News Archive


Senator questions quick approval of Amazon’s Whole Foods purchase

WASHINGTON (Reuters) – A U.S. Democratic senator on Friday questioned the Federal Trade Commission’s quick approval of Amazon.com Inc’s purchase of Whole Foods Market Inc this week, less than three months after the $13.7 billion deal was announced.

The FTC said on Wednesday that it had ended its antitrust investigation without seeking a second request for additional information on a deal that has sent shock waves through the grocery industry.

Senator Amy Klobuchar of Minnesota said in a statement on Friday that she was concerned about the FTC’s decision to “not fully review” the deal, which was announced on June 16.

“Amazon’s increased access to data on consumers and their behavior, and its dominance in internet retail sales, raises questions about whether this merger harms consumers and suppresses competition,” she said.

Klobuchar said she would ask the FTC to explain why it made such a quick decision.

Seattle-based Amazon declined to comment. The FTC did not immediately reply to a request for comment.

After getting the approval of the FTC and Whole Foods shareholders this week, Amazon said on Thursday that it planned to complete the acquisition on Monday and simultaneously introduce lower prices on some grocery staples.

The world’s biggest online retailer also said it planned to start selling some Whole Foods-branded products on its website and offer incentives to its Prime members at Whole Foods stores.

Shares of major grocery stores fell sharply on Thursday on fears that Amazon’s move would spark a new round of price wars in the industry, but they recovered somewhat on Friday.

The approval was one of the first major decisions by the Trump administration’s FTC. The commission has five seats but just two members at present, and Trump has not yet nominated anyone to fill the remaining three positions.

Earlier this month, Reuters reported that President Donald Trump’s leading choice to run the agency was Washington lawyer Joseph Simons, who was a top FTC official under President George W. Bush.

A partner at law firm Paul, Weiss, Rifkind, Wharton and Garrison LLP, Simons would replace acting Chairman Maureen Ohlhausen, who has been running the FTC since January.

The U.S. Senate still has not approved Makan Delrahim, Trump’s choice to head the Justice Department’s antitrust division.

Congressional Democrats in July proposed taking a harder line on mergers and strengthening antitrust laws to give regulators more tools to block such deals or revisit those that were previously approved. “Growing corporate influence and consolidation has led to reductions in competition, choice for consumers, and bargaining power for workers,” as well as higher prices, they said.

The Trump administration is reviewing a number of mergers, including ATT’s Inc proposed $85.4 billion purchase of Time Warner Inc, the owner of HBO, Warner Bros and news network CNN. The Justice Department and ATT have been discussing potential conditions in recent weeks.

Reporting by David Shepardson; Editing by Bill Rigby and Lisa Von Ahn

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/TYMg6Uo_poU/us-whole-foods-m-a-amazon-com-idUSKCN1B51W0

Philippines says will lift Uber suspension if hefty fine paid

MANILA (Reuters) – The Philippine transport regulator said on Friday it would lift a one-month suspension on Uber Technologies Inc [UBER.UL] if it paid a penalty of 190 million pesos ($3.7 million), a fine nearly 20 times greater than Uber had offered to pay.

The Land Transportation Franchising and Regulatory Board, or LTFRB, said Uber also needed to collectively pay its drivers nearly 20 million pesos daily as financial assistance during the suspension period.

There was no immediate comment from Uber on Friday.

The regulator halted Uber’s operations for a month from Aug. 14 for disregarding a directive to stop accepting new driver applications.

Uber, which said it did not process those applications, later told the LTFRB it could pay a fine of 10 million pesos to get the suspension lifted.

The Uber freeze has attracted public attention because many Philippine commuters regard the ride hailing app as more reliable and competitive than mainstream transport services.

Uber recently said it had nearly 67,000 Philippine drivers.

The LTFRB said the penalty was calculated by “taking into consideration the number of days that (Uber) should be suspended in relation to the daily average income.”

Citing data submitted by Uber, the LTFRB said it had daily income of up to 10 million pesos from at least 150,000 trips. The fine took into account the remaining suspension period of 19 days, said LTFRB board member Aileen Lizada.

