CLOs

As investors renew their demand for speculative-grade corporate loans, businesses are enjoying the benefits, reports the Wall Street Journal (17 February, Goldfarb). Borrowing costs have been slashed by billions of dollars as investors press on with one of the biggest refinancing waves on record. BJ's Wholesale Club Holdings, Calpine Corp., and other companies have lowered their interest rates on US$117 billion in loans. In January alone, rates decreased on US$95 billion in loans, the second-largest monthly total in records going back to 2002. Businesses prefer loans over bonds precisely because they are relatively easy to refinance. Though companies with speculative-grade credit ratings often are prevented from refinancing bonds for at least three years after they sell them, they typically face only a small charge for refinancing speculative-grade, or leveraged, loans within six months of a sale, and no penalty after that. Companies tend to ask investors to lower interest rates on existing loans rather than issue new loans, and investors typically agree if demand for loans is strong.

From "Companies Seize on Loan Demand with Near-Record Refinancing Push"
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French Foreign Minister Jean-Yves Le Drian offered a grim warning to his UK counterparts ahead of post-Brexit trade negotiations. The BBC (17 February) reports that Le Drian predicted the two sides would "rip each other apart" in their efforts to claim the advantage in the negotiations. The United Kingdom has said it wants to complete a UK-EU trade deal by the end of 2020, but Le Drian cautioned that it would be tough to complete the trade deal in that time frame. The United Kingdom formally left the European Union two weeks ago, but will continue to trade like a member through the transition period, set to end on 31 December. Talks on the future trade deal are expected to begin next month after the 27 EU members agree on the bloc's negotiating mandate. UK Prime Minister Boris Johnson's government has said it wants a deal based on "friendly cooperation between sovereign equals." But Le Drian said Sunday that the European Union and United Kingdom remain far apart on a number of key issues, jeopardizing the sides' ability to negotiate a trade deal by year's end. European Commission President Ursula von der Leyen and chief negotiator Michel Barnier have also cast doubt on Johnson's aim to reach a comprehensive agreement by the end of December.

From "Brexit: France Warns United Kingdom of Bitter Trade Negotiations"
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General Motors (GM) confirmed that it will pull out of Australia and New Zealand, retiring its 160-year-old Holden brand and selling its factory in Thailand. The Financial Times (17 February, Smyth, Shepherd) reports that the moves are part of GM's global restructuring plan. China's Great Wall Motors has agreed to buy the Thai manufacturing plant. By the end of 2020, GM will pull its Chevrolet brand from Thailand. Mary Barra, GM's CEO and chair, said it was part of GM's plan. "We are restructuring our internal operations, focusing on markets where we have the right strategies to drive robust returns and prioritizing global investments that will drive growth in the future of mobility," Barra said, adding that GM is especially interested in innovations in electric and autonomous vehicles. GM has recently pulled back from markets where it has underperformed, leaving Russia, India, and Europe. The automaker plans to focus instead on successful markets, including the United States, China, South Korea, South America, and the Middle East. But Australian Prime Minister Scott Morrison slammed GM for shutting down its Australian operations without first consulting the government, which provides AUS$2 billion in industry assistance.

From "GM to Exit Australia and New Zealand as Part of Global Overhaul"
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Investors have given solar power the financial means to use industrial-scale battery packs to capture noontime surpluses and store them for use when the sun goes down. Solar farms across the United States use the batteries to capture and store energy that is used after sunset to power lights, appliances, air conditioners, and more, notes the Financial Times (17 February, Meyer). Fund managers, power producers, utilities, and tech companies have all backed industrial batteries for solar farms, supporting the farms and making it possible for a rise in renewable energy. States across the country have embraced solar energy as the cost of solar panels and lithium ion batteries have dropped drastically in recent years. Meanwhile, the government has encouraged investment in battery-assisted solar energy by offering a tax credit on batteries installed alongside renewables. Though batteries have some drawbacks, including the fact that they lose charge after several hours, they provide a smart solution to an issue that plagued California generators last year: lost energy. Solar and wind generators in the state were forced to discard almost one million megawatt-hours of production in 2019 because there was nowhere to store it.

From "US Solar Industry Powers Ahead as Investors Back Batteries"
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Unione di Banche Italiane SpA (UBI), Italy’s fifth-largest bank, has revealed some details of its three-year strategic plan. Bloomberg (17 February, Sirletti, Remondini) reports that under the plan, UBI could pay out 40 percent of net income to shareholders on average, and could make an extra payment if capital is strong enough. The bank also confirmed Monday that it plans to eliminate about 2,030 positions and close 175 branches over the next three years. The position eliminations account for some 10 percent of UBI's workforce. By the end of 2022, UBI is planning to reduce costs to 58.1 percent of income from the current 62.1 percent. UBI CEO Victor Massiah said the bank is focused on its standalone strategy, but is open to merger opportunities if the situation is right.

