|Bid||214.15 x 800|
|Ask||214.18 x 1300|
|Day's Range||210.89 - 214.86|
|52 Week Range||129.26 - 220.68|
|Beta (3Y Monthly)||1.41|
|PE Ratio (TTM)||33.24|
|Forward Dividend & Yield||2.00 (0.95%)|
|1y Target Est||N/A|
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be...
(Bloomberg Opinion) -- Standard & Poor’s(1), Moody’s and Fitch Ratings, the biggest credit-ratings companies, were major causative factors in the financial crisis. Even free-market acolyte Alan Greenspan admitted as much. Little has changed since then, other than that enough time has passed to allow investors to forget this fact.I have been following this issue since 2007, so here is a brief history.With the economy still sluggish after the dot-com crash and 9/11, the Federal Reserve slashed interest rates to 1%. Bond managers were under intense pressure to generate yield. This sent them on a mad scramble to find investment-grade debt with higher returns.This is where the credit raters come in. Moody’s and S&P (Fitch was a relatively small player) slapped investment grade ratings on securities backed by junk subprime loans because they were literally paid to do so by debt issuers. Issuers shopped for ratings -- if Moody’s refused to provide a desired grade, then S&P would (and vice versa). When it all went south, the debt raters made feeble attempts to claim their ratings were "opinions," or protected political speech under the First Amendment. These arguments failed, eventually leading to fines for their malfeasance. S&P paid $1.5 billion to settle with the U.S. and individual states; Moody’s paid a much smaller fine.In the aftermath of the financial crisis, regulators concluded that the way to fix the problem of the raters' conflict-riddled, issuer-pays model was to introduce more competition. But this market-based solution seems to be no better; because the newcomers are hungry for business, their ratings tend to be even laxer. If anything, the solution has only made the conflicts of interest more apparent. To fix this problem requires a radical rethink of the business model. Here are some things regulators should consider:• Sell ratings to bond buyers, not bond issuers: The ratings companies date back to the panic of 1837. The defaults and bank failures that followed led to creation of new businesses to help rate the debt of merchants. During the 19th century, investors in railroads paid for information on the quality of the bonds they were buying, which is how S&P and Moody's got their start. In the 1970s, the raters began the practice of charging issuers for their services, displacing the subscriber-pays model. That the investor-pays model once prevailed suggests that under the right conditions and with the right incentives it could work again.• Assign and rotate rating companies randomly: After the many accounting scandal of the early 2000s -- Cendant, Computer Associates, Enron, WorldCom, Tyco, Adelphia, AOL, Global Crossing, Halliburton and many more -- a number of reforms were made to the accounting industry. Included in the Sarbanes-Oxley Act was the establishment of the Public Company Accounting Oversight Board, or PCAOB. This established new standards for independence, created audit rules and mandated quality control. Perhaps most importantly, it required whoever the lead partner was on an audit to rotate off that project every five years, reducing the tendency of those who are supposed to work at arm's length from getting too cozy.(2) The incentive to cheat was replaced with a high probability of getting caught. The result has been a dearth of the kind of accounting frauds that were so common in the late 1990s and 2000s.• Eliminate the government stamp of approval: The credit raters were granted special government dispensations in 1975, setting them up as the official arbiters of corporate credit quality. This unique status created a moral hazard, with raters facing few consequences for their actions; it is also what enabled the structural problem in the first place. Compare this situation to the equity side: the dot-com implosion taught stock buyers not to rely on Wall Street analyst ratings, which exist (mostly) for the benefit of investment bankers, not investors.The financial crisis should have taught the same lesson to bond investors. But there's still the imprimatur of government credibility to fall back on. If we eliminate that special status, the structural problem should disappear. At the very least, there should be some form of legal liability for misleading ratings.• Create stronger capital reserve standards: This is a big part of the problem: Higher credit ratings give banks and other financial companies cover for holding less capital. If more specific capital requirements were mandated, the need for AAA ratings would change dramatically; ratings would be explicitly structured for the benefit of bond buyers, and not the needs of the borrowers. Today, the ratings serve as a way for issuers to engineer their way to lower borrowing costs.As the Financial Crisis Inquiry Commission concluded in its autopsy of the crisis: “The three credit-rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval.”The ratings companies were broken in 2008; they are still broken today because post-crisis reforms didn't address the root problems. Don’t be surprised if it turns out that the credit raters provided some of the kindling the next time the financial system goes up in flames.(1) Disclosure: The original publisher of my book on the financial crisis, "Bailout Nation," was McGraw-Hill, which also owns S&P. After an editorialdisagreement about thechapter on the credit raters, including S&P, I withdrew my manuscript. The book was later published by Wiley.