credit ratings from the support provider's credit rating.

For provisional ratings, this announcement provides certain regulatory disclosures in relation to the

provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent

to the final issuance of the debt, in each case where the transaction structure and terms have not

changed prior to the assignment of the definitive rating in a manner that would have affected the

rating. For further information please see the ratings tab on the issuer/entity page for the respective

issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies)

of this credit rating action, and whose ratings may change as a result of this credit rating action, the

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associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach

exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated

entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no

amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited

Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the

related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our

credit analysis can be found at

https://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1243406

.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt

am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No

1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the

Moody’s office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada

Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.

Further information on the UK endorsement status and on the Moody’s office that issued the credit

rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the

Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory

disclosures for each credit rating.
Paulette Truman

VP-Senior Analyst

Financial Institutions Group

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Sarah Hibler

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Releasing Office:

Moody's Investors Service, Inc.

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250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653

© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their

licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS,

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    Nobuaki Kurumatani is leaving after the firm received an offer from his former employer, CVC.

  • BlackRock’s Record-Breaking ESG Fund Looks Just Like a Big Tech ETF

    (Bloomberg) -- As the biggest launch in the history of ETFs, it’s a ringing endorsement of all things ESG. But beyond its billion-dollar debut, BlackRock Inc.’s new fund might feel awfully familiar to most investors.The top holdings in the U.S. Carbon Transition Readiness ETF (ticker LCTU) -- which lured about $1.25 billion in its first day on Thursday -- turn out to be Apple Inc., Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Facebook Inc.The same five companies, in the same order, are the top stakes in the largest environmental, social and governance ETF on the market, the $16.5 billion iShares ESG Aware MSCI USA ETF (ESGU). That’s also from BlackRock with a fee of 0.15%, half the price of LCTU.In fact, those tech megacaps form the bedrock of many exchange-traded funds, both in the ESG space and beyond. For example, four of them also are among the five largest holdings of the $167 billion Invesco QQQ Trust Series 1 ETF (QQQ), which is simply tracking the Nasdaq 100. “The new fund looks akin to any other U.S. tech fund,” said James Pillow, managing director at Moors & Cabot Inc. Its early success is all tied to the growing “drumbeat” to allocate to investments tied to responsible themes, he said.For all their overlap in terms of holdings, there are key differences between funds like LCTU and ESGU.The new arrival is actively managed, and aims to target Russell 1000 companies that are best positioned for a green energy transition, considering issues like clean technology and waste and water management.Meanwhile, its more-established sister product passively tracks an index with a broader ESG remit.The sheer size of some tech names naturally leads to heavy ownership, especially by cap-weighted ESGU. The common holdings also may say more about the tech giants and their commitment to ESG, including clean power, than they do about the funds’ strategies.LCTU’s similarities to more mainstream indexes are intentional, according to Carolyn Weinberg, global head of product for iShares at BlackRock. “It enables our clients to invest as a core part of their portfolio as opposed to a satellite aspect,” she said. “They can build portfolios the way that they traditionally build portfolios, but substitute out the benchmark and add the sustainable or climate version.”The approach has certainly won some early fans. A consortium of large institutions was behind the stellar debut of LCTU and another fund, the BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD), the firm said in a statement. These included the California State Teachers’ Retirement System.Read more: Record Number of ETFs Launch Into Industry Deluged With CashThe record launch comes while many questions linger in the still-maturing ESG sector. A report released Friday by the U.S. Securities and Exchange Commission cautioned that some firms are mis-characterizing their products as ESG, possibly even violating securities laws in the process. The agency didn’t name any companies.“The definition of ESG is wide enough to drive a fleet of semi trucks through,” said Ben Johnson, Morningstar Inc.’s global director of ETF research. Even so, ESG ETFs are in demand. They attracted a record $31 billion in 2020, almost four times the prior year. In January alone, investors added $6.3 billion for a best-ever month. That’s pushed assets to an all-time high of $75 billion, up from less than $10 billion two years ago.“It’s one of the areas where I think you will see growth, but there’s very little consensus as far as how you measure these things,” said Marc Odo, client portfolio manager at Swan Global Investments. “We need to be little bit more diligent about how we use that label.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Credit Suisse identifies $2.3 billion of exposed assets in Greensill-linked funds

    Credit Suisse has identified $2.3 billion worth of loans exposed to financial and litigation uncertainties in its Greensill-linked supply chain finance funds, it told investors on Tuesday. Switzerland's second-biggest bank has been reeling from its exposure to the collapse first of Greensill Capital and then Archegos Capital Management within a month. Its asset management unit was forced last month to shut $10 billion of supply chain finance funds that invested in bonds issued by Greensill after the UK firm lost credit insurance coverage shortly before filing for insolvency.

