|Bid||217.43 x 800|
|Ask||217.63 x 800|
|Day's Range||217.04 - 219.03|
|52 Week Range||129.26 - 222.85|
|Beta (3Y Monthly)||1.37|
|PE Ratio (TTM)||33.85|
|Forward Dividend & Yield||2.00 (0.92%)|
|1y Target Est||N/A|
(Bloomberg) -- Investors are prepared for the worst as the day of reckoning looms for Eskom Holdings SOC Ltd., the state-owned power utility seen by Goldman Sachs Group Inc as the biggest threat to the country’s economy.Yields on benchmark South African government notes are at their highest in three weeks, trumped only by junk-rated Nigeria, Turkey and Lebanon among 29 major emerging markets. Rand-denominated sovereign debt has lost 3% for dollar investors this half, the worst performance after Colombia and Argentina. Foreigners have dumped a net 25 billion rand ($1.7 billion) of the country’s bonds this year, cutting their holdings to 37% of the total, from 43% less than 18 months ago.The rand has weakened 4.6% in the half to date, and is among the five worst-performing developing-nation currencies versus the dollar. Speculative long-rand contracts retreated to the lowest level in more than three months last week, Commodity Futures Trading Commission data show. When it comes to the cost of insuring South Africa’s debt against default, only Turkey and Argentina are more expensive.Eskom, which supplies about 95% of the country’s power, has 450 billion rand ($30.5 billion) of debt and is surviving on state bailouts after massive cost overruns at two partially completed coal-fired power plants. The country endured four days of controlled blackouts last week to prevent total collapse of the grid. Power shortages and policy uncertainty have damped economic growth and plunged business confidence to multi-decade lows as investors await the government’s turnaround plan for the utility.“These outages threaten South Africa’s fragile growth profile,” Siobhan Redford, a Johannesburg-based analyst at Firstrand Bank Ltd., said in a client note. “Clarity and certainty on plans for Eskom -- both in terms of financing needs and returning to a more sustainable power generation profile -- are vital in boosting the confidence of both domestic and offshore investors.”South Africa will “soon” announce the appointment of a permanent chief executive officer for the utility and “shortly” release a special paper on the path the CEO and a strengthened board should take, President Cyril Ramaphosa said in a statement on Monday, in which he described Eskom’s financial situation as “untenable.”“The sheer scale of Eskom’s debt is daunting,” Ramaphosa said. “Further bailouts are putting pressure on an already constrained fiscus.”Lingering UncertaintyThe bailouts will probably widen South Africa’s budget deficit to the biggest since the financial crisis, threatening the country’s last remaining investment-grade credit rating at Moody’s Investors Service, according to a Bloomberg survey of economists. Moody’s is scheduled to review the assessment on Nov. 1, days after the mid-term budget is presented to lawmakers.A risk premium was priced in to the rand and local debt partly due to weak economic fundamentals and uncertainty on the future of Eskom, the medium-term budget policy statement and the credit assessment from Moody’s, said Elna Moolman, a Johannesburg-based economist at Standard Bank Group Ltd.Last week, the government published its latest Integrated Resource Plan, which maps out the energy mix for the next decade. It includes a switch to more green energy as the country, which sources most of its electricity from coal, faces pressure to meet emissions-reduction targets.South Africa will develop a framework to take aging coal-fired plants out of service, Ramaphosa said. While this will present challenges for communities and workers where fossil fuel-powered energy generation takes place, “it also presents opportunities for those affected to have access to technologies that are more cost-effective and better for human health.”The rand gained 0.2% to 14.7878 per dollar by 3:40 p.m. in Johannesburg. Yields on benchmark 2030 government bonds climbed four basis points to 8.97%.(Updates prices in final paragraph)\--With assistance from Ana Monteiro.To contact the reporters on this story: Renee Bonorchis in Johannesburg at email@example.com;Colleen Goko in Johannesburg at firstname.lastname@example.orgTo contact the editors responsible for this story: Gordon Bell at email@example.com, Robert Brand, Alex NicholsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Eskom Holdings SOC Ltd., the state-owned South African utility that provides about 95% of the nation’s electricity, implemented power cuts on Wednesday amid maintenance problems. The rand weakened as investors fretted about the effect on economic growth.Power shortages have been a major constraint on output in Africa’s most industrialized economy. Protracted outages could cost the country its last investment-grade credit rating from Moody’s Investors Service, which is due to deliver its next assessment on Nov. 1. The government has said it will announce plans to restructure Eskom into three operating units and reorganize its debt by the end of the month.PowerAlert Due to a shortage of capacity stage 2 loadshedding is to be implemented from 9 am to 11pm today. Media statement with more details to follow @CityPowerJhb @City_Ekurhuleni @CityTshwane @CityofJoburgZA @CityofCT @ewnupdates @SABCNewsOnline @IOL @eNCA @SAgovnews— Eskom Hld SOC Ltd (@Eskom_SA) October 16, 2019 “The timing isn’t great,” said Simon Harvey, a London-based currency analyst at Monex Europe Ltd. “Whether this is a short-term reaction from Eskom to stem longer-term supply issues or is the start of a continuous process is key and will determine if the rand’s sell-off is more structural. Regardless, investors won’t take the news well.”The power cuts were likely to last from 9 a.m. to 11 p.m. local time, Eskom said in a Twitter posting, without specifying whether this was a once-off or the start of a new round of rolling blackouts. The utility, which has amassed 450 billion rand ($30 billion) of debt and is reliant on state bailouts to remain solvent, has battled to meet demand for electricity because most of its plants are old and have been poorly maintained.