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Ken Odeluga, July 11th 2014

  •  M2:
  • US Regulators, German banks inch toward Settlements
  • FCA losing Patience with Asset Managers
  • US ExIm closure could hit Boeing -FT
  • SSP Group IPO Priced at Lower End of Range
  • Middle East, Africa:
  • 53 Blindfolded Bodies Found south of Baghdad
  • 35,000 displaced by Yemen Conflict -Agency
  • Dutch Special Forces in Mali


M2 – Banking


US Regulators, Commerzbank, Deutsche inch toward Settlements


U.S. state and federal authorities have begun settlement talks with Commerzbank and Deutsche Bank over their dealings with countries blacklisted by the United States, Reuters reported on Tuesday, citing a source with direct knowledge of the regulatory investigations. The New York Times had first revealed the existence of talks between regulators and Commerzbank on Monday, citing people briefed about the matter.

The settlement talks have just begun and the timing of the deal is unclear at this time, the person told Reuters.

Deutsche Bank and Commerzbank declined to comment.



The New York Times said a deal with Commerzbank could be struck as soon as this summer.


Commerzbank, accused by U.S. authorities of transferring money through its U.S. operations on behalf of companies in Iran and Sudan, could pay at least $500 million in penalties, the New York Times reported.


The No.2 German lender would likely face a so-called deferred prosecution agreement that would suspend criminal charges in exchange for the financial penalty and other concessions, the report said.


A potential deal with Commerzbank, which is expected to pave the way for a separate settlement with Deutsche Bank, would pale in comparison to the deal with France’s BNP Paribas SA , the NYT said.

Sources: Reuters, New York Times


M2-Asset Management


FCA losing Patience with Asset Managers


An asset management firm has been told to repay customers after using their money to settle its market data bill, Britain’s Financial Conduct Authority (FCA) said on Thursday, in a crackdown on commission charges.


The watchdog’s chief executive acknowledged it is losing patience with firms that fail to comply with stricter rules imposed to help safeguard the UK’s position as a leading centre for asset.


British asset managers pay brokers about £3 billion a year in dealing commission, which is passed on to customers, but FCA investigations found that many firms have been using this as cover to get customers to pay for market data and research of questionable value.


Only trading fees and useful research can be passed on to customers as dealing commission, but the watchdog’s CEO Martin Wheatley said the review of 17 investment managers and 13 brokers found that only two investment managers were fully in line with the new rules.


Given poor compliance with the regulations, Wheatley said that the FCA is now backing a European Union law to separate research and trading fees to encourage greater competition and transparency.

Source: Reuters


M2Trade Finance


US ExIm closure could hit Boeing -FT


Dissolution of the US’s Export-Import Bank could have a “significant” long-term impact on Boeing, the commercial aircraft maker which receives more than a third of the bank’s credit, according to the Financial Times, which cites a report by Standard & Poor’s.

Boeing could be forced to finance more of its overseas sales directly, says FT, and Boeing could find itself in a more difficult financing position than Airbus, its European rival, when negotiating aircraft sales, the paper adds.


FT notes that ExIm, the US export credit agency, has been caught in the crossfire of the latest political shootout between Republicans affiliated with the Tea Party movement, who want to shut down or reform the bank, and the party’s business-friendly party moderates.

To stay in operation ExIm needs to be reauthorised by Congress by September 30.

Source: Financial Times


M2 – IPOs


SSP Group IPO Priced at Lower End of Range

Takeaway food and coffee company SSP Group has set the offer price for its listing on the London Stock Exchange at 210 pence a shares, at the low end of the previously mooted price range, the company said on Thursday.


SSP, which owns the Upper Crust and Caffe Ritazza brands, said it would raise £482 million giving the company a stock market value of £997 million. Conditional dealings in the shares began on Thursday.


The group’s advisors had narrowed the price range to between 210p and 230p, from between 200p and 240p set at the start of the flotation.

Source: Reuters


Middle East, Africa



53 Blindfolded Bodies Found south of Baghdad

Iraqi security forces found 53 corpses, blindfolded and handcuffed, in a town south of Baghdad early on Wednesday, local officials said.

They said the bodies had been left in the mainly Shi’ite Muslim village of Khamissiya, about 25 km (15 miles) southeast of the city of Hilla, near the main highway running from the capital to the southern provinces.

The head of the provincial council, local police and the governor’s office all confirmed the discovery of the bodies, but had no immediate information on the identity of the dead, who appeared to have been killed execution style.

The bodies were found at 2 a.m. (2300 GMT) on Wednesday, they said.

Source: Reuters


35,000 displaced by Yemen Conflict – Agency

More than 35,000 people have been displaced in Yemen’s Omran province, a local government refugee agency said on Wednesday, a day after Shi’ite Muslim tribal fighters overran the provincial capital following fighting that killed more than 200 people.


In an urgent appeal sent to relief organizations operating in Yemen, the head of the Yemeni government refugee agency in Omran reported “mass flight of Yemenis from Omran and surrounding areas after the city’s fall”.


“Based on the monitoring and follow-up that we have been doing, there are more than 35,000 people that have left for other areas in Omran or to the greater Sanaa area, Hajja and Mahaweet,” Mutahhar Yahya Abu Sheeha wrote in his appeal.

Source: Reuters


Dutch Special Forces in Mali

Dutch troops have joined a U.N. peacekeeping mission in Mali to meet a growing security threat from the region to the Netherlands, and Europe as a whole, the Dutch foreign minister said.


The Netherlands has deployed some 450 Special Forces troops, intelligence operatives and attack helicopters to a U.N. force rolling out across northern Mali, where al Qaeda-linked Islamists occupied swathes of the country before being driven back last year by French troops.


