.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Monday May 3, 2021:
May 3, 2021 4:43:37 PM
- In the United States, Florida Governor Ron DeSantis signed an executive order on Monday, suspending all outstanding local COVID-19 emergency orders and related public health restrictions. While noting Florida wasn’t done with its fight against coronavirus, the Republican governor said they were no longer in a state of emergency and signing the order was the evidence-based thing to do. The country’s third largest state in terms of population, has the third most COVID-19 cases in the United States with 2.2 million since the pandemic began and the fourth highest death toll at more than 35,000, according to the latest data from Johns Hopkins University.
- In Canada, the province of Alberta now has the unfortunate distinction of reporting the highest number of COVID-19 cases per capita in the country, along with the United States. CTV News is reporting Alberta has seen an average of 423.8 cases per million people in the last seven days and set a record for their province over the weekend with 2,433 new infections. Dr. Noel Gibney, co-chair of the Edmonton Zone Medical Staff Association’s pandemic committee, says the government’s mixed messaging is to blame, “I believe we’re here because our government hasn’t taken the necessary steps in the messaging (and) what we’ve received is mixed. One day the premier is suggesting that lockdowns don’t work and the next day, suggests that we’re going to have bring in new targeted public health restrictions,” said Dr. Gibney.
- United Kingdom Prime Minister Boris Johnson gave his clearest signal on Monday that international travel will resume as of May 17th. During a campaign visit, the prime minister said the following: “We do want to do some opening on May 17, but I don’t think that the people of this country want to see an influx of disease from anywhere else.” The government is set to announce later in the week a small set of countries that will make the “green list” for travel, which means travellers returning to the country won’t need to quarantine upon arrival, but still required to take a PCR test. The list, once announced, will be reviewed every three weeks.
- India reported more than 300,000 new COVID-19 cases for the 12th straight day with medical experts saying the actual numbers across the country of 1.35 billion people may be five to 10 times higher than the official tally. According to a mathematical model from a team of scientists advising the government, India’s coronavirus cases are expected to peak between Monday and Wednesday, a few days earlier than a previous estimate as the virus spread faster than expected. Medical experts have pleaded with the government to announce a national lockdown, but Prime Minister Narendra Modi has been reluctant to do so, concerned about the economic impact.
- Bloomberg is reporting the United Arab Emirates (UAE) non-oil economy shrank 6.2% in 2020, the first such contraction since 2011. The overall GDP in the Middle East’s second largest economy contracted 6.1%, slightly more than the initial projections of a 6% downturn. “The UAE economy performed better than expected in 2020 despite the current global challenges brought about by the COVID-19 pandemic,” said Abdulla Bin Touq Al Marri, the country’s economy minister. The Ministry of the Economy and other government entities are looking to double the UAE’s economy over the next decade to 3 trillion dirhams ($816.8 billion USD).
- In Australia, Prime Minister Scott Morrison’s government is defending its decision to ban Australian citizens returning from India and threatening to punish those that do with fines of roughly $50,000 and five years of imprisonment. Prime Minister Morrison appeared on Australian radio on Monday and said the move was made to protect the health interests of Australians and implemented the ban on advice from his health officials. The Australian Human Rights Commission spoke out against the government decision saying the “extraordinary” ban and threat of criminal sanctions raised serious concerns. Others also said the move was motivated by racism; a claim Foreign Affairs Minister Marise Payne quickly rebuked. The travel ban is set to last until at least May 15th.
Covid-19 – Due Diligence And Asset Management
The Pandemic Hit Public Pensions Hard – But Now They’re Better Funded Than They’ve Been in Years
Brief : The Covid-19 pandemic didn’t hit all U.S. public pensions funds equally. Funds that were in the best financial health at the start of the pandemic took the hardest hit to their funded statuses over the course of the past year — but they’ve also benefitted most from the speedy recovery over the past 12 months, according to Goldman Sachs Asset Management’s public pension fund report for the first quarter of 2021. The report, which is based on a performance sample of 99 public plans representing approximately $3 trillion of assets under management, found that a majority of the pensions experienced funded status declines of 10.1 to 12.5 percent in March 2020. Retirement plans which were well funded to begin with — at over 90 percent funded — experienced the largest decline in funded statuses from December 2019 to March 2020. Meanwhile, pensions that started off the pandemic with funding ratios below 70 percent experienced a single-digit median decline in funded status. GSAM suggested that the trend in funded status declines was “likely influenced by varying allocations to fixed income.” Plans with the highest rates of decline in funded positions also allocated the lowest percentages of assets to fixed income.