“The lifting of suspension will depend on the payment of fine and remittance of financial assistance,” Lizada told reporters in a text message.

The dispute with the Philippine regulator is the latest setback this year to Uber, a firm valued at more than $60 billion.

Its Philippines suspension caused a spike in demand for rival Grab, and long queues near offices and malls and some disgruntlement about reverting to using regular taxis.

Senator Grace Poe, a prominent advocate for improving transport services, tried to bring Uber and LTFRB officials together to work out a compromise. An executive of Uber apologized for its “misunderstanding”.

Poe on Friday said the hefty fine should “make Uber rethink its actions and re-evaluate its strategy in testing the extent of government regulations.”

The LTFRB last year suspended applications for ride-share operators, to work out how best to regulate the industry. It said Uber was “irresponsible” for challenging that order.

Editing by Martin Petty and Edmund Blair

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZTQF8uE0MXQ/us-uber-philippines-idUSKCN1B525A

GM says small number of Chevy Bolts face battery issue

(Reuters) – General Motors Co said on Friday it had informed a small number of owners of its Chevrolet Bolt electric cars about a battery problem that could cause a loss of propulsion.

Some early Bolt models may incorrectly report remaining range at low states of charge due to lower battery voltage, resulting in the car halting abruptly.

The company said under 1 percent of the more than 10,000 Bolts sold to date were facing the problem.

GM said it would arrange for service of the affected cars.

The Bolt is the first electric car in the U.S. market to offer more than 200 miles of driving range per charge at a starting price of around $35,000.

Reporting by Ankit Ajmera in Bengaluru; Editing by Sai Sachin Ravikumar

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Ie1DWtLb9RE/us-gm-bolt-battery-idUSKCN1B51YG

U.S., Mexico, Canada ink non-disclosure agreements for NAFTA talks

MEXICO CITY (Reuters) – The United States, Mexico and Canada signed non-disclosure agreements before the first round of negotiations to revamp the North American Free Trade Agreement (NAFTA), Mexico’s Economy Ministry said on Friday.

Initial talks between Mexico, the United States and Canada to update NAFTA ended in Washington last weekend amid signs of deep division on key issues. Further discussions are due to start in Mexico City on Sept. 1.[nL2N1L60CM]

“This agreement does not compromise Mexico’s priorities in the negotiations for the modernization of NAFTA, nor does it limit the information that Mexico can share with the legislative branch, local governments, productive sectors and society in general, in order to inform in a timely manner the negotiation process,” it said in a statement.

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/i_H12xhwDsw/us-trade-nafta-idUSKCN1B51K3

Samsung leader Jay Y. Lee given five-year jail sentence for bribery

SEOUL (Reuters) – The billionaire head of South Korea’s Samsung Group, Jay Y. Lee, was sentenced to five years in jail for bribery on Friday in a watershed for the country’s decades-long economic order dominated by powerful, family-run conglomerates.

After a six-month trial over a scandal that brought down the then president, Park Geun-hye, a court ruled that Lee had paid bribes in anticipation of favours from Park.

The court also found Lee guilty of hiding assets abroad, embezzlement and perjury.

Lee, the 49-year-old heir to one of the world’s biggest corporate empires, has been held since February on charges that he bribed Park to help secure control of a conglomerate that owns Samsung Electronics, the world’s leading smartphone and chip maker, and has interests ranging from drugs and home appliances to insurance and hotels.

Lee, who emerged stony-faced from the Seoul courtroom in a dark suit, but without a tie, and holding a document envelope, was escorted by justice ministry officials back to his detention centre.

“This case is a matter of Lee Jae-yong and Samsung Group executives, who had been steadily preparing for Lee’s succession … bribing the president,” Seoul Central District Court Judge Kim Jin-dong said, using Lee’s Korean name.

Kim said that as the group’s heir apparent, Lee “stood to benefit the most” from any political favours for Samsung.

Lee denied wrongdoing, and one of his lawyers, Song Wu-cheol, said he would appeal.

