Wall Street Breakfast
Today - Wednesday, August 20, 2014
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Argentina is looking to push bondholders to swap defaulted debt for new notes, in order to dodge a U.S. ruling that prevents the government from paying creditors. Argentina's last interest payment of $539M was blocked by a NY court, resulting in the country's sovereign default on July 30. President Cristina Fernandez has continued to argue that Argentina is not in default, and has called for a new bond swap as a result of the ruling.
Despite the new announcement, the International Swaps and Derivatives Association is going ahead with Argentina's CDS auction, but has delayed it until September. An issue arose yesterday regarding the addition of two Japanese-law restructured notes to be included in the auction, and needs to be resolved before the sale can take place. The auction will establish the payout that holders of protection on Argentine bonds will receive as a result of the country's recent default.
China's anti-monopoly regulator has issued fines against 12 Japanese companies for colluding over prices of auto parts and bearings. The penalties total 1.2B yuan ($201.8M) and fine companies including Hitachi (OTCPK:HTHIY), Sumitomo (OTCPK:SSUMY), Mitsubishi Electric (OTCPK:MIELY), Jtekt (OTCPK:JTEKY) and Denso (OTCPK:DNZOY). China has been increasing its efforts to bring companies into compliance with an anti-monopoly law enacted in 2008, and has recently taken aim at the country's auto sector.
The latest cease-fire in the Gaza Strip has collapsed, after Palestinian rocket fire resumed nearly eight hours before the cease-fire was due to expire. Israel responded with airstrikes, and ordered its delegates back from Cairo saying it will not negotiate under fire. Egyptian mediators have been struggling to end the 5-week-old conflict with several temporary cease-fires, but no permanent truce has yet emerged.
Vladimir Putin is set to meet face-to-face with his Ukrainian counterpart, Petro Poroshenko, in Belarus on Aug. 26 to discuss stabilizing the situation in Ukraine and the latter's energy concerns. Ukraine's energy sector is crumbling, and estimates suggest that coal supplies to electricity producers can run out within the next 40 days due to damaged rail lines by Russian separatists.
Another executive has left Bombardier, following last month's major restructuring announcement involving its aerospace division. "Since then, there's been a lot of movement within the company," says spokesman Marc Duchesne. "There could be more." Besides for the 1,800 layoffs announced in July, Bombardier's (OTCQX:BDRBF, OTC:BOMBF) CSeries orders have suffered since the plane was grounded in late May due to an engine failure.
Glencore is launching a share buy-back program of up to $1B over the next six months, making it the first among the diversified miners to return extra cash to shareholders this year. Glencore (OTCPK:GLNCY) announced last week that it had received $6.5B from the sale of its Peruvian copper project Las Bambas earlier this year, triggering the possibility of a special dividend for shareholders or a buy-back.
Among Warren Buffett's Q2 moves was a pullback in oil company investments, selling off the vast majority of his stake in ConocoPhillips (NYSE:COP) and dumping some of his holdings in Phillips 66 (NYSE:PSX) and National Oilwell Varco (NYSE:NOV). The move looks prescient, as U.S. crude prices have dropped from ~$107/bll in mid-June to less than $95 yesterday, and energy stocks went from being among the best performers on Wall Street to the middle of the pack.
Petrobras has agreed to pay $434M to Bolivia's state-run energy counterpart YPFB to settle a dispute over natural gas payments and secure supplies of the fuel for a gas-fired power plant. The agreement comes as the companies prepare to work out a new agreement covering the Bolivian natural gas supply to Brazil. The existing contract expires in 2019, and Petrobras (NYSE:PBR) has said it is counting on continued imports from Bolivia to fuel Brazil's economy.
Six months after stepping down as CEO, Steve Ballmer has resigned from Microsoft's (NASDAQ:MSFT) board. "In the six months since leaving, I have become very busy...I hold more Microsoft shares than anyone other than index funds and love the mix of profits, investments and dividends returned in our stock," says Ballmer. "I expect to continue holding that position for the foreseeable future."
Lear is close to an $800M+ deal to acquire Eagle Ottawa, the world's largest supplier of premium automotive leather. The deal is likely to be announced this week or next. Eagle Ottawa's leather products are used in BMW (OTCPK:BAMXY), Chrysler (OTCPK:FIATY), Mercedes-Benz (OTCPK:DDAIY) and other vehicles, while Lear (NYSE:LEA) manufactures seating for auto makers including Ford (NYSE:F) and GM (NYSE:GM).
Along with its Q2 results, PetSmart has confirmed reports that it is exploring strategic alternatives, including a possible sale. Comparable store sales fell 0.5% Y/Y in Q2, and full-year EPS guidance has been set at $4.29-$4.39 (consensus is at $4.32). PetSmart (NASDAQ:PETM) also announced that it is buying online pet product retailer Pet360 for $130M up-front and up to $30M in earn-outs. The deal is expected to close in September.
Overstock is preparing to accept Bitcoin for its international sales as of Sept. 1, transforming the company into the biggest online merchant to extend the payment option beyond the U.S. Since January, several established retailers, including Expedia (NASDAQ:EXPE) and Dell, have started accepting Bitcoin (COIN, OTCQB:BTCS) for domestic sales, although the new move by Overstock (NASDAQ:OSTK) suggests a more widespread adoption of the virtual currency to the international space.
Bumble Bee Foods has received takeover overtures from Post (NYSE:POST) and Thai Union Frozen Products (OTC:TUFRF) in recent months, and is now planning to launch a sale process this fall. As the largest canned tuna and sardines producer in North America, Bumble Bee is seeking a valuation upward of $1.5B.
Amid a continuing push to pare back its sprawling operations, Citigroup (NYSE:C) is mulling a sale of its retail-banking business in Japan, but would still leave its corporate and investment banking divisions there. Since Michael Corbat became CEO in late 2012, Citi has exited retail operations in a number of countries, most recently agreeing to sell units in Greece and Spain. Citibank Japan currently has 33 branches with deposits of $39B.
Epsilon Energy (OTCPK:EPSEF) +19% since Jul. 28 Value Digger article »
Summer Infant (NASDAQ:SUMR) +69.6% since Oct. 16 Stephen Simpson, CFA article »
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In Asia, Japan flat at 15454. Hong Kong +0.2% to 25160. China -0.2% to 2240. India -0.4% to 26314.
In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.4%.
Futures at 6:20: Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude +1.2% to $95.57. Gold -0.1% to $1295.40.
Ten-year Treasury Yield flat at 2.41%
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