‘Extremely Constrained’“The electricity system has been extremely constrained this week,” due to unplanned plant breakdowns, Eskom said. “We unreservedly apologize to South Africans for the negative impact this may have on them and want to ensure the nation that we continue to work tirelessly to ensure security of energy supply.”The rand slumped as much as 1.1% before paring the decline to trade 0.8% weaker at 15.0035 per dollar by 4:10 p.m. in Johannesburg. Yields on benchmark 2026 government bonds climbed five basis points to 8.29%. South Africa has experienced intermittent power cuts since late 2005, with the previous round occurring more than six months ago.Business Unity South Africa, a lobby group, urged the government to finalize an energy plan as a basis to stabilizing power supplies. A review of Eskom’s capital structure, operating model and tariff regime is also “of the utmost importance” to ensure the company can meet energy supplies, it said in a statement.Eskom attributed the latest outages -- it had to cut 2,000 megawatts from the national grid -- to boiler tube leaks at five of its generating units and the breakdown of a conveyor belt used to supply coal to its Medupi plant. Pumped storage and open cycle gas turbine facilities had been used extensively due to shortages of generation capacity from its coal-fired plants, lowering dam levels and diesel supplies, it said.“The announced blackouts should be a very strong incentive for the administration to urgently address prevailing issues at Eskom,” said Piotr Matys, a currency strategist at Rabobank in London. “It is absolutely critical that a comprehensive and credible restructuring plan is quickly implemented, not only to avoid more blackouts in the future that seriously undermine economic activity, but also to reduce the risk of South Africa being downgraded to junk by Moody’s.”(Updates prices in sixth paragraph, business comment in seventh)\--With assistance from Robert Brand.To contact the reporters on this story: Mike Cohen in Cape Town at firstname.lastname@example.org;Colleen Goko in Johannesburg at email@example.comTo contact the editors responsible for this story: Paul Richardson at firstname.lastname@example.org, Robert Brand, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
American shoppers curbed their spending last month, raising new questions about how much longer they can continue to support the economy as global growth falters. Unexpectedly weak Commerce Department data released on Wednesday showed overall US retail sales dipped 0.3 per cent in September, the biggest monthly decline since February. The figures, which fell notably short of the 0.3 per cent increase economists had expected, will give monetary doves more ammunition to press for another Federal Reserve interest rate cut.
Is Moody's Corporation (NYSE:MCO) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically […]
Global Payments (GPN) integrates Netspend's digital Mastercard and mobile technology into Samsung Pay, Samsung's digital wallet, to expand the usage of smartphone transactions.
Moody's downgrades the outlook for E*TRADE Financial (ETFC) and Charles Schwab (SCHW), following fee cut announcement. The outlook for TD Ameritrade (AMTD) remains stable.
(Bloomberg Opinion) -- The latest university endowment return data dribbling out for the fiscal year ended June 30 is not pretty.Earlier return estimates of 8.7% for the Ivy League were too optimistic. Harvard’s endowment gained 6.5%, while Yale’s had an increase of just 5.7%; the University of Pennsylvania endowment gained 6.5%; Dartmouth yielded 7.5%; Brown, the smallest of the Ivy endowments at $4 billion, was a performance outlier at 12.4% (Princeton, Cornell and Columbia have yet to report). Other notable endowment returns include Massachusetts Institute of Technology at 8.8%, Stanford at 6.5% and Duke at 6.9%.(1)During the same time period, investors in the Standard & Poor's 500 Index had total returns, which includes dividends, of 10.4%; a portfolio of 60% stocks and 40% bonds returned 9.9%. This underperformance is consistent with the record of the past decade, with none of the Ivy endowments beating a 60-40 portfolio in the 2008-2018 period, though a couple did come close.The biggest contributors to the weak performance of endowments were high exposure to hedge funds (2019 returns = 1.1%) and natural resources (2019 returns = -6.8%), while many endowments’ high operating costs also acted as a drag on returns.Many endowments have cut back their exposure to hedge funds, only to find a new object of affection: private equity. That seems to be an odd choice, given the similarly high cost structure, illiquidity and returns that may well lag behind the broader market.There has been some notable skepticism about private equity’s accounting methodologies: Numerous analyses and studies have concluded that private equity overstates its returns by as much 50%. None other than Warren Buffett observed: “We have seen a number of proposals from private equity funds where the returns are really not calculated in a manner that I would regard as honest.”Perhaps the most detailed critique of private equity comes from a former private equity analyst. Daniel Rasmussen, formerly of Bain Capital, now founding partner of Verdad Advisers, assembles his own empirical research and found that “private-equity returns are trailing public indexes,” with “far more volatility” than many big investors believe. Claims of improved efficiencies at private-equity takeover targets are “largely illusory,” he said. He warned that many investors are overpaying for private equity.Furthermore, Rasmussen says that investors in private equity are much too optimistic:94% of institutional investors expect private equity to outperform public markets; 23% expect PE to outperform by 4% per year or more. This is an astonishing degree of consensus from the most sophisticated investors in the world. Great mispricings require highly correlated beliefs on the part of investors, and what we have today in private equity is the greatest of consensuses . . . But what's even more frightening than the degree of consensus about returns is the lack of understanding of the risks. In the same report, Rasmussen found other examples of groupthink:78% expect the default rate on private equity deals to be comparable to BB or above rated bonds. But only 2% of private equity deals monitored by Moody's have credit ratings of BB or above. 