A Chinese local-government investment platform that defaulted on a Rmb500m bond payment on Monday has belatedly repaid the debt, according to local media, the Financial Times reported. China Business News, a respected Chinese newspaper, cited unnamed sources to report that Sixth Agriculture State-Owned Assets Management Co had already transferred the full amount due for principal and interest on the bond to Shanghai Clearing House, one of two main state-owned clearing house and custodians for China’s interbank bond market. The clearing house had said late on Monday that it had not received any payment for principal and interest due that day. The default had been seen as a precedent-setting event for China’s domestic bond market, where investors viewed state-owned investment holding companies like Sixth Agricultural as agents of fiscal policy that could rely on implicit guarantees from their local government owners. Read more. (Subscription required.)
PwC should have flagged significant doubts over the future of BHS in an audit that was completed just days before the now collapsed British retailer was sold for a token one pound in 2015, a regulator said on Wednesday. BHS, which was sold in 2015 by billionaire retailer Philip Green’s Taveta Group, had 163 stores and 11,000 staff when it collapsed a year later, triggering a political firestorm, Reuters reported. The Financial Reporting Council (FRC) watchdog in June fined PwC a record 6.5 million pounds ($8.3 million) and former partner Stephen Denison 325,000 pounds. Denison was also effectively banned from auditing for 15 years. After pressure from lawmakers and a court challenge by Taveta, the FRC published documents on Wednesday detailing eight allegations of misconduct that prompted the penalties. Read more.
Wesfarmers’ annual profit halved as a result of more than A$1bn in write-offs linked to the sale of Homebase, the Australian retail-to-industrials conglomerate’s disastrous foray into the UK DIY market, the Financial Times reported. The company said on Wednesday that full-year profit for the 12 months through June fell 58 per cent to A$1.2bn (US$861.4m). But it posted strong results from its core Australia and New Zealand businesses, with profit at its continuing operations rising 5.2 per cent to A$2.9bn, slightly ahead of consensus forecasts. Investors welcomed the improved performance, which came ahead of the planned spin-off of the Coles supermarket business later this year, pushing Wesfarmers’ shares up as much as 4.2 per cent to a record high of A$52.70. Rob Scott, Wesfarmers managing director, said the group had taken decisive action to reposition its portfolio of businesses, which would deliver sustainable earnings growth. Read more. (Subscription required.)
Arnaud Vagner has been a mystery for more than three years. Noble Group, once one of the world’s biggest commodity trading houses, characterized him as a disgruntled former junior employee behind a series of reports by Iceberg Research, an anonymous group that began attacking its accounting practices in 2015, Bloomberg News reported. Even as the combined value of Noble’s equity and debt plunged by about $10 billion since then, Vagner declined to comment publicly or even confirm he was behind Iceberg. With the company now on the brink of a restructuring, he’s ready to talk. “I am Arnaud Vagner,” he said in an interview by phone from an undisclosed location in Europe, confirming for the first time his link to Iceberg Research. He’s speaking publicly now because he’s trying to organize a legal challenge to Noble’s restructuring plan. “Bad companies have to die,” he said. Read more.
The price of Italian government bonds dropped sharply on Wednesday afternoon in a renewed bout of selling amid wider woes for risk assets, the Financial Times reported. The yield on two-year Italian debt — which moves inversely to price — hit 1.435 per cent at one point, up 16 basis points from the day’s open to the highest level since early June. Meanwhile the 10-year yield rose by 12 basis points on the day to 3.2 per cent, also the highest level for two months. The fresh downturn comes just two days after a sharp sell-off pushed 10-year yields to 3.109 per cent as the financial crisis in Turkey precipitated a widespread move away from risk assets and into haven markets. Trading volumes were particularly thin on Wednesday with Italian markets closed for a national holiday, a factor that can exacerbate price moves. Jitters have repeatedly hit the €2tn market in Italian government bonds after the country’s populist Eurosceptic coalition government began negotiations on its debut budget earlier this month, something investors had previously not expected until the autumn. Read more. (Subscription required.)
