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ARAB TIMES, FRIDAY, DECEMBER 26, 2014
BUSINESS
37
MF Global Holdings to pay $1.21b restitution
MF Global Holdings Ltd must pay $1.21
billion to reimburse customers for losses
sustained when the brokerage firm failed
in 2011.
The Commodity Futures Trading
Commission said Wednesday that a
New York court required the payment to
ensure that claims made of its subsidiary, MF Global Inc., are paid. The
order also imposed a $100 million civil
penalty on MF Global Holdings. The
company admitted to unlawful use of
customer funds as charged by the
CFTC.
MF Global Inc. had already settled
with the CFTC in 2013. It was required
to repay $1.21 billion to its customers,
plus a $100 million penalty.
MF Global Holdings, the New Yorkbased parent company, imploded in
October 2011 after making big bets on
bonds issued by European countries that
later turned sour.
When it collapsed, more than $1 billion in customer money was discovered
to be missing. It was later found that
the funds were used to pay for the
company’s own operations. With $41
billion in assets, it was the eighthlargest corporate bankruptcy in US history.
The CFTC said Wednesday that litigation continues against Edith O’Brien,
who had been MF Global’s assistant
treasurer, and MF Global’s former leader,
Jon Corzine. Corzine is a former chief of
Goldman Sachs, a former Democratic
US senator and the former governor of
New Jersey. (AP)
HKND plans IPO – CEO
The Hong Kong-based company with a
concession to build a $50 billion shipping canal in Nicaragua said it is
preparing to launch an initial public
offering.
Wang Jing, Chairman and Chief
Executive of the HK Nicaragua Canal
Development Investment Co Ltd (HKND
Group), told reporters in Managua that he
hoped the listing would take place in the
stock market that offered the best conditions.
Wang Jing gave no details of how much
HKND aimed to raise, nor when the offering might be. He said the company was
preparing a prospectus which would
reveal the investors behind the waterway
that seeks to compete with the Panama
Canal.
More than a year since it was first
announced, the canal project faces
widespread skepticism, with questions
still open about who will provide financing, how seriously it will affect Lake
Nicaragua and how much land will be
expropriated for it. (RTRS)
Govt banking on lower oil prices, weaker euro to breathe life into its economy
France’s unemployment hits new record in November
PARIS, Dec 25, (AFP): Unemployment
in France hit a new record in November,
with official statistics published
Wednesday showing 3.488 million people claiming jobless benefits.
The figures showed a rise of 27,400
people on the jobless queue compared to
the previous month, up 0.8 percent from
October and 5.8 percent compared to the
previous year.
Reducing unemployment is one of
President Francois Hollande’s main
pledges, but more than halfway through
his five-year term, that has yet to happen.
In an interview last month, he said he
would not stand again for the French
presidency in 2017 if he had not managed
to live up to his promise to bring down
unemployment by then.
France’s economy is barely growing,
showing a gain of just 0.3 percent in the
third quarter.
The government is Paris has forecast
0.4 percent growth for the full year, but is
banking on lower oil prices and a weaker
euro to breathe some life into its economy in 2015.
But many economists believe France
needs average of 1.5 percent growth is
needed to reduce unemployment.
The government has introduced a
much-vaunted but highly disputed
“Responsibility Pact”, which will cut
social charges for businesses by 40 billion euros ($49 billion) in exchange for
them creating 500,000 jobs by 2017.
Given the parlous state of France’s
budget deficit, Hollande plans to finance
the tax breaks with 50 billion euros in
public spending cuts.
This has proved highly unpopular on
the left flank of Hollande’s ruling
Socialist Party, which sees the pact as a
gift to business.
CLOs to perform well in 2015 despite weaker loan underwriting: Moody’s
NEW YORK, Dec 25: The performance
of collateralized loan obligations (CLOs)
in the US, Europe and Asia (excluding
Japan) will remain strong as a result of the
improving global economy, according to
Moody’s Investors Service’s “2015
Outlook — Global CLOs.”
