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Coronavirus Diligence Briefing

Our briefing for Tuesday May 5, 2020:

May 6, 2020 12:25:45 PM

  • In the United States, it’s a case of good news and bad news. First, the good news. The country saw its daily death toll stay around 1,000, the first time they have been around that number in a month as New York state, the country’s epicentre for the virus, has seen a decline in their numbers. Now the bad news: with many states easing restrictions, including California this Friday, multiple media reports are citing an influential coronavirus model that is predicting as many as 3,000 deaths a day in America by June 1st. California is the country’s largest state with close to 40 million people.

  • In Canada, Quebec Premier Francois Legault has pushed back its government’s plan to reopen its largest city from May 11th to May 18th. Stores in Montreal with entrances to outside streets were going to be permitted to open on May 11th, but the city’s public health director has not seen a flattening of the curve yet. The island city had 350+ new cases and 45 deaths a couple of days ago. In total, Montreal has seen over 16,000 confirmed cases and over 1,400 deaths, most of those deaths are seniors in long-term care homes.

  • The United Kingdom now have the grim distinction of having the most deaths due to COVID-19 in Europe, surpassing Italy. Government figures have coronavirus related deaths in the UK at 29,427 while Italy’s latest official figure is 29,316. Secretary of State Dominic Raab tried to downplay the latest numbers saying, “I don’t think you can make the international comparisons you are making at this stage – at least, I don’t think you can make them reliably.”

  • Doctors at a Paris hospital are saying they’ve found evidence of a patient being admitted in December who was infected with COVID-19. The patient was first diagnosed with pneumonia on December 27th when they actually had coronavirus, which was discovered after a recent retest of the swab taken at the time. The first official reports of the coronavirus in France were reported on January 24th, 2020 from two people who had a history of travel to Wuhan, China.

  • Similar news is circulating in Sweden with their chief epidemiologist telling local media they could have had their first case in November or December. The country’s first official case wasn’t noted until January with a woman returning from a trip to Wuhan.

  • The Philippines telecommunications body has ordered the country’s leading broadcaster, ABS-CBN Corp. to cease operations on Tuesday. President Rodrigo Duterte has repeatedly threatened to block the renewal of the station’s license after the broadcaster refused to air his campaign commercials during the 2016 presidential election. Government opposition lawmakers have noted the decision Is poorly timed with the country in the midst of a pandemic and the media playing an important role to inform the public.

  • Australian and New Zealand government officials are in meetings to establish a COVID-safe travel zone between the two countries, which would allow residents to travel freely between the two nations without a need to quarantine. Australian Prime Minister Scott Morrison invited New Zealand Prime Minster Jacinda Ardern to join a national cabinet meeting. This marked the first time a New Zealand head of state had attended an Australian national cabinet meeting, or similar gathering since World War II. Both countries are in fairly good shape in regards to the coronavirus. New Zealand hadn’t reported any new cases in the past two days, while Australia recorded only 14 news cases between Sunday and Monday.

Covid-19 – Due Diligence And Asset Management

Goldman Sachs CEO: Return to Work Will be Gradual

Brief: Goldman Sachs Group Inc is working on a strategy to gradually return staff to working in offices worldwide, the bank’s chief executive told staff on Tuesday in an internal memo viewed by Reuters. Goldman Sachs staff in Hong Kong, mainland China, Sweden and Israel have already started returning to work in phases, according to the memo, which was verified by a Goldman spokeswoman. “However, in certain cities, such as New York and London, it will take longer before we start to slowly increase the number of people in our offices,” stated the memo, which was signed by Chief Executive Officer David Solomon, President John Waldron and Chief Financial Officer Stephen Scherr. 

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Virus Lockdown Takes Toll on Frazzled Compliance Teams

Brief: The thought of a single banker spilling company secrets on a personal phone is a compliance worker’s worst nightmare. The Covid-19 lockdown and the sudden surge in makeshift home-working setups has multiplied those fears by hundreds of thousands. The coronavirus outbreak is taking its toll on the City’s compliance workers tasked with tracking the behaviour of employees scattered throughout the UK. The crisis has placed huge pressure on already stretched financial services compliance teams to get the right systems and controls in place. And it’s reigniting old tensions with bankers in the front line. Financial News spoke with several senior compliance officers and traders. All asked to remain anonymous to avoid a backlash from their colleagues or regulators.

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Victoria’s Secret Partnership with Sycamore Partners Implodes after Coronavirus

Brief: Sycamore Partners was all set to acquire a majority stake in Victoria's Secret. For the lingerie brand's parent company L Brands, it was all part of the plan to spin off one of its most recognizable properties.But now, after a global pandemic and a lawsuit filing, the deal with Sycamore has officially fallen apart, according to a statement retail holding company L Brands sent out Monday In a statement sent to Business Insider, L Brands announced that it had come to a "mutual agreement" with Sycamore to "terminate" the company's previously agreed-upon sale of Victoria's Secret. Private equity firm Sycamore Partners had previously been interested in acquiring a 55% stake in the apparel and lingerie brand for $525 million. The private equity firm valued Victoria's Secret at $1.1 billion in February.

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ESG Has Been a Win for Stocks, Not so Much for Bonds Amid Covid-19

Brief: The market convulsions caused by the coronavirus pandemic and efforts to halt its spread might offer some answers to one of fund managers’ biggest questions: What’s the affect on financial performance of investing in companies that make a positive contribution to society and the environment? Allianz Global Investors, which oversees about $615 billion for clients, offered some insights with an analysis of how its sustainable and responsible investment mutual funds performed. The asset manager reviewed the “downturn resilience” of its funds and found that the vast majority of its sustainable strategies outperformed broad market benchmarks in the first quarter. In the past decade, fund managers who consider environmental, social and governance issues alongside regular financial metrics have gone from outliers to the mainstream with more than $30 trillion of assets now managed using a broad definition of the ESG approach.

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Hong Kong’s Exchange Fund Sees Record $11 Billion Quarterly Loss

Brief: Hong Kong’s wealth fund suffered a HK$86.1 billion ($11 billion) loss in the first quarter, its biggest ever, as stocks tumbled globally. The Exchange Fund, managed in its current form by the Hong Kong Monetary Authority since 1998, lost HK$111.5 billion on its portfolio of domestic and foreign stocks, while bonds gained HK$54.4 billion in the quarter, according to a presentation by HKMA Deputy Chief Executive Howard Lee to lawmakers Monday. The HK$4 trillion fund acts as a backstop to ensure the stability of Hong Kong’s currency and as a stabilizer in times of crisis. It joins other funds around the world in posting losses at the start of the year as markets tumbled due to the coronavirus outbreak. The MSCI global stock index slumped 22% in the first three months of the year. The fund clawed back some losses in April, seeing gains of about HK$30 billion to HK$40 billion, according to Lee.

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Ultra-Rich Families With Cash on Hand Pile Into Private Debt

Brief: Michel Andre Heller is looking to lend when credit is tight. The London-based real estate adviser to a billionaire family from the Middle East is lining up deals of as much as 5 million pounds ($6.2 million) for U.K. residential developments and more than double that amount alongside other investors for bigger properties, such as hotels or offices. The private debt market “is more than trickling along for us,” Heller said. “From a family office perspective, you don’t want to take on too much risk, but you still want to deploy capital.” As the coronavirus upends financial markets, family offices with money to spend are boosting private debt and credit holdings to take advantage of cheaper valuations and avoid the volatility of stock markets. Meanwhile, central banks are keeping economies afloat with cheap-money policies and negative yields, making assets that used to preserve and grow family fortunes less effective.

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Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Topics:Coronaviruscovid-19