It’s pay day for $1.125 billion of Venezuelan sovereign bonds. But no one is expecting to get any money. After all, the bond in question is already in default due to a missed interest payment back in February, Bloomberg News reported. Why would Nicolas Maduro’s government fork over hundreds of millions of dollars it can’t afford to part with when the nation and its flagship oil company are already about $5 billion in the hole with creditors? The one new thing today is that this missed payment will mark the first default on government bond principal, rather than just interest payments. The notes are already trading at just 28 cents on the dollar, indicating the low level of hope among investors. Still, creditors are beginning to get restless. Mining company Crystallex -- which was forced into bankruptcy after Venezuela nationalized the Las Cristinas deposit -- was told by a Delaware judge last week that it can seize shares of the nation’s largest U.S. asset, PDV Holding, the U.S. parent of PDVSA’s refining unit Citgo. Read more.
As Venezuela's state-owned oil company PDVSA saw its finances devastated by low oil prices and mismanagement, it funnelled millions of dollars to Petrolera del Conosur, a loss-making Argentine gas station operator it controls, the International New York Times reported on a Reuters story. PDVSA decided to cut off the support payments late last year, according to a person familiar with Petrolera del Conosur's operations, as the once-proud icon of Venezuelan oil production struggled with declining output aggravated by a worsening economic crisis. The transfers had totalled $89 million (69.9 million pounds) between 2013 and 2017, according to a Reuters review of filings with Argentina's securities regulator, years that coincided with a frustrated effort by Venezuela to extend the petro-diplomacy it employed in the Caribbean to the southern cone of Latin America. Read more. (Subscription required.)
President Recep Tayyip Erdogan has found a benefactor to help pull Turkey from the brink of a financial crisis as Qatar promised to invest $15 billion in the country, Bloomberg News reported. The lira extended gains to 6 percent after Qatar’s Emir Sheikh Tamim Bin Hamad Bin Al Thani made the pledge after a 3-1/2-hour meeting with Erdogan in Ankara on Wednesday. It follows a string of urgent steps Erdogan has taken to protect its economy from an escalating feud with U.S. counterpart Donald Trump over an American pastor held in Turkey. With the pledge, Turkey is reaping the rewards of standing by its wealthy Arab ally while Gulf neighbors led by Saudi Arabia cut off diplomatic ties with Qatar last year. Since tightening his grip on power in June elections, Erdogan’s relations with the U.S., a NATO ally, have deteriorated. Read more.
Struggling to staunch a run on the peso that has helped drive the economy to the brink of recession, Argentina is aggressively pushing investors out of some of the local debt notes they hold, Bloomberg News reported. It is a risky gambit -- the opposite of the kind of measure a country would typically take at a moment of great financial duress. And yet Argentina finds itself pursuing the tack as part of a complex scheme aimed at shoring up investor confidence in its beleaguered central bank -- a step that policy makers believe is crucial to ushering in economic stability in a place long associated with default and runaway inflation. If the gamble is to work, many of the investors who are being driven out of the notes they now hold -- popular short-term securities that were issued by the central bank at interest rates that reached 47 percent -- will have to be persuaded to plow their money into newer debt instruments being dangled by the government. Read more.
Anil Ambani’s Reliance Communications is in discussions with TPG, Blackstone and other bidders over the sale of its remaining telecommunications assets in a deal that would mark the tycoon’s formal exit from India’s telecommunications sector, the Financial Times reported. According to people involved in the talks, the sale of RCom’s international submarine cable network, fixed-line telecoms network and data centres has attracted bids from I Squared Capital and a consortium comprising TPG, Blackstone and Varde. Both bids have valued Mr Ambani’s remaining telecommunications business at about $1.1bn. The sale process is RCom’s latest gambit in its struggle to avoid being forced into insolvency proceedings under India’s historic new bankruptcy code, having become unable to service debts of $7bn. Its default came amid a price war launched by new entrant Reliance Jio, controlled by Mr Ambani’s elder brother Mukesh. Read more. (Subscription required.)
