News Archive

Dubai’s Majid Al Futtaim says to wait for stability in Egypt, Syria before investing

Sat Sep 28, 2013 8:51am EDT

ABU DHABI (Reuters) – Dubai’s Majid Al Futtaim Holding (MAF), the sole franchisee of hypermarket chain Carrefour (CARR.PA) in the Middle East, will not pursue investments in Egypt and Syria until stability returns to the two countries, a senior company official said on Saturday.

MAF, also the only Carrefour franchisee in North Africa and Central Asia, had been in advanced talks to buy Egypt’s largest supermarket chain Metro from the family-owned Mansour Group, sources told Reuters in April.

“Egypt is still unstable, we are waiting for it to settle down but we are still in negotiations. As for Syria, any investor will hold back. It’s not good to move forward now with the revolution going on,” Younus al Mulla, MAF’s senior vice president for retail international development, told reporters at the opening of a new Carrefour hypermarket near Abu Dhabi.

MAF had also been eyeing a major investment in Syria before the 2011 uprising, and one Carrefour store in Aleppo was shut down as a result of the violence.

The new Carrefour hypermarket in oil-rich Abu Dhabi, the capital of the United Arab Emirates, is MAF’s fifth there. MAF operates 19 hypermarkets and 24 regular outlets across the UAE.

MAF, franchisee for Carrefour hypermarkets in 38 countries, currently operates in 15 of them and plans to enter the others gradually.

“We are looking at entering those markets within the next three to five years, it will also include Russia, East Africa and some others,” he said.

Unlisted MAF also runs nearly a dozen shopping malls across the Middle East and North Africa.

(Reporting By Stanley Carvalho; Editing by Hugh Lawson)

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Analysis: Shutdown, default threat elevates appeal of U.S. Treasuries

Sat Sep 28, 2013 8:05am EDT

NEW YORK (Reuters) – Government shutdown. Federal default. These looming political threats to the U.S. economy might scare investors to buy more U.S. Treasuries in the coming days as they seek a shelter for their cash.

While a protracted government shutdown, and particularly a default, could harm to the image of Uncle Sam’s debt, its safe-haven appeal looks unchallenged in the short term.

Worried about rising chances that federal workers and contractors won’t get paid if much of the government shuts down on October 1 amid a political standoff in Washington, investors are expected to go by the conventional crisis playbook – dumping assets perceived to be higher-risk and rushing into those seen as lower risk.

An extended shutdown, which would include furloughs and temporary unpaid leave for many government employees, would have a direct impact on businesses who rely on government contracts or spending by government employees. It could also lead to delays in spending on big-ticket items by companies and consumers as confidence takes a hit.

That could all harm economic growth and make it less likely that the Federal Reserve will curb its stimulus program through bond buying, further supporting prices of government debt.

Congress must also raise the federal borrowing authority by October 17 – when the government is expected to exhaust its $16.7 trillion debt limit.

Failure to do so could threaten a debt default but many analysts think the government would slash spending before declining to pay its creditors, leaving Treasuries relatively unscathed, at least initially.

Analysts said a risk-aversion move could push benchmark yields on 10-year notes below 2.50 percent, more than 0.50 of a percentage point below the two-year high above 3 percent set in early September. Late on Friday they were trading at about 2.63 percent.

“It’s paradoxical that a government shutdown or hitting the debt ceiling is good for Treasuries, but you most likely would see a flight-to-safety into Treasuries,” said Bill Cheney, chief economist at John Hancock Financial Services in Boston.


Any fears about a protracted government shutdown haven’t been reflected in recent trading. This month, Treasuries are likely to post their first gain in five months as the sector recovered from its summer swoon, sparked by the Federal Reserve decision last week to maintain its bond purchase program.

Growing demand for some Treasury obligations that mature before the October 17 debt limit deadline knocked their interest rates to below zero this week. A month ago, they traded at 0.02 percent.

The yields on benchmark 10-year Treasuries have already fallen to their lowest levels in six weeks partly on safe-haven bids on bets about a possible government shutdown next week.

Still, a long-lasting government shutdown, or, even worse, a default, could harm the Treasuries market.

“You don’t want to damage investor confidence in U.S. Treasuries,” said Craig Dismuke, chief economic strategist with Vining Sparks in Memphis, Tennessee. “If there is a flight-to-safety, it would a temporary one.”

Ironically, the wrangling between President Barack Obama and Republican lawmakers over the budget, the debt ceiling and the Affordable Care Act – also known as Obamacare – was renewed at a time when the U.S. fiscal picture has improved this year.