The report discusses the outlook for US
broadly syndicated loan (BSL) CLOs, US
small- and medium-enterprise (SME)
CLOs, European BSL CLOs and Asian
(excluding Japan) CLOs.
The strengthening global economy will
be the main driver of CLO credit performance in 2015. US BSL and US SME
CLOs will benefit from historically low
leveraged loan default rates. European
CLO performance will be similarly strong
even though economic growth in the
region will be weaker than in the US.
The absence of refinancing pressure
will further help CLO performance.
“Debt maturities have been pushed to
2018 and beyond for European CLOs,
which will keep default rates low,” says
Ian Perrin, a Moody’s Senior VicePresident.
However, risks persist in the sector.
Loan covenant quality will continue to
erode in 2015 in the US and Europe and
corporate leverage will remain high.
Covenant-lite subordination will also continue to shrink as the amount of debt subordinate to first-lien loans declines.
“Loan underwriting will continue to
weaken in 2015, but CLO structures and
Physical oil mkt signals price
crash may have further to run
Traders refocusing on excess supplies after OPEC
LONDON, Dec 25, (RTRS):
Physical crude markets are
flashing warning signs the 50
percent fall in oil prices could
have further to run as cargoes slip to cheaper levels
versus the Brent benchmark,
mirroring a move this summer that signalled the start of
the crash.
Cargoes of Russia’s main export
grade Urals, West African crudes and
lighter grades in the Mediterranean
all have come under pressure in
December, normally a time when
prices are supported by seasonal
demand.
Traders say the move illustrates that
both oil futures and physical prices
may have further to fall, even though
they have started to factor in an expected surplus of more than 1 million barrels per day in the first half of next
year, as fast-growing US shale output
overwhelms demand.
Driven
“The price rout started in the physical market this summer, but the most
recent flat-price sell-off has largely
been driven by the outlook for a heavily oversupplied market next year,”
Petromatrix analyst Olivier Jakob said.
“That is starting to change again now
as traders refocus on the physical market,
which is weakening after a period of relative stability compared to the flat price.”
In West Africa, well over half the
January export programme for Nigeria
has yet to find buyers, less than two
weeks before cargoes for February
loading come to market. Russian Urals
crude has also weakened amid ample
supplies.
Azeri Light crude oil differentials
fell to near a four-year low and North
Sea oil cargoes that underpin the Brent
crude futures contract have also been
slow to find buyers this week, despite a
slightly lower export programme next
month.
Back in June, price differentials for
the same grades fell to their largest discounts to the dated Brent benchmark in
several years as Brent futures prices
rallied towards a year-high of $115 on
Major global
Continued from Page 36
Cendana Sejati - Malaysia’s Cendana
Sejati, a unit of local bank Masraf Al
Barakah, proposed a 360 million ringgit
senior sukuk murabaha medium-term note
programme, RAM Ratings said in late
September.
Agaogle - Turkish construction-to-energy Agaoglu Group plans to raise around
$300 million by issuing sukuk, Niyazi
Albay, Agaoglu’s chief investment officer,
told Reuters in mid-September. No specific
time frame was given.
Aktif Bank - Aktif Bank, Turkey’s
largest privately owned investment bank,
has received regulatory approval to issue
200 million lira in sukuk, the Capital
Markets Board said.
Dogus Group - Turkish conglomerate
Dogus Group has received regulatory
approval to raise $370 million by issuing the
country’s first U.S. dollar-denominated corporate sukuk, the Capital Markets Board said
in late August. No time frame was given.
CIMB Islamic - CIMB Islamic, the
sharia-compliant unit of Malaysia’s second
largest bank, is preparing an Islamic bond
programme to raise up to 5 billion ringgit,
transaction terms will support performance,” says Yvonne Fu, a Manager
Director of Structured Finance at
Moody’s. US and European CLOs will
continue to adhere to the strong structural
features and protections inherent in the
CLO 2.0 template.
Rising interest rates will pressure
excess spread for US CLOs. However, the
risk of excess spread compression in
Europe is minimal because the European
Central Bank is unlikely to tighten monetary policy given the weak economic outlook.
