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Our briefing for Friday August 14, 2020:
Aug 14, 2020 4:21:21 PM
- Fresh off naming his vice-presidential running mate, United States Democratic Presidential nominee Joe Biden is calling on governors to implement mandatory mask mandates for the next three months. Biden, along with his running mate, Kamala Harris said by state leaders adopting these measures, wearing masks into the fall season could save up to 40,000 American lives. With over five million total cases and 167,000+ deaths due to the coronavirus, the pandemic has become the key focus in Democrats minds come the November election. In response, President Donald Trump said Biden and Harris shouldn’t be using the coronavirus as a political tool.
- In Canada, the federal government announced on Friday that the land border with America will be closed for another 30 days until September 21st. The closure has been in place for months now, restricting traffic to essential workers. Although if they so choose, Canadians can still fly to American destinations, albeit a need to quarantine for 14 days upon returning. Elsewhere in the country, top health officials have laid out their plan for the upcoming fall season, and the prospects of the feared second wave. The Public Health Agency of Canada is hoping for a “slow burn” scenario for the upcoming season with the number hopefully remaining low enough not to cause the health system strain with an influx of patients.
- United Kingdom residents hoping to enjoy some much-needed vacation, are now scrambling after Prime Minister Boris Johnson announced British tourists will be facing a two-week quarantine if they don’t return by Saturday at 4 AM from specific locales. The destinations added to Prime Minister Johnson’s list are France, Netherlands and Malta, which has affected hundreds of thousands of tourists who don’t want to face the prospect of being isolated at home for 14 days. The news sent travel stocks tumbling and the French government calling the move “regrettable” while indicating it will respond in kind, but without giving details.
- The reason the UK made the snap move to a quarantine with France is because the country is making moves to help curb localized spreads of the virus. The French government declared tourist hotspots Paris, Marseille and its surrounding areas as high-risk zones for the coronavirus. Doing so grants local authorities’ powers to help stop the spread of COVID-19. On Friday, France reported more than 2,500 new cases for the third day in a row, which are levels last seen in mid-April when the country was in the midst of lockdown restrictions.
- Experiencing the fastest growing resurgence of coronavirus cases in Europe, Spain will close all discotheques and cocktail bars, and will limit smoking in public spaces to help stem the current surge. The country’s health minister made the announcement on Friday, along with restaurants and other bars not being allowed to admit customers after midnight and needing to close by 1 AM. Spain reported nearly 3,000 new cases on Thursday, their highest total since April.
- Australia is seeing a glimmer of hope of slowing down their second wave after Victoria state recorded their lowest single day rise in new cases in more than three weeks. Victoria state recorded 278 new infections on Thursday, down from 410 the previous day. The news is welcome after earlier in the week, the country confirmed 21 deaths in one day due to COVID-19, their deadliest day so far during the pandemic.
- The news isn’t as good in neighbouring New Zealand, as they have extended the lockdown of their largest city for another 12 days. Friday was supposed to be the day Auckland’s temporary lockdown was released, but with the outbreak now growing to 30 people and outside the city borders, Prime Minister Jacinda Ardern made the move saying the extension will give health authorities time to get a handle on the cluster and isolate those infected.
Covid-19 – Due Diligence And Asset Management
CBI President Who Got Coronavirus: ‘Firms Should Test Staff for Covid-19 Every Week’
Brief: All UK companies should test staff for coronavirus every week in order to bring more people back to their offices, according to the boss of one of the UK’s most influential business lobby groups. Karan Bilimoria, the president of the Confederation of British Industry - the body which represents 190,000 businesses, together employing nearly seven million employees - told Financial News that the government should offer free Covid-19 testing to the UK’s entire population. The move would encourage more people back to the workplace, and help spur a recovery in the UK economy which plunged into its largest recession on record this week. “Even if the government offered free testing to every member of the population of a country of 66 million people every two weeks, that would be a fraction of what we're spending on all these other [coronavirus] measures,” Bilimoria, who is also the founder and chairman of Cobra Beer, told FN. The UK government has so far spent nearly £190bn to deal with repercussions of the coronavirus crisis, according to Treasury figures from July.