Although Dutch forces do not have an offensive mandate, the deployment marks a shift towards security issues in Africa for the Netherlands and their task – gathering intelligence – is new to U.N. peacekeeping missions that have traditionally avoided the art of spying.

Source: Reuters

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Ken Odeluga, July 8th 2014


Middle East


(Updated) Iraq Parliament Postpones, Reconvenes next Sitting

Iraq’s new parliament put off its next session for five weeks on Monday, fuelling concerns that the country’s political paralysis would be extended amid a Sunni Islamist insurgency that claimed the life of an army general near Baghdad. However early Tuesday, The Financial Times reported on its website that Iraqi politicians had decided late on Monday to hold a meeting the following Sunday after all.

The initial postponement had been due to failure to reach “understanding and agreement” on nominations for the top three posts in government, the office of acting speaker Mehdi al-Hafidh had said earlier, indicating parliament would not meet again until Aug. 12.

Iraqi officials described the announcement of a hastily reconvened meeting as a “clarification”, according to the FT.

The United States, the United Nations and Iran, have all urged the swift formation of an inclusive government to hold the country together.

Sources: Reuters, 


Yemen forces clash with Rebels in North, South


Clashes in the north Yemen town of Omran continued on Sunday between the army and fighters from the Houthi movement after at least 104 people were killed on Saturday, while in the south six soldiers were shot dead by al Qaeda militants.


Yemen’s government is struggling to regain stability in a country facing a deadly uprising in the north, a separatist movement in the south and a growing al Qaeda insurgency that has survived repeated assaults by the military.


Western and Gulf governments fear the spread of al Qaeda in Yemen and persistent fighting in the north could allow the militants room to plot attacks on international targets and in neighbouring Saudi Arabia, the world’s top oil exporter.

Source: Reuters


Kuwait Opposition Leader Bailed

A prominent Kuwaiti opposition politician whose detention last week set off a wave of sometimes violent protests in the oil-rich Gulf Arab state was freed on bail on Monday, his lawyer said.


Musallam al-Barrak, who had been detained for questioning after allegedly insulting Kuwait’s judiciary, has long been at loggerheads with the authorities over changes made in 2012 to an election law which he and other opposition politicians said were intended to prevent them taking power.


One of Barrak’s lawyers, Mohammed Abdel-Kader al-Jassim, said a Kuwaiti court on Monday had ordered the former lawmaker be freed on payment of a 5,000-dinar ($17,700) bail and delayed his case until September.

Source: Reuters


Islamic State Extends Gains in Syria

Around 30 Islamic State fighters broke out of a makeshift jail where rival Syrian Islamists had been holding them, a monitoring group said on Friday as it detailed the latest territorial gains by the al Qaeda offshoot.

The insurgents demolished a wall to escape the building – a former school – after fellow Islamic State fighters took control of al-Hawaaj village where al Qaeda loyalists had been holding them, the Syrian Observatory for Human Rights said.

In the same province on Thursday, Islamic State seized control of Syria’s largest oil field from the Nusra Front, al Qaeda’s official wing in Syria, consolidating its position in the eastern Deir al-Zor province bordering Iraq.

Source: Reuters


Three European Engineers believed Kidnapped in Libya


Three Europeans working for an Italian construction company have probably been kidnapped in Libya, officials from the Libyan and Italian governments said on Sunday.


A car used by Italian, Macedonian and Bosnian engineers was found abandoned in the town of Zuwara, west of the capital Tripoli, an official in the local town council told Reuters.


“They are missing and we suspect they have been kidnapped,” said the official, without giving further details.


A spokesman for the Italian Foreign Ministry named the missing Italian as Marco Vallisa, an employee of Piacentini Costruzioni SpA based in northern Italy, and said the ministry “presumes him to have been kidnapped”.

Source: Reuters


Violent Protests spread to Israel


Violent protests sparked by the abduction and killing of a Palestinian teenager spread to Arab villages in Israel on Saturday, presenting a new challenge to the government of Prime Minister Benjamin Netanyahu.

Israeli-Palestinian tensions have risen sharply since three Israeli teens were kidnapped on June 12 and later found dead in the occupied West Bank.


Latest updates – Monday July 7 (

11:50 P.M. Hundreds of Israeli protesters, most of them Orthodox, continuing to clash with Israel Police and Border Police at Bar-Ilan Junction. The protesters are attempting to block the intersection by burning tires, but police scatter them with batons and horses. (Nir Hasson)


11:45 P.M. IAF planes strike a Gaza rocket-launching cell. The IDF has identified a direct hit. (Gili Cohen)


11:34 P.M. A rocket launched from Gaza explodes in an open area in the Eshkol Regional Council. In Tel Sheva, near the southern city of Be’er Sheva, Israel Police arrest eight people suspected of rioting and stone-throwing. (Shirly Seidler)

Sources: Reuters, Haaretz




Ukraine Forces Capture Separatist Stronghold


Ukrainian forces routed pro-Russian rebels in a flashpoint area of eastern Ukraine on Saturday and raised the country’s blue and yellow flag again over what had for months been the separatist redoubt of Slaviansk.

A Reuters reporter saw a convoy of about 20 military transport vehicles and buses filled with armed rebels driving out of Kramatorsk where they had gone after apparently fleeing Slaviansk 20 km (12 miles) to the north.

Source: Reuters


Pro-Russian Rebels Consolidate in Donetsk

Pro-Russian rebels erected new barricades on the streets of Donetsk on Monday, preparing to make a stand in the city of a million people after losing their bastion in the town of Slaviansk in the worst defeat of their three-month uprising.


Occasional bursts of gunfire could be heard in the distance from the centre of Donetsk, where residents said they were now living in fear of a potential battle between government forces and the separatist gunmen now out in force.