Higher tax receipts, even in this sluggish recovery, have helped lower the federal deficit and reduced the government’s borrowing needs.


Washington last shuttered government offices and stopped paying workers for five days in November 1995 and then from mid-December 1995 to early January 1996.

The yield on the 10-year Treasury notes ended that year at 5.76 percent, down from 7.88 percent at the beginning of the year. The yield had begun falling earlier that summer after the Fed started cutting interest rates in July.

More than 15 years later, under the threat of a federal default, the 10-year yield has fallen 0.6 percentage point from just above 3 percent in three weeks during late July to early August of 2011, when Republican lawmakers and President Barack Obama were also bickering over raising the debt ceiling.

In the derivatives market back then, traders ratcheted up their bets on a U.S. default. The price of thinly-traded credit default swap contracts, which might have paid out if the U.S. government missed its debt payments for an extended period, jumped to 62 basis points, which was the highest since the worst days of the global credit crunch, according to data firm Markit.

This meant an investor would have paid 62,000 euros a year to insure 10 million euros worth of Treasuries against a default within a five-year period. The contract is denominated in euros to offset the impact of a default on the U.S. currency.

On Friday, the price on the five-year CDS on U.S. Treasuries was nearly 32 basis points, the highest since May.

It is difficult to predict what might transpire the coming days.

“Looking at history, there is not a clear pattern,” said Cheney at John Hancock.

The 1995 government shutdowns barely interrupted a Standard Poor’s 500 index’s .SPX winning streak. It ended up 34 percent that year.

In contrast, the SP tumbled 14 percent in the summer of 2011 during the first debt ceiling fight between Obama and the Republicans and following Standard Poor’s stripping of the United States’ AAA-rating. Investors stampeded into Treasuries from stocks.

While many still expect that the White House and Republican leaders will come up with temporary fixes to avert a government shutdown and a default, analysts said there is some nervousness given that political leaders have remained far apart.

“We are conditioned for an 11th hour deal, but you can’t take anything for granted,” said Eric Green, global head of rates, currency and commodity research at TD Securities in New York.

If Washington were able to keep the government running and paying its bills, the 10-year yield will likely rise back to around 2.75 to 2.80 percent. It would also allow Wall Street to focus on whether the economy is showing any signs of picking up steam and the timing of the Fed’s bond buying pullback, analysts said.

“The Fed tapering is way more important than all of this,” Cheney said.

(Reporting by Richard Leong; Editing by Martin Howell and Tim Dobbyn)

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Polish banks should be smart in buying foreign-owned rivals: central bank

Sat Sep 28, 2013 7:07am EDT

WARSAW (Reuters) – Polish central bank governor Marek Belka said the country’s banks should look for opportunities and attempt to buy local rivals owned by foreign lenders in a smart and intelligent way.

Poland, with a banking system 70 percent controlled by foreign lenders, has seen a spate of deals in recent years as some parent institutions under pressure to boost capital sold their holdings.

“It is not about taking something from somebody. But if somebody is not successful, take them over,” Belka said in an interview in Gazeta Wyborcza daily, adding that he advocated banks seizing the opportunity “in a smart and intelligent way”.

Earlier this year Poland’s largest lender PKO BP PKO.WA announced a takeover of Nordea Bank Polska NDAP.WA valued at 2.83 billion zlotys ($907.31 million).

In recent years, Commerzbank’s (CBKG.DE) BRE Bank BREP.WA, millennium BCP’s (BCP.LS) Bank Millennium MILP.WA, and Bank Pekao PEO.WA have all been tipped as being potentially up for sale.

Poland’s financial sector supervisor said in June that foreign banks are not targeting any Polish lenders at the moment as there is little space for further consolidation.

Belka also repeated his stance that Poland should not hurry in entering the euro zone.

“Looking at it as an economist, especially as the head of the central bank I would refrain from entering,” he said.

(Reporting by Agnieszka Barteczko; editing by David Evans)

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ANZ, Singapore’s UOB eye Hong Kong’s Wing Hang Bank: sources

Sat Sep 28, 2013 1:45am EDT

HONG KONG (Reuters) – Singapore’s United Overseas Bank Ltd (UOBH.SI) and Australia New Zealand Banking Group Ltd (ANZ.AX) are considering a bid for Hong Kong’s Wing Hang Bank Ltd, according to people familiar with the matter.

Wing Hang (0302.HK), with a market capitalization of $4.7 billion, announced earlier this month that its controlling shareholders had received preliminary offers from independent third parties to purchase their shares in the bank. It did not name the bidders.

