Wall Street Breakfast: Argentina Defaults, Crude Falls, Blackstone Hedge Fund

by: Wall Street Breakfast
Wall Street Breakfast
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Argentina will enter a state of technical default today, as the $832M payment given to holders of the country’s restructured bonds was declared illegal this past Friday. The showdown continues as the New York judge presiding over the case insists the holdout creditors must be paid $1.5B before any other payments can be made. Argentina will still have a 30-day grace period until it enters a formal default.

Crude-oil futures fell in Asian trading hours today, due to waning concerns of Iraqi oil supply for the near term. On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $105.45 a barrel at 4:52 GMT, down $0.29 in the Globex electronic session. August Brent crude also fell $0.29 to hit a low of $113.01 a barrel. Brent futures are still up 3.4% in June.

Tensions are mounting in Ukraine, as the additional three day cease-fire between government forces and pro-Russian separatists is set to expire tonight. Both camps are being accused of violating the agreement, and have called for an end to the cease-fire. Increased sanctions are also at stake, after the EU set a deadline for Russia and separatists today to take a series of steps toward peace, including retreating from checkpoints and releasing captives.

Blackstone is taking another leap into the hedge-fund sector, in an effort to rival some of the other largest firms in the business. The company is now planning on starting a fund with a few teams of traders, and hundreds of millions of dollars to "place a relatively small number of large, highly concentrated wagers." Blackstone (NYSE:BX) is in final negotiations with the first teams, who will likely start the business in the fall.

With more than $998B in its iShares business, BlackRock (NYSE:BLK) is on target to conquer its upcoming $1T mark, although the company is facing market competition from rivals Vanguard and State Street (NYSE:STT). Vanguard secured 43% of the new money in the ETF market this year, compared to Blackrock's 35% share. Blackrock is still highly unlikely to be surpassed soon due to its sheer size, although new market share percentage is beginning to favor rivals.

BNP Paribas' board has approved an $8.9B settlement, following the investigation of U.S. authorities into $30B of transactions which avoided economic sanctions. BNP (OTCQX:BNPQF) is expected to plead guilty to the charge today, and more than a dozen employees will leave the bank in addition to the settlement. Last week, BNP Paribas stated it will cut its dividend and sell billions of dollars of bonds to fund the record payout.

Shire has received a $248M cash refund from Canadian revenue authorities, and is now expecting another $162M by the end of the year. The refund will be used to repay former debt, and $216M will be listed as a net credit to income taxes. Shire (NASDAQ:SHPG) is currently being pursued by AbbVie (NYSE:ABBV), and the latter is now preparing to bring the proposed takeover directly to Shire shareholders.

Philips will merge its Lumileds LED components and Automotive lighting subsidiaries into one unit, as the company attempts to bring in more investor capital to accelerate growth. In 2013, the two divisions amassed more than $1.9B in combined sales. The merger is expected to take place in the first half of 2015, and will cost Philips (NYSE:PHG) around €30M in the second half of this year.

The partners in Israel's Leviathan natural gas field, including Noble Energy (NYSE:NBL), Delek Group (OTCPK:DGRLY) and Ratio Oil (OTC:RTEXF) have announced a newly signed preliminary agreement with BG Group (OTCQX:BRGYY, OTCQX:BRGXF), for a deal exporting gas to BG's LNG plant in Idku, Egypt. Although still far from finalized, the deal is likely to be valued near $30B, and would supply an annual 7B cubic meters of gas to BG for 15 years.

InterOil will sell its Papua New Guinea oil refinery and petroleum distribution business to Puma Energy for $526M, in order to put a greater focus on its natural gas business. "Our upstream and LNG business has become core to the company's growth...and the time is right to focus on this part of our business," says InterOil (NYSE:IOC) COO Jon Ozturgut.

Healthscope, an Australian hospital and pathology company, is likely to become Australia's third-largest IPO listing on record. The company is owned by private-equity owners Carlyle (NASDAQ:CG) and TPG, which are now looking to raise $2.4B for the IPO, as the private healthcare sector in the country keeps growing. The number of Australians with private health insurance rose 8% annually in the last five years, increasing from 9.8M to 11M customers.

General Motors will delineate the terms and conditions applying to its compensation fund today. The fund is being setup to pay victims or families connected to the faulty ignition switch problem that led to 13 reported deaths and hundreds of injuries. This past Friday, GM (NYSE:GM) issued an additional four recalls, the largest affecting 467k pickup trucks, bringing this year's total recall count up to 48.

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Today's Markets:
In Asia, Japan +0.4% to 15162. Hong Kong -0.1% to 23191. China +0.6% to 2048. India +1.3% to 25414.
In Europe, at midday, London +0.1%. Paris -0.2%. Frankfurt +0.3%.
Futures at 6:20: Dow flat. S&P flat. Nasdaq flat. Crude -0.4% to $105.32. Gold -0.4% to $1314.60.
Ten-year Treasury Yield -1 bps to 2.53%

Today's economic calendar:
9:45 Chicago PMI
10:00 Pending Home Sales
10:30 Dallas Fed Manufacturing Outlook

Notable earnings after today's close: IRET

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