Source: Reuters





Gunman Kill at least 29 in Kenya

Gunmen killed at least 29 people in raids on two coastal areas of Kenya, Reuters reported on Sunday. The attacks are the latest in a series claimed by Somali Islamists who have vowed to drive Kenyan forces out of Somalia, although police cast doubt on their role.

The Interior Ministry said one attack killed nine in the trading town of Hindi in Lamu County, the same district where about 65 people were killed by gunmen last month. Another was further south in the Gamba area, where 20 died.

Source: Reuters






Chinese hackers Switch Focus to US Experts on Iraq


A sophisticated group of hackers believed to be associated with the Chinese government, who for years targeted U.S experts on Asian geopolitical matters, suddenly began breaching computers of experts on Iraq as the rebellion there escalated, a security firm said on Monday.


CrowdStrike Inc said that the group is one of the most sophisticated of the 30 it tracks in China and that its operations are better hidden than many attributed to military and other government units.


CrowdStrike co-founder Dmitri Alperovitch said he has “great confidence” the hackers are affiliated with the government, though he declined to provide many details on the matter. A spokesman for the Chinese embassy in Washington could not be reached for comment.

Source: Reuters


IMF Hints at Global Growth Forecast Cut

Global economic activity should strengthen in the second half of the year and accelerate in 2015, although momentum could be weaker than expected, IMF chief Christine Lagarde said on Sunday, hinting at a slight cut in the Fund’s growth forecasts.

Lagarde said central banks’ accommodative policies may have only limited impact on demand and that countries should boost growth by investing in infrastructure, education and health, provided their debt stays sustainable.

The IMF’s update of its global economic outlook, expected later this month, will be “very slightly different” from the forecasts published in April, she said. In April, the IMF had forecast that global output would grow by 3.6 percent in 2014 and 3.9 percent in 2015.

Source: Reuters


American Apparel Creditor, Legal Worries Intensify

Lion Capital has ordered American Apparel to immediately repay a $10 million loan, after the retailer failed to do so by a July 4 deadline, a source close to the matter said on Monday.


The ousting of American Apparel Chief Executive Officer Dov Charney more than two weeks ago prompted Lion Capital to demand repayment of a loan that was originally due in 2018.


In an unrelated matter, a shareholder named Tammy Federman sued Charney and American Apparel board members, saying they failed to take appropriate, timely actions despite knowing about Charney’s misconduct, according to a case filed in a U.S. district court in California on Monday.


A spokesperson for American Apparel declined to comment on the Lion Capital loan and was not immediately available to comment on the lawsuit. Federman’s lawyer was not immediately available for comment.

American Apparel’s legal and credit-related issues intensified as investment firm Standard General LP said it gained voting control of ousted CEO Dov Charney’s shares in the firm and that it would back the retailer in its battle against bankruptcy.

Source: Reuters


BHP has Six Bidders for Australia Nickel Unit – AFR

Six potential bidders, including Dutch commodity trader Trafigura and Hong Kong-listed MMG Ltd, are looking at the books of BHP Billiton’s Australian nickel unit, the Australian Financial Review reported on Sunday, without saying where it got the information.

X2 Resources, a private company run by former Xstrata chief executive Mick Davis, Canadian nickel miner Sherritt International Corp, Glencore Plc and Chinese nickel refining company Jinchuan Group are also doing due diligence on Nickel West, which could be worth as much as A$800 million ($749 million), the newspaper said.

Sources: Australian Financial Review, Reuters


More US Companies adopting ‘tax efficient’ measures

Seventy-six U.S. corporations have shifted their tax domiciles out of the United States to other countries since 1983 to avoid U.S. taxes, with a sharp increase recently in such deals, a policy research arm of Congress said on Monday.

Known as inversions, these transactions are still rare but are becoming more common and causing concern in Washington. Responding to a request from lawmakers for background, the Congressional Research Service said it had found 47 such deals had been done in the past decade and more are in the works.

Source: Reuters


New CEO at Portugal’s BES faces Questions about Loans to Founding Family

The naming of the first CEO from outside the founding clan of Banco Espirito Santo (BES) has reassured investors, but he will be under pressure to explain how Portugal’s biggest bank will recover nearly a billion euros lent to family-controlled firms.

BES nominated respected economist Vitor Bento on Saturday as CEO, just five days after revealing it was owed 980 million euros by firms controlled by the founding Espirito Santo family, 700 million more than had been disclosed when it raised 1.045 billion in new capital from shareholders on June 11.

Source: Reuters

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Ken Odeluga, July 5th, 2014


(M2 items only this time.)


Goldman Sachs hit with Rare Broker Downgrade


The stock of The Goldman Sachs Group Inc. was downgraded by an analyst at brokerage Sanford C. Bernstein & Co., according to the website of Institutional Investor magazine, which called such a downgrade of the stock “rare”. The magazine said Bernstein analyst Charles Hintz had been bullish on the stock for more than a decade. In a report meant for clients dated June 30th in which he changed his stance on GS to ‘market perform’ from ‘outperform’, Hintz said Sanford C. Bernstein “had not anticipated the effect of the regulatory response to the financial crisis”. Citing the new Basel III and Volcker Rule regimes which include funding policy changes and “onerous stress tests”, Hintz went on to lament Goldman’s “heavily weighted” propensity to “sales and trading, especially [fixed income, currency and commodities].” The analyst qualified the opinion by noting he still had confidence in Goldman’s management, but he noted his brokerage could not “get around the fact that sales and trading is facing deep structural impairment and will likely not get back to its previous highs.”

Source: Institutional Investor



Nibor reforms don’t end risk of manipulation – Industry Experts


Proposed central bank reforms of Norway’s Nibor interbank lending rate will fail to eliminate the risk of manipulation, according to finance industry experts.


Norway promised reforms of the Norwegian Interbank Offered Rate last year after some foreign banks complained about suspected rigging.