“The entire guilty verdict is unacceptable,” Song said, adding he was confident his client’s innocence would be affirmed by a higher court. The case is expected to be appealed all the way up to the Supreme Court, likely next year.

The five year-sentence – one of the longest given to a South Korean business leader – is a landmark for South Korea, where the family-run conglomerates – or chaebols – have long been revered for helping transform the once war-ravaged country into a global economic powerhouse.

But they have more recently been criticized for holding back the economy and stifling small businesses and start-ups.

Samsung, a symbol of the country’s rise from poverty following the 1950-53 Korean War, has come to epitomize the cosy and sometimes corrupt ties between politicians and the chaebols.

  • Downfall of ex-Samsung strategy chief leaves ‘salarymen’ disillusioned
  • Supporters of ousted South Korea leader outraged over jail for Samsung chief

“The ruling is a turning point for chaebols,” said Chang Sea-jin, a business professor at Korea Advanced Institute of Science and Technology. “In the past, chaebols weren’t afraid of laws because they were lenient. Now, Lee’s ruling sets a precedent for strict enforcement of laws, and chaebols should be wary.”

Under South Korean law, sentences of more than three years cannot be suspended.

LEADERSHIP VACUUM

The third-generation de facto head of the powerful Samsung Group, Lee has effectively directed operations since his father, Lee Kun-hee, was incapacitated by a heart attack in 2014. Some investors worry a prolonged leadership vacuum could slow decision-making at the group, which has more than five dozen affiliate companies and assets of 363.2 trillion won ($322.13 billion).

Its listed companies make up about 30 percent of the market value of South Korea’s KOSPI stock index.

Many tycoons, including Lee’s father, were convicted of crimes in the past, ranging from bribery, embezzlement and tax evasion, only to get presidential pardons, as both the government and the public feared going too hard on them would hurt the economy.

But South Korea’s new liberal president, Moon Jae-in, who won a May election, has pledged to rein in the chaebols, empower minority shareholders and end the practice of pardoning tycoons convicted of white-collar crime.

The presidential Blue House said in a statement that it hopes the ruling will serve as an opportunity to “end the nexus of business and politics that has held back the country.”

In a June interview with Reuters, Moon said he did not believe Samsung’s operations depended just on Lee.

“When Lee was taken into custody, the share prices of Samsung went up,” Moon said. “If we were to succeed in reforming the running of the chaebols and also increasing transparency, I believe this will not only help the economic power of Korea but also help to make the chaebols themselves more competitive.”

Investors say shares in chaebol companies trade at lower prices than they would otherwise because of their opaque corporate governance – the so-called Korea Discount.

Shares of Samsung Electronics dropped more than 1 percent, and other group companies, including Samsung CT and Samsung SDS, also turned lower after the verdict.

The court said Samsung’s financial support of entities backed by a friend of Park’s, Choi Soon-sil, constituted bribery, including 7.2 billion won ($6.4 million) in sponsoring the equestrian career of Choi’s daughter.

In return, prosecutors say, Samsung sought government support for the 2015 merger of two of its affiliates, which helped Lee tighten control of the conglomerate. His lawyers had argued that the merger was done for business reasons.

Some criminal lawyers had expected Lee to be found innocent of the major charges, as much of the evidence at the trial has been circumstantial. The appeals court and the Supreme Court might put a greater emphasis on prosecutors to provide direct proof of quid pro quo, the lawyers said.

PARK SUPPORTERS OUTRAGED

Park, who was forced from office in March, faces her own corruption trial, with a ruling expected later this year.

Prosecutors have argued that Park and Lee took part in the same act of bribery – so Lee’s conviction would appear ominous for the former president.

Hundreds of Park’s diehard supporters who rallied outside the court on Friday reacted with outrage to the ruling.

“Our ultimate goal is Park’s acquittal and release,” Kim Won-joon, a 62-year-old former construction worker said. “We worry how today’s guilty verdict for Lee would affect Park’s ruling.”