CLOs will seek ways to comply with
regulations, such as the Volcker Rule and
Dodd-Frank and European risk retention
rules, to appeal to investors globally.
4.1 pct rise in sales seen
US retailers may just
meet holiday forecasts
CHICAGO, Dec 24, (RTRS): US
consumers have not turned out in
force for the final shopping days
before Christmas, suggesting that traditional retailers will just meet industry sales forecasts in a season marked
by deep discounts and growing
encroachment from online rivals led
by Amazon.com Inc.
Super Saturday — the last preChristmas Saturday, which fell on
Dec 20 this year — failed to make up
for spotty performance this season.
That included a disappointing Black
Friday, the day after the US
Thanksgiving holiday that is typically one of the busiest shopping days of
the year.
“The past weekend will not save
this holiday season,” said Craig
Johnson, president of the retail and
consumer product-oriented private
equity fund Customer Growth
Partners. “But combined with online
sales, it would certainly save the year
from being a dismal one.”
Johnson said if sales hold up in the
next few days and the week after
Christmas, retailers may finish close
to his company’s November and
December forecast of 3.4 percent
growth in store and online sales. He
estimates that Super Saturday weekend sales, which include store and
online, rose 2.5 percent to $42 billion
this year.
Leading
A file picture shows the removal of the drilling tool with a sample of the marine seabed at La Muralla IV exploration oil rig in
the Gulf of Mexico. The oil market faces an uncertain outlook
in 2015 as tumbling prices – arising from global oversupply -
stoke geopolitical tensions in key crude producers, analysts
say. Oil prices have plummeted by almost 50 percent since
June, punished by abundant supplies, a stronger dollar and
weak demand in the faltering world economy. (AFP)
fears Islamic State’s advance in Iraq
might hit supply.
It proved to be a rally based more on
misplaced expectations than reality.
When major supply disruptions in Iraq
did not develop, investors realised that
physical cargo levels were signalling
there was more than enough oil around.
This week, West African differentials
versus Brent were just above the levels
seen this summer, and experienced
traders said they could not remember
seeing cargoes so slow to clear.
Crude for delivery in the near future
could be the hardest hit, because
traders will need steep discounts versus
contracts for later delivery to finance
storage of the oil.
Traders are watching to see whether
oil starts to get stored at sea, as tanks
on land start to fill up.
So-called floating storage generally
requires contracts for delivery a month
in the future to trade at least 70 cents a
barrel above spot prices to cover the
cost of renting a Very Large Crude
Carrier, analysts and traders say.
London-based consultancy Energy
Aspects said that either demand in the
first half of 2015 is going to be stronger
than expected, indicating prices have
fallen too far, or that spreads will need
to widen to allow for floating storage.
“We know something will have to
give eventually, and we believe it is
more likely to be spreads,” Energy
Aspects said in a note.
Estimates vary for how low Brent
prices might fall between those who
say a drop in investment in future proj-
ects will be enough to lead to a reversal
in prices, and others who say the price
must go low enough to shutter existing
output.
“Oil is already at a level where many
projects will be cancelled, but in the
short term that won’t matter much to
prompt supplies,” one senior Londonbased trader said, estimating Brent
could shed another $10 a barrel.
Morgan Stanley analyst Adam
Longson questioned whether the extent
of the supply overhang had been overstated but said traders would still be
ready to pounce on any softness in
physical markets.
“With the market primed to sell any
sign of weakness, the risk of a large
downward move is rising,” Longson
said.
ratings agency MARC said in late August.
Sunway - Malaysian property developer
Sunway will raise up to 2 billion ringgit by
issuing sukuk mudaraba, it said in August;
short-term commercial paper under the programme will have maturities of between a
month and a year, while medium-term
notes will have maturities of one to seven
years. Sunway will make its first issuance
within two years.
