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Our briefing for Monday May 11, 2020:
May 11, 2020 3:49:25 PM
- United Kingdom Prime Minister Boris Johnson’s plan for the country to get back on its feet was met with confusion and criticism. Government officials had to do some damage control on Monday after citizens were left confused by Johnson’s televised address to the nation on Sunday. For instance, people weren’t sure how many people could meet together outdoors, or when businesses should return to work. The UK will have three phases to the easing of their lockdown; the first starting this Wednesday. People will be allowed to leave their households as often as they want for exercise and leisure, but still maintain social distancing. Workers in construction and manufacturing sectors should actively be encouraged to go to work, but those taking public transit are urged to wear masks to limit spread of the virus. Stage two, which will not take place before June 1st, will include phased reopening of primary schools and non-essential shops.
- In the United States, three senior officials guiding the country through the coronavirus pandemic are now in self-quarantine after coming in contact with two White House staffers who tested positive for the disease. Dr. Anthony Fauci, the director for the National Institute of Allergy and Infectious Diseases, Robert Redfield, the director of the Centers for Disease Control and Prevention, and Stephen Hahn, Commissioner of the U.S. Food and Drug Administration will all be monitoring themselves for any symptoms over the next two weeks. President Donald Trump and Vice President Mike Pence are being tested daily, and so far have tested negative. Elsewhere in America, parts of upstate New York will be allowed to reopen once their state shutdown expires this Friday. Governor Andrew Cuomo though noted New York City isn’t there yet, having hit just four of seven metrics an area must meet before they are allowed to start the reopening process.
- The Canadian federal government will be offering bridge financing for big Canadian businesses across all sectors, except for banks. The bulk of the details were not delivered, but Prime Minster Justin Trudeau made the announcement during his Monday news briefing. Employers with annual revenues of more than $300 million can apply for support whose credit needs aren’t being met through conventional financing. Trudeau insisted this program was of the bridge loan variety, not a “bailout” and the government is a “lender of last resort.”
- After two months of strict lockdown, France was allowed to emerge on Monday. Reports noted the shops on Paris’s famed Champs-Elysees were only half open and the notorious traffic jams in France’s capital city were absent. Government has encouraged businesses to continue allowing employees to work from home and are promoting bicycles and other modes of transport, as opposed to buses, trains and subways if possible.
- With unemployment doubling in the country, Russian President Vladimir Putin unveiled his plan for citizens to head back to work as early as Tuesday. Putin emphasized the lifting of restrictions would be gradual and the world’s largest country (in terms of land) would need to tailor their approach to local conditions. Moscow will keep its lockdown measures in place until May 31st. Russia has recorded nine straight days of 10,000 or more new cases, and now have the third most cases in the world trailing only the United States and Spain.
Covid-19 – Due Diligence And Asset Management
Hg said to Top $11 Billion for its Largest Ever Buyout Funds
Brief: Hg will soon stop accepting new money for three of its buyout funds after raising $11 billion for its largest ever pool of capital, according to people familiar with the matter. The U.K.-based private equity firm, which focuses on software and service businesses, will divide as much as $10 billion equally between its second large-cap fund, known as Saturn, and its ninth mid-cap fund, known as Genesis, said the people, who asked not to be identified discussing private information. An additional $1.5 billion has been raised for the firm’s third small-cap fund called Mercury, the people said. Hg’s first investment from Saturn will go to increasing its stake in Norwegian cloud software developer Visma Group, the people said. Last April, private equity firm Cinven Group sold its stake in Visma to Hg and co-investors, valuing the business at more than 6.5 billion euros ($7 billion) at the time. Hg has been invested in Visma since 2006 when it led the company’s delisting from the Oslo Stock Exchange.
Scott Minerd sees ‘Moral Obligation’ Arising from Virus Bailouts
Brief: Scott Minerd, the chief investment officer of Guggenheim Investments, thinks that government support of corporate America in the wake of the coronavirus pandemic will ultimately lead to the creation of a “new moral obligation” to help U.S. companies access credit. “Corporate borrowers are most likely on the way to becoming something akin to government-sponsored enterprises like Fannie Mae and Freddie Mac,” he wrote in a note dated May 10. “Many companies, including Boeing, Southwest, and Hyatt Hotels, have likely gained access to financing simply on the strength of the government’s intentions to intervene in credit markets.” Minerd, who on Friday warned that markets were sending a clear message that negative rates would soon be here, said he thought yields on 10-year Treasury notes could fall to -50 basis points in the intermediate term.
BlackRock and Pimco Take Lead Role in Managing Federal Reserve’s Coronavirus Stimulus
Brief: The Federal Reserve’s giant programme of corporate bond buying is about to kick in. It will hand a critical new role in propping the struggling economy to a business with increasing clout in the financial world: money management. The central bank has tapped BlackRock to help it direct money into both new and already issued corporate bonds, assisting the Fed in its recently adopted role as lender of last resort for businesses. The Fed is expected to launch the programme in coming days. The Fed also has given Pacific Investment Management Co., or Pimco, the job of helping it purchase commercial paper, or companies’ short-term borrowings. That programme is already up and running. The two firms could eventually invest hundreds of billions of central bank dollars.
Future Air Travel: Four-Hour Process, Self Check-In, Disinfection, Immunity Passes
Brief: Once airports and borders open again and people are able to fly freely — a process already in play as airports of all sizes around the world ready strategies to ensure healthy air travel — how much are you ready to change your flying habits? As much as was required after 9/11? Less? More? Considering some of the changes already happening and the many more recommended before airports can reopen safely to commercial routes, experts are referring to the coronavirus pandemic as ‘the new terrorism,’ triggering the biggest crisis the airline industry has ever faced. Let’s start with the entire process of checking in for flights, which some calculate that it could take up to four hours and involving social distancing, sanitation of passengers and luggage, wider spaces for various lines and waiting to board. Nine out of 10 experts expect slower turnarounds between flights due to the need of thorough cleaning of cabins and following of sanitary measures at airports.
Carlyle, GIC Back Away from AmEx Global Business Travel Deal
Brief: Private-equity firm Carlyle Group Inc. and Singapore sovereign-wealth fund GIC Pte. Ltd. are backing away from a deal to take a 20% stake in American Express Global Business Travel, whose revenue has plummeted as a result of the coronavirus pandemic, according to people familiar with the matter.The deal, announced in December, values the company at $5 billion including debt. It was scheduled to close Thursday but representatives for Carlyle and GIC informed AmEx Global Business Travel on Wednesday they wouldn't participate in the closing, the people said. AmEx Global Business Travel, which is 50%-owned by American Express Co., offers airfare and hotel-booking services mostly to large and midsize businesses. In 2014 the credit-card giant sold the other half to a group led by investment firm Certares. Carlyle and GIC, along with a group of others, agreed to purchase a portion of that stake last year.An entity acting on behalf of the sellers filed a motion this past week in Delaware Chancery Court against Carlyle and GIC, calling for it to compel the duo to proceed with the purchase.
Michael Hintze’s CQS is Experiencing a Nightmare
Brief: CQS is facing its worst crisis since Michael Hintze founded the London-based credit-driven multistrategy firm in 1999. At least three of its funds are among the worst-performing hedge funds this year after posting massive losses in March alone, when the global financial markets were in free fall. Other funds have posted smaller declines. These huge losses have raised questions about the future direction of the firm, which was managing $20 billion at the beginning of the year. In March alone, the CQS Directional Opportunities Fund, which Hintze manages himself, lost more than 33 percent, according to a document from investment bank HSBC that tracks hedge fund returns. As a result, it was down 35 percent for the quarter.