Such supporters are a minority compared with the huge crowds that turned out in Seoul every week to call for Park’s ouster after the bribery scandal surfaced late last year.

Public approval of Lee’s prosecution may underscore growing frustration in Asia’s fourth-largest economy that the wealth amassed by conglomerates has not trickled down.

“I think it was difficult for a court to ignore public opinion, given that the scandal rocked the country,” said Chung Sun-sup, chief executive of research firm Chaebul.com.

“The five-year sentence was low given that he was found guilty of all the charges. I think the court gave him a lighter sentence, taking into account Samsung’s importance to the economy.”

Additional reporting by Jack Kim, Hyunjoo Jin and Dahee Kim, Writing by Soyoung Kim; Editing by Ian Geoghegan, Robert Birsel

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/YwJY-schZjc/us-samsung-lee-idUSKCN1B41VC

Britain heads back to the Brexit table, plans in hand, economy in decline

LONDON (Reuters) – Britain’s economy is beginning to feel the Brexit pinch, or perhaps given the strong performance of the rest of the world economy, it should be punch.

After a prolonged period of relatively benign economic numbers following last year’s vote to leave the European Union, there are now signs of a potentially serious slow down.

They stretch from retrenching households to hesitant businesses, from a widening trade deficit to lackluster manufacturing. They also come just as the EU and Britain return to the negotiating table, the latter with a handful of new post-Brexit position papers.

Since mid-August, London has been releasing official papers on issues such as trade, customs, the European Court of Justice, and what the province of Northern Ireland’s future border with EU member Ireland will look like.

The performance of Britain’s pound over that period suggests few people were impressed enough with them — or with the likelihood they will come to pass — to overcome the economic signs.

Running through the release of five official Brexit papers, the pound has lost more than 1.4 percent against the dollar since Aug 14 and the euro has gained the same against sterling.

While the pound weakness is not directly linked to the papers, their release has clearly done nothing to improve confidence in the currency.

That is at least in part because the UK economy is starting to feel the impact of Brexit.

“Economic momentum looks uncertain. Monthly factory orders this year suggest that the sector is failing to capitalize from a weaker sterling and a pick-up in global trade,” Jaisal Pastakia, investment manager at Heartwood Investment Management, said in note.

Elsewhere, second quarter economic growth figures showed consumer spending slumping to a two and a half year low of just 0.1 percent quarter-on-quarter.

Business investment was also at a standstill. Barclays said this was “highlighting just how much businesses are holding back investment in the face of high levels of uncertainty regarding the outlook for business conditions.”

Add to that a warning from Britain’s heavyweight food supply industry that EU workers it relies on are already leaving or considering doing so.

BACK TO THE TABLE

It is not completely linear, of course. Car manufacturing bounced back in July and the unemployment rate is falling.

Last month’s purchasing managers indexes also pointed to steady — albeit sluggish — economic growth over the coming months.

So the wheels have not come off.

But the backdrop for Britain as it returns to the table on Monday is nonetheless a stark contrast to what the other side is experiencing.

The euro zone, which comprises 19 of what will be the remaining 27 EU members, is flying high.

The latest data shows annual growth at 2.2 percent, the highest for more than six years; economic sentiment is cruising at levels last seen before the financial crisis; even the bloc’s notoriously high unemployment rate is falling.

Improvement is fairly widespread among euro zone countries, meanwhile.

Florian Hense, an economist with Berenberg bank, notes the euro zone has now had 17 consecutive quarters of growth.

“And most countries of the currency union were at the party,” he said in a note. “Countries that have for a very long time… struggled do get a stable footing, are beginning to recover, too.”

Whether this continues or is peaking may become clearer in the coming week when various sentiment indicators, unemployment and manufacturing reports are released.

The flash composite purchasing manager index has already shown the bloc to be well in expansion mode with no sign of an August slowdown.

Inflation too will be on the agenda. It is expected to be 1.4 percent year-on-year, too far below the European Central Bank’s near 2 percent target to impact rates decisions on its own.

But the growth picture is enough to have the ECB at least thinking about tapering its quantitative easing bond-buying programme.