  • Stock market news live updates: Stocks trade higher amid big bank earnings

    Stocks opened mixed Wednesday morning, with traders digesting a slew of earnings results from big banks that largely topped expectations.

  • Newsmaker: From Harvard to Nasdaq listing: Grab CEO's ride to world's biggest SPAC deal

    The CEO of Grab, a popular app to book taxis, order food and make payments in Southeast Asia, has always been determined to win -- from making his firm the best-funded regional start-up to defeating behemoth Uber Technologies. On Tuesday, Anthony Tan set another record when Grab Holdings agreed to list on Nasdaq through a $39.6 billion merger deal with a blank-check company, Altimeter Growth Corp. The transaction will be the world's largest merger involving a so-called special purpose acquisition company (SPAC).

  • Coinbase Listing Puts Spotlight on Nasdaq As Bitcoin Booms

    (Bloomberg) -- Nasdaq Inc., an exchange that has never hosted a major direct listing, is about to try its hand on the most valuable company to go public using one.Coinbase Global Inc., the largest U.S. cryptocurrency exchange, is set to debut on Wednesday through a direct listing, an alternative to a traditional initial public offering that has only been deployed a handful of times. While Slack Technologies Inc., Palantir Technologies Inc. and most recently Roblox Corp. all listed on the New York Stock Exchange, Coinbase picked the younger bourse known for tech-oriented companies.Early indications Wednesday showed the stock opening at $340 per share, which would give Coinbase a market valuation of $63 billion, and a fully diluted valuation of almost $89 billion, according to Bloomberg calculations. That would make it the biggest company to take the direct listing route to market.Nasdaq on Tuesday set a reference price of $250 a share for Coinbase’s direct listing, a number that’s a requirement for the stock to begin trading, but not a direct indicator of the company’s potential market capitalization. Every major direct listing has so far opened significantly above its reference price, with Roblox shares debuting at $64 each –- 42% higher than the number set by the exchange.Coinbase shares changed hands at a roughly $90 billion valuation in early March, Bloomberg News reported at the time, in what was one of the last chances for investors to trade its private stock before the company went public.Digital Currency Group founder Barry Silbert, who’s built an empire that spans the crypto world, tweeted Tuesday that his shares would definitely not be changing hands at the reference price.Nasdaq has hosted smaller direct listings by insurance, financial technology and biotechnology companies, but has never before landed a big one.Coinbase’s Chief Financial Officer, Alesia Haas, said in an interview Wednesday morning that one of the reasons that the company picked Nasdaq is because the bourse offered the ticker symbol ‘COIN,’ which was not part of the New York Stock Exchange’s pitch.“Ultimately that they had the ticker coin and that was a really great ticker for us to get,” Haas said.Nasdaq’s ability to provide a private market for the shares, as well as services it offers such as investor relations work, were among its selling points, according to a person familiar with the matter.Appropriately for a company that in May said it was committing to a “remote-first” work culture and doesn’t list a headquarters on its filing, Coinbase’s pitch meetings with Nasdaq happened virtually, the person added. “We evaluated both NYSE and Nasdaq and ultimately felt that the Nasdaq platform was aligned with our value as a tech company,” Haas said.In a direct listing, a company’s shares begin trading without it issuing new shares to raise capital. That avoids diluting the shares and also, unlike a traditional IPO, often allows the company’s existing investors to put their shares on the market without waiting for lockup period -- typically six months -- to expire.Luring Coinbase is a win for Nasdaq, whose years-long fight for a larger share of mega listings gained traction in the past year. Half of the 10 largest U.S. IPOs, excluding blank-check companies, were on on Nasdaq, according to data compiled by Bloomberg. That included the third largest, Airbnb Inc.’s $3.8 billion IPO in December, which was the biggest listing on Nasdaq since Facebook Inc.’s $16 billion monolith in 2012.Crypto UpstartsPutting his trust in the stock exchange is Coinbase Chief Executive Officer Brian Armstrong, who started the company with Fred Ehrsam in 2012. At the time, few people had even heard of Bitcoin, and many crypto exchanges were run by amateurs from their garages and homes. Unlike most rivals, Coinbase’s founders always envisioned strict regulatory compliance as a cornerstone of the operation, which has helped the exchange to grow in the U.S., where many early Bitcoin traders and investors were located.Ehrsam left the company in 2017, and is now investing in crypto startups. Both Armstrong and Ehrsam own huge swaths of Coinbase, with stakes worth about $15 billion and about $2 billion, respectively.Coinbase is going public as Bitcoin, which together with Ethereum made up 56% of its 2020 trading volume, jumped to an all-time high. The token breached the $64,000 level for the first time Wednesday, exceeding the previous peak a day earlier. Ether, the second-largest cryptocurrency, climbed to a record, while Bitcoin Cash jumped more than 10% at one point.On the back of the boom, Coinbase last week said it expects to report a first-quarter profit of $730 million to $800 million, more than double what it earned in all of 2020.“They are going to build out a full financial services company,” said Barry Schuler, a co-founder of Coinbase investor DFJ Growth who until last year sat on the company’s board. “Like a crypto version of a Goldman Sachs or a Morgan Stanley.”Skeptics, RegulationThe company’s rapid growth hasn’t been without controversy, ranging from frequent outages during periods of heavy trading to new restrictions Armstrong placed on employee discussions of politics last fall. In March, Coinbase also settled with the Commodity Futures Trading Commission for $6.5 million, after the agency said the company reported inaccurate data about transactions and that a former employee engaged in improper trades.Then there are the crypto skeptics, as well as the regulators around the world who are stepping up oversight and casting doubt on Bitcoin’s usefulness as a currency.European Central Bank executive board member Isabel Schnabel, in an interview this month with Der Spiegel, called Bitcoin “a speculative asset without any recognizable fundamental value.”Coinbase’s early investors disagree.“I think Coinbase is this decade’s Microsoft, Netscape, Google or Facebook,” Garry Tan, founder and managing partner at Initialized Capital and an early-stage Coinbase investor, said in an interview with Bloomberg Television Tuesday. (Updates with details from CFO interview starting in eighth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Singapore keeps monetary policy on hold amid patchy recovery