(2) Auditor rotation was abandoned under intense pressure from the accounting industry.To contact the author of this story: Barry Ritholtz at email@example.comTo contact the editor responsible for this story: James Greiff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- When it comes to credit ratings in the bond markets, it’s perfectly rational to believe both of the following things:S&P Global Ratings, Moody’s Investors Service and Fitch Ratings played an important role in the financial crisis because no one challenged them as they awarded top grades to subprime mortgage investments. Adding more competition to S&P, Moody’s and Fitch in the credit-rating industry leads to inflated ratings because borrowers shop around for the best grades.This is something of a Catch-22, and primarily has to do with the business model of credit ratings. Because debt issuers are the ones that pay for these widely understood grades, there’s inherent pressure to give the best mark possible or risk losing a customer. Institutional investors are broadly aware of this, which is why they still employ their own team of dedicated credit analysts. It’s part of the reason concerns reached a fever pitch last year about the proliferation of highly leveraged triple-B rated companies. Bond buyers sensed that S&P, Moody’s and Fitch might be stretching their analysis to keep household brands from becoming junk.Triple-B bonds, by the way, have returned 13% so far this year, better than any other ratings tier among U.S. corporate debt, Bloomberg Barclays data show. So that fear seems to have dissipated, with investors betting that the Federal Reserve will continue to cut interest rates and these big borrowers will have no trouble refinancing their obligations at a lower cost.However, the lingering worry about Pollyannaish credit ratings hasn’t gone away entirely. The Wall Street Journal published a feature last week titled “Inflated Bond Ratings Helped Spur the Financial Crisis. They’re Back.” The reporters say they analyzed “about 30,000 ratings within a $3 trillion database of structured securities issued between 2008 and 2019.” They found that each of the biggest ratings companies changed their criteria in some way since 2012, and each time it led to an increase in their respective market share. The conclusion:“A key regulatory remedy to improve rating quality — promoting competition — has backfired. The challengers tended to rate bonds higher than the major firms. Across most structured-finance segments, DBRS, Kroll and Morningstar were more likely to give higher grades than Moody’s, S&P and Fitch on the same bonds.”Of course this is what happened. And it’s not just in structured finance. Five years ago, Jim Nadler, president of Kroll Bond Rating Agency, told me something I always recall: “That’s the curse of a new rating agency. No one is going to add a fourth rating that is lower. You’ll never see the ones that we turn away or gave lower ratings to.” Kroll and Morningstar Inc. made the same defense to the Journal, arguing that if unpublished grades were included in the analysis, they wouldn’t look as lenient.I more or less buy that argument. Are there incentives for the ratings companies, big or small, to alter their criteria to give higher scores and win more market share? Of course. The business model makes the appearance of conflicts of interest virtually unavoidable. Are there also perfectly valid reasons for these firms to update how they see markets evolving and react accordingly? You bet. If analysts did nothing to tweak their methodology, they’d probably be criticized anyway for not keeping up with the times.This continuing concern that ratings are too optimistic is unsolvable without wholesale change. But I’m not sure anyone truly cares enough to demand it. As I wrote in May, when Morningstar agreed to buy DBRS, the industry isn’t exactly ripe for disruption. For institutional buyers, potentially off-base credit grades are a feature of the system because they can use their own analysis to take advantage of any mispricing. The Securities and Exchange Commission certainly seems in no hurry to shake things up. And if the financial crisis couldn’t bring down the “Big Three” for failing investors, it stands to reason that nothing will.Some have said the solution is for bond buyers (not borrowers) to pay S&P, Moody’s or other firms for their ratings. This will almost surely never happen. For one, the credit-rating companies need to work with borrowers to gain timely access to crucial financial information. But just as important, the investment-management industry is already being transformed as it looks to cut fees to as little as possible. The last thing money managers need is another added cost of doing business. That leaves credit markets mired in the status quo. And that’s probably just fine. In general, my theory is that if all of Wall Street is worried about the same thing, then it’s unlikely to be the true flashpoint. I said as much in November, when large fund managers were warning of a “slide and collapse in investment-grade credit” precipitated by triple-B companies like General Electric Co. Fast-forward to the present, and GE’s perpetual bond is again trading closer to 100 cents on the dollar. Broadly, corporate credit spreads last month reached the narrowest level in about 10 months.The same reasoning applies for credit ratings. The system isn’t perfect by any stretch, but at least the structural flaws are transparent. For those who specialize in commercial mortgage-backed securities or collateralized loan obligations — the Journal