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Our briefing for Tuesday April 14, 2020:
Apr 14, 2020 3:21:49 PM
- As the United States close in on 600,000 confirmed coronavirus cases, there seems to be a three-way battle between the government, the individual states, and health officials. President Donald Trump has said in recent media briefings that guidelines will be released “soon” aimed at re-opening the country. The President has also stated he has absolute power in making the reopening decision across the country, a claim that Governors in individual states are balking at. Meanwhile, health officials continue to state that re-opening the country May 1st is too ambitious and when the United States does start getting back to normal, it needs the capacity to test and trace new cases, which it doesn’t have currently.
- In Canada, the Federal government is stating the country is still several weeks away from getting back on track and when it does, it will be with a phased-in approach. Prime Minister Justin Trudeau said that jobs in some sectors are at a lower risk than others, so workers into those fields may be able to return to work sooner. The closure of the border with the United States for discretionary travel will also remain in place for “several weeks”.
- The United Kingdom is dealing with similar issues to America as media reports have ministers divided on when to relax lockdown measures as they try to balance the health of its citizens vs. the health of their economy. However, UK Chancellor Rishi Sunak tried to make clear where the government’s priority lies noting, “[t]he single most important thing we can do for the health of our economy is to protect the health of our people.” The UK’s Office for Budget Responsibility stated the country could be facing a 35% drop in output for the second quarter of 2020 if the lockdown remains in place for three months.
- As health care front line workers have been praised throughout the world for their work during the coronavirus pandemic, a Bloomberg report notes something much different in India. The report indicates healthcare workers have been verbally and physically abused by its fellow citizens who believe they could catch the coronavirus from them due to their close contact with the infected. Government officials have also extended their curfew until May 3rd as confirmed cases continue to rise.
- According to a study released on Monday, Brazil likely has 12 times more cases than what is being officially reported by the government. The large gap in numbers is due to a combination of little testing and long wait times to confirm results. The government has focused on testing only serious cases rather than all suspected cases. The country is closing in on 24,000 confirmed cases with 93,000 tests still being processed for results. Brazil also has the issue of having President Jair Bolsonaro at the helm, one of the few world leaders left who continues to downplay the seriousness of the coronavirus.
Covid-19 – Due Diligence And Asset Management
General Atlantic Teams up with Tripp Smith for $5bn Distressed Fund
Brief: Private equity firm General Atlantic is teaming up with veteran credit investor Tripp Smith to launch a roughly $5bn fund that will provide financing to companies hit by the new coronavirus pandemic, according to people familiar with the matter. General Atlantic, which typically takes minority equity stakes in rapidly growing companies, is forming a joint venture with Smith’s credit-focused firm Iron Park Capital Partners LP, the people said. Atlantic Park, as they have dubbed the venture, will provide structured equity and debt financing to previously healthy companies now facing distress because of the pandemic. Founded in 1980, General Atlantic has $35bn in assets and offices around the world. Under chief executive Bill Ford, the firm has made its name by investing in successful technology companies, such as Alibaba Group Holding, before their initial public offerings.
GAM Accelerates Cost Cutting Plans Amid COVID-19 Uncertainty
Brief: Swiss asset manager GAM has stepped up its cost cutting initiatives after recording outflows as it gets hit by the Covid-19 pandemic. The firm has now unveiled plans to make at least CHF65m ($67m) in cost cuts by the end of 2020. This is more than twice the amount of cost cuts originally targeted by the end of this year. In February, GAMannounced a strategy overhaulthat was centred on three pillars – efficiency, transparency and growth. According to that policy, the firm aimed for CHF30m in cost savings by the end of 2020. The firm’s assets under management (AuM) totalled CHF112.1bn at the end of March 2020, versus CHF132.7bn at the end of 2019.
Hedge Fund Managers are Claiming Bailouts as Small Businesses
Brief: Free money. That’s the enticing prospect hedge funds and other trading firms are pondering after realizing they too might be able to participate in a historic U.S. stimulus package to keep small businesses alive through the coronavirus pandemic. Since early April, law firms have hosted Webinars and sent out alerts, and accounting firms have reached out to clients, all with the goal of explaining how they might be able to tap into the Paycheck Protection Program. The $349 billion package administered by the Small Business Administration provides loans to cover payroll, rent and utilities for up to eight weeks. The loans can convert to grants if recipients retain or rehire their workers.
AMP Capital Wholesale Property Fund Rejigs Withdrawals
Brief: AMP Capital's wholesale Australian property fund is moving asset valuations from quarterly to monthly, has fixed the distribution payouts for this year and is altering withdrawals during the COVID-19 pandemic. The fund, which currently allows monthly redemptions, allows only 5% of the funds' total net asset value for withdrawals every quarter. It has deferred its April 15 withdrawal date to May 15. The fund's constitution allows it to widen payment times beyond the 12-month processing time. "It's not considered in the best interests of all investors to maintain monthly redemptions in the current economic environment. However, the changes we have announced provide investors with an ability to redeem up to 20% of their holding in the short term, with full payment made for any redeemed units over and above this threshold within 12 months," AMP Capital said in a letter to investors last week.
One of Canada’s Largest Private Lenders Halts Redemptions
Brief: One of Canada’s largest private lenders is freezing redemptions. Bridging Finance Inc. said in an letter to investors Monday that it has gated its funds indefinitely “to maintain investor value and limit pandemic effects.” The non-bank lender has C$1.6 billion ($1.2 billion) in assets under management with the most of its direct lending funds invested in collateral-based bridging loans, inventory and accounts-receivables financing. Request for redemptions spiked to about 15% of the assets from the usual 5%, which prompted the gating, Chief Executive Officer David Sharpe said by phone. The news was first reported by the Globe and Mail newspaper.
Abraaj Founder Arif Naqvi Contracts Coronavirus
Brief: Founder of the once-mighty Middle Eastern private equity firm Abraaj has tested positive for COVID-19, it emerged on Monday. Naqvi has said that he is undergoing treatment at a private hospital and that he is “on the road to recovery”. “Today is my fourth day in the hospital and I am praying that they [hospital staff] will let me go home soon; my cough is definitely better, my oxygen saturation is heading in the right direction,” he said. Naqvi said that he was still low on energy but understood that it was due to the fact that his body was taking up a lot of strength to recover from the virus. He praised the doctors and nurses at the hospital for taking care of him.