98% of PE deals are rated B or below, but only 23% of allocators expected default rates to be comparable to B or below rated bonds. If that sounds familiar, it is because it seems so similar to the dashed expectations of subprime mortgage investors.If history feels like it's repeating itself, it probably is. Endowments and pension funds were counting on higher – and imaginary – returns of hedge funds to make up for the low returns on offer elsewhere. Financial consultants played no small part in that last round of magical thinking about hedge funds and no doubt have a similar role this time.The only part that has yet to unfold is the probability that private equity turns out to be the next great asset class to disappoint. University endowments and other big institutions have yet to learn that chasing the mirage of above-market returns more often than not leads to subpar performance.(1) Also noteworthy: Harvard Management Co.,which oversees more than $40 billion for the Harvard endowment, has been passed in size by University of Texas/Texas A&M Management Co., or UTIMCO.UTIMCO, including the “operating funds” it manages, has ballooned to more than $47 billion, thanks in large part to the giant oil reserves under its West Texas land grant.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 is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Ecuador’s government-on-the-run is making overtures to protesters to negotiate an end to the chaos that drove it from the capital city.Officials who took refuge in coastal Guayaquil are negotiating with organizations of indigenous Ecuadorians that blocked mountain roads to protest increases in fuel prices favored by the International Monetary Fund. Deputy Finance Minister Esteban Ferro said in a Tuesday interview that the government has money set aside for indigenous people, who are often poor and historically discriminated against. But it won’t reverse last week’s decision to end gasoline and diesel subsidies, Ferro said.President Lenin Moreno, whose austerity measures set off the protests, promised citizens on a Tuesday afternoon broadcast that “violence and chaos” wouldn’t win and said that he wanted the crisis resolved within two days.“We will continue to protect the rule of law and civil tranquility,” he said. “We will always avoid any bloodshed.”Protesters have occupied government offices, oil fields and looted businesses this week as security forces in the South American nation of about 16.5 million struggled to enforce a state of emergency. The government decamped after another night of unrest. Demonstrators in Quito damaged Ecuador’s congressional building and violently entered the comptroller general’s office across the street.An oil pipeline known as SOTE was halted for more than two hours Tuesday after vandals sabotaged it, the Energy Ministry said. State oil producer Petroamazonas estimates losses of 165,000 barrels per day after staff halted operations following a protest Monday, the company said in an emailed statement.Security forces have retaken several major oilfields from protesters, and workers are now getting output back to its normal level, Ferro said.The tumult began when the government eliminated subsidies on gasoline and diesel, which caused a 30% rise in low-octane gasoline prices, while diesel prices more than doubled. The move was welcomed by the IMF and debt-rating companies including Moody’s Investors Service. Moreno reiterated Monday night that he wouldn’t reinstate the support, which had been in place since the 1970s and which was costing the government close to $1.4 billion a year. Observers didn’t take that as the final word.“There is a non-zero risk that Moreno knuckles under pressure and rolls back the subsidy cuts,” Edwin Gutierrez, London-based head of emerging-market sovereign debt at Aberdeen Asset Management, wrote in a written reply to questions. “Given the violence and protests, that risk has clearly risen.”The nation’s dollar bonds due in 2028 fell 3.6 cents to 93 cents on the dollar, the biggest drop since they were sold in January 2018, sending yields up 0.65 percentage point.Moreno tried to shift blame for the uprising, saying that protests had been infiltrated by supporters of exiled ex-President Rafael Correa. Morena said Correa, his former mentor, is promoting violence to bring down the government, though he provided no evidence.Correa, who is living in Belgium as he fights charges that he had a political opponent kidnapped, said in a Twitter post that Moreno “is finished” and called for elections.