From "UBI Plans to Pay Out 40 Percent of Profit in Dividends in 2022 Plan"
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The Trump administration’s push to prevent China from dominating the market for advanced technologies is reportedly alarming US firms, putting it on a collision course with the same American companies it wants to protect. Tech companies specializing in microchips, artificial intelligence, biotechnology, and other industries have voiced worries that the push to restrict China could backfire on the United States, isolating US firms away from technological advances and eroding their advantage. The concerns, which have been simmering for months, have taken on new urgency as the Commerce Department considers adopting a sweeping proposal that would allow the United States to block transactions between American firms and Chinese counterparts. Foreign firms have already shunned US components and technology over fears they could abruptly lose access to parts they need, and the new Commerce proposal could exacerbate that situation. The New York Times (17 February, Swanson, McCabe) notes top administration officials are set to meet on 28 February to consider whether further restrictions against China are needed. There is growing bipartisan consensus in Washington that China poses a security threat and that the United States must protect domestic industries to retain a technological edge, but the initial trade deal signed last month with Beijing did little to dispel security concerns. Tech companies have said they appreciate and support the efforts to preserve US security, but they have specifically objected to the Commerce proposal.

From "Trump Effort to Keep US Tech Out of China Alarms American Firms"
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Germany's Thyssenkrupp has shortlisted two private equity consortia for the sale of its €16 billion elevator unit, reports Reuters (17 February, Steitz, Käckenhoff, Schuetze et al). The move comes as a blow for Finland's Kone, which has withdrawn from the closely-watched deal. The elevator buyout could potentially be Europe's biggest private-equity deal in 13 years. The transaction is now in its final stages, and a decision could be made as early as next week when Thyssenkrupp's supervisory board is scheduled to meet. One consortium in the running consists of Blackstone, Carlyle, and the Canadian Pension Plan Investment Board, while the other is led by Advent and Cinven. Thyssenkrupp said in a statement on Monday that the two consortia "have submitted more concrete offers," as Thyssenkrupp and Kone shares both fell following news the tie-up was off the table. While Thyssenkrupp has said it wants a complete sale of its most profitable business, the company has maintained that it could proceed with an initial public offering (IPO) this summer if the consortia deals fall through.

From "Thyssenkrupp Shortlists Buyout Firms for Elevator Unit, Kone Out"
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The US Environmental Protection Agency (EPA) is continuing its efforts to roll back regulations against mercury and toxin emissions against the objections of the US power industry, reports the Washington Post (17 February, Eilperin, Dennis). Exelon, one of the nation’s largest utilities, directly appealed to the EPA to stop its regulatory rollback, characterizing the effort as "an action that is entirely unnecessary, unreasonable, and universally opposed by the power generation sector." Kathy Robertson, a senior manager for environmental policy at Exelon, said the industry has complied with the regulations for a long time, and companies have observed positive benefits of compliance. Exelon is not alone in voicing objections to the regulatory rollback. Unions, business groups, and electric utilities have all told the EPA it should back away from the plans, but coal executives have lobbied for the rollback. The EPA reportedly plans to announce that it is not "appropriate and necessary" for the government to limit harmful pollutants from power plants. While the mercury regulations will still technically remain in place, the government will not be able to count collateral benefits, like reducing soot and smog, when it calculates limits for toxic air pollutants. Experts have joined the power industry in objecting to the planned rollback. Professor Michael Greenstone, an energy and environmental economist, said the rollback could lead to a slippery slope. Calling the rollback "an incredibly sharp sword," Greenstone predicted that "there’s no reason that sword can’t be used to roll back other regulations that have produced extraordinarily large benefits for American society."

From "US EPA About to Weaken Emissions Rule Despite Opposition from Power Industry"
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Jurors in federal court in Cape Girardeau, Mo., on Saturday awarded US$265 million to a farmer who alleged that Bayer's dicamba herbicide destroyed his peach orchards, reports Bloomberg (14 February, Feeley, Bross, Loh). It was the first US trial over the herbicide, opening a new front against the beleaguered Bayer. The company has sustained significant financial penalties as it works to settle claims its weedkiller Roundup causes cancer. But Bayer must now shift its attention to dicamba, as it faces more than 140 lawsuits over allegations that dicamba wreaked havoc across the Midwestern United States when it drifted onto crops that weren’t engineered to resist it. Two German industrial giants are already involved in the dicamba lawsuits, but Bayer is expected to be the focus of the legal challenges. Bayer in 2018 acquired Monsanto, which produces both Roundup and dicamba. The lawsuits put added pressure on Bayer CEO Werner Baumann, who staked his career on the US$63 billion Monsanto takeover.