World’s Biggest Wealth Fund Won’t Demand Full Office Return
Brief: Norway’s sovereign wealth fund, the world’s biggest, will let its employees continue working from home a couple of days a week once the pandemic is over, Chief Executive Officer Nicolai Tangen said. Staff at the Oslo-based investor, which oversees $1.3 trillion in assets, will be allowed to spend “up to two days” a week working from home, Tangen told lawmakers in Norway’s parliament during a hearing on Monday. But there will also be “two set office days for everyone,” he said, so that “we can have the meetings we need to have in the office.” Tangen, a former London-based hedge-fund manager, is the latest prominent member of the financial industry to acknowledge that life won’t return to pre-pandemic norms even after the Covid crisis subsides. Barclays Plc CEO Jes Staley recently said he won’t force employees to return to the office, while Deutsche Bank AG is working on plans to let staff work from home up to three days a week. At Norway’s wealth fund, Tangen said he was considering requiring staff to be in the office on Tuesdays and Thursdays. He also said no one would ever be forced to work from home, but said he thinks granting employees the option on a voluntary basis “can be positive.”
Corporate America Rides Wave of Inflation to Record Profits
Brief: Markets have been obsessed -- and sometimes roiled -- for months over whether higher inflation is coming. The latest batch of quarterly reports suggests it’s already here and helping corporate America. Faced with rising prices for everything from lumber to oil to labor and computer chips, chief executive officers have cut costs and boosted prices for their products. The strategy appears to be working, with first-quarter income from S&P 500 companies jumping five times as fast as sales, data compiled by Bloomberg Intelligence show. As a result, their net margin -- which measures how much profit companies are squeezing from their revenue -- has risen to a record high, according to Bank of America Corp. Executives mentioned “inflation” more than any time since 2011 during earnings conference calls last month, according to Bank of America. Warren Buffett joined the chorus two days ago, saying price increases are more intense “than people would have anticipated six months ago.” The billionaire added that as his Berkshire Hathaway Inc. boosted prices, customers have accepted them.
Restaurant Survival Hopes Pick Up as $28.6B in Grants Begin
Brief: Thousands of restaurants and bars decimated by the COVID-19 outbreak have a better chance at survival as the government begins handing out $28.6 billion in grants ¬— money to help these small businesses stay afloat while they wait for customers to return. Laurie Thomas is applying for grants for her two San Francisco restaurants that have closed and reopened several times as coronavirus cases surged and declined; she’s still at just 50% of capacity. Rose’s Cafe and Terzo are operating at a loss but grant money will help them stay open. “This allows you to go back to February 2020 and apply these funds to help pay down debt, catch up on past due rent, etc.,” she says. The Small Business Administration is accepting applications for grants from the Restaurant Revitalization Fund as of Monday. For the first three weeks only applications from restaurants that are majority-owned by women, veterans and “socially and economically disadvantaged” applicants will be processed and paid out, although any restaurant can apply. After that, grants will be funded in the order that they’ve been approved by the SBA.
Airlines Push for U.S-U.K. Travel Deal by G-7 Meeting in June
Brief: A coalition of airline and travel groups urged the U.S. and the U.K. governments to lift travel restrictions between the two nations, citing the growth in vaccinations and other tools that limit the spread of Covid-19. Officials should announce reopening before the Group of Seven economic talks scheduled for June, the groups said Monday in joint letters to President Joe Biden and Prime Minister Boris Johnson. “We are confident that the right tools now exist to enable a safe and meaningful restart to transatlantic travel,” said the letter from 49 industry groups and unions on both sides of the Atlantic. “Safely reopening borders between the U.S. and U.K. is essential for both countries’ economic recovery from Covid-19.” Exports between the two countries and tourism represent have a significant impact on each nation’s economy, highlighting the importance of resuming more normal travel, the group said. Industry officials in the U.K. have been saying that travel could begin to reopen as soon as this month, but the White House has been mum on when that might happen or what steps are needed to trigger such a move.
Despite Pandemic Fears, A Record-Breaking ‘Frenzy’ of M&A Activity is Underway
Brief: When a pandemic was declared last spring, Paul Aversano feared the worst. Aversano leads the global transaction advisory group at Alvarez & Marsal, which works with dealmakers across the corporate world and private equity. As stock markets plunged, investors turned their attention away from new acquisitions and toward shoring up their existing portfolio companies. It seemed like the industry-wide pipeline of deals was in danger of drying up. “I remember last year telling my CEOs, best estimate, I think our business will be down 50%, and I’d be thrilled if that was the case,” Aversano said. Rarely has he been happier to be proven so wrong. Deal activity did tick down during the second quarter of last year. But sooner than anyone expected, the market began to recover. In the end, Aversano’s business actually increased in 2020. And in 2021, acquisition activity of every kind is soaring to unprecedented heights.
