Abengoa has creditors over a barrel 27 Nov 2015 The beleaguered Spanish engineering group might survive if lenders take haircuts of two-thirds. In liquidation, losses could mushroom due to the group’s spiralling working capital needs, complex business and slow Spanish courts. Abengoa needs a speedy resolution and more cash.
Dollar peg remains Saudi Arabia’s best option 27 Nov 2015 Saudi Arabia is under pressure to break its currency peg with the dollar. The inflexible riyal means Saudi can’t devalue to offset weak oil prices. But given Riyadh’s huge forex reserves, the risks of moving to a floating currency still outweigh the rewards.
Britain’s “Black Friday” better left on the shelf 27 Nov 2015 The Thanksgiving shopping orgy, recently adopted by the UK, is unhelpful for all concerned. Consumer credit is spiralling, confidence falling and retail margins are under pressure. If shoppers and retailers take a rational view of low prices, the festival will snuff itself out.
BBVA’s Abengoa swerve cements risk-oversight kudos 27 Nov 2015 Unlike its domestic peers, the Spanish bank didn’t lend to the teetering engineering group. Nor did it invest in Bankia’s failed IPO or Spain’s bad bank, Sareb. Luck may be an element, but BBVA’s risk controls and an independent-minded chairman are probably helping, too.
Barclays money-laundering rap is oddly reassuring 26 Nov 2015 The UK bank has been fined for cutting corners on a 1.9 bln stg deal for politically sensitive clients in 2011. The temptation for banks to bend the rules for VIPs is just as strong today. But more vigilant regulators are chipping away at the idea that this is business as usual.
ECB has bright idea for targeted bank-bashing 26 Nov 2015 Imposing a staggered penalty on banks that hoard cash is one of many ways to ease policy being discussed by the European Central Bank. Such levies have drawbacks. But at least a split-level charge would encourage the biggest hoarders to boost cross-border lending.
Britain joins sovereign wealth party too late 26 Nov 2015 Creating a 1 billion pound sovereign wealth fund to encourage shale gas drilling in the UK could fail on two fronts. It won’t sway opponents of fracking in the UK countryside, and a financial windfall is unlikely given a global gas glut and unattractive shale economics.
German open-door isolationism is unsustainable 26 Nov 2015 Angela Merkel has ignored domestic calls to shut out refugees. But she will find it harder to brush off French calls for the same. Alienating a key ally would undermine the union Merkel wants to save, and threaten economic integration.
UK’s Osborne is less austere than he makes out 25 Nov 2015 Finance minister George Osborne isn’t quite the budget zealot his Nov. 25 spending cuts suggest. The UK has run bigger deficits relative to GDP than France during his tenure. He has also executed tax and spending U-turns when required. It helps that gilt investors buy the hype.
UK housing market policy gets ever more misguided 25 Nov 2015 Britain is hoping its Help to Buy scheme will get more punters into the inflated housing market. That’s alongside 2.3 bln stg in subsidies to tempt private sector builders to sell at a discount. Even if this somehow creates 400,000 new homes, the rich gain more than the poor.
Pfizer’s war chest stealthily rebuilt by Allergan 25 Nov 2015 The $160 bln mostly stock deal will create a combination gushing $25 bln of operating cash flow annually. An offshore tax address means there’s no reason to keep over $60 bln of cash on its balance sheet. That’s a lot of financial firepower to buy back shares and fuel more M&A.
Bank regulator’s blunder sums up Europe’s troubles 25 Nov 2015 Lenders’ capital ratios are higher than previously calculated, the European Banking Authority has said. The watchdog’s technocratic remit makes the error galling. Such confusion could deter investment just as the region’s financial institutions are doing more to deserve it.
Europe’s terrible banks look their best in years 25 Nov 2015 Capital levels, profitability and lending rose in the six months to June, the European Banking Authority says. Bad loan ratios are almost double those of U.S. banks, and more EU quantitative easing could be bad for business. Even so, lenders are proving surprisingly healthy.
BHP and Rio look out of touch on China 25 Nov 2015 Low-cost iron ore miners BHP Billiton and Rio Tinto are accomplished experts digging for the ferro-raw material. They are much less good at consumption estimates. With the ore at 10-year lows, the companies’ investment cases depend on them getting ahead of China’s demand curve.
Abengoa’s creditors face certain pain 25 Nov 2015 The heavily indebted engineering firm is seeking creditor protection after a new investor backed out of injecting fresh equity. Abengoa is probably viable, but only with a lot less debt. That makes debt-for-equity swaps and writeoffs the likely next step.
Delay in Pfizer split is material adverse event 24 Nov 2015 The $160 bln acquisition of Allergan will cut taxes and add solid assets, but it’s also causing Pfizer to defer until 2018 a decision on splitting up. Even though the company’s disposals have added greater value than acquisitions, CEO Ian Read seems more eager to bulk up.
Time for Germany to let EU banking union fly 24 Nov 2015 The European Commission wants a mutualised deposit insurance scheme for banks by 2024. Berlin may be averse to the idea of financing non-German busts. But there are some safeguards, and unpicking the link between banks and states would better avoid trouble in the first place.
Oil market rests on Saudi-Iranian output deal 24 Nov 2015 Saudi Arabia says it will work with the world’s biggest oil producers to maintain price stability. To be effective, the OPEC kingpin will also have to make room for Iran to add barrels to the flooded market. The geopolitics are fast moving. But logic points to a deal.
Allianz coal ban will change investment climate 24 Nov 2015 The German insurer is to pull $4.3 bln out of investment in coal companies, ditching its scepticism against blanket anti-carbon policies. This rethink suggests big asset managers are taking climate change seriously. Other carbon-heavy industries like oil and cement may be next.
BBVA’s UK buy sees digital banks going mainstream 24 Nov 2015 The Spanish lender has bought 29.5 pct of mobile-only UK player Atom Bank. The 45 mln stg outlay is tiny beside Sabadell’s purchase of TSB. But BBVA joins Woodford Investment, Toscafund and Jon Moulton in backing Atom. Digital banks may find a way to carve out a valuable niche.