Financial Times Europe - 02 10 2020

2020·11.06 MB·English

WORLD BUSINESS NEWSPAPER
FRIDAY 2 OCTOBER 2020 EUROPE
Not-so-central banks SoftBank’s shift Brand America
Health and finance officials are more Japanese tech group’s conversion China is delighted by damage to US
vital to this crisis into asset manager credibility
— CHRIS GILES, PAGE 19 — BIG READ, PAGE 17 — EDWARD LUCE, PAGE 4
Brussels sues UK over plans to
Briefing
i Rolls advisers baulked over cash call
breach Brexit agreement terms Rolls-Royce’s top advisers on its discounted £2bn
rights issue radically scaled back their underwriting
commitments in the days leading up to the aero-
engine maker’s cash call.
— PAGE 6; LEX, PAGE, 20
i Powers demand ceasefire in Caucasus
Russia, France and the US have jointly demanded a
3 Prospect of ECJ case 3 ‘Good faith’ provisions broken 3 London refuses to back down
ceasefire between Armenian and Azerbaijani forces,
as the death toll from a spiralling territorial conflict
between the neighbours continued to rise.
— PAGE 2
Jim Brunsden — Brussels
Peter Foster and George Parker i Playboy set to return to public markets
London
Playboy, which this year shut
Brussels is suing the UK over plans to down the print magazine that
violate last year’s EU withdrawal was the core of its business, said
agreement, which could lead to Britain it had secured a cash injection
being hauled before the European Court and would return to public
of Justice. markets.
— PAGE 6; LEX, PAGE 20
Ursula von der Leyen, the European
Commission president, said that Brus- i Madrid agrees to national virus curbs
sels had sent a “letter of formal notice” Madrid, Europe’s worst-hit Covid-19 region, is set to
to the UK over prime minister Boris impose new curbs on people entering and leaving the
Johnson's “internal market bill”. The city despite the opposition of the local government,
letter is the first stage of formal EU which pledged to fight the measures in court.
— PAGE 2
“infringement proceedings”.
The commission acted even though i H2O beset by bond payment woes
the UK bill is not yet law because it H2O, a €22bn UK-based investment unit of French
believes Mr Johnson has breached “good bank Natixis, has faced payment issues on illiquid
faith” provisions in last year’s treaty by bond investments, including an unpaid bill from a
even tabling the draft legislation. lingerie maker that appeared to be a default.
— PAGE 8
“This draft bill is by its very nature a
breach of the obligation of good faith i Lapse in Covid relief dents US incomes
laid down in the withdrawal agree- US personal income fell 2.7 per cent, $543.5bn, in
ment,” said Ms von der Leyen. She August after the lapse of emergency jobless benefits
added the draft bill was “in full contra- for millions, raising fears that lower consumption
diction” to the Northern Ireland proto- could damp the economic recovery.
— PAGE 4
col — the arrangements in the with-
drawal agreement intended to avoid a i Google earmarks $1bn for news content
hard border on the island of Ireland. Google has said it will pay news publishers about
Britain has one month to respond $1bn over three years, as it aims to establish new
before Brussels escalates the process. terms of trade with media groups and avoid
Under the terms of last year’s deal, the European legal safety net to protect the integrity of assurances of a level playing field for Britain. A deal on state aid as part of an potentially more costly action by regulators.
— PAGE 8
commission can still initiate infringe- Commission the UK’s internal market.” business, governance arrangements and EU-UK free trade agreement could help
ment proceedings even though Britain president Ursula UK officials played down the signifi- justice co-operation. address UK government fears that the
has left the EU. von der Leyen cance of the legal move and its likely In London there is a growing sense of Irish protocol might be used as a back
Datawatch
The UK government’s bill would allow sent a ‘letter of impact on negotiations. “They are optimism that outstanding differences door for Brussels to continue to dictate
it to override crucial parts of the delicate formal notice’ to always infracting someone,” said one. can be resolved, with Downing Street UK state aid policy after Brexit.
Build UK offshore asylum
compromise that Mr Johnson and the the UK over The dispute over the bill is playing out saying: “We are continuing to work con- “In the end, if there is a deal on the Some 40 per cent
centre 4,000 miles away?
EU negotiated last year on Northern Ire- Boris Johnson’s in parallel to the continuing EU-UK structively to seek to reach an agree- trade talks there will have to be a ‘grand of Britons think it
land — notably on sensitive points internal market trade negotiations. David Frost, the ment with the EU.” bargain’, where the UK drops the offend- (% of respondents) would be a good
around state aid and export documenta- bill UK’s chief negotiator, is in Brussels this Negotiations are continuing to resolve ing clauses of the internal market bill if Good idea Bad idea idea to build an
Johanna Geron/Pool/
tion. Brussels has insisted that the EPA-EFE/Shutterstock week for the ninth negotiating round differences on the implementation of it wants the deal to be ratified on the EU 60 asylum-seekers’
measures must be scrapped. with his EU counterpart Michel Barnier. the Northern Ireland protocol, includ- side,” said a senior EU diplomat with 50 centre on
But UK cabinet office minister EU officials urged caution on the ing a requirement — which the British knowledge of EU thinking. 40 Ascension Island,
Michael Gove told the commission on progress of the talks even after some side rejects — for Northern Ireland busi- Trade talks in Brussels will conclude 30 a British territory
about 4,000 miles
20
Monday that Britain would not back officials in London spoke optimistically nesses to fill out customs forms when today. At stake is whether enough
from the UK,
10
down. of a breakthrough in the discussions. sending goods from the region into progress can be made on sticking points where applicants
0
“We have clearly set out our reasons In closed-door meetings in Brussels, mainland Britain. such as fishing rights and rules on state would remain
Conservative Labour General
for introducing the measures related to Michel Barnier, the EU’s chief Brexit A “zero tariff” trade deal would also subsidies to justify shifting into intensi- party voters party voters population while their claims
the Northern Ireland protocol,” said the negotiator, insisted that progress had to remove the need for tariffs to be paid on fied “submarine” negotiations. Source: YouGov were processed.
