Today - Saturday, February 28, 2015
- Chicago's credit rating was downgraded Friday by Moody's to Baa2, two notches above junk, with a negative outlook on the “expectation that the city’s credit quality could weaken as unfunded pension liabilities grow and exert increased pressure on the city’s operating budget."
- Chicago's four pension funds have ~$20B in unfunded debt, and without further action the city would need to increase its payments to those accounts by $600M next year and even more after that.
- The rating includes the city’s $8.3B billion of outstanding GO debt, $542M of outstanding sales tax revenue debt, and $268M of outstanding or authorized motor fuel tax revenue debt.
- The downgrade could immediately terminate four interest rate swap agreements, costing the city ~$58M, and potentially lead to terminations of 11 more swaps deals that could cost another $133M.
- Also yesterday, S&P warned it could slap its own multi-notch downgrade on Chicago in the absence of a plan this year to deal with the pension crisis.
- It's all another big headache for Mayor Rahm Emanuel, who is facing a surprise run-off in his bid for re-election.
- Muni ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, SHM, BABS, XMPT
Friday, February 27, 2015
- China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU) announced that they won 4G LTE FDD licenses from China's industry regulator, the Ministry of Industry and Information Technology.
- The move is another that may allow the carriers to challenge the dominance of China's leader, China Mobile (NYSE:CHL), by drawing more data users. The two have been somewhat behind China Mobile in terms of 4G upgrades.
- In 2013, the three companies were licensed to use the homegrown TD-LTE standard.
- Previously: Chinese telecoms jump in Hong Kong on merger rumor (Feb. 11 2015)
- Previously: Merger rumors lift U.S. shares of Chinese telecoms (Feb. 12 2015)
- Wind Telecomunicazioni -- the Italian unit of Russian telecom VimpelCom (NASDAQ:VIP) -- may be selling its wireless towers to Spain's Abertis Infraestructuras (OTCPK:ABRTY) as soon as the coming week.
- The companies are talking about 6,000 towers that Wind values at as much as €700M ($786M), though other observers peg the value even higher, at €800M ($914M).
- An additional 1,700 towers under discussion could easily boost the deal to that latter figure or even to €900M ($1B).
- Abertis -- chiefly in toll-road management -- is reportedly considering transferring the towers into a unit to be listed on the Madrid exchange, in order to get more cash to shareholders.
- The Spanish firm is winning the deal over competition from American Tower (NYSE:AMT), Mediaset's (OTCPK:MDIUY) EI Towers and a coalition of investment fund F2i SGR and Providence Equity Partners.
- Shares of VimpelCom closed the day up 4.8%; they tracked lower in after-hours trading, -1.5%.
- Shortly after CEO Keith Murphy suggested another capital raise is on the way to help his company grow its R&D investments, Organovo (NYSEMKT:ONVO) has filed to raise up to $190M via future stock, debt, and/or warrant offerings. (prospectus)
- The 3D-printed tissue developer had $50M in cash at the end of 2014, and no debt. Shares have fallen to $5.67 AH.
- With shares having gone into earnings just $0.29 away from a 52-week high of $23.44, investors weren't in a forgiving mood towards Pegasystems (NASDAQ:PEGA) regarding its Q4 revenue miss, nor its guidance for 2015 revenue of $653M and EPS of $0.78 (below a consensus of $680.2M and $0.94).
- On its CC (transcript), the app development software vendor suggested near-term profits will be affected by major R&D and sales/marketing investments. It also mentioned more services work is being handled by partners.
- License/cloud backlog rose 5% Y/Y in Q4 to $364.5M. License revenue rose 21% to $77.4M, maintenance revenue grew 8% to $48.7M, and services revenue fell 4% to $42.8M.
- Shares fell 14.5% in regular trading to $19.79.
- Q4 results, PR
- Fresh off their vote for re-regulation of Internet transmissions, the five FCC commissioners will be spending mid-March on Capitol Hill answering to the GOP Congress.
- The House Energy and Commerce Committee is holding its hearing March 19, a day after the members are scheduled with the Senate Commerce Committee.
- The chairmen of the two committees, Greg Walden and John Thune, are backing a bill that would reverse the FCC's Title II reclassification (treating Internet providers more like utilities) and substantively narrow its approach to ensuring net neutrality.
- Following the 3-2 vote, major carriers indicated their strategy would be twofold: Lawsuits (CMCSA, T, VZ, CHTR worried about "years" of litigation); and legislative action to undo the move, with a cooperative congress apparently ready to act.