Ghana’s central bank plans to prosecute executives of failed local lenders suspected of dissipating depositors’ funds and insider dealing, the regulator told Reuters on Tuesday. The Bank of Ghana on Aug. 1 said it had revoked the licenses of Unibank and smaller peers Royal Bank, Beige Bank, Sovereign Bank and Construction Bank, and had appointed a receiver to manage their assets because they had become insolvent, Reuters reported. Deputy central bank governor Elsie Awadzi told Reuters the central bank was also considering barring culpable directors from operating in the Ghanaian financial sector. “We are working very hard on submitting a dossier on each of these banks to the law enforcement agencies ... to further investigate criminal behaviour or what could potentially be criminal behaviour and to prosecute,” Awadzi said in an interview in Accra, without naming any of the individuals under investigation. Read more.
As China girds for an escalating trade fight with the U.S., it is facing increasing trouble on the home front from a slowing economy, The Wall Street Journal reported. Spending on so-called fixed assets such as factory machinery and public works projects cooled to the lowest point in nearly two decades, the government reported Tuesday. Other data also pointed to economic challenges. Retail sales grew, but not as sharply as analysts had expected. And unemployment ticked up to 5.1% last month, from 4.8% in June, the National Bureau of Statistics said. Taken together, the data suggest that China can’t go toe-to-toe in retaliating against U.S. trade levies, said Shuang Ding, an economist with Standard Chartered Bank in Hong Kong. “China should avoid adopting a direct, confrontational approach in the trade fight with the U.S. and focus on strengthening its economy first,” Mr. Ding said. Read more. (Subscription required.)
Sports Direct International Plc says it will continue to operate most of House of Fraser Ltd.’s 59 U.K. and Ireland department stores after rescuing the chain from near collapse, Bloomberg News reported. “Our aim is to keep at least 80 percent of the stores open,” Liam Rowley, Sports Direct’s head of strategic investments, said Tuesday in an interview on Bloomberg TV with Anna Edwards and Manus Cranny. “We feel that we can bring a lot more to the table with our ambition than, maybe, was previously done.” Sports Direct acquired House of Fraser last week for 90 million pounds ($115 million) after would-be Chinese buyer C.banner International Holdings Ltd. pulled out, prompting the U.K. company to begin insolvency procedures. C.banner had planned to shut more than half of the chain’s department stores. House of Fraser is the latest near-victim of a crisis that has claimed retailers like BHS, Maplin Electronics and the U.K. arm of Toys “R” Us Inc. Read more.
Struggling commodity trader Noble Group, which is trying to push through a debt-for-equity restructuring in a bid to secure its survival, slumped to another quarterly loss in the second quarter of this year as the Asia-focused commodity house paid out bumper fees to its advisers, banks and creditors, the Financial Times reported. The company, which has seen its market value collapse by more than 99 per cent to just $121m since being racked by accounting and debt issues, posted a net loss of $128.3m in the three months to June, including $94.6m in restructuring expenses and $74.3m in net financing and tax. Singapore-listed Noble has agreed to pay the legal costs and expenses of several lenders and shareholders, including Goldilocks Investment Co, which lent its support to the debt restructuring in June, as the commodity trader tries to win support for its restructuring plan. The majority of Noble’s senior creditors are backing the deal, but existing shareholders will end up with just 20 per cent of the restructured company under the deal. Read more. (Subscription required.)
An investment arm of western China’s Xinjiang region has failed to repay a Rmb500m ($73m) bond, marking the first public default by a Chinese government-linked holding company, the Financial Times reported. The default by the Sixth Agriculture State-Owned Assets Management Co is the first by an investment holding company and a signal to investors that even state-owned groups that are agents of fiscal policy — considered closer to Beijing than commercially operated state-owned enterprises— are not guaranteed to be bailed out by the state. Sixth Agricultural is a holding company for state-owned enterprises in the city of Wujiaqu, including cotton trading, coal mining, real estate, finance and logistics. Bond defaults have risen sharply in China this year as Beijing has mounted a fierce campaign against excessive debt. Read more. (Subscription required.)