“There is no coup-mongering here,” he said in a video posted to the site. “Conflicts in democracy are resolved at polls, and that’s precisely what we’re asking for.”Read More: Ecuador’s Exit Is Another Blow for OPECThe protests have engulfed Ecuador, a producer of commodities such as oil, copper, shrimp and bananas. Central regions were cut off from television and radio service as demonstrators seized repeater antennas. Indigenous communities blocked numerous main roads in the Andean region, home to half the nation’s residents. Cuenca, the third-largest city, is receiving supplies by air.In Quito, traffic on a cool Tuesday was unusually light and the city was oddly quiet. Schools were closed, and many evening events canceled. The unprecedented scale of the unrest, including rioting and looting, has worried many residents who stocked up on goods, emptying supermarket shelves. Police and armed forces are escorting supplies to stores as numerous important roads remain cut off by protesting indigenous people.The crisis marks a turning point for Moreno, who was expected to lead as a leftist but has governed as a maverick.When he took office in 2017, many assumed he’d continue to lead the country along the repressive and spendthrift path forged by Correa, who held office for a decade. Correa is responsible for a string of ill-considered public works projects, including power plants, refineries, pipelines, airport terminals and a railway. They’ve been dogged by cost overruns, construction and design flaws and accusations of corruption. Correa defaulted on $3.2 billion in bonds for political reasons.Correa is due to be judged in absentia this month on charges that include illegal campaign financing.Moreno has pushed economic and political reform, fought corruption and tried to restore an independent press and judiciary. He championed term limits for elected officials and helped judicial reformers replace a constitutional court so discredited that several members were under suspicion of money laundering. He remade economic policy, which led to a decrease in yields on Ecuadorian bonds and a $4.2 billion agreement with the IMF to restore dollar reserves and stabilize public debt -- in part by removing the fuel subsidy.“The stakes are high,” said Siobhan Morden, the head of Latin America fixed income strategy at Amherst Pierpont Securities in New York. “If President Moreno reinstates the subsidies, then the IMF program is at risk.”To contact the reporters on this story: Stephan Kueffner in Quito at email@example.com;Matthew Bristow in Bogota at firstname.lastname@example.orgTo contact the editors responsible for this story: Juan Pablo Spinetto at email@example.com, Stephen Merelman, Bob IvryFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- HSBC Holdings Plc’s interim Chief Executive Officer Noel Quinn is considering going much further than his former boss in cutting fat at the bank. He may triple job reductions announced just two months ago to as much as 6% of the workforce.Sure enough, Quinn may be trying to impress the board and investors to secure the No. 1 position at HSBC on a permanent basis. But his rivals at other financial firms could follow in his footsteps: Fresh revenue pressure and a lingering problem with costs at European banks don’t give many alternatives.HSBC is reportedly questioning why it has so many people in Europe, while it has double-digit returns in parts of Asia, the Financial Times has reported. London-based HSBC may target highly-paid bankers in the latest round of reductions and asset sales that could affect 10,000 roles.It isn’t hard to see why HSBC, Europe’s biggest bank, wants to tighten expenses. The London-based lender, which generated 80% of pretax profit in Asia in the first half, has made China a focus for growth. But the bank’s expansion there is now threatened by the economic slowdown stemming from the China-U.S. trade spat. The deepening unrest in Hong Kong, where it is the biggest bank, will compound the hit to growth.Cutting back in Europe and the Americas, where analysts at Citigroup Inc. say HSBC has a structural profitability problem, seem the right thing to do – just over 30% of its full-time employees are in Europe and North America.But HSBC is not alone in facing challenges in Europe that will give lenders little choice but to accelerate and deepen cost cuts. The 60,000 jobs that have already been earmarked for the chop this year, mostly by European banks, are probably just a taste of things to come. Too many lenders are still far too inefficient.The top 20 European banks have done little to improve their cost-income ratios, which remained largely flat around the 68% to 70% level between 2016 and 2018, according to a Moody’s report from earlier this month. By contrast, their U.S. peers have improved efficiency considerably, lowering their ratios to closer to 62% from about the same starting point in 2014. As a result, Moody’s says banks in Germany, France, Italy and the U.K. lag those in the U.S. in a measure of operating profitability. Those in Germany, the most inefficient EU market, had the lowest score among institutions in the European Union .Even before the European Central Bank’s latest interest rate reduction, the average return on equity was about 6% across the industry, well below the cost of equity, estimated at 8% to 10%, according to Moody’s.It’s no surprise then that the mood at a recent banking conference was so subdued. Analysts at Bank of America Corp., which hosted 50 lenders and investors from Europe, the Middle East and Africa at the end of September, concluded that the outlook for revenue has declined “materially” with little scope for new loan demand. About one-fifth of the event’s participants said there’s nowhere for financial services firm to hide.While some are starting to pass the cost of negative rates on to individuals further down the wealth rankings, large charges to retail clients don’t appear to be on the cards just yet. The potential damage to their franchises is too much of an unknown quantity.The Bank of America analysts concluded that more cost cuts are on the way, though probably not till banks report full-year earnings. Competition in trading and lower rates will continue to hurt French banks, so much so that they said some conference participants expected “major cost saving plans.” UniCredit SpA in Italy is considering as much as 10,000 cuts, while in Germany Deutsche Bank AG and Commerzbank AG have both embarked on fresh plans.Analysts estimate that 2020 earnings per share (excluding one-time charges) should improve by 5.2% on a 1.5% increase in net revenue, according to data compiled by Bloomberg Intelligence. Both of those will probably come down.In signaling now that more pain is needed, HSBC’s Quinn may have shown his