Ras Al-Khaimah - The emirate of Ras
al-Khaimah, part of the UAE, invited banks
to pitch for arranger roles on a potential dollar-denominated sukuk, sources said in
early June. However, bankers said in
August that Ras al-Khaimah had sent out
requests for proposals for a syndicated loan,
casting doubt on whether the planned sukuk
issue would now go ahead.
Adira Dinamika - Indonesia’s PT Adira
Dinamika Multi Finance plans to raise at
least 500 billion rupiah ($42 million) with
ringgit-denominated sukuk in Malaysia by
the end of the year, bankers said.
K-Electirc - Karachi-based utility K-Electric
plans to raise as much as 22 billion rupees ($223
million) through sukuk to refinance existing
debt, the company said in late June.
Bank Muamalat - Malaysia’s Bank
Muamalat, a unit of sovereign fund
Khazanah and auto-to-property conglomerate DRB-Hicom Bhd, will raise up to 2 bil-
lion ringgit with Islamic bonds, credit
agency Malaysian Rating Corp said in late
June.
Bahri - National Shipping Co of Saudi
Arabia (Bahri) plans to arrange long-term
sharia-compliant financing in the next year
to replace a bridge loan backing its $1.3 billion acquisition of Saudi Aramco’s marine
unit, Bahri said in June. Banking sources
prebiously told Reuters Bahri was looking
at a potential debut sukuk issue to replace
the bridge loan.
Societe Generale - Societe Generale
completed the roadshow for the first issue
in its 1 billion ringgit multi-currency sukuk
programme in Malaysia, and would decide
on the size in days, the bank said on June
18. In early July, banking sources said
Societe Generale was still seeking a window to launch.
IFC - The International Finance Corp,
the World Bank’s lender to the private sector, is considering a return to the Islamic
bond market, an IFC official said. A sukuk
issue is still in the early stages of discussion
but would likely be in the fiscal year starting in July 2014.
Jordan - Jordan’s government is studying a proposal to issue its first Islamic bond
as early as next year, possibly raising over
$1 billion in multiple currencies, but a preference for concessionary loans from aid
donor countries could hinder the plan, government sources said.
Malaysian Resources Corp Malaysian Resources Corp, a local construction firm, said on June 12 it would
issue Islamic bonds to raise up to 680 million ringgit for land acquisitions and working capital.
Bangladesh - The central bank is seeking
to amend rules on its existing sukuk programme to broaden its use and allow for sovereign issuance by the government, a central
bank spokesman said in June.
Al Othaim - Saudi Arabia’s Al Othaim
Real Estate and Investment Co, owner of
five shopping malls in the kingdom, plans
to issue its debut local currency sukuk as
early as in June, sources aware of the matter said at the start of the month. The transaction is likely to be worth between 500
million and 1 billion riyals ($133-267 million), one of the sources added.
Jeddah Economic Co - Saudi
Arabia’s Jeddah Economic Co said in
mid-May it was in talks with local banks
to raise funds for the 14 billion riyal first
phase of its Kingdom City project. For
part of the money, “we are looking at the
bonds and sukuk market but this will
need a structure in place, which we are
working on,” chief executive Mounib
Hammoud said.
For US BSL CLOs, the pending implementation of the new risk retention rules,
along with rising interest rates, will cause
a decline in new issuance in 2015, though
levels will remain high, bolstered by
amortization and redemptions of older
deals. Issuance for US SME CLOs will
remain at a similar level to 2014.
Even though European CLOs will need
to comply with risk retention rules and
contend with a scarcity of collateral,
Moody’s expects a modest increase in
European CLO issuance in 2015.
For Asian (excluding Japan) CLOs, the
continued decline in corporate defaults in
the region and the need to refinance existing deals will lead to an improvement in
credit quality from already strong levels.
The National Retail Federation
(NRF), the leading industry trade
body, forecast a 4.1 percent rise in
holiday sales this year, including
online and store sales. The NRF is
hoping to meet its expectations amid
falling gasoline prices, lower US
unemployment and consumer spending which showed signs of increasing
during the first two weeks of
December.