highlighted both as having looser credit standards — it shouldn’t take an inordinate amount of effort to understand what’s under the hood of each company’s grades and price the securities accordingly.So, yes, seemingly inflated bond ratings are back. The truth is, they never left.To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- The world’s largest copper miner is selling bonds, taking out loans and selling non-structural assets to secure funding for its multibillion-dollar upgrade projects only four months after saying it didn’t need to raise money this year or next.Codelco agreed to borrow $300 million and sold two bonds for a combined $180 million of funding, the state-owned company said in a statement dated Thursday to Chile’s securities regulator CMF. Earlier this week, it sold a 37% stake in natural gas port terminal GNL Mejillones for $193.5 million.“Through these financing operations, Codelco ensures an efficient source of funding to invest in its structural projects,” the company said. The sale of the port terminal stake is part of Codelco’s strategy to strengthen its financial position in light of its project pipeline, the company said.The Santiago-based miner’s moves this week are a departure from the strategy that chairman Juan Benavides outlined in April, when he said Codelco was well financed through 2020 and wouldn’t need government funding or to issue more debt.Copper SlumpingOne thing that’s changed is the price of copper. In mid-April, prices were near a 10-month high, at around $6,500 per ton. They have since fallen about 12% and this week hit the lowest in two years.Codelco declined to comment. Chile’s Finance Ministry didn’t immediately respond to emails and calls requesting comment.The company responsible for over 8% of the world’s copper production needs to invest more than $20 billion over the next decade to prevent a slump in output at its aging mines in Chile. The Chuquicamata mine expansion, the first of a string of so-called structural projects, started ramping up in April and will be officially inaugurated next week.Codelco had net debt of $14.9 billion at the end of the first quarter, according to information compiled by Bloomberg. At the end of 2018, the company’s ratio of net debt to earnings before items was more than four times higher than that of some of its biggest competitors.Codelco hands all of its profit to the Chilean state, which then decides how much it will reinvest. In the past, the company relied on a combination of debt and government capitalization to fund its projects. But it received its last funding package from the Chilean government in February, a $400 million payment that was part of a $4 billion package approved under the previous administration, and President Sebastian Pinera hasn’t announced new capitalization for the company.Moody’s Investors Service assigned an A3 rating to Codelco’s senior unsecured notes due in 2039, which “reflects Codelco’s status as a government related issuer,” the credit agency said in a statement on Friday.(A previous version of this story corrected net debt in third-to-last paragraph.)To contact the reporter on this story: Laura Millan Lombrana in Santiago at email@example.comTo contact the editors responsible for this story: Luzi Ann Javier at firstname.lastname@example.org, Steven Frank, Joe CarrollFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Eskom Holdings SOC Ltd. has told bondholders that it wants the majority of its 440 billion rand ($29 billion) of debt transferred to the South African government.The struggling state power utility can only sustain 150 billion rand of debt, company executives at a road show in London on Wednesday told investors, said Ksenia Mishankina, a senior credit analyst at Union Bancaire Privee Ubp SA, who attended the meeting. The discussions follow the announcement last week of Eskom’s record 20.7 billion rand annual loss.Eskom wants the government to transfer the debt it has guaranteed onto the state’s balance sheet. At the end of the fiscal year in March, the company had utilized 295 billion rand of the guarantees offered by the government, according to the National Treasury. South Africa recently increased its Eskom bailout to 128 billion rand over the next three years to keep the state-owned company afloat, as it implements a plan to make the business profitable.“We are having business update discussions with investors,” Dikatso Mothae, a spokeswoman for Eskom, said in a reply to questions about the meeting. The yield on the utility’s 2025 dollar bonds declined 10 basis points during the day.The state-owned company is hoping for resolutions to some of its problems and progress on a plan to split into three units after the National Treasury’s mid-term budget in October, the executives said, according to Mishankina. They also want the government to resolve the problem of unpaid debt from some of Eskom’s municipal customers.Moody’s Investors Service on Tuesday warned that Eskom’s operational and financial performance has deteriorated to the point that it urgently needs to take steps toward turning the business around.The 150 billion rand figure is derived from an assessment that it can sustain debt of five times earnings before interest, taxes, depreciation and amortization. A number of other people who attended the meeting declined to comment.