UK government. “We need to create a be made in four key areas: fisheries, goods entering Northern Ireland from Markets page 11
FDA widens probe into AstraZeneca
virus vaccine trial after patient fell ill
Donato Paolo Mancini — Rome are continuing to work with the FDA to The Financial Times reported on
facilitate a review of the information Wednesday that the chief executive of
The US Food and Drug Administration
needed to make a decision regarding Moderna Therapeutics, which is devel-
has widened its probe into a trial for the
resumption of the US trial.” oping a potential jab, said the vaccine
coronavirus vaccine that AstraZeneca
One of the people briefed on the mat- would not be ready before the election.
is developing with the University of
US support for Taiwan ter said that the FDA was “being thor- Stephen Hahn, FDA commissioner,
Oxford, according to people briefed on
sparks China sabre-rattling ough” by widening its review, which was said this week that his agency would
the matter.
first reported by Reuters. stick to its vaccine approval criteria
Analysis i PAGE 3 The FDA’s move stems from a patient on The revelation came as the European despite Mr Trump’s pressure, the FT
the UK trial falling ill with unexplained Medicines Agency was set to introduce reported. The regulation of vaccines,
neurological symptoms, believed to be rolling reviews for potential coronavirus which are technically biologics, falls into
consistent with transverse myelitis, jabs, starting with AstraZeneca’s prod- the EMA’s remit, including for the UK,
Austria €3.90 Malta €3.70
Bahrain Din1.8 Morocco Dh45 which led to trials being halted last uct, according to people familiar with which is in a transition period as it
Belgium €3.90 Netherlands €3.90
Bulgaria Lev7.50 Norway NKr40 month. the matter. departs the EU bloc.
Croatia Kn29 Oman OR1.60 Trials in the UK, Brazil and South The move could speed up the assess- Multiple Covid-19 vaccine candidates,
Cyprus €3.70 Pakistan Rupee350
Czech Rep Kc105 Poland Zl 20 Africa, which were all paused after the ment and marketing of any potential backed by large amounts of public cash,
Denmark DKr38 Portugal €3.70
Egypt E£45 Qatar QR15 adverse event was reported, have been inoculations. Drugmakers and regula- are undergoing phase 3 testing — the last
Finland €4.70 Romania Ron17 deemed safe to resume, AstraZeneca tors have been under intense political step before they go to regulators for
France €3.90 Russia €5.00
Germany €3.90 Serbia NewD420 said yesterday. “Regulators in each indi- pressure — especially in the US from approval. Timelines have been com-
Gibraltar £2.90 Slovak Rep €3.70
Greece €3.70 Slovenia €3.70 vidual country determine when trials President Donald Trump, who is seek- pressed from years to months.
Hungary Ft1200 Spain €3.70 can start and they do this in their own ing re-election next month — to deliver The FDA and EMA did not immedi-
India Rup220 Sweden SKr39
Italy €3.70 Switzerland SFr6.20 timeframe,” said the drugmaker. “We a vaccine as soon as possible. ately respond to requests for comment.
Latvia €6.99 Tunisia Din7.50
Lithuania €4.30 Turkey TL19
Luxembourg €3.90 UAE Dh20.00
North Macedonia Den220
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OCTOBER 2 2020 Section:FrontBack Time: 1/10/2020 - 19:11 User: nick.miller Page Name: 1FRONT USA, Part,Page,Edition: EUR, 1, 1
2 ★ FINANCIAL TIMES Friday 2 October 2020
international
Nagorno-Karabakh Spain
Powers demand ceasefire in Caucasus Madrid falls
in line with
orders on
Russia, France and US hundreds more injured after a decades- seen negotiations in the dispute since it and our Azeri brothers and sisters have Mr Erdogan of sending mercenary fight-
condemn escalation but old struggle for control of Nagorno- was set up in 1992, ratcheted up pres- taken matters into their own hands.” ers from Syria to Azerbaijan. Baku has curbing Covid
Karabakh, an Armenia-controlled sure on Turkey. President Recep Tayyip The conflict has raised tensions denied that any “irregular forces” are
Turkey stands defiant region inside Azerbaijan, erupted last Erdogan’s military support for Azerbai- between Moscow and Ankara, which assisting their troops.
weekend in the worst military clashes jan and warmongering rhetoric has already back opposing military forces in Mr Macron said France had evidence
for decades. drawn condemnation from both Mos- the civil wars in Libya and Syria. Russia that Syrian jihadis had travelled from
Henry Foy — Moscow
Laura Pitel — Istanbul “We condemn in the strongest terms cow and Ankara’s Nato allies. has a military base in Armenia and a the Turkish city of Gaziantep, close to Daniel Dombey — Madrid
Michael Peel — Brussels the recent escalation of violence . . . Mr Erdogan, who has broken with mutual defence pact with the country, the Syrian border, to fight in Nagorno-
Madrid is set to impose new coronavi-
The leaders of Russia, France and the US [and] call for an immediate cessation of Ankara’s previous tradition of urging though that does not cover the disputed Karabakh.
rus restrictions on people entering and
have issued a joint demand for an hostilities between the relevant military de-escalation in the long-running con- territory. Mr Erdogan yesterday reiterated a
leaving the city despite the opposition
immediate ceasefire between Armenian forces,” presidents Vladimir Putin of flict, rejected the ceasefire demand. Russia resents efforts by Mr Erdogan promise that Turkey would continue to
of the regional government, which
and Azerbaijani forces, as the death toll Russia, Emmanuel Macron of France “It is not acceptable that the Minsk to expand Turkey’s influence in the his- support Azerbaijan “in every way that
pledged to fight the measures in court.
from a spiralling conflict between the and Donald Trump of the US said in a group is still in search of a ceasefire,” he torically Moscow-dominated Caucasus we can”. “The path to peace in this
neighbours over a territorial dispute joint statement. said in a speech. “In order for there to be region through its warm ties with region is the withdrawal of Armenian The region is the worst hit by Covid-19 in
continued to rise. The demand by the co-chairs of the a solution, the occupiers must withdraw Azerbaijan. occupation from every inch of Azerbai- Europe, reporting 49,000 cases in the
Dozens of people have been killed and Minsk group, the body that has over- from these lands. It’s time for results, Both Moscow and Paris have accused jan’s soil,” he added. past fortnight and an infection rate of
735 per 100,000 people over the period.
After days of confrontation with cen-
tral government, Isabel Díaz Ayuso,
head of the regional administration,
Hong Kong
said yesterday that Madrid would
implement a health ministry order that
Riot police restricts access to Spain’s capital and
nine outlying municipalities.
“This region is not in rebellion,” Ms
target protests
Díaz Ayuso said. “We will comply
strictly with all the orders . . . but we
will go to the courts to defend the legiti-
mate interests of Madrileños.”
Hong Kong deployed thousands of The conflict over the measures
riot police yesterday to quell one of reflects the failure of Spain’s often bit-
the territory’s first attempts at large terly polarised national and regional
co-ordinated protests since China governments to keep the pandemic
imposed a tough national security under control since the formal end of
law on the city in June. the country’s lockdown in June.