Promotions heated up in the past
five days but that did not boost store
traffic materially, said Keith Jelinek,
senior managing director of FTI
Consulting.
Most retailers offered an additional 20 to 30 percent off on top of 30 to
40 percent discounts on a wide range
of products, Reuters found during a
series of visits to three dozen stores
in Chicago over the weekend.
Best-sellers during the season
included Apple Inc’s iPhone 6, toys
based on the Walt Disney Co animated movie “Frozen,” and winter clothing such as coats from retailers like
Macy’s Inc after a cold spell last
month.
Home appliances including mixers, coffee makers and food processors from chains like Home Depot
Inc, Lowe’s Companies Inc JC
Penney Co Inc and Target Corp were
also particularly popular, industrywatchers said.
Super Saturday sales rose 0.5 percent to $9.15 billion from $9.1 billion
a year ago, according to early estimates by ShopperTrak, which surveys spending at brick-and-mortar
stores. This fell short of the firm’s
$10 billion sales forecast for the day,
founder Bill Martin told Reuters.
Specialty
Analytics firm RetailNext, which
tracks specialty stores and large footprint retailers, said sales dropped 8.9
percent over the weekend versus a
year ago, and store traffic dipped
10.2 percent. However, customers
who did hit the stores spent more.
Specialty stores in the United States
include chains like Best Buy Co Inc
and large footprint retailers include
Wal-Mart Stores Inc and Target.
“Even with this drop in growth,
Super Saturday was still better compared to Black Friday,” said Shelley
Kohan, vice president of retail consulting at RetailNext. “It generated a
tad more in terms of sales on slightly
less traffic.”
Promotions earlier in November
took a toll on in-store sales during the
Thanksgiving weekend, when total
spending fell by 11 percent from a
year earlier.
Highly discounted categories like
consumer electronics and home
improvement, which have had a
strong season this year, continued to
do well on Super Saturday.
The apparel segment, which has
had one of its worst years, also
picked up momentum, although not
enough to offset slower growth in the
past two months.
Experts including Craig Johnson
said the growth in apparel is occurring on the back of heavily discounted pricing, so margins this
year will be weak in most of the
category.
FTI Consulting’s Jelinek pointed
to a jump in online shopping this past
weekend which, he said, will bring
relief to retailers with physical stores
who also have an online presence.
“The majority of retailers will be
flat to negative in their bricks and
mortar business but their online sales
will show significant double-digit
increases. This should boost the overall sales number.”
London City firms’ senior
workers see bigger bonuses
LONDON, Dec 25, (RTRS): Senior
workers in London’s financial services
sector are expecting on average a 21 percent rise in their bonus payouts for this
year, despite pressure from regulators and
lawmakers for payouts to be reined in, a
survey showed.
Managing directors predict their
bonuses will rise to an average of
£124,680 ($195,000), bringing the bonus
element of their pay as a proportion of
base salary up to 60 percent from 54 percent for last year, according to recruitment firm Astbury Marsden.
Politicians have been trying to crack
down on generous bonuses in financial
services following the credit crunch.
Many blame such incentives for encouraging excessive risk-taking, which destabilised banks that then needed to be
bailed out.
The European Union has sought to
deter such behaviour with a new law that
limits a bonus to no more than 100 per-
cent of a banker’s fixed salary, or twice
that level with shareholder approval. It
will apply to awards for performance in
2014 that are paid in the new year.
Astbury Marsden said improving market conditions over the past year had led
to an increase in the proportion of all City
of London workers who expect to see
their bonus increase in 2014. However, it
warned some may be overly optimistic.
“Despite shareholder and public pressure to limit bonuses and with the EU
bonus cap now set to be introduced at the
start of 2015, City staff clearly feel that
their employers are in the position to
reward them well,” said Astbury Marsden
Director Adam Jackson.
“But even though conditions have
improved recently, some staff may find
themselves disappointed in the upcoming
bonus round,” he added.
Bonuses for Britain’s bankers and
insurance workers rose at double the pace
of those for the total workforce last year.