British home improvement retailer Homebase said on Tuesday it planned to close 42 stores, putting 1,500 jobs at risk, with new owner Hilco Capital seeking to reduce its cost base in a brutal trading environment, Reuters reported. Hilco acquired the struggling chain from Australian group Wesfarmers for a nominal 1 pound in May. Homebase said the proposed closures form part of a so-called Company Voluntary Arrangement (CVA) restructuring, allowing the business to avoid insolvency or administration. A string of British store groups have either gone out of business or announced plans to close shops this year, as they struggle with subdued consumer spending, rising labour costs, higher business property taxes and growing online competition. CVAs have been adopted by a string of British retailers including fashion chain New Look, floor coverings group Carpetright and mother-and-baby goods firm Mothercare. Read more.
South African state-owned power firm Eskom has hired financial adviser Lazard to draft a plan to shore up its balance sheet as it struggles to emerge from a financial crisis, two banking sources told Reuters. Cash-strapped Eskom is critical to Africa’s most industrialised economy as it supplies more than 90 percent of its power and is one of its most indebted state firms, Reuters reported. President Cyril Ramaphosa appointed a new board at Eskom early this year in one of his first interventions since becoming leader of the ruling African National Congress (ANC). He later secured the backing of senior ANC figures for a radical overhaul of Eskom. “Eskom hired Lazard to come up with options for the company’s turnaround strategy,” one of the banking sources said. “This isn’t a straightforward debt restructuring.” Read more.
A rally in bonds from China’s local government finance vehicles, sparked by the recent easing measures, may be at risk of losing momentum after a surprise bond default by a state-owned firm on Monday, Bloomberg News reported. Xinjiang Production Construction 6th Shi State-owned Assets Management, a cotton trader owned by the local government, missed interest and principal on a 500 million yuan ($72.6 million) note on Monday. The company has features similar to an LGFV, which raises funds for local authorities and carries out infrastructure investments, according to analysts. The default has dampened investors’ belief that the Chinese government would bail out such funding platforms, according to SWS Research Co. China last month introduced a package of fiscal policies aimed at supporting the economy, while a State Council meeting also urged financial institutions to ensure reasonable borrowing demand from LGFVs. Read more.
United Arab Emirates-based energy company Dana Gas reported a 14 percent decrease in second quarter net profit on Tuesday, citing one-off sukuk restructuring costs, Reuters reported. Dana Gas has been at the centre of a long and complex legal dispute with its creditors when last year it halted payments on $700 million in sukuk, or Islamic bonds, saying the instruments had become unlawful in the UAE. After reaching a consensual restructuring agreement in May, the firm said on Tuesday it completed the sukuk refinancing and that all legal proceedings have been brought to an end by the parties involved in the dispute. Dana made a net profit of 37 million dirhams ($10 million) in the second quarter, down from 43 million one year earlier. In the six months to 30 June it registered a 4 percent increase year on year to 88 million dirhams, thanks to higher realised hydrocarbon prices and savings on the sukuk profit payment, CEO Patrick Allman-Ward said in a conference call. Read more.
Jet Airways India Ltd.’s lenders are reluctant to extend additional loans to the cash-strapped airline ahead of a key report by the company’s financial auditor, according to people with direct knowledge of the matter. India’s biggest full-service carrier, part-owned by Etihad Airways PJSC, had approached banks for emergency funding but the lenders prefer that the company raises money from a share sale before they would commit to any fresh credit, said one of the people, who asked not to be identified as the matter is confidential, Bloomberg News reported. Lenders are waiting for auditors’ endorsement of financial accounts after the airline delayed its earnings announcement last week, the people said. A spokesman for Jet Airways didn’t respond to emails and calls seeking comments on its efforts to repay borrowings. In a separate statement late Monday, the airline said it’s been evaluating funding options to meet liquidity requirements “on priority” and proactively working on multiple revenue enhancement and cost-cutting measures. Read more.