Commercial Awareness Discussion Thread

[SportsThoughts]

Following on from this, in today's 'Due Diligence' feature in the FT, the impact of Robinhood investing is laid bare by reference to Hertz which, although bankrupt, is planning on selling $1 billion worth of shares to investors to try and survive restructuring in a move which has left a lot of analysts scratching their heads. This is because, normally, a company would look to restructure its businesses with debt and not equity.

Here is more below - it is really well explained in simple terms, so I'd encourage all those who were a little confused (like I was) as to how this was able to happen to give it a read:

Hertz: buyer beware
https://www.ft.com/content/9cf7759c-7d02-4051-a551-18d15c9986e3

The Hertz case is very interesting. A great moral dilemma arises from this. Should a company controlled by creditors post Chapter 11 filing, be able to issue more equity in order to raise capital? (I'm aware the SEC pulled the plug but consider it anyway)

In this case it's quite clear from the Hertz books that if you were to liquidate the assets they'd still be in something like 1.6bn USD in the red. BUT because of the whole 'bro investors' (no offence intended for those that consider themselves bros) movement replacing sports gambling during covid, you have a pool of investors who might very well purchase the newly issued equity.

This means that upon the distribution of assets when the company is wound up, the creditors have diluted some of their losses at the expense of those who don't understand what they've purchased. How is that fair?

According to some noble prize winning economists, applying the Efficient Market Hypothesis means there is a bigger than 0% chance that Hertz might still come out of Chapter 11 and make those 'bros' a bloody fortune!

 

[Daniel Boden]

Carrying on with the Hertz case today, in perhaps no great surprise, the company is now desperately seeking a $1bn bankruptcy loan to try and survive.

See the story below:

Hertz scrambles to secure $1bn bankruptcy loan
https://www.ft.com/content/5a3ffc66-5e42-4a78-aa07-81fe0fc2c36c

 

[Daniel Boden]

Equally, in other PE news, the UK insurer is seeking to sell its $500m stake in its business Jackson to a company backed by Apollo.

See more information below:

Insurer Prudential to sell stake in US business to Apollo-backed rival
https://www.ft.com/content/99c80a73-0139-48d8-b024-d0f51b4d2bd0

 

[Daniel Boden]

Furthermore, a story I've been following is the continued private investment into Jio, the telecoms subsidiary of Reliance Industries. The latest investment into the company was by Saudi Arabia's Public Investment Fund which invested $1.5bn on Thursday, taking the list of private investments to 10 in almost as many weeks.

See the stories below:

Reliance Jio: PE and Fomo
https://www.ft.com/content/8a74cf8d-e064-4696-b803-1dc45be260f7

Saudi Arabia’s PIF invests $1.5bn in Jio Platforms
https://www.ft.com/content/aa7bc92c-8185-43f5-8c5a-ac080b046191

 

[Crastle]

Does anybody know of any recent deals involving oil/energy companies? Thanks

 

[Daniel Boden]

Morning all, just before I make my way through the FT, I thought I'd share some other interesting PE stories from last week which you may have missed. Firstly, Bain Capital has raised €3.2 billion for a distressed debt fund and has committed over 50% of the funds in the last three months to try and help struggling companies that are in financial distress due to COVID-19. Secondly and in a similar way, BlackRock has invested €16 billion into portfolio companies to again try and help them to alleviate their financial distress; $3 billion has been invested in equity and €13 billion has been loaned as credit.

See more below:

Bain Capital Raises $3.2 Billion for Latest Distressed Fund
https://pe-insights.com/news/2020/06/18/bain-capital-raises-3-2-billion-for-latest-distressed-fund/

BlackRock injects US$18 billion into European firms during pandemic
https://pe-insights.com/news/2020/06/18/blackrock-injects-us18-billion-into-european-firms-during-pandemic/

 

[Daniel Boden]

Does anybody know of any recent deals involving oil/energy companies? Thanks

I am not sure of any recent deals but I'd recommend checking out the firms that are highly ranked for project finance and seeing if their websites mention any recent deals.

Not a deal per se, but in the FT today the Senegal president announced that the country will have to delay its oil and gas project for up to two years because of COVID-19.

Here's more below:

Senegal president admits virus will delay oil projects
https://www.ft.com/content/5f13f853-f64c-4a07-9293-f33840154f1d

 

[Daniel Boden]

In other, pretty shocking, news, Wirecard has acknowledged the incredible scale of fraud that has caused more than 80% of value to be wiped from its shares since Thursday. To those not familiar with the story, last week it emerged that nearly €2 billion on Wirecard's balance sheet had disappeared or simply never existed which is pretty staggering.

See more below:

Wirecard fights for survival as it admits scale of fraud
https://www.ft.com/content/2581fda5-8c89-46b5-9acf-ba8a88d74d88

 

[NMD]

Hey guys, I was wondering whether anyone had any knowledge on equity derivatives that they would be happy to share or resources to point me to??

@Daniel Boden has already been kind enough to give me a few!

 

[Daniel Boden]

Afternoon all, in a continuation on the aforementioned story of PE firms looking at investing into the Serie A, Advent International has bid for the Italian league meaning that the league could be valued at around €13 billion.

This follows the recent trend of PE firms investing into the sports industry.