mettle, and he’s certainly upping the pressure on rivals.To contact the author of this story: Elisa Martinuzzi at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Ecuadorian President Lenin Moreno accused his political opponents of attempting a coup as the government moved outside the capital amid violence triggered by the ending of fuel subsidies last week.In a national address, Moreno said he was moving the executive branch to the port city of Guayaquil due to security threats. The president said that allies of his predecessor Rafael Correa had infiltrated the demonstrations in a bid to overthrow his government, without providing evidence.During the fourth night of a state-of-emergency, protesters in the capital Quito caused minor damage to Ecuador’s congressional building and violently entered the comptroller general’s office across the street. Rioters also attacked an oil production facility, a major dairy, dozens of rose plantations and burned police and military vehicles as security forces struggled to contain the violence. Moreno reiterated that he won’t reinstate the fuel subsidies.In the Amazon region, demonstrators entered facilities of the Sacha oilfield, prompting authorities to shut down production there and causing the loss of 70,000 of Ecuador’s 550,000 barrel-a-day oil output.Parts of central Ecuador again were cut off from television and radio service as demonstrators seized repeater antennas. Indigenous communities continue to block numerous main roads in the Andean region, home to half the nation’s 17 million residents. Cuenca, the third-largest city, is receiving supplies by air.The elimination of the gasoline and diesel subsidies, which cost close to $1.4 billion annually, was welcomed by the International Monetary Fund and Moody’s Investors Service. Ecuador’s Business Committee recommended mediation by the Catholic Bishops’ Conference to resolve the crisis.In a post on Twitter, Correa said that Moreno “is finished” and called for elections.To contact the reporter on this story: Stephan Kueffner in Quito at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Bristow at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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(Bloomberg) -- Ecuador’s President Lenin Moreno declared a state of emergency as protesters barricade roads across the country over fuel price hikes.Moreno pledged to maintain the policy of ending diesel and gasoline subsidies, which he says are no longer affordable.This year, Ecuador had to budget close to $1.4 billion to keep gasoline and diesel prices below market prices. Moreno’s move was welcomed by the International Monetary Fund and by Moody’s Investors Service, but not by drivers of buses, taxis and trucks, who blocked key highways with vehicles and burning tires.“The decision is unprecedented and very courageous,” said Sebastian Hurtado, president of political risk consultancy Profitas in Quito. “I have serious doubts whether the government has the political capacity to manage the backlash.”Airlines including American Airlines, Iberia, Air France, and KLM rerouted flights, as protesters blocked all routes in and out of Quito’s airport.The umbrella group CONAIE, which represents indigenous communities, and some student organizations also pledged to support the strike.Ecuador’s Red Cross said protesters refused to allow ambulances to pass.A group of mostly young protesters with communist flags marched through the historic center of Quito, where police kept them from occupying Independence Square, where the presidential palace is located.The Interior Ministry reported several injuries and close to two dozen arrests in the capital.Oil IndustryResources Minister Carlos Perez said oil industry installations are being guarded against attempts to occupy them. Local news media report demonstrations in cities throughout the nation of 17 million, as well as looting of some supermarkets in Guayaquil. Some banks have closed branches for security reasons, according to the banking regulator.The fuel price increase went into effect at midnight, causing long queues as drivers tried to fill their tanks before the deadline. Moreno announced the measure amid a package of economic reforms aimed at keeping a $4.2 billion funding package with the IMF as he struggles with the legacy of profligate spending inherited from his predecessor, Rafael Correa.To mitigate the impact of the reforms on the poor, Moreno pledged to increase a social safety net so that it would protect close to 5 million Ecuadorians, increasing a monthly transfer by $15.By targeting fuel prices rather than raising the value-added tax, Moreno has at least been able to win support of Ecuador’s economic elites and middle class, Hurtado said.Transportation organizations, many of which supported Correa, said Wednesday that they would strike indefinitely after Moreno ended the subsidies.The government says the fuel subsidies have cost the nation close to $60 billion since they were introduced by a military dictatorship in the 1970s.Speaking after a cabinet meeting at the presidential palace in Quito, Moreno said he was open to discuss the situation, but declined to reverse the decision and pledged to have the roads opened.On Tuesday, Ecuador said it would quit the Organization of Petroleum Exporting Countries, to avoid having to cut output to meet quotas.(Updates throughout with more information on events and with background on Moreno’s reforms)To contact the reporter on this story: Stephan Kueffner in Quito at firstname.lastname@example.orgTo contact the editors responsible for this story: Matthew Bristow at email@example.com, Robert JamesonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Today we're going to take a look at the well-established Moody's Corporation (NYSE:MCO). The company's stock received...
American Tower (AMT) plans to use proceeds raised from the senior unsecured notes offering to repay outstanding debt under its multi-currency senior-unsecured revolving credit facility.