Some have taken to calling that QExit.

Reporting by Jeremy Gaunt; Editing by Toby Chopra

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/FsKhaR5GVYE/us-global-economy-outlook-idUSKCN1B512N

Fiat Chrysler says will always evaluate deal inquiries

MILAN (Reuters) – Fiat Chrysler (FCA) (FCHA.MI) said on Friday it would evaluate any inquiries about potential transactions, but did not have anything to add to its previous comments on reported interest from China’s Great Wall Motor (601633.SS) in its Jeep brand.

Responding to requests from Italian market regulator Consob, FCA said: “From time to time, FCA may receive inquiries about potential strategic transactions and will evaluate such inquires consistent with its duties to stakeholders.”

FCA “does not comment on market rumors and therefore does not intend to comment further on any inquiries,” it added.

The carmaker said on Monday it had not been approached by Great Wall, and was implementing its current business plan.

Great Wall reiterated its interest in FCA on Tuesday but said it had not held talks or signed a deal with executives at the Italian-American automaker.

Reporting by Giulia Segreti; Editing by Mark Potter

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/KQOJfj1WIR8/us-fiatchrysler-m-a-idUSKCN1B50LJ

Asia stocks resilient, dollar up before Yellen, Draghi speeches

SINGAPORE (Reuters) – Asian stocks advanced on Friday, once again shrugging off a sluggish day on Wall Street, and the dollar strengthened as attention shifted to the central bankers’ symposium that began on Thursday in Jackson Hole, Wyoming.

Europe looks set for a similar start, with financial spreadbetter CMC Markets expecting Britain’s FTSE 100 .FTSE to open little changed, and Germany’s DAX .GDAXI and France’s CAC 40 .FCHI to start the day up 0.1 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS, was up 0.25 percent, set to end the week 1.6 percent higher.

Overnight, Wall Street indexes closed between 0.1 percent .IXIC .DJI and 0.2 percent .SPX lower as a rift between U.S. President Donald Trump and Congress appeared to widen.

In a post on Twitter, Trump said Congress could have avoided a legislative “mess” if it had heeded his advice on raising the amount of money the government can borrow, known as the debt ceiling.

That came after Trump said on Tuesday that he would be willing to risk a government shutdown to secure funding for a wall along the U.S.-Mexico border.

A late-September deadline looms for the United States to raise the its debt ceiling or risk defaulting on debt payments.

The MSCI World index .MIWD00000PUS was steady, heading for a 0.7 percent weekly gain.

Japan’s Nikkei .N225 advanced 0.6 percent, heading for a flat end to the week.

China’s Shanghai Composite index .SSEC jumped 1.5 percent to its highest level since January 2016. Hong Kong’s Hang Seng .HSI gained almost 1 percent.

South Korea’s KOSPI .KS11 climbed almost 0.1 percent and Australia’s SP/ASX 200 index was little changed.

The dollar rose as investors turned their attention to the Jackson Hole central bankers’ meeting at which Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are due to speak on Friday, although no new policy messages are expected from either.

Yellen and Draghi will are scheduled to speak at 1400 and 1900 GMT respectively.

“Expectations for further rate hikes (by the Fed) this year have been tempered by the stubbornly low inflation with some Federal Reserve members calling for a halt to the rate hiking plan,” said William O’Loughlin, investment analyst at Rivkin in Sydney.

“Mario Draghi is also set to speak, with markets hoping he will reveal details of the ECB’s tapering plans.”

The dollar was also helped by fewer-than-expected U.S. initial jobless claims for the week ended Aug. 19.

The dollar was slightly stronger on Friday at 109.64 yen JPY=D4, extending Thursday’s 0.5 percent gain, and heading for a weekly rise of 0.4 percent.

Japanese core consumer prices rose for the seventh straight month in July, a sign the economy is making steady but painfully slow progress toward meeting the central bank’s 2 percent inflation target, although the increase was still largely driven by higher fuel bills.