Police also targeted journalists Madrid’s centre-right regional admin-
covering the demonstrations, which istration, a political foe of Prime Minis-
were held to mark China’s National ter Pedro Sánchez’s leftwing national
Day, in the latest move to crack down coalition, is keen to avoid new restric-
on Hong Kong’s freewheeling press. tions that apply to the whole of the capi-
Local media said the government tal and to protect the region’s economy,
deployed 6,000 officers to secure the the biggest in Spain. But critics say
city. Police screened whole streets of Madrid has responded too slowly and
shoppers for evidence they were halfheartedly to the crisis.
protesters and placed several mostly Under the rules, people will not be
young people, their hands secured able to enter or leave the city of Madrid
with cable ties, on to buses. except for work, education or other per-
Police said they made 86 arrests for mitted reasons. Bar service will be
illegal assembly including four banned, restaurants will be forbidden
politicians from district councils. to accept new customers after 10pm
Primrose Riordan and Nicolle Liu and residents asked to avoid unneces-
sary journeys.
Anthony Kwan/Getty Images The central government had given the
region 48 hours to comply with the
curbs. But when asked on Wednesday
Interview. Hubertus Heil night whether Madrid would fall into
line, Enrique Ruiz Escudero, the region’s
Germany embraces law reforms for homeworking era top health official, had indicated that it
would not.
Mr Ruiz Escudero had argued that the
ministry’s order — which in theory
applies to hard-hit municipalities any-
technological progress, new business a way of cushioning people from the gaining, a pillar of Germany’s social similar policies. He intends to push for where in Spain — was “generic”, arbi-
Labour minister rejects fears
models and higher productivity into worst of the economic slowdown. market economy. Remote workers may rules holding gig economy companies trary and lacked legal validity because it
over outsourcing of jobs and progress not only for a few, but for many “The fundamental lesson of this crisis also struggle to organise when they do more accountable for workers’ welfare. was not unanimously backed by Spain’s
people. How do we turn technological is that a strong welfare state not only not meet face to face. Mr Heil said his He acknowledged that negotiations regions.
lower employment standards progress into social progress?” helps people but has an economically law would protect collective bargaining for a European minimum wage were The order, which has been endorsed
The pandemic has pushed many stabilising effect,” Mr Heil said. rights but did not offer details. “There unlikely to be completed during the by most regions, imposes the new
employers around the world into a The Social Democrat announced are already combinations of such mod- presidency. Berlin’s efforts had been restrictions in cities with a level of more
Erika Solomon — Berlin
forced experiment in mass mobile plans for the law in June, though the els, of wages and bonuses . . . But I am slowed by the crisis as member states than 500 coronavirus cases per 100,000
Germany is to press ahead with plans to work. While it offers companies scope draft may receive only hesitant support not in favour of abolishing classic wage tried to maintain cohesion while remote people over two weeks, where more
give people the legal right to work from for cost savings, many governments are systems. Companies and employees will working made decision-making harder. than 10 per cent of coronavirus tests are
home, as the pandemic prompts gov- looking for ways to regulate workers’ always have different interests. We have “It is not always easy to negotiate in positive and where more than 35 per
ernments to consider significant welfare away from the office. Hubertus Heil: to balance these interests fairly.” video conferences,” he said. cent of intensive care beds are occupied
Labour minister
reforms in the world of employment. France is relying on a 2017 law that Mr Heil accepted not all jobs would Other measures Mr Heil has endorsed by Covid-19 patients.
says a strong
Hubertus Heil, labour minister, said limits the extent to which employees are benefit and gender disparities remained involve a review of German labour regu- At present, the only urban centres in
welfare state ‘has
in a Financial Times interview a draft obliged to answer phone calls and an economically a challenge. “There is the cliché, which lations. He has proposed measures to Spain where the criteria would apply are
law to be published in a few weeks emails outside the office, while Spain, stabilising effect’ is unfortunately often true, that men go prevent exploitation of migrants in the the city of Madrid and the nine munici-
aimed to give people the option of work- Greece and Ireland want to introduce into their home office and close the door meat industry and backs a law that palities in the greater region — in part
ing from home when possible and to reg- fresh homeworking legislation. from Angela Merkel’s Christian Demo- while women working from home are would hold companies liable for human because of the acute pressure the sec-
ulate their activity, such as limiting Spain has approved decrees that crats, his party’s senior coalition part- simultaneously taking care of children.” rights and environmental violations at ond coronavirus wave is putting on the
hours. The measure would seek to rein- make employers liable for work-related ner. Many business leaders close to the But he said his plan could not be every step of their supply chain. region’s hospitals.
force rights and set boundaries for the costs. Germany, once a laggard in its CDU say the legislation is unnecessary. blamed for outsourcing or for the jobs The CDU says the draft law puts com- Ms Díaz Ayuso’s administration said
increasingly blurred lines between per- attitude to flexible work, has embraced Ingo Kramer, president of the Confed- being lost to automation and technolog- panies at a competitive disadvantage that the situation was stabilising, but
sonal life and work. change in recent months by pushing eration of German Employers’ Associa- ical change long before the pandemic. abroad but Mr Heil wanted the propos- the region has reported more than 150
He dismissed criticism the law would ahead with the legislation. tions, said the proposals were “utter Berlin hopes a law passed this spring als to spark a Europe-wide debate about Covid-19 deaths in the past two days.
weaken collective bargaining and It is part of a rethink of the German nonsense” and would encourage com- offering grants to downsizing compa- supply chain regulation. “This is a ques- Until now, Madrid’s response has
encourage the outsourcing of jobs to economic approach that includes aban- panies to outsource jobs abroad. nies that help train workers for new jobs tion of a fair, level playing field,” he focused on limiting movement in 45,
countries with lower labour standards. doning the longstanding commitment Some companies favour a shift to pay will cushion the impact of the changes. added. “It creates legal certainty for largely working-class neighbourhoods
“We cannot stop the changes in the to a balanced budget — the “black zero” by performance rather than hours Mr Heil said Germany would use its companies and it is simply necessary that account for about 15 per cent of the
world of work, nor do we want to,” he or “schwarze Null” — and extending its worked, raising concerns among labour EU presidency, which runs until the end [that] we take care of such issues.” region’s population and some 27 per
said. “The question is how we can turn Kurzarbeit, or short-term work scheme, activists of an erosion of collective bar- of this year, to press the bloc to adopt Philip Stephens see Opinion cent of its coronavirus cases.