(Bloomberg) -- Lebanon’s slow-churning currency crunch is fast engulfing Bashar Boubess’s business.The miller pays for wheat imports in dollars but bakeries buy his flour in Lebanese pounds. For weeks now, the bank has refused to exchange those pound earnings back into the hard currency he needs to replenish supplies. His wheat stocks have dropped 30%.Boubess has turned to money changers to keep his business alive, but it’s expensive: they demand more pounds for every dollar than the increasingly unrealistic official rate.“If I sell to the bakeries in dollars, I’d just be transferring the problem to them,” said Boubess, owner of Modern Mills of Lebanon. “I don’t know if we can last the week. What am I supposed do?”More than two decades after Lebanon pegged its pound to the dollar, providing an anchor of stability as the economy emerged from civil war, the moment of reckoning may finally be arriving.The central bank on Tuesday announced that it will guarantee a supply of dollars at the official rate of 1,507.5 pounds to cover imports of wheat, gasoline and pharmaceuticals, which retail at government-regulated prices. The measure could go some way to averting social upheaval, after weeks of strikes and protests, but it also amounts to a tacit acknowledgement that everyone else is working to a parallel rate.The divergence is small -- Boubess, for instance, said he last paid 1,595 per dollar to buy $50,000 at an exchange bureau -- and top officials including Prime Minister Saad al-Hariri have said the peg is a red line. But the widening imbalance has raised fears among Lebanese that a steeper slide is now only a matter of time.The central bank’s reserves have fallen some $4 billion in the last two years to reach about $37 billion in July. As confidence has plummeted, even ordinary people have begun to transfer their dollar savings abroad or hide notes under their mattresses.“You can’t help but be affected by what people are are saying and I’ve thought of transferring my money abroad,” said Rose, a widow who’s living on her late husband’s retirement savings and declined to give her name for privacy. “But if everyone withdraws their money, what will happen? There’ll be a crisis?”High StakesFor this tiny, import-dependent country that straddles the geopolitical fault-lines of the Middle East, the stakes have rarely been higher since the 15-year civil war that ended in 1990. The slow bleed of bank deposits, a key source of funding for the government, has exposed glaring vulnerabilities. The International Monetary Fund projects Lebanon’s current-account deficit will reach almost 30% of gross domestic product by the end of this year. Only Mozambique is in worse straits.The central bank has repeatedly urged calm. Governor Riad Salameh told Bloomberg last month that reserves were “ample” and Lebanon has no intention of abandoning the peg.Those words have done little to reassure investors increasingly worried that Lebanon’s political divisions are insurmountable and will bedevil any effort to cut spending, raise taxes and fight corruption -- measures required by international donors to unlock $11 billion in aid pledges sorely need to revive a sluggish economy.Moody’s said Tuesday it was putting Lebanon on review for a potential downgrade in its sovereign risk rating as the central bank’s drawdown of foreign exchange risks destabilizing the peg. The issue is preoccupying the airwaves, further diminishing demand for the national currency and pressuring the peg.Lebanese expatriates, a mainstay of the economy for as long as anyone can remember, are sending less money home. Goldman Sachs Group Inc. estimates that deposit growth turned negative in May for the first time in decades.“This peg policy might not be under threat now but it’s not sustainable because of a growing deficit of the balance of payment and a growing external financing gap,” said Sami Nader, head of the Beirut-based Levant Institute.The sense of urgency isn’t lost on the government, but with a political system built around a fragile sectarian balance, decisions are notoriously difficult to reach and implement. Deputy Prime Minister Ghassan Hasbani is calling for “immediate action.”“Doing the same old things without cracking down and executing reforms immediately, and without a transformational approach to doing business, will place further pressure on the peg,” he said in an interview Monday.Near breaking point, many are now demanding authorities take action to avert a crisis. On Sunday, protesters burned tires and blocked roads in downtown Beirut as a public backlash builds against worsening living standards.Gas stations have been closing in protest and wheat mills are warning of shortages if they can’t get enough dollars at the official rate, because paying the parallel rate squeezes their margins.“Banks would tell me they can only give $5,000 daily,” said a gas station manager in Beirut. “But what can I do with the rest of my payments? I need dollars.”As he spoke, his employees sat behind orange cones tethered with red and white tape, turning drivers away with a single word: Strike!The financial prosecutor last week detained six money changers, later releasing them on bail, for trading outside the central bank’s band -- a criminal offense in Lebanon.“Citizens are concerned and we need to reassure them,” said veteran lawmaker Yassin Jaber. “We haven’t been doing that.”Dollar LifelineLebanon still has enough to ward off collapse, said Marwan Barakat, chief economist at Bank Audi, the country’s largest lender by assets. The central bank’s international reserves stood at $38.7 billion as of mid-September, equivalent to three-fourths of Lebanese pound money supply, and banks’ overall foreign-exchange liquidity covers 40% of their customer deposits, he said.Promises of assistance from Saudi Arabia and Qatar, energy-exporting Gulf Arab countries that helped pull Lebanon back from the brink in decades past, have yet to materialize, though talks continue.Lebanon also plans to tap international debt markets in October for $2 billion to finance its needs for the rest of the year after the central bank paid off over $3.2 billion in maturing debt in 2019. It is due to pay another $1.5 billion this year.But under a definition of usable reserves that excludes assets not readily available for balance-of-payments purposes, Lebanon only has enough to cover about 42% of short-term debt, according to S&P Global Ratings, far short of the 100% threshold it says is the generally accepted minimum adequacy requirement.Fitch Ratings, which ranks Lebanon at the same level as Zambia and the Democratic Republic of Congo, is warning the country’s large external financing needs will further erode the central bank’s gross reserves. Salameh has resorted to increasingly complex operations to ensure that the government can be financed without depleting the reserve.Despite its efforts, the stockpile is essentially at the same level as when the central bank started the operations it calls “financial engineering,” according to Fitch analyst Toby Iles.