Saudi Wealth Fund is Said to Repay $10 Billion Bridge Loan
Brief: Saudi Arabia’s sovereign wealth fund has paid back a $10 billion bridge loan two months ahead of schedule, according to people familiar with the matter. The Public Investment Fund has fully repaid the loan, which was due in October, the people said, asking not to be identified because the information is private. It had signed the loan last year to raise funds while it waited for the proceeds of the sale of its nearly $70 billion stake in Saudi Basic Industries Corp., which closed in June. Saudi Arabia has been pushed into a deep budget deficit by the coronavirus pandemic and oil-price slump, forcing the kingdom to hike taxes and increase the government debt ceiling to 50% of economic output. The PIF is a key part of a plan by Crown Prince Mohammed bin Salman to transform the economy and wean it off a reliance on petroleum revenues. A group of 10 banks provided the loan: Bank of America Corp., BNP Paribas SA, Citigroup Inc., Credit Agricole SA, HSBC Holdings Plc, JPMorgan Chase & Co., Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc., Standard Chartered Plc and Sumitomo Mitsui Banking Corp. A spokesman for the PIF confirmed it had been repaid ahead of schedule, without providing further details.
Corporate Funds Face Higher Liabilities due to COVID-19
Brief: U.S. corporate defined benefit plans face higher liabilities in the coming months as the impact of the COVID-19 pandemic becomes apparent, according to a report from Moody's. The report released Thursday is one of a series of in-depth sector reports from the credit agency and says rising pension liabilities will put more pressure on cash flow in sectors hardest hit by the pandemic, particularly in the airline and auto industries. With discount rates plummeting to what Moody's said is an all-time low of 2.26% as of July 31, the 50 companies with DB plans sampled by Moody's will see their adjusted debts rise by $120 billion. The report also said that while the CARES Act provides some short-term relief for corporations with DB plans, the help is limited. The Coronavirus Aid, Relief and Economic Security Act, signed by President Donald Trump on March 27, provides companies the option of a one-year holiday from making 2020 pension contributions, with interest accrued, until Jan. 1, 2021.
Private Equity Sees Late July Mini-Boom as Funds Gear up for ‘New Normal’
Brief: Private equity deals saw a late-July surge and whether this is part of a recovery or due to a backlog of deals that were impossible to close in April, May or June, EY Global is advising funds to make adjustments for the post-COVID world now to capitalize on the moment. To that end, Andres Saenz, private equity leader on EY Global’s markets leadership team, said the need to carry out a full-swing overhaul to step up digital transformation and rethink investments under the “new normal” are now part of nearly every conversation held with investors. Currently, there is US$2.6tn in “dry powder” private equity capital globally ready to release and a pool of private limited partners eager to the pull the trigger on investment as economies begin to exit the pandemic’s initial shock. Saenz was speaking Wednesday during Mexico’s annual private equity event, hosted virtually by Amexcap, which groups 120 member private equity funds with total committed resources of US$60bn, of which 54% has already been invested in projects and companies in sectors such as energy, infrastructure and real estate.
Companies Shift Emerging Tech Investments Amid COVID-19
Brief: In the immediate wake of COVID-19, Global 2000 companies moved to slash funding for emerging technologies, such as automation, artificial intelligence (AI), blockchain, and 5G, according to new KPMG International research. However, many executives are optimistic emerging technology spending will likely increase in the next 12 months, as enterprises recognize COVID-19 creates a burning platform to accelerate digital transformation and stimulate long-term growth. Enterprise reboot, a new report from KPMG International and HFS Research, surveyed 900 technology executives* to explore the current and future state of emerging technologies and demonstrates a dramatic shift in how businesses are approaching emerging technology now versus just a few months ago before the onset of COVID-19. “This crisis isn’t affecting all industries equally, but for many of the industries facing crisis, managing the transition to a digital business model is imperative. However, doing so is made more complicated in a time where investments are critical, but cash must be preserved,” said Cliff Justice, KPMG global lead for Intelligent Automation and US lead for Digital Capabilities. Specifically, 59 percent of executives surveyed say that COVID-19 has created an impetus to accelerate their digital transformation initiatives, yet approximately four in 10 say they will halt investment in emerging technology altogether as a result of COVID-19.
Wall Street’s Buyout Titans Have Been Sitting out the Credit Boom
Brief: Amid one of the greatest credit booms ever, a key player in the financial world has been conspicuously absent. Private equity firms that would usually jump at the chance to go on a debt-fueled buying spree are only just tip-toeing back to the market. In theory, business should be flourishing. Borrowing rates are close to record lows and investors are gorging on everything from rescue loans to shareholder payouts due in large part to historic support from the Federal Reserve. Banks are also ready to open the checkbooks after selling billions of dollars of debt for buyouts and acquisitions they feared they’d be stuck with as credit markets froze in March. Yet sponsors that slammed the brakes on deals, citing too much uncertainty on how long the coronavirus outbreak will last, have been sitting it out until now. “Two months ago, most of our clients who would have been thinking about acquisition financings, whether they’re corporate or sponsor, were tending to their own existing portfolios,” said John McAuley, head of North American leveraged finance at Citigroup Inc. “Now these companies and sponsors are looking at the opportunity set and being more proactive.”