Nerve agent Infections
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OCTOBER 2 2020 Section:World Time: 1/10/2020 - 18:14 User: sanjay.gohil Page Name: WORLD1 USA, Part,Page,Edition: EUR, 2, 1
Friday 2 October 2020 ★ FINANCIAL TIMES 3
InterNATIONAL
China military
‘If we react, the risk of
incidents rises. If we
don’t, they undermine
flights raise
our sovereignty’
Taiwan stakes
could mistakenly fly into Taiwan’s sov-
ereign airspace over the main island,
which could trigger open conflict.
“You have to distinguish between
deterrence and threats,” said a former
top Taiwan military official. “Deter-
Fighter jet incursions increase as Beijing rence would be meant to discourage us
from certain moves — moves that they
is angered by island’s closer ties with US would define as pro-independence.
Threats are the opposite: they are meant
to provoke a reaction, to wear us down
Kathrin Hille — Taipei Sbragia, the top China official at the US and to be able to put the blame on us
Katrina Manson — Washington defence department. “And in time, as when something goes wrong.
Weng Hui-ping wanted to sleep in on her China builds on its capacities, this will “This leaves no good options for us. If
day off. But the Taipei yoga teacher was become more intensified and induce we react, the risk of incidents rises. If we
Taiwan Air Force personnel
woken up at 7am on Monday by aircraft more risks.” don’t, they undermine our sovereignty.”
assemble for a visit by President
screaming overhead. “I thought, are the This week, the People’s Liberation Taipei and Washington are also con-
Tsai Ing-Wen to a Penghu island
Chinese communists here? My house is Army has been holding exercises in five cerned about the spread of disinforma-
military base last week
not close to the airport, it sounded like different areas off the coast of Taiwan — tion via social media about alleged US
Ritchie B Tongo/EPA-EFE/Shutterstock
fighters,” she said. the second time in as many months it military activity out of Taiwan, which
Taiwan’s defence ministry had a sim- has held multiple drills simultaneously. Chinese hawks have used to argue for
ple explanation: some of its jet fighters According to people briefed on opera- Chinese military superiority punitive military action.
and helicopters were practising for Tai- tional details, the PLA has also stepped “A potential malign explanation could
wan’s National Day on October 10. up simulations of attacks on Taiwan’s be that they are trying to construe a
Key 100,000 50 combat-capable
“Don’t you worry!” the ministry said in a east coast, where Taipei has an impor- 5 submarines casus belli,” said a person familiar with
active personnel fixed-wing aircraft
statement posted on social media. tant missile base and most of its hard- the matter. But many military experts
But preparations for celebratory ened shelters for fighter aircraft. 5 surface vessels 200 main 20 surface-to-surface argue China’s moves are an attempt to
flights are not the main reason the air Chinese military aircraft crossed the above corvette size battle tanks missiles shake Taiwan’s morale and signal dis-
force has been busy. China sharply Taiwan Strait median line seven days in pleasure about closer ties with the US.
China Taiwan
increased military manoeuvres close to a row in mid-September. During a visit “China’s not getting ready for some-
Taiwan’s borders last month, with Tai- by Keith Krach, US under-secretary of 2m 163,000 thing [like invasion], it’s conducting
pei forced to scramble fighters almost state to Taiwan and the most senior military diplomacy by using its military
every day over the past two weeks. Tai- state department official to travel to the forces to try to make political state-
3,330 568
wan and US officials say it is the worst country in more than three decades, the ments on the one hand, and on the other
escalation in more than two decades. PLA flew a total of 37 jets across the line. hand, it is trying to put some more miles
The military pressure on Taiwan is Both sides had largely respected the on Taiwanese aircraft,” said Dennis
rising alongside China’s growing ten- unofficial demarcation until the PLA Blair, a retired US navy admiral and
sions with the US. As Washington began crossing it frequently in March former commander of the US Pacific
59 4
strengthens its support for Taipei with last year. China asserted that “there is fleet. He added that China had never
visits of senior government officials, fre- no median line in the Taiwan Strait” 10 conducted an amphibious exercise tar-
107 26
quent public praise for Taiwan’s democ- days ago, obliterating a tacit agreement geting Taiwan with more than about
racy and arms sales — the Trump that helped prevent military incidents. 1,000 people, far short of the 80,000
administration is considering a $7bn “The erosion of the median line will troops that would be needed.
package — Beijing is pushing back. have consequences, and those conse- 5,850 665 “If you have never practised at a scale
China claims Taiwan as its territory quences will very much heighten insta- above 1,000, in relatively permissive
and says it reserves the option to seize it bility in the Taiwan Strait,” said an offi- conditions, it would be a fool of a mili-
militarily. The public had grown numb cial with knowledge of the situation. tary leader who would say that he has
to that 71-year-old threat, living in peace The Taiwan Strait is only 160km wide 603 12 confidence that when he gathers the
and de facto independence for decades. at its narrowest point. PLA fighter sor- 80,000, they would be able to not keep
But Beijing’s new aggression has raised ties in the direction of Taiwan over the out of each other’s way, shoot each
alarm in Taipei and Washington. median line eliminate warning time for other, fall off schedule, have a complete
“It’s important for us to recognise that the country’s air defences. They also debacle which would make the opera-
this is not hollow, it’s real,” said Chad raise the risk that a Chinese fighter Source: IISS Data as of Jan 2020 tion fail,” he said.
OCTOBER 2 2020 Section:World Time: 1/10/2020 - 18:14 User: sanjay.gohil Page Name: WORLD2 USA, Part,Page,Edition: USA, 3, 1
4 ★ FINANCIAL TIMES Friday 2 October 2020
INTERNATIONAL
Global insight
Unemployment benefits
Washington
Lapse in Covid relief hits US incomes
Edward
Luce
Consumers tap personal US economy as it recovered from the the department said yesterday, com- ‘The main has stopped accepting jobless claims for
lockdowns. That support has faded after pared with 873,000 a week earlier and a two-week period to address fraud and
savings to maintain a political stalemate in Washington held lower than economists’ forecast for engine of work through a backlog. Trump’s debate antics
levels of spending passage of new relief measures. 850,000. The figure marked a fresh pan- economic Weekly jobless claims fell the most in
Nancy Pelosi, Democratic House demic low but remained elevated. Florida, Texas and Georgia, according to accelerate decline
activity is
speaker, and Steven Mnuchin, Treasury Weekly jobless claims, which peaked advance figures that are not seasonally
James Politi — Washington
secretary, have been trying to strike a near 6.9m at the end of March, totalled at risk of adjusted. Some states, including Mary-
Matthew Rocco — New York
compromise. 211,000 in the week before the pan- land, Illinois and New Jersey, registered in America’s standing
stalling’
US personal income fell 2.7 per cent in “The main engine of economic activ- demic first dealt a blow to the economy. a slight uptick from the week before.