    SINGAPORE (Reuters) -Singapore's central bank kept monetary policy settings unchanged on Wednesday and said the accommodative stance was appropriate due to a benign inflation outlook and global economic uncertainties caused by the pandemic. The Monetary Authority of Singapore (MAS) was, however, more upbeat about official 2021 growth projections while data showed the economy unexpectedly growing in the first quarter from a year earlier. The central bank manages monetary policy through exchange rate settings, rather than interest rates, letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed band.

  • Asian-American businesses suffer outsized pandemic toll

    After it shut down for two months last year, Jan-Ie Low and her family reduced the hours at their Las Vegas restaurant and converted much of their dining room into a food delivery hub. "If you don't adapt, you're going to be left behind," said Low, whose family has owned the SATAY Thai Bistro & Bar for more than 15 years. COVID-19 is hitting business owned by Asian Americans on multiple fronts.

  • Bitcoin ETF Drumbeat Gets Louder as Eight Issuers File With SEC

    (Bloomberg) -- As Bitcoin hits records and Coinbase Global Inc. goes public, ETF issuers are betting en masse that U.S. regulators will green-light a fund tracking the largest cryptocurrency at long last.No fewer than eight applications for a Bitcoin ETF have now been filed with the Securities and Exchange Commission since late December, after billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd. joined the list on Monday.It is racing with the likes of Fidelity Investments for first-mover advantage as conviction grows that the SEC will relent after years of rejected applications. With the first North American Bitcoin ETF in Canada already at $1 billion in assets, industry-watchers are wagering the agency will follow its northern neighbor’s lead.“Anyone who wants to launch a Bitcoin ETF and has been waiting wants to make sure their hat is in the ring if/when the SEC approves,” Bloomberg Intelligence analyst James Seyffart said. “So if they’re not first, they’re at least on the radar.”Bitcoin rose for a seventh straight day on Wednesday morning, hitting the highest on record and trading at about $63,900 as of 6:12 a.m. in New York. The all-time high comes as Coinbase, the largest U.S. crypto exchange, prepares to list on the Nasdaq.Whether Gary Gensler, the nominee to be next SEC chairman, will prove more open-minded toward a Bitcoin ETF than his predecessor Jay Clayton remains unclear. The agency has rejected every crypto ETF application since the first was filed in 2013 amid concerns about manipulation and criminal activity.An SEC spokesperson declined to comment.This time around, there’s more attention on the potential benefits of a Bitcoin ETF as a way to reduce market distortions.The Grayscale Bitcoin Trust (ticker GBTC) is the largest crypto product. In its current structure as an investment trust, it lacks the share creation and redemption process that helps an ETF keeps its price in line with its holdings. That makes GBTC vulnerable to dislocations like its monster premium at the end of 2020 relative to the Bitcoin it held, or the record discount it swung to earlier this year.In a report on Friday, JPMorgan Chase & Co. touted the benefits of a listed ETF over the closed-end trust to reduce tracking errors. Grayscale Investments LLC, the firm behind GBTC, has said it is “100% committed” to converting GBTC into an ETF.That means the pipeline is even larger than the eight official applications.“There’s a huge amount of pressure on the SEC to do something,” said Nic Carter, a partner at crypto-focused venture firm Castle Island Ventures. “The trust has way outgrown its structure and the lack of an arbitrage mechanism is causing a fair amount of harm to holders.”Between events like the Reddit-fueled GameStop Corp. mania and the recent blowup of Bill Hwang’s Archegos Capital Management, the SEC may have bigger priorities. But the Bitcoin ETF clock is ticking.The regulator has now acknowledged applications from VanEck Associates Corp. and WisdomTree Investments, meaning it has a limited period of time in which to approve or reject their proposals, though it can also extend its deliberations.