Here is more below:

Advent Bids for Stake in Italian Soccer League Serie A
https://pe-insights.com/news/2020/06/23/advent-bids-for-stake-in-italian-soccer-league-serie-a/

 

[Daniel Boden]

Equally, in other buyout news, Bill Ackman is back in the headlines again, this time seeking to raise a record $6.5 billion for a special purpose investment vehicle, known as a SPAC. These are different from normal investment funds because the company is raising the funds without a particular target in mind, hence the 'blank cheque'. These types of acquisition vehicles are popular with investors because if the firm is unable to find a suitable investment then the money is returned to investors, normally after a 2-year period.

As ever, here is more below:

Ackman’s Blank Check Company Could Raise Up to $6.45 Billion
https://pe-insights.com/news/2020/06/23/ackmans-blank-check-company-could-raise-up-to-6-45-billion/

Ackman’s ‘blank cheque’ company looks to raise up to $6.5bn
https://www.ft.com/content/83fd1ba6-899c-40f9-876b-a0db4f7ff712

 

[Daniel Boden]

Afternoon all, today there is an interesting article in the FT where the head of Telefónica, owner of o2, predicts a dealmaking boom in the European telecoms industry, following o2 and virgin media's merger earlier this year.

See more below:

Telefónica chief predicts dealmaking boom for European telcos
https://www.ft.com/content/9522b2e6-dc9b-49c4-853b-489e2dbef3ca

 

[Daniel Boden]

Adding to this, an EU court ruling earlier this month is predicted to have a general effect on dealmaking (specifically Public M&A) which has been under threat due to the EU Competition Policy. Link below:

Link: https://www.ft.com/content/cf0b0198-e7e0-4215-a43d-746dfb2a94c7

Thanks for sharing that Raam!

 

[Daniel Boden]

Another interesting article is the changes that COVID-19, when combined with the increased investor focus on ESG, will bring to the mining industry in Africa in particular.

See more below:

Covid-19 crisis will bring change to mining industry
https://www.ft.com/content/781b40af-8bb5-4eb7-8f0c-5c7165ac27a7

 

[Daniel Boden]

In Aviation news, EasyJet is seeking to raise $450 million in a share placing this week to try and help balance its books after an incredibly difficult year due to COVID-19. Moreover, in the US, other airlines have followed suit with a number including American, Alaska and United Airlines all raising a significant amount of cash this week.

See more on both stories below:

EasyJet looks to raise £450m with share placing
https://www.ft.com/content/0a4f3e61-3d06-45ed-aa12-2508951efb67

US airlines raise $10bn in a week
https://www.ft.com/content/bc771da9-c3a3-45f1-a1f5-e2ebfba0aca0

 

[Jaysen]

Huge amounts of government debt right now all over the world (combined with declining revenues). Will be interesting to see how governments try to fund their deficits after the pandemic:

https://www.bloomberg.com/news/arti...premium&sref=KkPzpZvz&utm_source=morning_brew

 

[Daniel Boden]

At the end of a quite extraordinary two weeks in the German stock market, today Wirecard has filed for insolvency, after seeing shares tumble 90% since it emerged that €2 billion on its balance sheet 'did not exist'. It is the first time that a member of Germany's blue-chip company stocks, known as the DAX, has filed for insolvency in the market's 32-year history.

See more below:

Wirecard collapses into insolvency
https://www.ft.com/content/ac949729-6167-4b6c-ac3f-f0aa71aca193

 

[Daniel Boden]

In perhaps unsurprising news, Royal Mail is having a significant restructuring due to COVID-19, which has led to a fall in profits. Although parcel deliveries have increased in lockdown, the long-running trend of a decrease in the postage of letters has been exacerbated by COVID-19 and so Royal Mail has been forced to enact fairly drastic cost-cutting measures.

See more below:

Royal Mail to cut 2,000 management jobs as profits tumble
https://www.ft.com/content/890f1e00-0b4c-41f4-ad27-856afc1ec1e4

 

[Daniel Boden]

Does anybody know of any recent deals involving oil/energy companies? Thanks

This week it was announced that one of the largest energy deals in recent years has gone through with a nearly $21 billion pipeline being built in Abu Dhabi.

The state-owned Abu Dhabi National Oil Company has agreed to sell a 49% stake in its newly created gas pipeline unit for $10.1 billion to a six-firm private equity consortium including Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund GIC and Ontario Teachers’ Pension Plan Board, valuing the pipeline at $20.7 billion.

See more below:

GIP and Brookfield among investors in $10bn Abu Dhabi pipeline deal
https://www.ft.com/content/a14cb792-1312-4a15-a2c3-7e3e93b02779

Firms secure $20.7B pipeline deal in Abu Dhabi
https://pe-insights.com/news/2020/06/25/firms-secure-20-7b-pipeline-deal-in-abu-dhabi/

 

[Daniel Boden]

Equally, in other PE news, in a recent survey by Private Equity International, Fund Managers are less confident in public-to-private transactions as a result of the uncertainty caused by COVID-19. The three reasons given in the survey are:

1. The market dislocation caused by COVID-19 creating an uncertain market outlook for the rest of the year
2. It will be harder for a seller to recommend a private takeover to shareholders because of this aforementioned market uncertainty
3. Consideration - it will be harder for firms to finance deals since the debt market is so unstable right now

See more below:

Why GPs are less bullish on P2Ps since COVID-19
https://www.privateequityinternational.com/why-gps-are-less-bullish-on-p2ps-since-covid-19