August after the lapse of emergency ity is at risk of stalling,” Gregory Daco, The number collecting state jobless The US has recovered nearly half of
unemployment benefits for millions, chief US economist at Oxford Econom- aid eased to 11.8m from 12.7m in the the 22m jobs lost in April and May. The
raising fears that lower consumption ics, wrote in a note yesterday. “With week ending September 19 and a pan- labour department is due to publish its
could damp the economic recovery. compensation growing at a slower pace demic-era high of 24.9m. Continuing latest monthly figures today and econo- I n Tuesday’s US presidential debate, Donald Trump
Data from the commerce depart- and government transfers diminishing, claims equalled 8.1 per cent of the work- mists have forecast a gain of 850,000 in said China had eaten Joe Biden’s lunch when the latter
ment’s Bureau of Economic Analysis consumers dipped into their savings to force. The insured jobless rate, consid- September, compared with 1.4m in was vice-president. Mr Trump was referring to the
show the drop was worth $543.5bn and finance their outlays — this is not a sus- ered an alternative measure, was 8.7 per August. The jobless rate, which peaked rise of America’s trade deficit with China during
larger than economists were predicting. tainable reality.” cent the week before. at 14.7 per cent in April, is expected to Barack Obama’s presidency, omitting that the gap in
It came with a fall in consumption to Labour department figures show the Covid-19 outbreaks in the south and fall to 8.2 per cent from 8.4 per cent. goods trade is not much smaller under his presidency.
1 per cent in August from 1.5 per cent in pace of unemployment applications west have abated since developing in Yesterday’s report showed that 26.5m In that same period, US politics has degenerated into a
July and in the savings rate to 14.1 per slowing last week but remaining above May and June, raising hopes for a stead- people were claiming benefits in state macabre shadow of its former self. Its democratic brand is
cent in August from 17.7 per cent as peo- 800,000, highlighting the very gradual ier jobs recovery. Florida and Texas, hit and federal programmes as of Septem- in freefall. China is now eating America’s dinner and eyeing
ple tapped their savings for spending. rebound from shutdowns. hard in the summer, have taken steps to ber 12, up from 26m, according to unad- tomorrow’s breakfast.
The figures highlight how critical fis- There were 837,000 initial jobless relax or lift restrictions on businesses. justed figures that are reported on a two- Some of America’s declining reputation can be meas-
cal stimulus measures have been to the claims on a seasonally adjusted basis, California, the most populous state, week delay. ured. The Pew Research Center recently found that fewer
than a third of French and Germans had a favourable view
of America. At 41 per cent favourable, Britain’s view of the
US was a record low. Mr Trump’s impact is even more
South America. Rule of law stark. Just 16 per cent of the world trusts the American
president to do the right thing, lower even than the 19 per
cent who thought that about China’s Xi Jinping. Germany’s
Argentina’s judicial reforms in the dock
Angela Merkel got a 76 per cent positive rating. The sur-
veys were carried out well before this week’s debate.
Some of the reputational damage stems from the US’s
mishandling of coronavirus. With more than 210,000
deaths, America’s mortality rate is five times its share of
the global population — and more than 200 times the per-
Critics claim former president
capita death ratio in China where the pathogen originated.
will benefit from changes she A recent study of excess mortality found the US had a
28 per cent higher death rate than Europe, in spite of hav-
once attempted to introduce ing a far lower population density, a younger median age
and three extra weeks to anticipate the pandemic.
Benedict Mander — Buenos Aires It would be tempting to place the entire blame on Mr
When Argentina’s then president Cris- Trump’s shoulders. Most of it indeed belongs there. He has
tina Fernández de Kirchner tried in refused to create a national coronavirus strategy, rub-
2013 to reform the judiciary, her former bished social distancing
cabinet chief Alberto Fernández lam- (most recently in Tues- Just 16 per cent
basted the move as a blatant attempt to day’s debate when he
of the world trusts
strengthen political control over the mocked Mr Biden’s mask
courts. wearing) and terrorised the American
“Tell me who benefits from the crime US government scien-
president to do
and I’ll tell you who the murderer is,” Mr tists.
Fernández said during a withering take- But not everything is the right thing
down of the ultimately unsuccessful his fault. Much as Ameri-
proposal. The main beneficiary, he can democracy used to be
argued, would be the president herself, a model, the US Centers for Disease Control and Preven-
since she faced corruption charges. tion once set the global standard for epidemiology. The
Now, Mr Fernández is president and is CDC wasted valuable weeks in pursuit of dud Covid-19
renewing attempts to reform Argen- tests in February and March. Similarly, the Federal Avia-
tina’s dysfunctional and politicised jus- tion Administration has been rocked by allegations that it
tice system. But although it is widely has been captured by companies it is supposed to regulate,
accepted change is urgently needed, he notably Boeing. The Food and Drug Administration has
is coming under similar attack. also taken a hit. Not to mention the FBI and the state
The move comes as Mr Fernández department.
faces growing criticisms of his handling America’s ability to govern itself well — including its
of the economy and the pandemic, as capacity to run efficient elections — was slipping long
more companies choose to leave the before Mr Trump took office. He has accelerated the ero-
country amid mounting uncertainty. sion. Foreigners experience the shock of this in varying
The government says the reforms are ways. They may tune into a US presidential debate and
intended to make the justice system recoil at its sheer demagoguery. They may lament upon
more efficient and transparent. But hearing its president incite vigilantes and discourage vot-
opponents claim the former lawyer is ing. They could just as equally be shocked by the country’s
trying to protect Ms Fernández de declines in life expectancy, second-rate infrastructure,
Kirchner, the country’s powerful vice- Courting anger: that guarantees impunity for anyone.” Ms Fernández de Kirchner to remove and public opinion” — neither of which racial discrimination and waning claims to meritocracy.