(Adds background. An earlier version of the story corrected the amount of debt Eskom can sustain)\--With assistance from Oliver Telling and Paul Burkhardt.To contact the reporters on this story: Antony Sguazzin in Johannesburg at email@example.com;Lyubov Pronina in Brussels at firstname.lastname@example.orgTo contact the editors responsible for this story: John McCorry at email@example.com, Gordon Bell, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- China’s central bank set its daily currency reference rate marginally stronger than 7 a dollar, leaving analysts anticipating Thursday’s fixing as a key policy signal.The Wednesday level of 6.9996 gives the People’s Bank of China little headroom if it wants to track the spot rate lower while staying on the strong side of 7. The currency has recently breached that key psychological level, stoking criticism from Donald Trump and roiling global markets, but the fixing hasn’t. The yuan was down 0.28% at 7.0449 a dollar at 5:03 p.m. in Shanghai.“Investors may be concerned that the fixing may break 7 in the future, which will be seen as a sign that room for depreciation remains large,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. “The fixing in the coming days will send very important signals on the central bank’s stance.”The PBOC is seeking a balance between allowing more flexibility in the yuan amid an escalation of the trade war, and preventing a vicious cycle of depreciation and capital flight. Officials vowed Tuesday to keep the exchange rate steady, helping the currency rebound from its weakest level since 2008.The PBOC has helped create the perception that levels matter in the fixing and the spot rate. Monday’s plunge came after the central bank set the reference rate weaker than 6.9 per dollar for the first time since December. When the spot rate approached 7 in the past, officials were seen to take extreme steps to prevent further depreciation.JPMorgan Cuts China Yuan Forecast After Manipulator DesignationIt’s not just the dollar the yuan has fallen against. The Bloomberg replica of the CFETS RMB Index, which tracks the Chinese currency against 24 exchange rates, is approaching the lowest level since the basket was created in 2015.JPMorgan Chase & Co. joined investment banks to cut the forecasts on the yuan, expecting the currency to slide to 7.35 by year-end against the dollar and the trade-weighted index to fall to 88.7 by the end of 2019. The yuan could sink to as low as 7.7, if the U.S. increases tariffs on Chinese goods or takes other measures against the nation, Societe Generale SA analysts led by Jason Daw write in note.To contact the reporter on this story: Tian Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, Richard Frost, Will DaviesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- SoftBank Group Corp. has tapped Nomura Holdings Inc. as lead manager for a domestic bond sale to raise as much as 400 billion yen ($3.8 billion) in what could be one of the biggest in the local corporate bond market, said people familiar with the matter.The Japanese conglomerate is preparing to sell 300 billion yen to 400 billion yen of seven-year notes to individuals, and may set the bond’s marketing range as early as this month, for issuance in September, said the people who asked not to be identified because the matter hasn’t been made public yet. SoftBank, which last month unveiled plans for a second enormous technology fund, has a 400 billion yen bond due Sept. 12.Spokesmen at SoftBank Group and Nomura declined to comment.Founder Masayoshi Son has transformed SoftBank into a technology investment juggernaut in recent years, and the company said last month it will commit $38 billion of its own capital to a second Vision Fund, following its first unprecedented effort. The main purpose of the planned bond sale is for refinancing, and SoftBank has already hired several underwriters for the deal.SoftBank is also considering a bond offering to institutional investors that may include seven-year and 10-year notes, according to people familiar with the matter. The company registered to sell yen bonds at the start of last month, according to a regulatory filing.The Vision Fund injection is unlikely to affect the company’s current rating, even if financed entirely with debt, according to S&P Global Ratings last month. Both S&P and Moody’s Investors Service rate SoftBank with their highest speculative-grade rating.The new investment vehicle, which is targeting $108 billion of fundraising, is a “manifestation of an extremely aggressive growth strategy and underlying financial policy that are likely to continue to restrain its credit quality,” S&P said in a statement on July 26.The technology company raised 500 billion yen in April, a record amount in the domestic debt market, by selling bonds at a coupon of 1.64% to individual investors in Japan. The issuance was fully subscribed on the first day of a planned two-week sales period.SoftBank has an A- rating from Japan Credit Rating Agency Ltd. and is the single biggest issuer of yen debt in the local corporate bond market during the past five years, with the majority of that raised from individuals. It has sold more than 3.5 trillion yen of bonds in the domestic market during that period.To contact the reporters on this story: Takahiko Hyuga in Tokyo at firstname.lastname@example.org;Issei Hazama in Tokyo at email@example.comTo contact the editors responsible for this story: Takashi Amano at firstname.lastname@example.org, Finbarr Flynn, Beth ThomasFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
President and CEO of Moody's Corporation (30-Year Financial, Insider Trades) Raymond W Mcdaniel (insider trades) sold 7,500 shares of MCO on 08/01/2019 at an average price of $212.89 a share. Continue reading...
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Moody's (MCO) delivered earnings and revenue surprises of 4.55% and 2.47%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?
