Thursday 31st July 2014
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TICKER - WEDNESDAY - JULY 30th: Avanti Mining Inc has entered into a debt financing mandate letter with a syndicate of six lenders to provide secured debt finance facilities worth $612m to develop the Kitsault molybdenum mine. Lenders include BNP Paribas, Caterpillar Financial Services Corporation, Export Development Canada, Korea Development Bank, Mizuho Bank and UniCredit Bank. The facility set out in the term sheet is comprised of $500m senior debt for a term of 10.5 years, $42m in equipment finance for a term of 5 years and $70m in the form of standby cost over-run facilities for a term of 8 years. The interest rate is LIBOR based, loan repayments are semi-annual or quarterly (for equipment finance) and there are mandatory prepayment provisions of a portion of excess free cash flow. The facility will include customary provisions for a financing of this type, including fees, representations and warranties, covenants, events of default and security customary for this type of financing - Jupiter Fund Management reports strong investment performance with assets under management rising to £33.1bn, with the asset manager benefitting from net mutual fund inflows of £875m over the first half of this year. The firm says it has maintained operating margins above 50%. Maarten Slendebroek, chief executive, says “We are pleased with the progress being made on the implementation of our growth strategy during the first half of 2014. The Board’s intention to increase cash returns to shareholders through a combination of ordinary and special dividends reflects this progress and confidence in our future growth potential. We believe this approach will allow shareholders to participate in our organic growth story while receiving an attractive yield.” There will be an analyst presentation to discuss the results on July 30th at 9.00am at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD and is also accessible via a live audiocast for those unable to attend in person - CME Clearing says it will remove the Exchange-For-Swap (EFS) identifier for all NYMEX, COMEX and DME exchange futures executed in accordance with CME Rule 538 (Exchange for Related Positions). CME products were removed from EFS eligibility in October of 2010, and CBT products were removed from EFS eligibility in July of 2012. With this final transition, EFS will no longer be a supported transaction type at CME. The EFS transaction type has been harmonized into, and falls under, the Exchange for Risk (EFR) transaction referenced in Rule 538. EFR transactions are privately negotiated transactions (PNT) and include the simultaneous exchange of an Exchange futures position for a corresponding OTC swap or other OTC instrument. In addition, NYMEX, COMEX and DME exchange products will continue to be eligible for Exchange for Physical (EFP) and Exchange of Options for Options (EOO) privately negotiated transactions. Currently, an EFS transaction is represented as a TrdTyp=”12” on TrdCaptRpt messages. Effective on the above date, the TrdTyp value for these transactions should be submitted as “11” (EFR). CME Clearing will reject any NYMEX, COMEX, or DME exchange privately negotiated futures message sent as an EFS. The trade will subsequently need to be resubmitted with a valid transaction type to CME Clearing. Additionally, CME Clearing will re-categorize the Exchange of Options for Options (EOO) transaction type for all CME, CBOT, NYMEX, COMEX, and DME products. Currently, an EOO is represented as an option on an exchange for swap (EFS) in clearing and on FIXML TrdCaptRpt messages. Going forward, an EOO transaction will be represented as an option on an Exchange for Risk (EFR) - Chi-X® Japan Limited, a wholly owned subsidiary of alternative market operator Chi-X® Global Holdings LLC, says local brokers Yamawa Securities Co., Ltd. and Ark Securities Co Ltd., have commenced trading on Chi-X Japan, bringing the total number of trading participants to 23. Yamawa Securities and Ark Securities will access its market centre through Intertrade’s platform - The upgrade of the cities of Bogota and Medellin by Moody’s follows the upgrade on Colombia's sovereign ratings and reflects the close economic and operational links that these cities have with the central government. The rating action also reflects Bogota and Medellin's relatively solid financial metrics and moderate debt levels. The ratings assigned to both Bogota and Medellin are supported by their strong economic position in Colombia that includes a high level of own-source revenues and diversified local economies. The positive prospects of economic growth in the country translate in supportive conditions for both cities through higher local economic growth and own-source revenue growth. The assigned ratings also consider the close oversight that Colombia's central government exerts over the country's regional and local governments. Bogota and Medellin show solid governance and management practices that have supported historical low to moderate debt levels and moderate cash financing requirements, says the ratings agency. Between 2011 and 2013, Bogota's cash financing requirements averaged -5.7% of total revenues and net direct and indirect debt averaged 18.4% of total revenues. Medellin's cash financing requirements over the same period averaged -5.8% of total revenues and debt levels averaged 17.6% of total revenues.