president. Many say she is the real demonstrators All judges would keep their cases, she three judges presiding over cases involv- favoured the government. It is a measure of America’s reduced expectations that
power behind the government after she protest against said, adding: “This is not a project ing her, even though the Supreme Court But the lack of national consensus the alternative to Mr Trump is a 77-year-old man who is
picked Mr Fernández to run in her place judicial reforms [designed to benefit] the govern- ruled in 2018 that their appointments over the government’s proposals means past his prime. Mr Biden is a fundamentally decent per-
in presidential elections last year. in Buenos Aires ment . . . and if they say the reform were legitimate. that even if Congress approves them, son. His victory would be celebrated in most of Europe and
The first stage of the proposed last month. doesn’t work, well let’s debate it, let’s “The sole objective [of judicial “you can expect pushback in the short liberal America. But he is a far cry from much younger
reforms has been approved by the Sen- Below, former modify it.” reform] is the impunity of Cristina term and reversal in the medium term”. predecessors, such as John F Kennedy, Bill Clinton and
ate, although the bill faces a rough and president According to the government, the Fernández de Kirchner, her children Judicial reform “is an initiative that Barack Obama, who so skilfully channelled American
uncertain passage through the lower Cristina reforms aim to establish a more modern and [former] government officials. It doesn’t have anything to do with the pri- dreams. His candidacy is an admission of shorter horizons.
house of Congress, where the govern- Fernández de criminal justice system — in which pros- could hardly be clearer,” said Daniel orities of public opinion while repre- It is about damage limitation rather than hope.
ment does not command a majority. Kirchner ecutors rather than judges investigate Sabsay, a leading constitutional lawyer. senting a political cost and a waste of This week, the world witnessed a new low in America’s
Opposition members say the legisla- Ronaldo Schemidt/AFP/Getty cases — and merge some obsolete juris- If the government was serious about energy for the government”, said Igna- political culture. If the country is lucky, it will escape a con-
tion is aimed at diluting the power of dictions into others. It will also increase strengthening the rule of law it would cio Labaqui at Medley Global Advisors. stitutional crisis in November. Mr Biden’s poll lead has
judges charged with investigating cor- the number of federal criminal courts to move to depoliticise the system of He expected the bill to remain stuck been sufficiently stable to explain why Mr Trump was
ruption cases involving members of the address notoriously lengthy delays and appointing judges, a measure not in the lower house for some time unless even more unpleasant than usual on Tuesday. His intem-
ruling coalition. the concentration of power in the hands included in the bill, he said, adding: “Of it gained more support. “No govern- perate performance may even have cemented his defeat.
According to Synopsis, a local poll- of a few judges. course the reform is not aimed at mak- ment is so suicidal as to push a key law to Post-debate polls suggest Mr Trump’s tactics backfired.
ster, 60 per cent of Argentines think An expert advisory panel, which crit- ing [the judiciary] independent.” a vote that it [knows it] will lose.” But his worsening prospects make him even more danger-
judicial reform is aimed at control- ics say is dominated by govern- Regardless of the merits of the pro- Should the government push ahead ous. The night’s most important line was the one Mr
ling the justice system for the gov- ment supporters, including Ms posals, many worry the debate has with the reforms and fail, or further Trump refused to utter: “I will abide by the election results
ernment’s own purposes, while Fernández de Kirchner’s law- become divisive in an already deeply erode public support, the ruling coali- whoever wins.”
less than 5 per cent of see it as an yer, has been appointed to polarised political climate. That threat- tion’s competitiveness in midterm elec- America is likely to be consumed by divisions for the
urgent reform. study issues such as expanding ens to derail much-needed change. tions next year could be compromised. foreseeable future. Either election outcome would suit
But Marcela Losardo, jus- the Supreme Court. Mr Fernán- Andrés Malamud, an Argentine polit- “Much will depend on the state of the China. A Biden victory might even be preferable since he
tice minister, rejected the dez opposed such a move in the ical scientist at the University of Lisbon, economy. If that goes well, then many would be more predictable than Mr Trump while lacking
claims as misguided. past, and opponents of the said it was “improbable but not impossi- will say they [did this] but at least they the means to restore US primacy. Mr Biden could stop
“A phantom has been cre- reforms argue it could benefit ble” that the law would be passed by improved the economy. But if the econ- America’s internal bleeding. That is ambitious enough. It
ated,” she told the Financial the former president if loyalists Congress, since its approval depended omy goes badly, then this [reform] will would be a leap of faith to bet on more than that.
Times. “There is not a sin- were appointed. on a handful of centrist legislators “who probably make people even more
gle article of the reform Another issue is the drive led by are sensitive to the economic situation angry,” said Lucas Romero at Synopsis. [email protected]
Sentiment survey Environment
Japan’s economic recovery from virus falters Oil failures leave taxpayers with clean-up bill
Robin Harding — Tokyo Japan’s economy are the priorities for The survey covers almost 10,000 Myles McCormick “If they happen to go bankrupt, and Houston law firm Haynes & Boone, with
Yoshihide Suga, the new prime minister, companies with a response rate of more nobody wants to pick up the well out of combined debt loads of about $51bn —
Business sentiment in Japan is recover- US taxpayers could be left footing a bill
but the sluggish pick-up in corporate than 99 per cent. the bankruptcy, then the state’s going to more than half of which was unsecured.
ing slower than expected in a worrying of tens or even hundreds of billions of
sentiment suggests a tough task ahead. Companies are asked whether busi- end up picking up the tab.” To drill a well, companies usually
sign that the bounceback from Cov- dollars to clean up oil and gas wells
“We can see the signs of recovery,” ness conditions are favourable or unfa- A growing number of energy produc- need a bond that ensures they cover the
id-19 will take a long time. across the country as a growing
Katsunobu Kato, chief cabinet secre- vourable and one number is subtracted clean-up costs or pay a forfeit. But the
number of producers collapse into
The Tankan survey of large manufac- tary, told a press conference. “The econ- from the other, giving a result that can ‘If companies are in dire sum paid in many states is far less than
bankruptcy, according to a new report.
turers rose by only seven points from omy is in a tough situation because of range from -100 to +100, where higher the ultimate cost of plugging the well.
straits, plugging these
-34 to -27 in the third quarter, compared the impact of Covid-19, but our various figures suggest a stronger economy. A tiny proportion of the costs of “plug- Carbon Tracker says current bonds
with consensus expectations of -23. measures are having an impact.” Industry remained weak across the ging” active wells are covered by insur- wells is probably one of the would cover 1 per cent of the $280bn
The figures suggest Japanese compa- Japan has launched a large fiscal stim- board, with the iron and steel sector ance mechanisms, the report from the costs of plugging the US’s 2.6m active
last things on [their] list’
nies are still struggling and the shock ulus, including direct payments to reporting an index of -55, Japan’s impor- Carbon Tracker think-tank estimates. documented wells.