- Other related stocks: CVC, TWC, CTL, FTR, ELNK, DISH, DTV, CCOI
- Exxon Mobil (NYSE:XOM) has been a strong relative performer since the oil price swoon, but Jefferies analysts see Chevron (NYSE:CVX) and Royal Dutch Shell (RDS.A, RDS.B) as better investor options right now.
- Jefferies does not expect XOM's March 4 analyst day will offer reasons to own the stock, and if capex guidance exceeds expectations and the share buyback program is eliminated, it could make the market question XOM's defensive qualities.
- The firm prefers CVX over an 18-month period due to its superior growth, although it suggests holding off until after the company's March 10 analyst meeting; CVX trades at a 29% EV/DACF discount to XOM on its 2016 estimates.
- Jefferies likes Shell as a defensive stock within the sector, saying its cash cycle and balance sheet are just as strong as XOM and it trades at a 42% EV/DACF discount vs. XOM on its 2016 estimates.
- Dropbox and Vodafone (NASDAQ:VOD) have made a deal to bring Dropbox's file storage to the wireless carrier's customers -- a key market for Dropbox, who get 70% of its users and about half its revenue outside the U.S.
- With more than 440M subscribers as of year-end, Vodafone can provide a boost to Dropbox, which currently sports more than 300M users. Eventually, the carrier's Android phones will come pre-installed with Dropbox. For its part, aside from any payment considerations, Vodafone can offer its users 25 free GB of storage.
- Terms of the deal were undisclosed, though Dropbox's Marc Leibowitz says it's not just a "pay for play."
- The rollout is scheduled to happen for most Vodafone customers by the end of 2015.
- Vodafone Q4 earnings
- Dresser-Rand (NYSE:DRC) says it will cut 8% of its global workforce, or ~650 jobs, because of the weak oil price environment, "taking appropriate measures to continue its emphasis on operating earnings growth, even in what is expected to be a relatively stable year in sales in 2015."
- DRC says the cutbacks are in response to ongoing market conditions and not in anticipation of its merger with Siemens (OTCPK:SIEGY).
- In its Q4 earnings report, DRC says results were hurt by several events - including the cost of the merger transaction, the price of oil and the movement in several non-U.S. dollar based trade currencies - that it believes masks an otherwise a strong operating performance.
- Qualcomm (NASDAQ:QCOM) states its latest small cell base station chipsets (the FSM99xx family) and a new mobile device RF transceiver (the WTR3950) support 4G usage over the unlicensed 5GHz. band (currently used for Wi-Fi).
- Though they can't act as a full replacement for mobile networks using licensed spectrum in lower frequency bands (both due to range and capacity limitations), 5GHz. 4G networks, referred to by Qualcomm as LTE-U, could help relieve congestion and act as a longer-range Wi-Fi alternative in high-traffic/density environments such as train stations, malls, and stadiums.
- Qualcomm adds it has successfully carried out tests "prove co-existence between multiple LTE-U and Wi-Fi access points in ... unlicensed spectrum under extreme load conditions." Phones supporting LTE-U are expected in 1H16.
- Separately, Qualcomm has led a $50M funding round for 3D Robotics, North America's biggest personal drone maker; 3D's drones will use Qualcomm's Snapdragon processors going forward. The funding comes a couple weeks after the FAA proposed commercial drone rules.
- Pemex says it is in talks with oil service and rig providers to reduce daily rates, part of a series of actions it is considering to reduce spending after reporting a quarterly net loss of $7.75B and a 10% decline in sales.
- Pemex drilled 120 wells in Q4, 36% fewer than a year earlier, and oil output fell to 2.36M bbl/day in the quarter as production for the full year slumped to its lowest level since at least 1990.
- Pemex terminated service and drilling contracts with Diamond Offshore (NYSE:DO) last week; drilling rig contractors with the most exposure in offshore Mexico are Grupo Mexico (OTCPK:GMBXF) unit Perforadora Mexico, Paragon Offshore (NYSE:PGN) and DO.
- Petrobras (NYSE:PBR) denies it has hired JPMorgan Chase to handle the sale of oil exploration licenses in deep-sea areas off Brazil's coast.
- In a securities filing, PBR reiterated the need to reduce capital investments, dispose of assets and step up divestitures to preserve cash, but it also said JPM did not have a mandate to map out potential investors interested in acquiring licenses for its subsalt oil reserves.
- Reuters reported earlier this week that Petrobras had hired JPM to advise on the sale of ~$3B in assets, as fallout from Brazil's corruption scandal had shut access to financing.
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