After investigating, the banking regulator said it found no evidence of rate rigging but could not rule it out either.


There has been intense scrutiny of the numerous interbank rates in use around the world following the scandal that led to some of the world’s biggest banks being fined $6 billion for rigging the London Interbank Offered Rate (Libor) and its European counterpart Euribor.


Norway introduced new rules for Nibor – which sets parameters on a range of financial instruments including bonds – last autumn, including the creation of a control committee.


The experts say the proposed mechanism still lacks transparency and the panel that sets the benchmark is too small.


Additional measures have been under consideration since then.


In a letter to the Norwegian financial regulator published in early June, NorgesBank said regulations needed to be changed as soon as possible “to make Nibor more robust and create more trust than it does today”.


Source: Reuters




Stanford Marine pulls London IPO


Stanford Marine Group postponed a planned London listing after its Dubai-based majority owner Abraaj Group said it was now searching for potential buyers of the business, Bloomberg reported, citing two people with knowledge of the matter.

Abraaj Group, which is the largest buyout firm in the Middle East, declined to comment on the report.

The sources said Stanford Marine may now sell shares in the first half of 2015 instead of this year and will not proceed with the IPO if it finds a buyer earlier.

Abraaj may seek a market value of about $300 million for Stanford Marine, with a valuation of about five times Ebitda, Bloomberg said.

Stanford Marine Group is an operator of offshore supply vessels for oil and gas firms in the Middle East and Gulf of Mexico.

Abraaj owns 51 percent. The rest is held by Al Waha Capital PJSC, an Abu Dhabi-based investment firm.

Source: Bloomberg



Israeli ad firm Matomy in ‘Take Two’ with plans for London IPO


Israeli digital advertising firm Matomy Media Group is once again looking into floating on the London Stock Exchange, according to a report by Reuters on Friday citing a source familiar with the matter. The report comes just months after the firm got cold feet amid earlier plans to list. Matomy indicated, at the time that it put plans to list on ice, that it was concerned the market’s appetite for Internet stocks had soured. Matomy was one of the first companies of the year to pull plans, as European investors balked at a drop in U.S. Internet stocks like Facebook.


Matomy has since trimmed its $100 million offering of new shares, plus an unspecified amount of existing shares, Reuters said. Matomy will now only offer $75 million of new shares, at a fixed price of 227 pence each, giving the firm an equity value post-listing of around £205 million, Reuters added.


The books are fully covered at that price, which is a scale-back from the previously expected valuation of closer to £300 million, the source told Reuters.

Source: Reuters


BT takes out Insurance against Pension Fund Risk


The trustees of BT Group Plc.’s pension scheme have taken out insurance against the costs associated with members living longer than expected, the biggest such deal of its kind in Britain.


BT has 320,000 members in its scheme, making it the country’s largest private sector defined-benefit pension plan.


The trustees said on Friday they created their own insurance company with the Prudential Insurance Co of America that would cover 25 percent of the scheme’s total exposure to people living longer, currently £16 billion –worth of the scheme’s liabilities.


The type of deal that BT has entered is known as a longevity swap. It is intended to insure against the risk that a company might make a mistake in calculating potential shortfalls in funding a pension scheme. Under a longevity swap, a pension fund makes regular payments to a third party, based on agreed expected mortality rates among the scheme’s policyholders.


The third party then agrees to take on the risk that those figures were underestimated and is liable to pay out to policy holders based on actual mortality rates.


The U.K. appears to have taken the lead in this new market. Insurer Aviva entered into such an arrangement in March.


Deals done since the first by engineering contractor Babcock in May 2009 totalled nearly £32 billion pounds, according to Reuters, with an additional 50% of that total expected from BT’s deal.


BT currently pays annual deficit payments of £325 million and analysts believe this could increase to almost £500 million following the next review. The triennial review began on June 30 and often takes around 9 months

Source: Reuters





Bulgaria’s Bank run the backdrop for a tale of political, criminal intrigue


A run on major commercial and retail banks in Bulgaria was precipitated by political rivalries between major bank shareholders and investigations into senior central bank figures whilst the situation was exacerbated by claims of malicious rumours, a report by Reuters’ INSIGHT team alleges.


The bank run initially centred on Bulgaria’s Corporate Commercial Bank (Corpbank) which at the end of the 2013 financial year was adjudged by auditor KMPG, to be in good health, with less than one percent of its loans non-performing, against an average of 17 percent for Bulgarian banks.


The country’s central bank initially blamed the bank run on media reports about Corpbank’s main owner and leaked news that a central bank deputy governor was under investigation. Central Bank Governor Ivan Iskrov called the leak a deliberate “attack” on the bank.


Privately, Reuters said, senior government officials blamed the run on a clash between Corpbank’s main owner Tsvetan Vassilev and his political rivals, without saying who they were. Prime Minister Plamen Oresharski publicly blamed a “corporate clash” for the run on Corpbank, without going into specifics.


By June 20, more than a fifth of the bank’s assets had been withdrawn, prompting the central bank to temporarily nationalise Corpbank.


The run quickly spread to another bank and saw Sofia announce a protective $2.3 billion credit line.

Source: Reuters


Fund Managers increasing Exposure to Copper


Some fund managers are increasing exposure to copper mining companies, betting the industry has reached the bottom of a downturn and that shares offer value for money, according to Reuters.


Reuters calculates that copper has lost almost a third of its value from a peak in 2011 due to a slowdown in top metals consumer China, which buys about 40 percent of global output.


Current conditions in the commodity market provide an attractive entry opportunity for investors in shares of copper miners, with a 2-5 year view because copper’s fundamentals are expected to improve in the medium term, Reuters suggests.


It cites data from Morningstar which shows that some of the largest natural resources funds, including JPM Natural Resources and BGF World mining, have already increased their exposure to copper companies in the last few months.