from Covid-19 is calcifying into a more households, while the Bank of Japan is tant automobile industry at -61 and pro- That means when companies go bust, Joe Biden, Democratic contender for
traditional economic downturn. providing low-cost loans. The govern- duction machinery weakening to -43. the bill will be left to state authorities. ers are seeking protection from credi- the presidency, said in July the US could
Japan’s economy shrank by a record ment has also launched a “Go To” cam- Japan is a big supplier of capital equip- “If companies are in dire straits, plug- tors after this year’s price crash. Oasis add “more than a quarter million jobs
7.9 per cent in the second quarter of paign to subsidise domestic tourism. ment to China. In services, construction ging these wells is probably one of the Petroleum on Wednesday became the right away to do things like plug the mil-
2020 but there were hopes for a rapid The Tankan, compiled by the BoJ, is was up six points to +21, retail rose 16 very last things on the list of manage- latest big name to succumb. lions of abandoned oil and gas wells that
rebound, with Covid-19 largely under regarded as the best guide to the state of points to +18 and communications grew ment ideas for how to use cash,” said A total of 36 producers filed for bank- exist all across this country, posing a
control in east Asia. the economy. The central bank relies on 13 points to +21. But the hotel and res- Robert Schuwerk, an author of the ruptcy in North America in the first daily threat to the health and safety of
Tackling Covid-19 and reviving it heavily when making policy decisions. taurant sector was at a dire -87. report. eight months of the year, according to our communities”.
OCTOBER 2 2020 Section:World Time: 1/10/2020 - 18:30 User: sanjay.gohil Page Name: WORLD3 USA, Part,Page,Edition: USA, 4, 1
Friday 2 October 2020 ★ FINANCIAL TIMES 5
OCTOBER 2 2020 Section:Ad Page Time: 1/10/2020 - 09:54 User: john.lee Page Name: AD BLOOMBERG, Part,Page,Edition: LON, 5, 1
6 ★ FINANCIAL TIMES Friday 2 October 2020
y
Mansoor Mohi-uddin China’s currency is assuming the yen’s historic role as pointer to moves in the dollar
MARKETS INSIGHT, PAGE 11
Top banks cut
Playboy back
Going to seed Investors take fright as Bayer
on public
warns of severe hit to Monsanto business
Rolls-Royce
markets via
Spac deal
exposure ahead
Ortenca Aliaj, Eric Platt and James
Fontanella-Khan — New York
of cash call
Playboy Enterprises, the media and
lifestyle company founded by the late
Hugh Hefner in 1953, said yesterday it
had secured a cash injection and would
return to public markets almost a dec-
ade after going private.
The company, which earlier this year
3 Move by Goldman and M Stanley
shut down the print magazine that was
long the centrepiece of its business, said
3 Fears over pandemic and volatility
it would merge with a blank cheque
company known as Mountain Crest
Acquisition Corp in a deal valuing Play-
Peggy Hollinger, Patrick Jenkins up the shortfall. BNP, which has plans to boy at $381m including $142m of debt.
and Stephen Morris become the dominant force in Euro- Playboy will raise roughly $101.5m
The leading advisers on Rolls-Royce’s pean investment banking, has leap- after fees through the deal, a boost to a
deeply discounted £2bn rights issue frogged Goldman to become the largest balance sheet that counted just $22m of
radically scaled back their underwriting underwriter, with about 20 per cent of cash at the end of June, according to a
commitments in the days leading up to the total, sources said. presentation to investors. Its existing
the aero-engine maker’s cash call, on The underwriters stand to earn up to owners will continue to hold 66 per cent
concerns about pandemic risk and vola- £55m in fees, out of the total estimated of the company after the deal with
tility in the run-up to the US election. cost for the rights issue of £80m. Mor- Mountain Crest is finalised.
Goldman Sachs and Morgan Stanley, gan Stanley, Goldman Sachs and BNP Mr Hefner took Playboy private with
two of the top banks advising the board declined to comment. private equity firm Rizvi Traverse in
on the £5bn debt and equity fundraising In addition to the rights issue, in 2011 as the adult entertainment com-
unveiled yesterday, cut their exposure which new shares will be priced at 32p pany was struggling to compete with
by up to half late last week, several each, Rolls-Royce announced plans for a new online rivals. Mr Hefner died in
sources said. bond issue of at least £1bn, a new two- 2017 aged 91, and his family sold its
The timing of the rights issue was “not year term loan facility of £1bn, and 35 per cent stake for $35m to the tech-
ideal”, said one person close to the situa- agreement in principle from the UK focused investment fund in 2018.
tion. “It’s clearly a major risk if this guy Export Finance agency to guarantee a The company, which published its
[Donald Trump] is going to go mad.” further £1bn loan on top of £2bn first magazine in December 1953 with
granted in July. then rising star Marilyn Monroe on the
The lenders had pledged About £3.2bn of the company’s exist- cover, has shifted its business from the
ing debt falls due next year, which has The Bayer-Monsanto merger has been one of the most disastrous in corporate history nude images that catapulted the com-
to underwrite 60% of — Paulo Fridman/Bloomberg
put it under pressure to refinance. pany to fame. Today, it is mainly a com-
the new shares. The total Warren East, chief executive, said the Joe Miller — Frankfurt over the alleged carcinogenic proper- ability targets, the group said it would merce and brand licensing operation
measures represented a “comprehen- ties of the US group’s weedkiller cut €1.5bn of costs in 2024, on top of putting its famous bunny logo on prod-
is now closer to 30% Bayer stock fell to its lowest in more
sive package which will take the liquid- Roundup. the already announced €2.6bn from ucts from lingerie to digital gaming.
than six months yesterday after the
ity question off the table during this cri- In August, Bayer reported a net loss 2022, and potentially cut more jobs. Playboy chief executive Ben Kohn
group warned that the pandemic
Moreover, the outlook for air travel — sis. This is a final step to fixing the dam- of €9.5bn for the second quarter, Bayer did not adjust its dividend said he chose to use a blank-cheque or
would hit profits harder than
and in particular the long-haul market age done to the balance sheet.” largely due to setting aside €12.5bn to policy, committing to return between special purpose acquisition company
expected, particularly at its Mon-
served by Rolls-Royce — had deterio- Investors welcomed the debt and settle legal challenges primarily 30 and 40 per cent of earnings to (Spac) because of its “efficiency” versus
santo unit.
rated in recent months. “It’s clear no one equity combination, saying it was the related to Roundup. shareholders, though it warned that a traditional initial public offering.
