Big Tech will emerge from virus too big to fail 28 Apr 2020 Amazon is an essential service keeping families supplied in a pandemic. The Apple-Google alliance on contact tracing will aid efforts to reopen economies. Facebook’s reach has disrupted virus disinformation. Their size is an asset in a crisis, making it harder to break them up.
Dixon: Bailouts will store up lots more trouble 28 Apr 2020 Struggling individuals, businesses and countries deserve financial support during the pandemic. But we shouldn’t kid ourselves. Massive, taxpayer-funded rescues may encourage excessive risk-taking in the future and provoke new populist backlashes when the bills need to be paid.
Italy gives glimpse into post-pandemic dealmaking 28 Apr 2020 Politicians in Rome want to wed gas-grid operator Snam with power network Terna. Creating a 25 bln euro group would offer few cost savings and blur their industrial missions. It’s a sign that governments will want bigger, less-risky, more-diversified “champions” in the future.
Corona Capital: Trouble in the Levant 28 Apr 2020 Concise views on the pandemic’s corporate and financial fallout: Protests erupted in Lebanon as its Covid-19 lockdown worsens the country’s economic problems. It may be a harbinger of broader virus-related discontent.
HSBC’s dividend policy is ripe for reform 28 Apr 2020 The UK mega-bank is well-capitalised despite a 48% slump in pre-tax profit and five-fold rise in bad-debt provisions. That’s partly because regulators told CEO Noel Quinn to halt payouts. It’s an opportune moment to link them to earnings and provide flexibility in future crises.
Investors are rightly wary of Santander’s strength 28 Apr 2020 Spain’s largest lender reported a 9% return on equity in the first quarter despite 1.6 bln euros of provisions against likely losses from Covid-19. Lower costs and robust capital will buoy boss Ana Botin. But a drawn-out recovery would justify the bank’s lowly valuation.
BP’s dividend sangfroid may not last long 28 Apr 2020 The oil giant held its payout steady in the first quarter, despite crude prices falling off a cliff. CEO Bernard Looney has enough cash to keep it up this year. But debt has spiked and oil is now even cheaper. At the very least BP should let investors take dividends in shares.
Stars align for China tech’s stay-at-home project 28 Apr 2020 Controversial surveillance startup Megvii is mulling a local IPO, and exchanges are rolling out welcome mats. It’s good timing given the suspicion U.S.-listed Chinese firms are falling under. Backers face lockup periods and capital controls, but will get better valuations.
Groceries are gluttony for India’s takeaway giants 28 Apr 2020 Couriers of prepared food are increasingly pushing into dried and fresh fare. It’s a bigger prize in a market dominated by home cooking. That could make SoftBank-backed Grofers, last valued at $650 mln, appealing to Zomato. Such meal combos are unlikely to deliver value, however.
Neiman’s squabble shows retailer valuation problem 27 Apr 2020 The Dallas-based department store is preparing to file for bankruptcy, hurt by $5 bln of debt and a pandemic that has halted shopping. Whether and how many high-end patrons return is a big unknown for anyone bailing them out. A deal offers the most value but least certainty.
Leo Strine’s Wachtell plunge ups deal-advice ante 27 Apr 2020 The outspoken ex-Delaware chief justice is joining Wall Street’s most profitable law firm. Ditching mergers is one live issue. And the role of stakeholders beyond shareholders will only become a hotter topic. Strine and his new colleagues are at the sharp end of both debates.
GE boss’s options are to shine or shrivel 27 Apr 2020 Larry Culp’s recent goal of reducing the company’s $59 bln of debt to a manageable level this year is toast: It relied on cash flow from the airlines unit. He could hunker down, but that risks making GE weaker. Selling, say, a stake in the healthcare business would be wiser.
Imperial sale shows cigars’ soggy luxury status 27 Apr 2020 Tobacco group Imperial Brands sold premium stogies like Montecristo to undisclosed buyers for $1.4 bln. A low valuation of 12 times EBITDA fits with tobacco products’ niche appeal, and the uncertain virus hit. Other disposals needed to meet a 2 bln pound goal may be even harder.
Cox: Windfall-tax Covid-19’s sweepstakes winners 27 Apr 2020 Leaders are justifying bailouts saying the pandemic is “nobody’s fault”. By that logic giants like Amazon gaining ground as small firms collapse were handed unequal advantages by states. Tariffs such as those imposed on oil drillers after OPEC’s embargo could level the field.