Source: Reuters









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 Ken Odeluga, July 4th, 2014

Britain planned to train 100, 000-strong Syrian Rebel Army

Britain at one point had planned to train and equip a 100,000-strong rebel army to defeat Syrian President Bashar al-Assad, according to the BBC’s Newsnight show.


The plan was shelved before being put into action because it was deemed too risky, Newsnight reported on Thursday.


The BBC said the secret “extract, equip, train” proposal, put forward two years ago, was the idea of General David Richards, then Chief of the Defence Staff of the United Kingdom.

The UK Ministry of Defence declined to comment on the article, according to Reuters.


The secret initiative was considered by Prime Minister David Cameron and the National Security Council, as well as U.S. officials, the BBC said, citing Whitehall sources.

Richards’s initiative proposed vetting and training “a substantial army” of moderate Syrian rebels at bases in Turkey and Jordan.


Sources: BBC, Reuters

US Embassy in Algeria On Alert for potential Terror Attack


The United States embassy in Algeria has warned about a potential attack by a “terrorist group” on targets in Algiers, possibly near a U.S.-branded hotel in the capital.


A statement on the embassy website told embassy employees to avoid hotels owned or operated by U.S. companies on the July 4th U.S. Independence Day holiday and Algerian Independence Day on July 5.

The warning posted on Wednesday was one of several U.S. security alerts about possible attacks by radical groups.


The U.S. embassy in Uganda warned on Thursday about a “specific threat” of an attack on Entebbe International Airport near Kampala “by an unknown terrorist group”.

In the United States, airlines with direct flights arriving from abroad were told to tighten screening of mobile phones and shoes in response to intelligence reports of increased threats from al Qaeda affiliated militant groups, U.S. officials said.


“As of June 2014, an unspecified terrorist group may have been considering attacks in Algiers, possibly in the vicinity of a U.S. branded hotel,” said the statement dated July 2 on the Algiers embassy website.


Algeria is concerned about militants using the political chaos in neighbouring Libya as a refuge.


In January last year, militants raided Algeria’s Amenas gas plant near Libya’s border, killing 40 oil contractors, all but one of them foreigners.

Following that attack, British-based BP and Norway’s Statoil pulled employees out of the region.


Fighters loyal to veteran Algerian militant Mokhtar Belmokhtar carried out the attack.



Source: Reuters


Deadly overpass collapse in World Cup City


An unfinished overpass collapsed in the Brazilian World Cup host city of Belo Horizonte on Thursday, killing at least two people.

The bridge, located about two miles from Mineirao Stadium where the World Cup is being played, collapsed as vehicles were passing on a busy road underneath.

Part of a passenger bus was crushed and another car was still trapped in the wreckage hours later, as the news emerged.

Reports suggested that further passengers might still be trapped in vehicles involved in the accident.

Belo Horizonte has already hosted five World Cup games and the semi-final of the World Cup is due to be played in the city on Tuesday.


Source: Reuters


Israel boosts forces at border with Gaza Strip


Israel has reinforced its forces along its frontier with the Gaza Strip whilst launching air strikes against militant Hamas targets there on Thursday.

The moves follow Palestinian cross-border rocket attacks staged in recent days.

The developments come amid a second day of violent Palestinian protests in Jerusalem after the discovery of the body of a 16-year-old Palestinian boy on Wednesday in a forest near the city.


Israeli police are investigating the possibility that he was the victim of a revenge killing over the deaths of three Jewish teenagers, whose abduction on June 12 Israel has blamed on Islamist Hamas militants in the occupied West Bank.

Lieutenant-Colonel Peter Lerner, a military spokesman, said troops were taking up “defence positions” in Israeli communities that have been struck by the rockets from Gaza. He did not comment on the scale of the deployment.


It is the first time since the border began to heat up in mid-June – in tandem with an Israeli military sweep and search for the three abducted Israeli youths in the West Bank – that Israel has announced troop movements near the Gaza Strip.


Source: Reuters



Five Die in Egypt Violence as Anniversary of Mursi Exit Looms


Five people died in a bomb blast and clashes that broke out between security forces and protesters on Thursday on the first anniversary of the army’s ouster of elected Islamist President Mohamed Mursi.


Source: Reuters


81 Migrants Dead or Missing off Southern Italy Coast – UNHCR


Migrants arriving on boats in southern Italy say 81 other people travelling with them died or are missing following their sea journeys from North Africa, the UN refugee agency, UNHCR said on Wednesday.


A group of 27 migrants picked up on Tuesday by Italy’s naval rescue mission and brought to the town of Catania said there had been 75 other people on their boat, who were feared drowned, the agency said in a statement.


Other migrants arriving in Sicily’s Porto Empedocle said two of the party they travelled with had died and four had disappeared.


Authorities said the death toll on another packed fishing boat, discovered by an Italian rescue mission on Monday, had reached 45. The victims are believed to have suffocated.


All those found dead on Monday by the “Mare Nostrum” or “Our Sea” naval operation were men from Sub-Saharan Africa, the U.N. said.


Source: Reuters




Now you see it: Google Un-disappears News Stories

Google Inc. said on Thursday it had reversed a decision to remove several links to stories in The Guardian newspaper, having initially said the links would be removed from its search engine as a consequence of implementation of the European Union’s “right to be forgotten” ruling.

The Guardian protested the removal of its stories describing how a football referee lied about reversing a penalty decision. It was unclear who asked Google to remove the stories.


Separately, Google has not restored links to a BBC article that described how former Merrill Lynch Chief Executive Officer E. Stanley O’Neal was ousted after the investment bank racked up billions of dollars in losses.


In a further twist, E. Stanley O’Neal, Merrill Lynch’s former CEO, said on Thursday he had “no knowledge” of an apparent effort to remove a BBC article mentioning him from Google search results in Europe.