From "Bayer Faces More Monsanto Pain with Trial Loss on Dicamba"
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The British nanotechnology company Nanoco said Monday it has filed a patent infringement lawsuit against Samsung and affiliates. The lawsuit, which was filed in a Texas district court, pertains to quantum dot technology, notes Reuters (17 February). Nanoco uses quantum dots to make vibrant screen displays. It alleged that Samsung intentionally infringed Nanoco patents, and is seeking a permanent injunction from "further acts of infringement and significant monetary damages." Nanoco’s Chairman Christopher Richards said the company has historically worked alongside Samsung, but was left disappointed when Samsung "ended the collaboration and launched its QD-based televisions without entering into either a licensing or supply agreement with Nanoco."

From "Quantum Tech Company Nanoco Files Patent Infringement Lawsuit Against Samsung"
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The tech giant Apple warned Monday that it expects to fall short of its revenue goals in the first quarter, with the Washington Post (18 February, Hawkins, Albergotti) reporting that the profit slowdown can be attributed to the coronavirus outbreak. Apple released a statement to investors clarifying that while its factories in China are reopening, iPhone production is moving slower than the company originally anticipated. "These iPhone supply shortages will temporarily affect revenues worldwide," the company cautioned. Apple revenue has also been affected by low demand in China, where many of the company's stores have temporarily shuttered as the coronavirus continues to spread. Apple said the situation was still changing, and pledged to provide more information in its April earnings call. The company told investors that it remains "fundamentally strong," and predicted that the revenue shortfall was a temporary problem caused by the public health crisis. Over the past decade, Apple has largely relied on harnessing China's labor force to churn out its signature iPhones, but that dependency on China is now a risk. Gene Munster, an analyst with Loup Ventures, said because there is little diversity in Apple's supply chain, the coronavirus is a dose of "tough medicine" for the tech giant. Munster predicted Apple's second-quarter revenue could be as much as US$10 billion below the projected US$65.3 billion.

From "Apple Says the Coronavirus Will Cause It to Miss Its Revenue Goals"
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Google is in discussions with some of France's biggest news publishers about making direct payments for content, with the Financial Times (14 February, Barker) reporting that is a potentially significant shift by the search platform towards a model used by Facebook in the United States. In exploratory discussions with Le Monde, Le Figaro, and other French media groups, Google explored developing new products that would include financial deals to license news. Richard Gingras, the vice president for news at Google, said the tech giant was committed to "help[ing] people find quality journalism." The discussions are reportedly in early stages, but it could signal a shift to a Facebook-style policy. In October, Facebook launched a news tab feature in the United States after reaching multimillion dollar deals with BuzzFeed, the New York Times, the Wall Street Journal, and other outlets.

From "Google in Talks with French Publishers on Paying for News"
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Amazon and Walmart’s Flipkart are among online retailers demanding that India scale back a proposed tax on third-party sellers on their platforms, saying the burden of compliance will hurt the fledgling industry, according to Reuters (14 February, Kumar, Phartiyal). The online retail industry is braced for a possible 1 percent tax on each sale made by sellers on their platforms from April if the proposal is approved by parliament next month. The move is part of a broader plan by Prime Minister Narendra Modi’s government to increase tax revenues and counter a sharp economic slowdown due to weakening consumer demand. But the tax will hurt the country’s fledgling e-commerce sector, according to a presentation prepared by the Federation of Indian Chambers of Commerce and Industry. “(It) would cause irreparable loss to the entire industry with increased compliance burden,” the lobby group said on behalf of e-commerce companies. “This will also lead to reduced trading activity.” Some third-party sellers are also pushing back against the tax, arguing it would negatively impact their working capital, adding that they already contribute to a nationwide sales tax.

From "Amazon, Flipkart Challenge New Indian Tax on Online Sellers"
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The US chain store Rutter's disclosed a security breach at locations in Pennsylvania and West Virginia, reports ZDNet (14 February, Cimpanu). According to the company, hackers muscled their way into the stores' network system and planted malware that collected payment card details as they were being processed. Rutter's said most of the stores were impacted by malware between 1 October, 2018, and 29 May, 2019, but urged impacted customers to check out its website because a few stores had a slightly altered timeline. Rutter's said the malware collected data from payment cards swiped through point-of-sale devices installed inside convenience stores and some of its fuel pumps. The malware stole names, card numbers, expiration dates, and internal verification codes. Rutter's said a third party alerted it to the breach. Upon discovering the malware, Rutter's immediately took steps to remove it, called law enforcement officials, and began notifying impacted customers.