“They would have to either approve or deny both WisdomTree and VanEck in 2021,” Seyffart said. “Personally, I just can’t see the SEC denying both of them, unless something changes.”Other ETF watchers are similarly bullish on a turning of the regulatory tide.“At some point, if we’re not already there, the SEC runs out of reasons for not approving,” said Nate Geraci, president of advisory firm The ETF Store.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • EU Lays Out $1 Trillion Debt Plan to Challenge Treasuries

    (Bloomberg) -- The European Union set out its blueprint to raise nearly $1 trillion of debt over five years as it seeks to fund its recovery from the coronavirus pandemic.The bloc is aiming to issue the first debt under its NextGenerationEU stimulus as early as July and will use a “state of the art” platform to begin selling bonds and bills via a network of primary bank dealers by September, according to the bloc’s executive branch. Almost a third of the roughly 800 billion euros ($957 billion) will be in green bonds, using a framework of rules to be published in early summer, with issuance as early as the fall.“The Commission will need to execute financing operations up to EUR 150-200 billion per year over the period to end 2026,” the EU executive said Wednesday. “By June 2021, the Commission will be ready to begin mobilizing the funds.”It highlights the ambition of the EU’s first meaningful entry into bond markets, which will see the total of outstanding bonds closing in on that of Spain’s this decade. It also lays the foundation to challenge U.S. Treasuries in coming years as a haven asset, providing a boost to integration in the region and for its common currency.A One-Day Rival to Treasuries Is Born in Europe’s Pandemic BondsStill, EU member states still have to ratify the recovery proposals and a number of hurdles have arisen that could delay issuance. In Germany, there is a challenge to the package going through the courts, while in Poland a junior coalition party has also committed to opposing it.“We have no time to lose,” said Johannes Hahn, the EU’s budget commissioner, during a press briefing. “I appeal to all member states to speed up the process.”Bonds will be issued and regularly sold across a range of maturities from between three and 30 years, while there will also be short-dated bills, according to the Commission. It highlighted the latter as a quick way to raise money, at least in the early phase of the program. The program is 56 billion euros more than initial plans outlined last year that were predicated on 2018 prices.Hahn said that the Commission would need around 15 billion euros per year in extra revenue in order to service interest on the debt.Investors are likely to be keen. The bloc began selling social bonds tied to the funding of a jobs program last year, and those sales have broken global demand records. The EU will begin to issue debt via auction for the first time, as well as syndications via banks. The new platform will be provided by a national central bank that is already used by one of the “large sovereign issuers,” according to the document.The NGEU package includes grants and loans to member states. The loans will have 30-year maturities, with a grace period of 10 years as nations emerge from the crisis.A Rival to Treasuries? EU Bond Binge Raises Prospect: QuickTake“It’s no exaggeration to say our NGEU program will be a game changer on the capital markets,” said Hahn.(Updates with details throughout, Commissioner Hahn comments in sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Stocks, Bonds Rise With Inflation Concern Fleeting: Markets Wrap