The Exchange: Corona-nomics 27 Apr 2020 Kevin Warsh, Jason Furman and Laurence Boone join a wide-ranging panel discussion with Breakingviews to size up the global monetary and fiscal responses to the economic lockdowns enforced to halt the spread of Covid-19; and to map out a recovery back to something like normal.
Corona Capital: Small biz bankruptcies, NFL 27 Apr 2020 Concise views on the pandemic’s corporate and financial fallout. Small businesses get time but not money; the NFL’s draft viewership does a victory dance.
European banks’ bad-debt pain threshold 27 Apr 2020 The continent’s major lenders have bigger capital buffers and are getting help from regulators. However, their balance sheets are expanding and income is dropping, while many borrowers are at risk of default. This calculator shows what level of bad loans banks can safely absorb.
Europe’s big banks can weather 2009 times three 27 Apr 2020 Shares in the region’s top lenders have plunged as investors fret about a surge in bad debts. Yet a Breakingviews calculator shows most capital buffers can absorb a spike three times as bad as the 2009 average. Taxpayer bailouts or widespread equity hikes are unnecessary for now.
Bank of Japan gifts Abe massive monetary backstop 27 Apr 2020 The central bank says it will buy unlimited government bonds to support a $990 bln stimulus package, plus ramp up purchases of other assets. That helps the prime minister hold off catastrophe, but the BOJ’s balance sheet is getting even more massive with no end in sight.
Messy Air France-KLM rescue has lessons for others 27 Apr 2020 The French and Dutch governments are lending their respective parts of the ailing carrier up to 11 bln euros. The tricky bailout exposes the frailty of the 2004 merger. Germany’s Lufthansa, which owns Swiss and Austrian, and Anglo-Spanish operator IAG may face similar challenges.
Australia Inc reruns its crisis capital playbook 27 Apr 2020 Lender NAB will raise $2.2 bln in the biggest local equity issuance since the pandemic began. Just as in 2008, the country is weathering the disruption better than most. Companies Down Under are shrewdly restocking coffers, but often at the expense of retail investors.
Hollywood-Bollywood deal may need special effects 27 Apr 2020 Struggling studios STX and Eros are starring in a complex $1.1 bln merger. It’s a bold bet on video streaming in India by A-list backers including TPG and John Malone. Absent heroic financial achievements in the cutthroat market, there’s a real danger of producing a flop.
Indian mutual fund crunch squeezes central bank 27 Apr 2020 Franklin Templeton has frozen local debt funds worth over $3 bln. Thin liquidity and dozy rating agencies made trading credit fraught before, so this could prompt a stampede. The Reserve Bank of India might have to backstop, at the cost of constraining future firepower.
AT&T shows boring CEO transitions are needed 24 Apr 2020 The U.S. telecom firm is elevating John Stankey to replace long-time CEO Randall Stephenson. The transition has been in the works since Elliott came calling last year. But the pandemic has upended the world. Having a 30-year vet at the helm is now required C-suite experience.
Oil market inferno claims victims of all sizes 24 Apr 2020 This week’s price crash in U.S. crude looks an age-old example of small retail investors getting burned while savvy institutional players supply the matches. That does seem to have been part of the story. But some professional money managers probably also got singed.
Who really deserves government cash? 24 Apr 2020 U.S. airlines are getting big government checks. Retailers, restaurants, and energy firms are among those struggling. Breakingviews stacks them up based on their importance to employment, taxes, and other metrics. Banks’ implicit guarantee is warranted. Oil drillers: not so much.
Corona Capital: Primed debt, Lysol 24 Apr 2020 Concise views on the pandemic’s corporate and financial fallout: Senior creditors get “primed”; Reckitt Benckiser warns customers not to inject Lysol.
Keeping it local gives Nestlé a temporary lift 24 Apr 2020 Sales grew 4.3% in the first quarter as consumers in Europe and the U.S. stockpiled products like coffee and pet food. The $320 bln Swiss giant’s localised production and inventory helped it meet increased demand. But lower sales in Asia suggest the bounce will not last.
Russia’s oil-and-virus airbag is robust but finite 24 Apr 2020 The double whammy of a crude price collapse and Covid-19 could cause a hefty budget deficit. Moscow’s $170 bln wealth fund can plug a hole worth 5% of GDP if need be. The issue is more the optics of raiding the piggy bank while looking relatively stingy on subsidising wages.
Japan tilts at self-sufficiency windmill 24 Apr 2020 Prime Minister Shinzo Abe is subsidising firms to bring production back from China. Others may copy the idea. His $9 bln budget for the drive suggests the push is tentative. Reshoring has a bad track record. Duplicate chains and more inventory are the answer but will be costly.