People familiar with the matter told Reuters on Saturday that ANZ and UOB were among the companies considering a bid for the Hong Kong bank. The Wall Street Journal also cited people familiar with the matter as saying UOB and ANZ had shown interest.

Wing Hang Bank is the second family-run Hong Kong lender to get a takeover offer since August. Chong Hing Bank Ltd (1111.HK) said that it had received offers from multiple parties, without naming the suitors.

A UOB spokesman on Saturday said the bank does not comment on market speculation. An ANZ spokesman said: “From time to time we look at opportunities as part of our super regional strategy however we don’t comment on market speculation.”

Wing Hang Bank could not be reached for comment.

China’s economic clout and the growth of the offshore yuan fixed income market has made Hong Kong’s mid-sized banks increasingly attractive to foreign lenders seeking a gateway to the mainland market and seeking growth outside home markets.

New capital rules and competition from bigger rivals like HSBC Plc (HSBA.L) and Standard Chartered Bank Plc (STAN.L) have also given controlling shareholders of Hong Kong banks more incentive not to hold out for more lofty premiums that other city lenders commanded before the global financial crisis.

Hong Kong’s Fung family, along with BNY International Financing Corp, control about 45 percent of the Wing Hang Bank, whose stock has soared since takeover talk started.

The Wall Street Journal reported earlier this month that ANZ dropped its over $900 million bid for the main Australian businesses of British lender Lloyds Banking Group (LLOY.L).

ANZ was among four parties shortlisted to buy Lloyds’s asset finance and commercial lending units but withdrew on concerns about its ability to integrate the units with its Esanda financing arm, the Journal reported, citing people familiar with the matter.

ANZ, Australia’s third largest bank by value, has been seeking to expand its business across Asia for several years, a vision held by current CEO Mike Smith, a former top executive at HSBC.

Banks across Asia, from Japan to Singapore, are also aggressively expanding beyond their borders, looking for higher growth markets.

(Reporting by Saeed Azhar; Editing by Michael Flaherty and Jeremy Laurence)

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Brazil oil company OGX gets six-month delay in debt payment

Fri Sep 27, 2013 9:23pm EDT

RIO DE JANEIRO (Reuters) – Brazilian oil company OGX Petróleo e Gás SA (OGXP3.SA) won a six-month delay in a debt payment that will reduce the risk of default by the firm controlled by Brazilian tycoon Eike Batista, according to securities filings on Friday.

OGX Austria GmbH, which owns 100 percent of OGX Brazil bonds in circulation, agreed to delay a debt payment to March 25 from September 25, OGX said in a securities filing.

The amount of the debt payment was not specified in the filing. OGX officials in Brazil were not immediately available for comment after business hours.

OGX is rapidly running out of cash after output from its first offshore oil field, Tubarão Azul, turned out to be lower than expected and efforts to put another field into production are delayed. Efforts to raise new capital by selling stakes in oil and gas fields has also stalled.

A plunge in the company’s share price, as well as those of other companies in Batista’s EBX energy, mining, shipbuilding and port-operation group, caused his fortune, once Brazil’s largest, to shrink and limited his ability to keep financing OGX, a startup with more investment expenses than revenue.

Batista is also challenging OGX’s request that he put $100 million into the company under a promise known as a put option. The put option commits him to put up to $1 billion into OGX at the board’s request.

OGX Austria has sold the following bonds: $2.563 billion of 8.5 percent debt due in 2018 and $1.063 billion of 8.375 percent debt due 2022. It was not immediately clear if OGX’s payments are used to honor those bonds.

Both are rated CCC-, or likely to default, by Standard Poor’s. The OGX Austria bonds due in 2018 are trading at 17 percent of face value and the bonds due in 2022 are trading at 17.5 percent of face value.

OGX stock has lost nearly a quarter of its value in the last two days, slipping to 28 cents in São Paulo, an all-time low, after the Valor Economico daily newspaper reported Thursday that OGX was likely to miss a bond payment next week. Valor did not name a source for its story.

OGX has lost 94 percent of its value since the beginning of the year.

(Reporting by Jeb Blount; Editing by Gary Hill and Lisa Shumaker)

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Penney stock plunges on share sale, lower cash forecast

Fri Sep 27, 2013 8:52pm EDT

(Reuters) – J.C. Penney Co Inc’s decision to shore up its cash reserves by issuing almost $1 billion in new shares sent its stock tumbling more than 13 percent Friday.