    (Bloomberg) -- U.S. stocks climbed to record highs and bond yields fell as investors bet that a higher-than-forecast rise in inflation won’t be enough to slow economic stimulus measures.The S&P 500 closed at an all-time high even after the U.S. recommended pausing Johnson & Johnson vaccines amid health concerns. The tech-heavy Nasdaq 100 also set a record while the Dow Jones Industrial Average finished in the red. Consumer prices rose more than expected last month but investors speculated the acceleration was not fast enough to warrant any Federal Reserve policy change. The drop in yields weighed on bank shares.“The market has been skittish about rates for some time,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “While this may cause some short-term volatility, investors have been pretty steadfast in their faith in a full economic recovery.”J&J shares fell as officials agreed to the pause and started an investigation into a link from its shot to rare and severe blood clots, while rivals Moderna Inc. and Pfizer Inc. advanced. The U.S. anticipates having enough other vaccines during the period.Fund managers across the world now see inflation, a taper tantrum and higher taxes as bigger risks than Covid-19, according to the latest Bank of America Corp. survey.“A lot of growth and inflation have already been priced into the market,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “It’s almost as if you need to exceed those expectations in order to see a more pronounced reaction from markets.”Although policymakers at the Federal Reserve expect a bump in consumer prices to be short-lived, many traders disagree, with fears of faster CPI playing out across duration-heavy assets from bonds to tech stocks.Treasuries extended gains after the government’s auction of 30-year bonds was greeted with strong demand.Meanwhile, Bitcoin jumped to an all-time high as the mood in cryptocurrencies turned bullish before Coinbase Global Inc. goes public. Oil traded near $60 a barrel.Some key events to watch this week:Banks and financial firms begin reporting first-quarter earnings, including JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Morgan Stanley, Goldman Sachs Group Inc.Economic Club of Washington hosts Fed Chair Jerome Powell for a moderated Q&A on Wednesday.U.S. Federal Reserve releases Beige Book on Wednesday.U.S. data including initial jobless claims, industrial production and retail sales come Thursday.China economic growth, industrial production and retail sales figures are on Friday.These are some of the main moves in financial markets:For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Toshiba’s CEO Steps Down, Raising Doubt Over Buyout Offers