Google intends to adhere to a May European court ruling that gave its citizens the “right to be forgotten:” to request the scrubbing of links to articles that pop up under a name search.


Source: Reuters



  UBS Forex Strategy Chief Exits

UBS AG’s chief currency strategist Mansoor Mohi-uddin has left the Swiss bank as part of cost-cutting measures, said Wednesday, citing two people familiar with the situation.

Mr. Mohi-uddin joined Swiss Bank Corp. in 1998 as an emerging-markets strategist just before the company’s merger with Union Bank of Switzerland.

Through his numerous and frequent strategy reports, Mr. Mohi-uddin’s strategy came to be known for its staunch bullishness about the U.S. dollar.



Abbvie quietly presses case for Shire bid

AbbVie CEO Richard Gonzalez has pressed the case for his $46 billion pursuit of drugmaker Shire in discreet meetings with shareholders in London this week and is now weighing his next move, according to Reuters, which cites people familiar with the matter.


Shire shareholders who met with Gonzalez said he had reiterated the case for a deal, arguing that AbbVie would create more value from Shire’s assets than the hyperactivity and rare diseases specialist could do on its own, Reuters said.


The news agency said one person described the meeting he attended as fairly uneventful, with AbbVie giving no indication on the possibility of raising its offer – although analysts widely expect the offer to be raised in order to get the deal done.


Gonzalez, who under British takeover rules has until July 18 to make a firm bid for Shire or walk away, has flown back to Chicago for the U.S. long holiday weekend.


AbbVie declined to comment on the meetings.


Shire has rejected three separate proposals from the U.S. group, arguing the last offer of £46.26 a share in cash and stock fundamentally undervalues the company.


While AbbVie has yet to budge on price since Reuters first revealed its bid interest on June 19, it has stated that a deal at £46.26 would lift its earnings “materially” – a comment taken by analysts as a signal that it can afford to pay more.

Source: Reuters


Dented Gowex to announce Action Plan on Monday

Spanish wireless network provider Gowex said late Thursday it would present an action plan on Monday after a report by Gotham City Research LLC questioned the company’s revenue reporting, wiping about 60 percent off the value of the shares over two days.


Shares in Gowex had been suspended earlier on Thursday from Spain’s alternative stock exchange, MAB, pending a statement from the company.


Spain’ stock market regulator said on Wednesday it had asked the U.S. Securities and Exchange Commission (SEC) and the UK’s Financial Conduct Authority (FCA) to provide information about Gotham City Research LLC and its administrators to investigate whether the publication of the report could constitute a market abuse.

Source: Reuters



VW Denies plans for US Truckmaker Acquisition


Volkswagen on Thursday denied reports that it was planning to bid for U.S. truck maker Paccar next year.


A note by Singapore-based Bernstein Research analyst Max Warburton published earlier on Thursday quoted Daimler Trucks Chief Wolfgang Bernhard as saying that VW was preparing a takeover bid for 2015, citing “serious, multiple sources”.

Source: Reuters


Trainline May come to Market

The owner of popular Internet ticketing website,, has hired Morgan Stanley to oversee a potential listing, according to Sky News.

Exponent, which has had a controlling stake in Trainline since 2006, hopes to raise as much as £400 million, according to Sky News.

Source: Reuters



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Let’s Gowex: La Charada Pescanova (a Pescanovan Charade)

Gotham City Research LLC

Gotham City Research initiates coverage on Let’s Gowex SA, with a price target of € 0.00/share (100% downside)


  • Gowex shares are worth €0.00 per share.
  • Over 90% of Gowex’s reported revenues do not exist. We estimate GOW’s actual revenues to be <€10 million.
  • The shares will be suspended, just as Pescanova’s shares were suspended.


  • Gowex’s actual Wireless revenues are at most 10% of what GOW reports in its financial statements.
  • GOW’s Hotspot network it owns or manages is ~5K in size. CEO told us 100K+ & JBCapitalMarkets estimates 35K.
  • GOW’s audit fee is €40,000, which makes sense if Gowex’s actual revenues are only 5%-10% of reported revenue.
  • 90% of Telecom revenue originated from undisclosed related parties, tied to GOW CFO & an early investor. We have evidence Gowex’s largest customer was really itself.
  • Gowex Telecom (i.e. Iber-x) website has not been updated in years. It appears…

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EU Bank Stress Test III: ECB has just as much to prove

Tower 42 [home of the EBA] seen whilst facing north at Bishopsgate

Where is the European Banking Authority’s HQ? In The City of London, of course.


Ken Odeluga, June 24, 2014, 774 words

The words “stress” and “test” signify something obvious for banks, but they’re also likely potent on a personal level for senior bankers whose banks are undergoing testing, or, in the worst case scenario, for bankers whose banks have failed.

Imagine how Citigroup CEO Michael Corbat feels.

The extent to which the tests are arbitrary or material might well be debatable, given regulatory authorities are just as much in the business of reputation management as the banks themselves.

But being the boss of the most high-profile bank to date that has ‘failed’ a stress test this side of the financial crises, might leave such a person with something to prove, to say the least.

Of course in a few months, he could be joined by others who are in the same situation, in Europe.

 Final details of plans to stress test 124 EU banks were released in April. Neither the European Banking Authority nor the ECB have highlighted any further dates ahead of release of results sometime in October; so, speculation about the outcome has been heightened.

There ought to be little mystery by now, about the process of the tests themselves. The European Banking Authority announced the latest round of testing in January; it released draft methodologies and “templates” in March and began informal discussions with banks at the same time. Final details of scenarios and methodology were released at the end of April.

Here is a roadmap and further details about Europe’s latest round of stress tests.