Earlier in the day, the struggling U.S. department store chain had cut its forecast of year-end cash reserves, suggesting that it is burning through money faster than expected.

Penney said the 84 million shares in the offering had priced at $9.65 each. Underwriters have the option to buy another 12.6 million shares.

The board decided Thursday afternoon to sell shares after discussing in recent weeks various options to raise cash. As of September 6, Penney had total debt of $5.82 billion, according to the stock offering prospectus, making it difficult to raise new money through debt.

“We could not risk losing the confidence of our Associates or our supplier partners, both of whom are paramount to our long-term success,” Chief Executive Myron Ullman said in a note sent to all store employees on Friday and obtained by Reuters.

Penney spokeswoman Kristin Hays said the company was concerned that “shares could not handle much more pressure” if the company wanted to be able to sell new stock at some point.

The company has been struggling to improve sales after a failed attempt by Ullman’s predecessor Ron Johnson to take the store more up-market sent sales down 25 percent in 2012.

On Friday, in their first session since the sale was announced, shares closed at $9.05, down from a February 2007 high of $87.18. About 35 percent of Penney shares are held short by investors betting on its decline, making them very volatile.

Penney said in the prospectus it would have about $1.3 billion in cash by the end of the year. In August, it had forecast $1.5 billion.

“While an equity raise improves (near-term) liquidity, we remain concerned that JCP will continue to burn cash in ’14 and beyond,” UBS analyst Michael Binetti, who has a “sell” rating on the stock, wrote in a note.

UBS’ Binetti said the pre-holiday capital-raising, along with cautious comments from other retailers, increased concerns that near-term trends were not improving as anticipated.

So far some financing companies, known as factors, are not changing terms on the short-term loans they provide Penney suppliers.

Michael Stanley, the managing director at Rosenthal Rosenthal, a large factor, said his firm has kept approving orders to Penney.

“We feel they have enough liquidity, especially with this share sale,” Stanley said.


Penney’s offering confirmed an exclusive Reuters report on Wednesday that the company aimed to raise as much as $1 billion in new equity to build its cash reserves.

Penney on Thursday denied a CNBC report that said Ullman had told investors there was no need to raise more money before the end of the fourth quarter, which ends in early February.

The company’s shares had climbed on the CNBC report.

Earlier this year, Penney had a $2.25 billion loan arranged by Goldman Sachs, which is also the sole book-running manager for the stock offering.

Goldman said in a research note this week that poor business fundamentals, the need to rebuild inventory of goods popular with long-time customers and the weak performance of its home goods department would likely put pressure on Penney’s liquidity.

Penney’s shares have been on a wild ride in the past three days: plunging on the Goldman research, and declining further on the Reuters report about a capital raising, before recovering some of those losses on the company statement about trading conditions and the CNBC report. The shares fell again on the share sale announcement on Thursday, and continued their slide on Friday.

(Reporting by Phil Wahba, Michael Erman and Olivia Oran in New York and Siddharth Cavale in Bangalore; Editing by Ted Kerr, Grant McCool and Ken Wills)

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Samsung addresses EU concerns in antitrust probe

Fri Sep 27, 2013 8:29pm EDT

NEW YORK (Reuters) – Samsung Electronics Co on Friday offered remedies that may settle a European Union probe over whether it breached antitrust rules through its use of patent lawsuits against rival Apple Inc.

“Samsung has agreed to propose commitments that will be market tested,” EU Competition Commissioner Joaquin Almunia said in a speech in New York on Friday. “We hope to conclude this case.”

The details of the offer were not disclosed, and Samsung could not immediately be reached for comment.

South Korean-based Samsung attempted to settle with the European Commission earlier but the antitrust regulator had said it wanted more concessions.

Samsung and Apple, the world’s top two smartphone makers by volume and sales, are locked in patent disputes in at least 10 countries as they vie for control of the lucrative and fast-growing mobile market.

Samsung dropped injunction requests against Apple in Europe after the Commission filed charges against it last year.

The Commission also charged Google’s Motorola Mobility with a similar anti-competitive offense in May.

The Samsung case may help bring clarity to technology patents known as standard-essential patents, or SEPs, across the industry.

(Reporting By Karen Freifeld; Editing by Bernard Orr)

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Investors bet on last-minute deal to end fiscal showdown

Fri Sep 27, 2013 8:26pm EDT

NEW YORK (Reuters) – With a possible U.S. government shutdown days away, Wall Street still hasn’t come down with a critical case of fiscal fever despite forecasts that failure to resolve the federal budget standoff could be catastrophic.