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The European Review

By Patrick Artus, chief economist at Natixis

The adjustment in France has not even begun

Wednesday, 30 May 2012 Written by 
The adjustment in France has not even begun The French have the impression that their economy has worsened significantly and that austerity policies are weakening employment and living standards yet this inevitable adjustment is still to come Indeed, when examining the situation of public finances, competitiveness, foreign trade, the sophistication of products and businesses, it is clear that the process of adjustment and improvement has hardly begun in France, whereas it has progressed a lot on some criteria in Spain, Italy and Portugal, and of course long ago in Germany. http://www.ftseglobalmarkets.com/

The French have the impression that their economy has worsened significantly and that austerity policies are weakening employment and living standards yet this inevitable adjustment is still to come Indeed, when examining the situation of public finances, competitiveness, foreign trade, the sophistication of products and businesses, it is clear that the process of adjustment and improvement has hardly begun in France, whereas it has progressed a lot on some criteria in Spain, Italy and Portugal, and of course long ago in Germany.

The impression in France of a significant deterioration of the economy and living standards

The French are extremely pessimistic about the economy and living standards, as showed by a recent international optimism poll conducted by BVA – Gallup international. Yet, the French unemployment rate is lower than Spain and Portugal, and households' real income and spending are still increasing while they are falling in Spain, Italy and Portugal. The French fear a reduction in of social welfare, even though the welfare system has actually become more generous at a time when it has declined in Germany.

State of progress in France’s adjustment

In terms of the adjustment process, let us look at French public finances, competitiveness and foreign trade, and the financial position of French businesses and their product sophistication.

1. Public finances

In 2012, only Spain will still have a fiscal deficit higher than that of France. Meanwhile, the debt ratio will continue to increase in France at a time when it is falling in Germany and has stabilised in Italy.

2. Competitiveness, foreign trade

France and Italy have a higher unit wage cost than Germany, which explains the continuing losses of export market shares for these two countries; whereas Spanish and Portuguese exports, where producer costs are low, are now growing rapidly.

Indeed, France has a large trade balance deficit in manufactured goods yet Spain and Portugal now have an even trade balance. Meanwhile, Italy and Germany have trade balance surpluses. As long as international capital mobility remains low in the euro zone, due to the “renationalisation” of investors' portfolios caused by the crisis; countries will be subject to an external balance constraint. Indeed, France is the only country that has not yet reduced its current-account deficit.

An improvement in foreign trade can be achieved either through an improvement in cost-competitiveness, hence a fall in wage costs, or through a contraction of domestic demand, which reduces imports. At present, the unit wage cost is increasing faster in France than in Germany and all the other struggling euro-zone countries causing domestic demand to continue to increase instead of fall as in Spain, Italy and Portugal.

3. Financial position of businesses and product sophistication

In contrast to other euro-zone countries, the financial position of French businesses continues to deteriorate. It is clear that the deterioration of corporate profitability is due to the low level of product sophistication in French industrial output, which means that French businesses find it harder to pass on rises in production costs to consumers, contrary to what can be seen in Germany, Spain and even Portugal. This is extended by France’s slow productivity gains (efficiency in producing products), which are recovering in Spain and Portugal.

All in all, practically everything remains to be done in France:

France still needs to reduce its fiscal deficit, improve competitiveness/ foreign trade, and restore profitability (productivity) and product sophistication.

Meanwhile, these adjustments have been completed in Germany and are progressing well in the other euro-zone countries. Italy and Portugal now have small fiscal deficits; Spain and Portugal have seen improvement in cost-competitiveness; external deficits have been reduced in Italy, Spain and Portugal while both corporate profitability and productivity have also improved; and Spanish and Portuguese products have become more sophisticated as shown from their ability to pass on higher production costs to consumers.

This all points to a risk of more restrictive fiscal policies in France, a fall in wages, and efforts to restore productivity by businesses (as in Spain and Portugal), which will inevitably be costly in terms of employment.

Patrick Artus

A graduate of Ecole Polytechnique, of Ecole Nationale de la Statistique et de l'Adminstration Economique and of Institut d'Etudes Politiques de Paris, Patrick Artus is today the Chief Economist at Natixis. He began his career in 1975 where his work included economic forecasting and modelisation. He then worked at the Economics Department of the OECD (1980), before becoming Head of Research at the ENSAE. Thereafter, Patrick taught seminars on research at Paris Dauphine (1982) and was Professor at a number of Universities (including Dauphine, ENSAE, Centre des Hautes Etudes de l'Armement, Ecole Nationale des Ponts et Chaussées and HEC Lausanne).

Patrick is now Professor of Economics at University Paris I Panthéon-Sorbonne. He combines these responsibilities with his research work at Natixis. Patrick was awarded "Best Economist of the year 1996" by the "Nouvel Economiste", and today is a member of the council of economic advisors to the French Prime Minister. He is also a board member at Total and Ipsos.

Website: cib.natixis.com/research/economic.aspx

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