The dollar index .DXY, which tracks the greenback against a basket of six major peers, was little changed at 93.29. It is poised to end the week 0.15 percent lower.

The euro EUR=EBS was steady at $1.17975, set for a weekly gain of 0.3 percent.

In commodities, oil prices rose on Friday as production was shut down on expectations Tropical Storm Harvey would become a major hurricane when it reaches the Texas coast on Friday night or early on Saturday.

That came after crude prices fell overnight as some refiners shut down as Harvey crossed the Gulf of Mexico, reducing their short-term crude demand.

Harvey could turn out to be the most powerful hurricane to hit the U.S. mainland in 12 years, packing winds of up to 125 miles per hour (200 km per hour), driving a surge in sea levels as high as 12 feet (3.7 meters), and dumping up to 35 inches (97 cm) of rain over parts of Texas.

U.S. crude futures CLc1 rose 0.7 percent to $47.75 a barrel, after Thursday’s 2 percent slump. They’re on track for a weekly fall of 1.55 percent.

Global benchmark Brent LCOc1 advanced 0.7 percent to $52.41, and is headed for a drop of 0.6 percent for the week.

Copper remained near a three-year high hit on Thursday on signs of stronger demand in top consumer China while inventories in London warehouses fell.

Benchmark copper on the London Metal Exchange CMCU3 inched up 0.35 percent to $6,712 a tonne, extending Thursday’s 1.9 percent gain and set to end the week up 3.5 percent.

Gold XAU= was up slightly at $1,287.07 an ounce, heading for a 0.2 percent gain for the week.

Reporting by Nichola Saminather; Editing by Eric Meijer

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/GIa2pu_UFYg/us-global-markets-idUSKCN1B504R

Without insurance, some vendors balk at stocking Sears’ shelves

(Reuters) – U.S. department store operator Sears Holdings Corp is having trouble stocking shelves, as some vendors have fled while others are demanding stricter payment terms because of difficulties hedging against default risk.

The strain in Sears’ supply chain is exacerbated by the scarcity and high cost of a type of vendor insurance known as accounts receivable puts, which ensure a supplier will be paid even if the retailer files for bankruptcy, according to interviews with Sears’ vendors and insurance brokers.

“It’s too expensive,” Michael Fellner, owner of Montreal-based women’s wear company Lori Michaels Apparel Manufacturing Inc, said of the specialized vendor insurance. He said he stopped shipping to Sears in March, when his insurer stopped providing coverage.

Two other small vendors told Reuters they stopped supplying Sears this year because they could not afford the insurance, whose cost spiked after Sears warned in March of “substantial doubt” over its ability to continue as a going concern. They asked not to be identified discussing confidential commercial arrangements.

Sears’ vendors had previously benefited from support from Sears Chief Executive Eddie Lampert, who owns almost half of the company’s shares and is its largest lender. Through his hedge fund, ESL Investments Inc, Lampert invested in vendor insurance contracts worth $93.3 million in 2012, $234 million in 2013 and $80 million in 2014, according to filings with the U.S. Securities and Exchange Commission.

(Graphic on how vendor insurance works tmsnrt.rs/2ieMsTG)

Sears’ regulatory filings show no investment by Lampert in vendor insurance contracts since 2015. A Sears spokesman said the 55-year-old billionaire is not currently investing in these contracts and declined to say why.

As Sears’ financials deteriorated, other hedge funds such as Avenue Capital Group, and traditional credit insurance firms such as Euler Hermes Group SA, have also exited the insurance market, brokers and investors said. They did not specify the timing of their withdrawal.

Avenue Capital and Euler Hermes declined to comment. The dearth of market participants has made the insurance contracts more expensive and harder to come by, putting pressure on Sears’ ability to maintain a robust inventory of goods.

Merchandise inventory at Sears, once the largest U.S. retailer, fell to $3.4 billion as of July 29 from $4.7 billion a year ago, the company disclosed on Thursday. Sears has attributed the inventory decline to its transformation to an online-oriented business from bricks-and-mortar stores.

