Today - Friday, March 7, 2014
- As expected, China's corporate-bond market has suffered its first ever domestic default, with Shanghai Chaori Solar Energy Science & Technology failing to fully pay 89.8M yuan ($14.7M) in interest that was due today.
- Until now, China had bailed out distressed companies.
- Moody's believes that the default will be a "wake-up call" that will help the growth of China's bond market. It will "signal regulators' higher tolerance for corporate bond defaults amid financial market reforms, which is in line with the current central administration's shift to adopt more market-oriented policies," Moody’s says.
- Meanwhile, the Shanghai government has reportedly given authorization for a city-owned investment company to purchase non-performing loans from local banks. The approval follows similar approval by other municipalities and indicates how Shanghai is preparing for an expected rise in bad debt.
- The markets reacted calmly to Chaori's default and the Shanghai Composite closed -0.1%.
- ETFs: FXI, PGJ, GXC, FXP, YINN, CYB, CNY, DSUM, YANG, MCHI, XPP, YAO, FXCH, CHXF, YXI, HYEM, EMHY, FCA, TCHI, CHLC
- General Electric (GE) has taken advantage of continued low rates with a $3B bond sale comprising $2.25B of 30-year notes and $750M in 10-year paper.
- The auction attracted strong demand, mainly due to the not-so-common opportunity to buy debt from the parent company rather than GE Capital. The last time the parent sold bonds was in October 2010.
- GE is rate at AA+ at S&P.
- Meanwhile, following shareholder feedback, GE will end dividend payments to senior management on new stock that has yet to vest.
- ETFs: LQD, VCSH, VCIT, CORP, VCLT, CSJ, CIU, CFT, SCPB, LWC, CLY, ITR, QLTA, IGHG, PFIG, SLQD, ENGN, IGS, CBND, QLTB, IGU
Thursday, March 6, 2014
- The very notion of global warming used to anger most energy executives, but anti-environment rhetoric was dialed way back at this week's CERAWeek industry conference in Houston.
- "You can't argue with a rock," says BHP Billiton (BHP) CEO Andrew MacKenzie, whose geology training makes it clear to him that climate change is real and must be addressed; the telltale signs of a warming climate, he says, are baked right into the layers of earth his company digs up and drills through every day.
- Skepticism over the Obama administration also seemed on the wane, as EPA Administrator Gina McCarthy told attendees that looming new power plant rules would not "put the brakes on business"; Duke Energy's (DUK) Lynn Good is "encouraged" by McCarthy's approach - but says building new coal plants are not worth the regulatory risk.
- But skepticism of renewable energy abounds, with Eni's (E) Paolo Scaroni noting that Europe is realizing that renewables are "more a problem than a solution”; Siemens (SI) CEO Joe Kaeser says “using solar panels in Germany is like growing pineapples in Alaska."
- American Apparel (APP) -8.9% AH after providing downside FY 2014 revenue guidance and saying it received a noncompliance notice from NYSE MKT.
- APP sees FY 2014 sales of $634M-$658M, flat to a 4% Y/Y increase but below analyst consensus estimate of $667M, citing the "challenged implementation" of its new distribution center which disrupted the flow of merchandise to stores and wholesale clients.
- Says it received a letter from NYSE MKT stating that the company is not in compliance with continued listing standards.
- Coupons.com's (COUP) IPO price is above a prior range of $12-$14, and translates into a $1.2B valuation (7x 2013 sales). The online grocery coupon provider raised $168M by selling 10.5M shares.
- Shares begin trading tomorrow. Given investor enthusiasm for fast-growing Internet names, the debut could be a strong one.
- Prospectus, IPO analysis
- Alaska Communications (ALSK) expects 2014 revenue of $310M, above a $289.4M consensus. But free cash flow is expected to fall to $20M from a 2013 level of $22M. Capex is expected to drop to $40M from $47.7M.
- Adjusted EBITDA, pressured by the loss of $15.7M in revenue tied to the Alaska Wireless Network deal, fell 50% Y/Y to $16.6M. Consumer service revenue +2% to $10.1M, business/wholesale services -1% to $25.6M.
- Consumer access lines fell by 1.4K Q/Q to 49.3K, and business access lines by 200 to 79.8K. Consumer broadband connections rose by 600 to 38.7K, and business broadband connections by less than 100 to 19.3K.
- 3.2K wireless subs were lost in Q4, bringing the total to 108.8K. Wireless service revenue (hurt by Verizon's arrival in Alaska) fell 6% Y/Y to $17.6M. ARPU rose to $53.14 from $52.08 in Q3 and $52.96 a year ago. Churn was 3.4% vs. 3.2% in Q3 and 3.7% a year ago.
- Q4 results, PR
- Turquoise Hill Resources (TRQ) +4.1% AH on speculation from the Daily Mail that Rio Tinto (RIO) is preparing to bid ~$8/share for the outstanding 49.2% of the company it doesn't already own.
- Billionaire Robert Friedland holds 3% of TRQ is said to have been against selling out to RIO until recently.
- TRQ holds 66% of the massive Oyu Tolgoi copper and gold mine, but progress on the $6B second stage of the project has been held up by RIO’s inability to strike an agreement with the Mongolian government.
- Cisco (CSCO) is packaging various software/services offerings found in its ONE software-defined networking (SDN) platform (previous) into four suites that can be individually licensed, and which are meant for different use cases.
- "We have a bunch of products. We’ll turn those products into licenses – a data center suite, a WAN suite, an access suite – for the enterprise," says sales chief Rob Lloyd.
- Central to these efforts is Cisco's APIC SDN controller, unveiled last November along with several other products from its Insieme unit, and promising superior app/network visibility relative to alternatives.
- Cisco's likely goals, in addition to simplifying its pricing: 1) To head off a slew of SDN rivals - none larger than VMware/Nicira - hoping to sell enterprises on programmable networks capable of running on commodity (read: non-Cisco) gear. 3) To further drive a mix shift towards software at a time when hardware margins are seeing a bit of pressure.
- Alpha Natural Resources (ANR) -2.4% AH after Goldman Sachs downgrades shares to Sell from Neutral with a $4 price target, down from $6.
- Goldman cites a challenging met coal price outlook which drives its EBITDA estimates sharply below consensus; valuations near historical peak levels on an EV/EBITDA basis; competitively disadvantaged assets, including higher-cost met coal assets and lower-quality PRB mines; and high leverage levels and an incrementally negative free cash flow forecast.
- The firm says estimates need to be recalibrated lower before it could become more constructive on the stock.
- Enbridge (ENB) wins approval of its controversial plan to reverse and expand Line 9, allowing for more shipments of western crude oil to refineries in Quebec.
- The approval from Canada's National Energy Board is subject to 30 conditions, such as requirements that ENB take steps to ensure the integrity of the pipeline and guard against spills.
- The reversal of the 397-mile section is part of ENB’s effort to provide refineries in eastern Canada with lower-priced North American crude from Alberta’s oil sands and North Dakota’s Bakken.
- The line from Westover, Ontario, to Montreal is capable of sending ~240K bbl/day of overseas oil west; included in the approval for the reversal is permission to expand capacity to 300K.
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