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(Bloomberg Opinion) -- An abrupt reshuffle at the top of India’s finance bureaucracy makes it unlikely that the country’s inaugural issue of a controversial sovereign bond overseas will happen now. It’s just as well.Borrowing in a foreign currency, possibly dollars, would have set back New Delhi’s attempt to drum up more global interest in rupee debt. An unexpected meeting of minds formed between Prime Minister Narendra Modi’s core Hindu nationalist supporters and his more internationalist critics to put the bond’s future in question.Finance Secretary Subhash Chandra Garg was presumably the author – and is now the fall guy – of the foreign-debt adventure. In an unusual move for a senior Indian civil servant, he requested retirement after he was marched off to the power ministry. That’s enough for investors to speculate that the government wants to back off – as indeed it should.Now that $10 billion in subscription checks won’t be coming in October, the domestic Indian bond market will feel the pressure of higher borrowings locally by the government. There’s a way to ease it, though: masala bonds, or rupee debt sold overseas to global investors.India has deliberately eschewed foreign-currency sovereign borrowing and instead turned to its diaspora to tide over the occasional hard-currency shortage in the past. That was a prudent choice. Unlike export-led East Asian countries that routinely save more than they invest, India’s private sector has a chronic dependence on foreign money, particularly to pay for energy needs. But as long as the government only borrowed locally, any risk of a 1980s Latin American-style blowup because of externally financed twin deficits was kept at bay.The government’s sudden U-turn on that long-held consensus, driven by poor growth and depleting fiscal resources, has now backfired. Nationalists saw a dollar bond as subjugating India’s interests to a global order they deeply mistrust. Internationalist technocrats, led by former Reserve Bank of India Governor Raghuram Rajan, rejected the idea that sovereign borrowing in foreign currency would be a cheaper option. After accounting for customary rupee depreciation and the occasional currency meltdown, dollar debt can suddenly grow expensive.Granted, in a world where yield is so hard to find, there’s no dearth of appetite. Even skeptical institutions would be forced to buy the Indian paper, knowing that Asian private banks’ rich clients – especially those of Indian origin – would love to snap up the note. Even if the opportunity exists, however, should India take it?Moody’s Investors Service rates Indonesia and India at the same Baa2 level. Indonesia sold a 2029 dollar bond last month at a shade under 3.5%, slightly cheaper than the 3.6% yield at which the existing 10-year note was trading. Assume the same cost, and add the roughly 5% annual drop in the rupee against the dollar based on the trend in the past 30 years. The financing works out to be more expensive than the local Indian 10-year bond yield of 6.5%.But cost isn’t the only issue. A bigger problem is credibility. As I wrote at the start of Modi’s second five-year term, the new government needs to rebase its fraught relationship with investors on truth and trust. A former chief economic adviser from Modi’s first term believes the actual GDP growth rate is more like 4.5% than the published 7%. The Economic Times has reported that the federal budget deficit for the year that ended in March 2018 was almost 5.9%, according to the comptroller of government accounts, rather than the disclosed 3.5%. Instead of acknowledging that growth is sub-par and domestic fiscal resources are nearing exhaustion, the new Modi government upset many of its supporters in finance and business by jacking up tax rates, introducing new levies, and announcing the dollar bond as an expedient solution.With an honest appraisal, the government could have nudged banks to borrow in foreign currencies – on expensive terms – from the diaspora. That’s exactly what it did during the Fed’s 2013 taper tantrum. However, since the problem this time is of a domestic resource crunch rather than a hard-currency shortage, India can alternatively raise money overseas with rupee-denominated debt: a first-ever sovereign masala bond, as the category has come to be known.The masala markets in London and Singapore aren’t liquid enough to get New Delhi $10 billion in one scoop. (The state of Kerala recently became the first subnational government to raise about $305 million.) Then again, even Asian dollar bond investors may have been more than a little nervous by the size of India’s fundraising. Overall, the market has absorbed issuance in excess of $200 billion so far in 2019, up 42% from a year earlier. But Sri Lanka has needed four different securities (two in March, two in June) to scoop up $4.4 billion, while Indonesia has sold three bonds, including Islamic debt, to gather $2.7 billion. Both strategically and tactically, India’s dollar bond was ill-conceived. Some media reports suggested that New Delhi may opt to borrow in yen instead, although as Chikafumi Hodo of Bloomberg News reported, an issuance of that size would equal half of last year's so-called Samurai bond sales. It would have been too much for Japanese investors to handle. If India works half as hard on policy credibility, it won’t need the gimmicks. To contact the author of this story: Andy Mukherjee at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.