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Our briefing for Tuesday June 9, 2020:
Jun 9, 2020 4:17:09 PM
- In the United States, at least 28 of the 50 states are not following the US Centers for Disease Control and Prevention (CDC) guidelines on reporting new COVID-19 cases, according to a CNN report. Half of those 28 states saw their cases increase in the last week. CDC says states should be reporting probable cases that show evidence of an infection without the confirmation of a lab test and cases where coronavirus was listed as a cause or contributing cause of death, but are not confirmed with a lab test. America’s four largest states by population – California, New York, Texas and Florida are among those listed as not reporting probable cases.
- The Canadian federal government is proposing legislation that would impose fines and possible jail time for those deliberately lying on the country’s emergency response benefits applications. The Liberal minority government is facing fire from opposition governments who want completely different things. The Conservatives want to weed out the fraudulent claims and get people back to work, while the left of center NDP want to extend emergency aid and avoid going after those who make ineligible claims.
- In the United Kingdom, retail outlets can reopen starting June 15th as long as they comply with government secure guidelines the government’s Business Secretary said on Tuesday. Restaurants, pubs, as well as hairdressers, barbers, nail bars and related services will remain closed until July 4th at the earliest. Prime Minister Boris Johnson didn’t approve of protestors “flouting social distancing” over the weekend. Around 200 anti-racism protests took place over the weekend in the country, and while most did remain peaceful, it was the 35 police officers injured, and the tearing down of statue to slaver Edward Colston in Bristol that Johnson thought might undermine the movement, “in the eyes of many who might otherwise be sympathetic”.
- France’s government has announced a €15 billion rescue plan for its aerospace industry after it took a beating from the coronavirus pandemic. The plan hopes to save hundreds of thousands of jobs while keeping plane maker Airbus and airline Air France globally competitive. In exchange for the aid, the French government wants the industry to invest more in electric, hydrogen, or lower-emission aircraft as the country looks to make their aviation industry the “cleanest in the world.”
- Brazil’s government continues to face backlash over the handling of the coronavirus pandemic. The latest in a string of controversies happened over the weekend when government officials stopped publishing cumulative totals on the Health Ministry’s website after Brazil passed Italy for third in most COVID-19 related deaths. After a public outcry and backlash over the decision, a top Health Ministry official told reporters that the body would restore the cumulative death toll to its website later this week.
- The Chinese government has angrily rejected findings by scientists at Harvard University that claim the coronavirus started circulating in the city of Wuhan at the end of last summer. If Harvard’s claim is indeed true, this would be months earlier than the Chinese authorities have admitted. The researchers came to their conclusion after analysing satellite images of hospital car parks in Wuhan, ground zero of the coronavirus outbreak, and internet search queries about disease symptoms such as a cough.
- The World Health Organization (WHO) is walking a back a statement that claims it is “very rare” for asymptomatic sufferers of COVID-19 to transmit the virus. The statement came on Monday from Dr. Maria Van Kerhove during a news briefing. On Tuesday, Dr. Van Kerhove changed her tune stating that the organization needs to better understand the spread of asymptomatic cases. The WHO’s current evidence suggests between 6 and 41 per cent of the population could have COVID-19 and not show any symptoms, a very wide gap to make any concrete declarations.
Covid-19 – Due Diligence And Asset Management
Quarantine’s a Price Worth Paying to get on a Mega Deal, Bankers Say
Brief: Investment bankers would be willing to plunge into self isolation for two weeks under new UK quarantine rules for travel, if it meant securing a lucrative role on a big deal. With M&A bankers itching to get back on the road as deal volumes remain in the deep freeze during the coronavirus pandemic, some senior dealmakers admit privately that a two-week quarantine period would be a price worth paying to be in the mix for a large transaction, according to conversations with three senior bankers. “If there was even a 5% greater chance that we would get the deal, we’d get on a plane and take the two weeks in a hotel or at home,” said one senior M&A banker in London. “Maybe we could just travel every two weeks,” joked another senior dealmaker. The UK government imposed a 14-day self-isolating period on 8 June for any travellers or returning Britons entering the country on planes, trains or ferries — even as the country begins to unwind lockdown restrictions that have kept the majority of the population at home since March.“We would just travel and then figure out the painful logistics of working from home or a hotel room, or whatever they ask us to do,” said another senior banker.