    (Bloomberg) -- Toshiba Corp. said Chief Executive Officer Nobuaki Kurumatani will be replaced by Chairman Satoshi Tsunakawa, an abrupt leadership reshuffling that casts doubt on potential buyout offers for the $20 billion Japanese icon.Toshiba said the changes are effective immediately in an announcement Wednesday. The company will soon begin considering successors for Tsunakawa, who returns to the CEO job he held previously, said Osamu Nagayama, chairperson of the board, during a press conference in Tokyo.The decision came as factions within the conglomerate mounted resistance to a potential buyout offer from CVC Capital Partners -- where Kurumatani previously worked. Some executives felt the offer undervalued a storied Japanese corporation that still holds valuable energy and semiconductor assets, according to people familiar with matter, who declined to be identified discussing internal issues. Separately, private equity firm KKR & Co. is exploring a rival offer for Toshiba, Bloomberg News reported.“The optics, combined with the facts that CVC’s bid is now supposedly lower than KKR’s, and that CVC lacks experience with deals of such scale, probably mean it is out of the running,” said Mio Kato, an analyst with LightStream Research who publishes on Smartkarma.Nagayama, the Toshiba board chairperson, said he isn’t sure whether Kurumatani’s resignation will affect talks with CVC because the offer is “very preliminary and not formal.” He noted CVC voiced support for current management while Kurumatani was in charge.The company’s shares rallied after news of KKR’s possible bid, but then pared those gains to close 5.8% higher.Kurumatani suffered a sharp drop in support among the company’s executives and other staff. Employees who have confidence in the CEO fell to less than 60% in an internal January poll, down from more than 90% last year, Bloomberg News reported this week. More than 20% expressed a lack of confidence in his leadership, up from less than 5% previously.The survey results prompted Toshiba to conduct detailed interviews with a narrower group of about 30 top executives and more than half of them expressed a lack of confidence in Kurumatani.“Kurumatani’s resignation settles some issues, gives the new CEO some breathing room and the benefit of the doubt as long as he makes the right noises,” said Travis Lundy, an independent analyst who publishes on Smartkarma. “It will improve morale slightly internally as well. But the issues that have caused problems with shareholders are also at the board level.”The loss of confidence in Kurumatani was due in part to his decision to stick with three-year targets set in 2018, one of the people said. Many executives thought those goals were no longer realistic because of the Covid-19 pandemic and feared pressure to meet them resembled the rigid attitude of his predecessors, which led to an accounting scandal, the person said.In the press conference Wednesday, Nagayama said the CEO was leaving because the company had made its return to the first section of the Tokyo Stock Exchange.“Kurumatani offered his resignation as he feels his job to rehabilitate Toshiba is done with the return to the TSE’s first section,” Nagayama said. “We appreciate his efforts.”He said Kurumatani chose not to attend the press conference. The departing CEO did leave a letter, which a Toshiba spokesman read aloud.Kurumatani faced opposition outside the company too. He held on to his position by a slim margin last year, when only 57.2% of Toshiba shareholders approved of keeping him in the job. Questioning the transparency and process of that vote, Toshiba’s largest investor Effissimo Capital Management has requested an independent investigation, which was green-lit at an extraordinary shareholder meeting in March.​KKR is weighing a bid that would be likely to value Toshiba above the $21 billion buyout proposal that it’s already received from CVC, said one person familiar with the matter, who asked not to be identified as the details aren’t public. Canadian investment giant Brookfield Asset Management Inc. is also in the preliminary stages of exploring an offer for the company, including how such a bid might be structured, a separate person with knowledge of the matter said.The deliberations are at an early stage, no final decisions have been made, and the discussions may not lead to firm offers, the people said.Tsunakawa, the returning CEO, spent time during the press conference Wednesday offering reassurances that Toshiba would remain a strong Japanese company and invest in research and development. His comments appeared aimed at reassuring employees and business partners in the wake of the CVC offer.He also discussed Toshiba’s stake in Kioxia Holdings Corp., the memory chip business in which Toshiba sold off a majority stake. Tsunakawa said Toshiba would not sell its remaining holdings to a foreign semiconductor firm and that he anticipates the company will go public. The Wall Street Journal reported that Micron Technology Inc. and Western Digital Corp. are each exploring a potential deal for Kioxia.“We remain committed to provide our support to Kioxia’s IPO, and our stance on selling our holdings is unchanged,” he said.(Updates with chairperson’s comments from the fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Pigs Are Seen as Next Big Thing in Xinjiang as Cotton Dims