“It is questionable how much more room there is to keep attracting dollars through these operations.”(Updates to add Moody’s report in paragraph 13.)To contact the reporter on this story: Dana Khraiche in Beirut at firstname.lastname@example.orgTo contact the editors responsible for this story: Lin Noueihed at email@example.com, Paul AbelskyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- An Indian bank was able to dupe regulators about its growing exposure to a single property developer for at least a decade before the firm filed for insolvency, according to a letter written by the lender’s managing director, who has since been removed.Punjab & Maharashtra Co-operative Bank Ltd. used “dummy accounts” and other methods to hide its oversized loans to Housing Development & Infrastructure Ltd. from the Reserve Bank of India, Joy Thomas wrote in the letter, a copy of which was seen by Bloomberg News.“Every year during the course of RBI inspection we undergo into a lot of stress due to concealment of information from RBI,” Thomas wrote in his letter dated Sept. 21 and addressed to a senior supervisory official at the central bank. He said he also hid the true exposure from the PMC board and the bank’s auditors.Last week, the RBI took the rare step of limiting withdrawals from PMC, causing depositors to besiege the bank’s branches to retrieve their money. It also removed the former management, including Thomas, citing major financial irregularities, a failure of internal controls, and inaccurate reporting that understated exposures.PMC is one of some 97,000 cooperative lenders in India, which hold a combined $130 billion of deposits according to CLSA Ltd. -- nearly a tenth of the wider industry’s total.Among that plethora of lenders, only the 54 biggest are monitored by the central bank and investors are now trying to figure out whether they pose a new threat to a banking system hobbled by a 9.3% bad-loan ratio, the highest in the world.Thomas said he stopped reporting to the RBI on the bank’s large exposures from 2008 “because of reputational risk.” By 2011, the exposure to HDIL stood at 10.2 billion rupees ($144 million), or more than half the bank’s total advances of 20 billion rupees, according to the letter. The RBI restricts single borrower exposures to one-fifth of the total.Had the bank classified the assets as non-performing, “we would have had to stop charging interest on these accounts and we could have made losses,” Thomas said in the letter. “The growth path of the bank would have got hampered.”Prior to 2015, PMC was able to conceal its HDIL exposure because RBI officers would only inspect a few of the largest borrower accounts, Thomas wrote. When the RBI started to ask for more details around 2017 “the stressed legacy accounts belonging to this group were replaced with dummy accounts to match the outstanding balances in the balance sheet,” he said.HDIL has sought a meeting with the administrator of PMC Bank to “put forth the true and correct picture,” the company said in an exchange filing on Tuesday. Lenders, led by Bank of India, dragged the real estate developer into bankruptcy proceedings in August.The Press Trust of India reported on Sunday that Thomas had told the RBI that HDIL accounted for 73% of the bank’s total loan book. Thomas couldn’t be reached for comment on Tuesday. The RBI didn’t immediately respond to a request for comment.“This event might create a chain reaction among other lenders and they might turn more circumspect in lending to the real estate sector,” said Karthik Srinivasan, head of financial sector ratings at ICRA Ltd., the local unit of Moody’s Investors Service. “That is likely to increase the liquidity crunch among real estate companies.”The drumbeat of bad news in India’s banking market is affecting shares of lenders on speculation that the scandals will prompt savers to switch to larger banks. Yes Bank Ltd. plunged 23%, IndusInd Bank Ltd. dropped 6.2%, while RBL Bank Ltd. lost 9%.India’s cooperative banks, set up to serve areas where banking services aren’t widely available to all people, typically cater to poorer, less creditworthy customers.The RBI monitors only the cooperative banks, including PMC, that are considered systemically important. Even the larger ones aren’t as intensively supervised as the commercial banks, however, because their respective state governments play a role in regulation.Read how a corner of Indian banking sent a shudder through marketsThomas said the close relationship with HDIL dated back to 1986 when the company founders rescued the bank by infusing capital and maintaining large deposits.HDIL’s cash flow began drying up when a large project to develop land near Mumbai’s airport was scrapped following a change in government policy, according to Thomas’s letter.