“We continue to work to manage our vendor relationships in a constructive manner… we will continue to ensure that our vendors deliver on their obligations to Sears,” Sears said in its second-quarter earnings statement on Thursday.

EXPENSIVE INSURANCE

Sears and other mall-based retailers have struggled for years as shoppers migrated to Amazon.com Inc and other online stores. The storied American retailer, whose roots date back to 1886, has accumulated $7.7 billion in losses since 2013, and seen annual revenue fall 44 percent to $22.1 billion as of the end of 2016.

On Thursday, Sears reported a second-quarter net loss of $251 million, down from $395 million a year ago, indicating that its plans to close more than 300 stores this year and slash costs further are helping stem some of the earnings challenges.

Brokers and investors said that Sears insurance contracts for vendors are currently quoted at more than 4 percent of the value of the vendor’s shipment per month, making them uneconomical for many suppliers whose profit margins are in the single digits. Three years ago, the contracts were being quoted at about 3 percent per month.

LG Electronics Inc, which makes Kenmore-branded washing machines and refrigerators as well as LG-branded appliances, told Reuters it has not bought vendor insurance in the past year because of the cost.

Instead, LG said it negotiated shorter payment schedules to minimize the risk of not being paid by Sears. It declined to say how short the payment period was. The typical payment schedule in the industry is close to 90 days, though it can vary by item.

Sears has promised to pay some suppliers within 15 days, according to a source familiar with the matter who requested anonymity to discuss confidential commercial arrangements. Sears declined to comment.

A 15-day payment schedule gives a vendor priority for repayment in the event of a bankruptcy. This is because claims received within 20 days of a bankruptcy filing are typically repaid in full.

Some vendors are so keen for this protection, that they have offered Sears a small discount of around 5 percent on their merchandise, the source said.

However, quicker payouts erode a retailer’s working capital.

William Danner, president of CreditRiskMonitor.com Inc, told Reuters that at the end of the second quarter, Sears would likely have used $587 million to boost working capital – mostly from asset sales – due to the decision by some vendors to not extend as much credit. Sears’ available liquidity at the end of July was $810 million.

“Even for a huge company like Sears, finding this much more capital is a burden. This apparent loss of confidence in Sears by its vendors is greater now than it was at the end of 2016,” he said.

A spokesman for Sears declined to comment on the impact the lack of vendor insurance has had on its relationships with suppliers. A spokesman for Lampert did not respond to several requests for comment.

Lampert has complained on several occasions that vendors are trying to exploit Sears’ woes to negotiate better terms. He said last month that some of its vendors reduced their support, “thereby placing additional pressure” on Sears.

Sears took the issue to court in June, when it sued Ideal Industries Inc after the maker of Craftsman-branded tools declined to fulfill purchase orders because of Sears’ “known fragile financial condition,” according to court documents. Ideal Industries declined to comment.

The flight of some vendors has presented an opportunity for others. United National Consumer Suppliers, a wholesale distributor of overstocked goods such as beauty products and toys, now ships to Sears on the condition that it is paid within 30 days.

“We actually didn’t do business with Sears until they found themselves in their recent challenges,” said CEO Brett Rose. “As long as they pay their bills, we’ll keep shipping to them.”

Lampert has continued to support Sears in ways other than vendor insurance. He held about $1.7 billion in debt mainly backed by the company’s real estate and inventory as of April 29, according to regulatory filings.

Vendor insurance contracts, on the other hand, are not backed by any collateral. Last month, Lampert extended a $200 million 151-day credit line to Sears at an annual interest rate of 9.75 percent.

While the market for specialized vendor insurance contracts is opaque, at least one investment firm, Blackstone Group LP’s credit arm GSO Capital Partners LP, is backing Sears contracts through December, according to sources with knowledge of these contracts. They did not disclose their value. GSO declined to comment.

Reporting by Jessica DiNapoli in New York and Richa Naidu in Chicago; additional reporting by Nathan Layne in New York; Editing by Greg Roumeliotis and Edward Tobin

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/VJjnsbR6LHM/us-sears-vendors-insight-idUSKCN1B50E9