Whilst banks might well be resigned to the process, in-depth familiarity with details of the planned tests has sparked intense scrutiny over the capital conditions of Europe’s major banks amid a widening belief that regulators might have ‘stacked the deck’ to ensure at least one European SIFI ‘fails’ the tests. This expectation was compounded after U.S. subsidiaries of three European banking groups, in March, failed tests conducted by the Federal Reserve.

James Chappell, a banking analyst at Berenberg Bank told at the time of the release of the U.S. test results: “They have failed a big bank –Citi. The ECB will have to be willing to do the same if the market is to believe it is credible too.”

Such concerns seem to be focused around specific aspects of the European adverse stress-test scenario, especially the simulation of an international bond market collapse followed by a 7-percentage point drop in EU output over three years.

A number of analysts have questioned the validity of the scenario on the grounds that material imbalances have been created in the extent to which banks will be able fund themselves under such conditions, given that some continue to avail themselves of ECB funding from its Long Term Refinancing Operations and others will be reliant on market funding.

An additional important factor is that the tests are set against a backdrop of an unprecedented round of recapitalisations in the European sector since the second quarter of 2013.

According to Bloomberg, EUR34 billion has been raised or will be raised through new equity. Additionally, banks have raised EUR15 billion in contingent capital issuance and set aside EUR19 billion of provisions. [Note: I last checked these figures at the end of May.]

Despite misgivings about the forthcoming stress tests, a more sanguine view is that the sector is in a more robust condition than it has been at any time since the onset of the various financial crises at the end of the last decade. Whilst recognising that the ECB faces implicit questions about its credibility, proponents of the more positive view discount a political motivation behind the ECB enforcing greater rigour in the latest tests versus earlier ones.

For instance, Alberto Gallo, Head of European Macro Credit Research at Royal Bank of Scotland Global Banking wrote during a short discussion we had by email, late last month:

“I think the adverse scenario is realistic. People would not expect large banks to fail but they would like 5-10% to fail for the test to be credible. The market knows that some banks still need to raise capital, but capital markets are open and investors appear not too concerned about this.”


Mr Gallo has also become an authoritative commentator on ‘Additional Tier 1 Capital’ [including ‘contingent capital’]. Over the last few years, these forms of bank capital have  been made [by regulatory authorities] more central in judgements of bank capital adequacy ratios. Here is an opinion piece on CoCos for the Financial Times by Alberto Gallo.

 Ken Odeluga



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Apple Tax Probe – Why it’s not a Core Issue for Investors

Ken Odeluga, 11th June 2014, 400 words Image


Apple shareholders have not had a great deal to complain about so far this year. Sure, because Apple is a corporate titan with a market capitalisation of more than $500 billion, basic questions that worry the overall market (like ‘how much longer can the rally last’?) concern Apple holders too.


But with AAPL having gained around 17% in the year to date (adjusted for Monday’s 7-for-1 stock split) Apple buyers have already had a chance to reap a solid harvest in 2014.


So what should Apple shareholders think about news reports, like this one, suggesting the European Union has started an investigation into Apple’s tax affairs (and those of other big US names) similar to the probe by US tax authorities, last year?


Well, to answer that question, first, we need to note one subtle but important difference between the IRS’s beef with Apple, and the one the EU appears to have.


The IRS said it was going after Apple because of the tech giant’s ‘stateless income’ (that basically means offshore wealth).


But the EU’s alleged investigation is directed at a few European countries with looser taxation rules on the basis that these may represent indirect state aid.


So, in the US, the blame was directly on Apple (and others) but in the EU, Apple is only indirectly in the firing line.


The major upshot from that difference: even if the EU decides beneficial taxation is a form of state aid in disguise, there is unlikely to be direct punitive action against Apple.


(Even in the unlikely event that Apple does face a penalty, like a fine, for instance, history suggests it would be immaterial, compared to Apple’s enormous profits.)


But keep in mind that Apple could end up paying more tax regardless of the outcome of the EU’s investigation.


That’s because Ireland has already signalled it will abolish, within a year, the soft tax rules that Apple and other global corporate giants have benefited from.


Even so, that puts a potential hit on AAPL two years into the future and realistically, such an early warning gives Apple ample time to take steps to offset any tax hit.


All this translates into a likely neutral near-term impact on Apple’s stock price.


Again, like the overall market, Apple’s stock will face its day of reckoning, sooner or later. But that day is unlikely to be the same day Apple pays its next European tax bill.


Ken Odeluga


Disclosure note: I do not own any class of Apple Inc. stock, bonds, or derivatives that can be written off any of such assets, nor have I ever owned such assets, although I may do so in future. I have not sold Apple Inc. stock or any other Apple Inc. financial asset short, but may do so in future. 

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Poll: Thames Estuary Airport: Fly or Sink?

It’s the Mayor of London’s pet project, but do you think it will ever get off the ground? To lower the risk of further painful puns please give us your views as soon as possible.

Results will be available on completion and the poll will remain open for the foreseeable future. Thanks.

image: Foster and Partners’ artist impression of the Thames Hub

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The Case of the Disappearing FBI probe into Heinz Option Trades


Panoramics of Münsterhof square in Zürich, September 2008, ‘Roland zh’. The address of Goldman Sachs Bank AG [Zürich] is Münsterhof 4. [From Wikimedia Commons, “the free media repository”]

Two deals involving Berkshire Hathaway partner, 3G Capital, were scrutinized by the SEC for alleged insider trading. 

3G no stranger to US courts…

The takeover of H.J. Heinz & Co  by Berkshire Hathaway was done and dusted in May.

By definition that means all loose ends surrounding the takeover [including legal challenges] were cleared up.

Well, that would be true as far as it goes, but there is still one obvious issue outstanding, even though the takeover has been completed.

The freeze on a Swiss bank account linked to possible insider trading in H.J. Heinz Co. call options, just before Heinz agreed to be bought by Berkshire Hathaway Inc. and Brazilian investment firm 3G Capital, was never lifted.