(Adds analyst’s comment in 12th paragraph.)To contact the reporter on this story: Suvashree Ghosh in Mumbai at firstname.lastname@example.orgTo contact the editors responsible for this story: Marcus Wright at email@example.com, Russell Ward, Jeanette RodriguesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Eskom Holdings SOC Ltd.’s stand-alone credit profile was downgraded one notch at Fitch Ratings, signaling the South African power utility’s deteriorating ability to repay debt without additional government support.Weakening revenue growth, profit-margin compression because of lower tariff increases, and higher primary energy costs were cited by Fitch as among the reasons for the reduction. Eskom’s poor liquidity and high debt levels are the worst among its peers, which includes Namibia Power Corp., Fitch said in a statement on Monday.Fitch assessed the government’s support for Eskom as inconsistent, and said this has led to an unsustainable financial profile over an extended period of time. While the government plans to inject 230 billion rand ($15.2 billion) into the company over the next 10 years, this would only cover half of its debt-servicing costs, Fitch said. It does, however, give the company some flexibility over the next 12-18 months to execute its turnaround plan.There are also risks to implementing reforms at the company, Fitch said, adding these are often difficult, and “generally associated with convoluted social and political pressures.”Eskom, seen as the biggest threat to South Africa’s economy with at least 450 billion rand in debt, is due to get a new chief executive officer by the end of October. The government is also set to release a plan to save the business.The stand-alone rating was cut to ccc- from ccc, while Fitch affirmed Eskom’s long-term local-currency issuer default rating at BB-, three levels below investment grade, with a negative outlook. Moody’s Investors Service rates Eskom’s long-term debt at B2, five notches below investment grade. Moody’s is the only one of the three largest ratings companies to have held South Africa’s sovereign debt at investment grade.“We continue to engage with our shareholder ministries on feasible options to transition Eskom to financial sustainability,” acting Chief Executive Officer Jabu Mabuza said in a statement. “We are grateful for the support that we’ve received from the shareholder ministries and all key stakeholders including our employees in our endeavor to steer this company towards the desired financial and operational sustainability.”(Updates with Eskom comment in final paragraph.)To contact the reporters on this story: Vernon Wessels in Johannesburg at firstname.lastname@example.org;Paul Burkhardt in Johannesburg at email@example.comTo contact the editors responsible for this story: Stefania Bianchi at firstname.lastname@example.org, Renee BonorchisFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The company has about 40 technologists in its uptown office today, but it expects to hire an additional 100 employees in Charlotte over the next three to six months.
US Senator Elizabeth Warren expressed concerns about credit ratings, specifically those for loan securitizations, worried a top US regulator is not doing enough to ensure the independence of the process. The Democratic presidential hopeful sent a letter Thursday to Securities and Exchange Commission (SEC) Chairman Jay Clayton urging the regulator to take immediate action to study a model that she says unduly incentivizes rating firms to assign better grades. The issuer-pays model, in which financial institutions pay rating agencies for credit assessments of products they plan to sell, gives firms an incentive to assign better ratings, regardless of risk, so as not to lose business to competitors, Warren wrote.
American Tower's (AMT) ratings and outlook affirmation by Moody's indicates its robust cash flows, strong liquidity position and a wide geographic footprint.
(Bloomberg) -- Activist hedge fund Teleios Capital Partners called on German lender Aareal Bank AG to look into selling its software unit.Teleios, which owns about 3.4% of commercial real estate lender Aareal, said the software unit Aareon is a very different business than its parent, and without separate ownership it’s “in danger of failing to achieve its full potential.” The hedge fund made its case to the Aareal board in a Sept. 26 letter seen by Bloomberg.Aareal shares rose as much as 4.9% on the news.The bank’s current preference to hold on to Aareon and potentially partner with a strategic minority investor isn’t in the interest of shareholders, Teleios said. The hedge fund estimates that Aareon’s standalone valuation could be as much as 60% of the market capitalization of Aareal. Teleios called for a strategic review.“It seems obvious to us that an innovative and fast-growing software business would benefit vastly from different leadership and oversight, incentive schedules, and corporate and risk cultures -- removed from a conservative and stagnating commercial real estate lender,” Teleios partner Adam Epstein wrote in the letter.‘Strategic Options’Aareal spokesman Christian Feldbruegge confirmed that the company received the letter from Teleios. “It is the management’s fundamental duty to continually review value-creating strategic options in the interests of all stakeholders,” he said.A representative of Teleios declined to comment.Teleios manages about $1 billion. Started in 2013, it focuses on European mid-cap companies. Activist investors take stakes in companies and agitate for changes to help boost share prices.German banks are streamlining businesses under pressure in an overcrowded market where lenders are grappling with low to negative interest rates and an economy showing signs of weakness. Selling Aareon could help Aareal to deal with weaknesses in its U.K. business where non-performing loans for shopping centers have been piling up.Aareal has “substantial exposure” to the U.K. commercial real estate market and could be “hit hard” by a no-deal Brexit, Moody’s Investors Service said in a report in March.In the letter, the hedge fund flagged its meeting with the bank earlier this month and said the board is aware of third parties interested in the software division.“It seems logical to us that the vast majority of these potential bidders would prefer to own Aareon outright, and be willing to pay a premium valuation for control,” Epstein wrote.(Updates with Aareal comment in sixth paragraph.)To contact the reporters on this story: Nishant Kumar in London at email@example.com;Stephan Kahl in Frankfurt at firstname.lastname@example.orgTo contact the editors responsible for this story: Shelley Robinson at email@example.com, Patrick HenryFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.