From "Rutter's Store Chain Discloses Security Breach Involving POS Malware"
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A senior official told Puerto Rico's police this week that the island’s government had unwittingly handed over US$2.6 million to thieves after being fooled by a bogus email message, according to the New York Times (14 February, Rosa, Ayala). Rubén Rivera, the finance director of the government-sponsored Puerto Rico Industrial Development Company, said in the police report that the email message contained instructions to transfer money intended for the public pension system to a different bank account than had been used before. Rivera said his office sent the money to a foreign account on 17 January. The police said the email had been disguised to seem as if it had been sent by a government employee who handles pension fund transfers. The theft was discovered when the pension-system employee called to ask why the money had never arrived. Similar attacks, known as business email compromises, have grown increasingly common across the United States in recent years, often targeting municipalities. A school district in Manor, Texas, said it lost US$2.3 million to a similar fraud in January. Ayala said the development company, known as Pridco, had apparently been tricked out of another US$63,000 the same way in recent months, and that another government entity, the Puerto Rico Tourism Company, had been fooled into transferring US$1.5 million.

From "US$2.6 Million for Puerto Rico’s Pension Fund Went to Hackers Instead"
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Facebook decided Friday to allow a type of paid political message that had sidestepped many of the social network’s rules governing political ads, in a reversal that highlights difficulties tech companies and regulators have in keeping up with the changing nature of paid political messages. The Associated Press (14 February, Ortutay, Seitz) reports that the policy change came days after Democratic presidential candidate Mike Bloomberg exploited a loophole to run humorous messages promoting his campaign on the accounts of popular Instagram personalities followed by millions of younger people. Observers were alarmed at the lack of oversight and clear rules around influencer marketing. Bloomberg’s effort skirted many of the rules that tech companies have imposed on political ads to safeguard US elections from malicious foreign and domestic interference and misinformation, suggesting that there is a loophole that can be exploited by threat actors seeking to spread misinformation. Experts said Facebook's dilemma highlights the challenges of the digital age, when the lines defining advertisements can become blurred.

From "Facebook Reverses on Paid Influencers After Bloomberg Memes"
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London law firms are taking modernizing steps to improve their reputations and shake off the sector's outdated image, reports the Financial Times (14 February, Beioley). For example, the US litigation powerhouse Quinn Emanuel last week adopted gender-neutral forms of address, breaking from the traditional "Dear sir" to a more inclusive policy. The firm suggested using the alternative "Dear colleagues" or "Dear counsel" instead. Richard East, Quinn's senior partner in London, said "[t]he idea is to show that we take gender seriously and are revolutionary and innovative in our thinking." Meanwhile, Pinsent Masons replaced its traditional two-page dress code with a one-line single statement. Rather than providing specific outlines, the dress code advised staff to "dress appropriately for your job, schedule, and stakeholders." The changes come as London law firms have come under pressure for allowing a gender-based wage gap to continue even as women increasingly fill the law field.

From "Law Firms Scrap Dress Codes and 'Dear Sirs' to Modernize Image"
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Yahoo Finance (14 February) reports that Carrols Restaurant Group, Inc. on Friday announced that it has appointed Markus Hartmann as its new vice president and general counsel, effective 18 February. Hartmann has experience practicing law both domestically and internationally, most recently serving as the vice president for technical compliance at Mercedes-Benz Research & Development North America. He also served as a Marine pilot in Desert Storm and Desert Shield. Hartmann obtained his JD from Harvard Law School. Daniel Accordino, the chairman and CEO of Carrols, said Hartmann was a "great addition" to the company, adding that "his varied industry experiences and history of effective leadership" would be a welcome asset.

From "Carrols Restaurant Group, Inc. Names Markus Hartmann as General Counsel"
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Wall Street Journal (17 February, McNish, Dummett) sources are reporting that French train giant Alstom SA has reached a preliminary agreement to purchase Bombardier Inc.'s train business for more than US$7 billion. The deal is the latest move by Canada's Bombardier to dramatically shrink its business after production problems and order delays in its core train unit and US$1.5 billion debt coming due next year. The acquisition could be formally announced as early as Monday if terms are completed.

From "Alstom Reaches Preliminary Deal to Buy Bombardier Train Unit"
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A US jury on Friday found Michael Avenatti guilty in a criminal trial accusing the celebrity lawyer of trying to extort Nike Inc. out of millions of dollars and defraud a youth basketball coach he represented, reports Reuters (14 February, Stempel). Prosecutors argued that Avenatti extorted Nike by threatening to hold a press conference to discuss allegations the sports apparel company made illegal payments to families of college basketball recruits. Jurors deliberated for two and a half days before finding Avenatti guilty. Avenatti, who rocketed to public prominence challenging US President Donald Trump in television appearances on behalf of his former client Stormy Daniels, could get more than 40 years in prison at his sentencing on 17 June. His lawyer Scott Srebnick said Avenatti would appeal. Avenatti also faces scheduled criminal trials this spring in Manhattan on charges he defrauded Daniels out of proceeds from a book contract, and in California on charges he defrauded several other clients and lied to the Internal Revenue Service.

From "Celebrity Lawyer Michael Avenatti Is Found Guilty in Nike Extortion Case"
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