Additionally, although the corporate side of the takeover played out in the northern hemisphere, and the wheeling and dealing in options reportedly took place in the US and Switzerland, further reports indicated the SEC was also investigating related CFD trading, with a focus on one of the largest markets for that type of bet, The City of London.

Another twist, it makes sense to suppose the options contracts have long expired, and are now worthless.

More to the point, and perhaps somewhat bizarrely from the point of view of us non-legal folks, the SEC’s lawsuit against ‘unknown traders’ suspected of insider trading in Heinz stock options, remains open.

[In July I e-mailed the SEC to check if it had made any further ‘statement directly related to this case, either formally or informally?’ after the FBI announced it was weighing in with its own investigation. I’m still waiting for a reply from the SEC as I publish this blog post.]

The FBI does not comment on current, ongoing cases.

So, this post is my attempt to keep as many of the strands of the mystery as possible in one place for safekeeping, until such time as the investigations are concluded and this becomes a court case story….or not.

Let’s start with some reductive basics.

Switzerland. Yes, there are a few connections.

But there is absolutely no suggestion whatsoever of wrongdoing by the Swiss-Brazilian co-founder and board member of 3G,  Jorge Paulo Lemann. He lived in Switzerland for several years from the 1990s, onward. Nowadays he ‘shuttles between ‘São Paulo, Lake Zurich and St. Louis.’

And for that matter, nor is there any suggestion whatsoever of wrongdoing by 3G Capital Inc. itself.

However, 3G Capital has had its share of direct tangles with US prosecutors.

There again, 3G Capital was indirectly ensared in another case of possible insider trading last year when the SEC froze the assets of another former Brazilian banker in September 2012.

In November 2012, that ex-banker, Igor Cornelsen, agreed, without admitting or denying culpability, to pay $5.1 million to settle SEC charges that he and his firm, Bainbridge Groupmade more than $1.68 million by trading Burger King options, using confidential information, ahead of the 2010 announcement that the company was being bought by 3G Capital.

According to the SEC, Igor Cornelsen sought information from his Wells Fargo broker, who regulators alleged was stealing information from another customer involved in the Burger King deal.

Cornelsen was alleged to have sought inside information from his broker Waldyr Da Silva Prado Neto by sending him emails with such masked references as: “‘Is the sandwich deal going to happen?'”, according to the SEC’s statement on the case and settlement versus Cornelsen.

As for Waldyr Da Silva Prado Neto, the last reference I can find on to the commission’s investigation specific of him, was posted on September 21 2012 .

In that post, the SEC said the probe was continuing.

Both and reported in February 2013 that the SEC continued to investigate Waldyr Da Silva Prado Neto.

It’s worth repeating that there’s no suggestion whatsoever that such ticks against Cornelsen and Waldyr Neto involve any current executive or official of 3G Capital.

We’ll know more, I guess, when the FBI has completed it’s own investigation into the Heinz derivatives trading and has concluded whether or not wrong-doing took place, and also, by whom [maybe].

Guessing when that might be seems like a bet as complex, murky and vaguely crazy as a stock option trade, with a CFD on the side.


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A Sketchy Cyprus Day

The situation in Cyprus which an investor might try to assess this morning is not quite as dire as the one seen 24 hours ago; at least on the surface.

The vote on that vexatious tax on deposits did not take place on Monday as originally planned but has been delayed till Tuesday at 1600 GMT.

Also, banks in Cyprus will now not re-open until Thursday, not Tuesday as first mooted.

A Eurogroup meeting concluded yesterday with the view that small depositors should be treated differently from large depositors.

This bolsters the treaty principle that deposits under EUR100k be guaranteed.

However the work-around which protagonists have adopted to achieve this involves a 15.6% levy for savers of above EUR100k (versus the original plan of taxing deposits under EUR100k at 6.75% and those above EUR100k at 9.9%).

The evasive action by the main players also appears to include some tacit devolving of responsibility, with the reaffirmation of Cyprus having the prerogative to decide how it raises the mooted EUR5.8bn through any alternative proposal, so long as it does indeed raise that sum.

Down the line this sleight of emphasis by the EU with respect to responsibility might prove useful for saving face.

It’s important to note that the EU appears to be attempting to subtly re-frame the focus of the debate, albeit a little late. This is because whilst the market is calmer on the surface, so far Tuesday, it is still clearly positioned to take account of the risk of potential contagion [which might lead to potential bank runs elsewhere in Europe, let alone in Cyprus
when the banks re-open] and in the event of an escalation of Cyprus’s crises and/or knock-on events, the EU’s battered reputation will probably be back on the line, which in turn might increase the risk of market volatility.

Of course, the chances of the amended proposals being passed in the Cypriot parliament, remain just as sketchyas before the amendments, due to the thin majority of the ruling coalition, with no party enjoying an absolute majority and three parties having stated outright that they will not support the tax.

No Threat from Russia

The good news for both Cyprus and the EU, is that whilst, the Russians
are angry, those very large depositors whose adroitness can be described as ‘light’ at best, don’t have a legal leg to stand on.

Russian deposit holders might be responsible for an estimated one-half of the funds with Cypriot banks, according data from IHS Global and of course, they can’t all in fact be sketchy.

Either way, the country can be expected to maintain pointed rhetoric in the near term over any form of taxation on deposits–President Putin on Monday described the proposals as “unfair, unprofessional, and dangerous.”

However, whilst the size of the complete effect of the proposed taxation of deposits would be major for Cyprus, it can be deemed as minor for Russia.

It appears unlikely that Russia will engage in more than rhetoric in terms of ‘retaliation’ and will probably pay little more than lip service in support of any Russian chancers who opt for the litigious gambit.


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