    (Bloomberg) -- China should build more pig farms in Xinjiang as its cotton industry is under threat from declining soil fertility, according to a government researcher, commenting after some international companies avoided fiber produced in the region over allegations of forced labor.Hog farming could become a pillar industry in the region and supply 10% of the nation’s output, up from 1% now, wrote Mei Xinyu, a think-tank researcher at the commerce ministry. Xinjiang already grows more than 80% of the country’s cotton, and some of those pig farms would replace fields sown to the fiber that have been degraded.The suggestion comes after the U.S. banned imports of textile products containing cotton from Xinjiang in protest over alleged ill-treatment of its ethnic Uighur Muslim minority, and several western countries slapped sanctions on China over the same issue.Cotton is the most profitable crop in the region, and rotation to other crops is not in the interests of growers and hard to achieve on a large scale, Mei said on the WeChat account of Beijing News, a government-run newspaper. The only feasible option is to build more hog farms, he said, and they can use local grain to feed the pigs or import supplies from neighboring countries.Xinjiang Production and Construction Corps, a military-affiliated entity, and other groups have already started building several large-scale pig farms, which will increase output significantly in the next two years. In the meantime, animal waste from the farms could be used to boost soil fertility, which has been exhausted by extensive use of chemical fertilizer, said Mei.“The most desirable way to solve this problem is to raise pigs and grow cotton simultaneously, and return a large amount of manure from pig farms to the fields after treatment to enhance soil fertility and increase profits,” Mei said.China should expand hog farms in areas like Xinjiang and Heilongjiang, which are less population-intensive than the inland provinces like Sichuan, Hunan and Henan which dominate the country’s pork production, Mei said. Outbreaks of African swine fever that started in 2018 slashed hog herds by as much as half and sent meat imports spiraling to a record.(Updates with details from the report throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • India's Infosys upbeat on revenue forecast due to strong digital services demand

    Indian software services firm Infosys on Wednesday forecast annual revenue growth of 12% to 14% in constant currency terms for the year to end March 2022, buoyed by client demand for its digital services amid the coronavirus pandemic. Chief Executive Salil Parekh told reporters at an online news conference that in sectors from insurance and utilities to consumer products and banking, "there are new ways that our clients are looking to connect with their customers to grow their business". Bengaluru-headquartered Infosys reported a 17.5% rise in net profit to 50.76 billion rupees ($675.4 million) in the three months to March 31.

  • Tristar Is Set to Pull Dubai IPO as Investors Push Back on Valuation

    (Bloomberg) -- Middle Eastern logistics firm Tristar Transport has pulled its initial public offering in Dubai, dealing a blow to the city’s attempts to revive a stock market where just one company has listed in three years.Tristar has informed Dubai’s main bourse that the IPO has been withdrawn, Chief Executive Eugene Mayne told Bloomberg in an interview. The deal was likely withdrawn “largely due to a mismatch in valuation expectations and investor education,” he said.Tristar had set the price range for the offering at 2.20 dirhams to 2.70 dirhams per share. The firm was offering up to 24% of its shares in the IPO, valuing it at as much as 3.24 billion dirhams ($882 million), and the sale was scheduled to end on Thursday.“We have strong cash flow and cash balances, we have capital for growth,” Mayne said, adding that the firm is not in a hurry to tap the IPO market again in the short term.Setback for DubaiThe deal’s collapse is another setback for Dubai’s stock exchange after the recent delistings of major companies. Tristar’s IPO would have been only the second listing in three years in the Middle East’s financial hub.The bourse was already under pressure from shrinking volumes, with the total value of shares traded in the Dubai Financial Market PJSC at about $18 billion last year. That put it far behind Saudi Arabia’s exchange, which saw $557 billion worth of shares change hands in 2020, a jump of 137% from the previous year.Tristar’s valuation, on a relative basis, “is on the higher side -- at upper range of the price band -- when comparing with some of the global, regional peers in the logistics, transportation sector,” said Harshjit Oza, head of research at Abu Dhabi-based International Securities.Tristar had initially planned to sell shares in London, but those plans were scuttled after a fraud at London-listed firm NMC Health Plc revealed $6 billion of hidden debt, increasing worries among global investors about governance and transparency issues at Gulf firms.Bank of America Corp. and Citigroup Inc. are the global coordinators for the sale. First Abu Dhabi Bank PJSC, HSBC Bank Middle East Limited, Societe Generale SA and Kuwait Financial Centre KPSC are also involved in the sale. Moelis & Co is the financial adviser for the sale.Tristar operates in 21 countries across three continents, and provides transportation and storage services to customers including Abu Dhabi National Oil Co., Total SA and Dow Inc.(Updates with CEO comments)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.