Exclusive: Savings Surge Forces Goldman to Shut Marcus to New UK Clients
Brief: Goldman Sachs (GS.N) is closing its easy access savings business to new customers in Britain from Wednesday after deposits surged near to regulatory limits during the coronavirus lockdown.The British arm of digital brand Marcus, which pays market-leading rates to savers starved of meaningful cash returns, has attracted about 21 billion pounds ($27 billion) from more than 500,000 savers since its launch in 2018. However, British banking rules demanding ring-fencing of retail deposits totalling more than 25 billion pounds have prompted its executives to take steps to manage its growth. “We’ve really seen our growth accelerate under lockdown as people hold off on discretionary spending and take time to reorganise their finances and get the best deal for their money,” Des McDaid, head of Marcus UK, told Reuters. Ring-fencing would require Marcus in Britain to become a separate legal entity with its own board and limit how much capital it could share with the rest of Goldman’s businesses.
Exclusive: Banks to Berlin – Loosen Coronavirus Cash Rules for Firms
Brief: Germany’s bank lobby is set to urge the government to drop some of the conditions attached to a trillion euro rescue scheme, arguing that companies are so reluctant to take the help that it threatens any recovery from the coronavirus outbreak. Martin Zielke, the head of the lobby and Commerzbank, will appeal this week to limit conditions - like pay caps and board seats - for government cash injections into companies, three people with knowledge of the matter said. Zielke argues that companies are taking on further debt, the chief means of government support, as prospects for revenue dim, and Berlin should offer capital injections with fewer strings, according to a paper outlining his position seen by Reuters. Companies will not otherwise accept help, the three people said, citing Zielke, whose Commerzbank caters to the Mittlestand companies that form the backbone of the German economy and was bailed out during the last financial crisis. The state still holds a 15% stake in Commerzbank and occupies two board seats.
Shop Til you Drop: Mall Giant GPT Takes $500m COVID Hit
Brief: Diversified property giant GPT Group has become one of the first real estate investment trusts to reveal the impact of the coronavirus with a near $500 million write-down in the value of its shopping centre portfolio. Retail landlords have been hard hit by the COVID-19 pandemic as shoppers were forced to stay home under the lockdown laws, causing foot traffic and revenue to plummet. GPT, which owns 12 malls across the country, has written down the value of seven centres in which it has part or full ownership by $476.7 million after undertaking an independent assessment of its retail assets covering the months between December 31, 2019 to May 31. It is an 8.8 per cent decline since December. The group has also withdrawn its full-year 2020 guidance and is amending its dividend payout ratio policy. Chief executive Bob Johnston said the revaluations reflect the effects COVID-19 and the subsequent social restrictions have had on the retail assets. "This has generally been reflected in lower market rental growth rates, increased vacancy and abatement allowances and some softening in investment metrics," Mr. Johnston said.
Advent Countersues Forescout, Asking Out of $1.9 Billion Deal
Brief: Advent International Corp. countersued Forescout Technologies Inc. in Delaware Monday, six weeks before a YouTube trial over the breakdown of their $1.9 billion take-private buyout, saying the deal’s collapse can’t be blamed on the coronavirus alone.“Because Forescout’s precarious finances would leave it insolvent upon closing of the proposed transactions, buyers cannot in good faith certify the solvency of the post-closing entity—which is a condition to close the $400 million term loan financing,” the Chancery Court filing says.Forescout’slawsuit against Advent, filed about two weeks ago, is part of awave of suitsasking courts to keep mergers on track as acquirers balking at the coronavirusscramble deals worldwide. Most of those disputes are being heard in the Chancery Court…According to Forescout’s complaint, an Advent representative told its CEO as they sought to renegotiate the transaction that “the Covid-19 outbreak caused a change of heart.”
Private Equity Managers Eyeing Distressed Funds, Private Debt
Brief: Nearly all private equity managers expect to see a surge in distressed fund deals over the coming year, according to a new survey.The poll, commissioned by fund service firm Intertrust Group, found that 92 percent of private equity professionals across North America, Europe, and Asia believe distressed fund activity will increase in the wake of the coronavirus pandemic, which devastated businesses in the U.S. and elsewhere. Likewise, private equity managers viewed distressed funds as the biggest fundraising opportunity in the near future, with 83 percent indicating there would be more investor demand for strategies targeting distressed assets.This sentiment is already being borne out at major private equity firms. Last month, Apollo Global and KKR & Co. said they raised $1.75 billion and$4 billion, respectively, for credit funds focused on “dislocation” resulting from the Covid-19 crisis. Both funds were raised in just 8 weeks. Some respondents to the Intertrust survey also saw existing private equity funds shifting assets to target distressed opportunities. According to the report, 41 percent believed managers would reallocate unfunded commitments to “new distressed or non-traditional strategies.”