The benchmark SP 500 is up more than 3 percent for September, which has traditionally been described as the worst month for stocks and was just 2 percent off its all-time high.

“Part of the calmness comes from the fact that investors have seen this before,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, Ohio.

The market expects agreements will be reached, even if they come down to the wire, he said.

Time was running short for lawmakers to avert a partial shutdown of the government beginning Tuesday when the new fiscal year begins. Congress was struggling to pass an emergency funding bill, but Tea Party-backed Republicans in the House sought to use the must-do bill to gut the new healthcare overhaul known as Obamacare or enact other Tea Party policies.

The Democrat-majority Senate passed a funding bill without attachments on Friday, but the situation remained fluid. The Republican-controlled House could vote on a bill in an unusual Saturday or Sunday session. President Barack Obama called on the House on Friday to stop “political grandstanding” and pass the legislation.

If the government does shut down non-essential operations on Tuesday, the Labor Department said it will not issue its monthly employment report scheduled for next Friday.

An extended government shutdown, or even worse, a debt default, could harm the market’s reputation by rekindling memories of 2011 when similar political infighting prompted the loss of the United States’ triple-A credit rating and was the primary driver of the stock market’s last full-on correction.

For the week, the SP 500 declined 1.1 percent, the Dow was down 1.3 percent and the Nasdaq was up 0.2 percent. It was the first weekly drop in four for the SP 500 and Dow.

In a second explosive Washington cliffhanger, Congress must agree to increase the $16.7 trillion limit on federal borrowing, which the administration says will be reached by October 17. If Capitol Hill fails to act in time, the unthinkable could happen and the United States could default on its debts.

But even in the options market, which is often seen as the place to offset risk and make protective bets against a decline in the stock market, there is little or no volatility premium priced in for the debt ceiling debate.

A growing number of market participants are even viewing the battle in Washington as an opportunity to jump into equities.

“Every situation we’ve had like this over the past few years has been a buying opportunity. This is just another wrinkle, not a time to change your strategy,” said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds in New York with $400 billion in assets under management.

During the federal government shutdown from December 15, 1995, to January 6, 1996, the SP 500 added 0.1 percent. During the November 13 to November 19, 1995, shutdown, the benchmark index actually rose 1.3 percent, according to data by Jason Goepfert, president of


While the cost of insuring against a U.S. default on Friday crept higher, the price of put options on the SP 500, the most popular hedging strategy against a decline on the benchmark index, is near its lowest level since the financial crisis.

“We looked at options prices for the SP 500 as well as stocks with the highest revenue exposure to government, finding that relatively little fear is priced in,” said Goldman Sachs in a note to clients on Thursday.

“Complacency is even more pronounced on stocks with high government exposure. Fear priced into options on these stocks dropped over the past few months to new lows versus the SP index options.”

With just one trading day to go before the end of the third quarter, the stock market could see heightened volatility on Monday as money managers adjust their positions to improve the look of their portfolios, or “window-dressing.”

If a government shutdown is avoided, Wall Street will focus next week on the critical September jobs report, expected on Friday. After the Federal Reserve decided to keep its stimulus efforts intact, investors will scrutinize the report for a better sense of when the central bank may begin to reduce the size of its bond-buying stimulus program.

“The jobs situation is still the biggest driver for the market, and the Fed needs to see better data to pull the trigger,” said Garcia-Amaya.

Data next week include Chicago PMI and the Dallas Fed Manufacturing Survey, due on Monday. The Institute for Supply Management manufacturing and construction spending reports are due on Tuesday, followed by the ADP private-sector employment report on Wednesday. Weekly jobless benefits claims data will be released on Thursday.

(Additional reporting by Ryan Vlastelica in New York and Doris Frankel in Chicago; Editing by Kenneth Barry)

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Palantir Technologies raises $196.5 million

Fri Sep 27, 2013 7:31pm EDT

SAN FRANCISCO (Reuters) – Data-analytics company Palantir Technologies has raised $196.5 million, the company disclosed Friday in a regulatory filing.

The Palo Alto-based company, founded by former PayPal executives, builds analytics software for the armed forces, intelligence agencies, and financial-services companies.

The cash will be used for growth capital, a spokeswoman said.

Since its founding in 2004, it has raised almost $500 million. Peter Thiel, a co-founder of both PayPal and Palantir, is an investor, as are fellow PayPal alumni Keith Rabois, Jeremy Stoppelman, and Ben Ling. The declined to comment on the investors in this latest round.

(Reporting by Sarah McBride. Editing by Andre Grenon)

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