is going to fly long-haul for three to four right structure to get Rolls-Royce “We expect the Covid-19 situation to On Wednesday, Bayer said a com- its payouts would probably be in the “The intention was always to return
years,” the person added. through an extended downturn. particularly weigh on our crop science modity prices slump, reduced corn lower end of that range. the company to public markets,” he
Rolls-Royce, along with the rest of the Nevertheless, some were discomfited business in the second half of 2020 and soyabean output, and negative “We believe the additional meas- said, adding that Playboy was already
aerospace sector, has suffered a collapse by the timing of the cash call, with the and then throughout fiscal 2021,” currency exchange effects in Brazil ures are necessary to accelerate our planning acquisitions.
in revenues and an outflow of cash due shares having fallen 84 per cent since Werner Baumann, chief executive. had hit its crop sciences arm. It said overall transformation, generate The company’s media operation has
to a virtual shutdown in aviation. February. They closed down 10 per cent told investors. the “situation is unlikely to improve margin improvements and thus generated a declining part of its reve-
The banks, together with house bro- to 116.8p on Thursday, against just He said Bayer would take a several- considerably in the near term”. maintain our competitive profile,” Mr nues in recent years, accounting for 5.3
ker Jefferies, had pledged to underwrite under £7 in mid-February. billion-euro writedown of assets in its UBS analysts wrote yesterday: “The Baumann said. “They will help miti- per cent of its $78.2m of adjusted sales
60 per cent of the 6.4bn new shares to be “They should have done [the recapi- agricultural business, most of which extent of the additional pressure is a gate the impact of Covid-19 on our last year. That figure fell below $1.5m in
issued in the 10-for-three cash call. The talisation] either much earlier or much was bought from Monsanto for $63bn surprise to us. Relative to consensus business.” the first half of 2020. Instead, collabora-
total is now closer to 30 per cent, two later,” said one leading long-term inves- in 2018. expectation, the 2021 outlook is Earlier this month, Bayer tions with high fashion brands like Marc
sources said. tor. “I am disappointed with the timing.” The news prompted the shares to €2bn-€3bn lower on sales, with the announced that its supervisory board Jacobs and Monse have helped power its
But Rolls-Royce is guaranteed to raise Still, the investor said he remained con- fall more than 12 per cent yesterday. majority of the shortfall coming from had extended Mr Baumann’s tenure business. Its total revenues had slid 6.6
the funds after BNP Paribas, HSBC and fident in the group’s business model in With the Monsanto acquisition, crop science. It modelled “a slight until 2024, despite his overseeing of per cent in 2019 from the year before.
Citi, all involved in the £3bn debt pack- the medium term and would be sup- Bayer secured a leading position in decline for the division, but Bayer’s one of the most disastrous mergers in Playboy reported a profit of $265,000
age also announced yesterday, were porting the rights issue. agricultural chemicals but the com- guidance implies a 10 to 15 per cent corporate history. last year, compared with $1.7m in 2018.
invited to join as underwriters to make See Lex pany was hit by a wave of lawsuits decline”. To meet its long-term profit- See Lex See Lex

Legal Notices
Multiplying gadgets test ‘creepy line’ of consumer privacy
designed to patrol a home for intruders. owners) well beyond their own homes.
INSIDE BUSINESS
Lifting off from a docking station, the At heart, Amazon is betting that it has
device is the first product of Amazon’s permission from consumers to stretch
tECHNOLOGY
push into “smart home” technology that the boundaries of what is acceptable in
can move under its own power — the domestic surveillance. There is a clear
Richard progenitor of the home robots to come. risk that this will eventually provoke a
Eric Schmidt, Google’s former chief privacy reckoning. But for now, it is one
Waters executive officer, once talked about the reason Amazon has a clear lead in smart
“creepy line” that defines the limits of home technology.
consumer acceptance of powerful new The difficulties Googles faces in
personal technologies. Google’s aim, he making full use of its devices’ data-gath-
said, was to go as far as it could without ering capabilities, meanwhile, raise
T he consumer gadgets that actually crossing the line. Amazon, by what has become a perennial question
are multiplying around our contrast, seems to think nothing of leap- for the internet company: why do hard-
bodies and homes are the ing over and striding straight ahead. ware at all?
vanguard in a spreading One result is that “surveillance” is This is not something Google has ever
platform war between the now almost part of the Amazon brand, fully answered. Sales volumes of most of
biggest tech companies. But they also for better or worse. New product its products are low, and it has shied
pose a challenge for their makers: how announcements like the indoor drone away from putting serious marketing
to fit more closely into everyday life often produce wry smiles and head- and distribution investment behind
without provoking a backlash. scratching from the tech crowd, not the them. This week’s announcement of
The limits of Google’s ability to use outrage they might Google’s latest slate of personal gadgets
hardware as the vehicle to extend the attract if another Amazon is betting it has demonstrated the usual confounding
reach of its data-hungry advertising sys- company had mix: some impressive tech at attractive
consumers’ permission to
tem were made clear by the news this come up with the prices, but no sign that Google is about
week of concessions it is making to get idea. And many stretch the boundaries of to go all-in on hardware.
EU approval to buy Fitbit. Among other consumers seem to There are still reasons to keep trying.
what is acceptable in
things, the search company won’t be welcome having For Google, a network of smart devices
able to make use of data collected Orwellian-sound- domestic surveillance is a good way to infiltrate the home,
through Fitbit devices to power its ads ing technologies at embedding its AI into the everyday
for a decade. their fingertips — as anyone who has a experiences of users. Hardware also
This points not only to the restrictions neighbour addicted to the surveillance plays the role of an expensive hedge
Google faces in using acquisitions to videos from a Ring doorbell can attest. against the risk that it will someday be
extend its reach, but also the growing Where other tech companies balk at less able to count on others to distribute
regulatory resistance to its efforts to pushing the boundaries of the accepta- its mobile services.
spread into new domains of its users’ ble, in fact, Amazon ploughs ahead. As Will it ever need to make use of that
lives. Data is the thing that breathes life Geoff Blaber, an analyst at CCS Insight, hedge? Antitrust pressure has been
into its gadgets, personalising experi- says, there is a risk of a backlash, but “at growing, and Europe has already made
ences as well as supporting advertising least they’re addressing the category, an attempt to turn Android into a more
and commerce. Beset by growing politi- and learning”. open platform. There is no sign yet
Notice to Advertisers cal and regulatory concern that it is the Amazon also said last week that it is that this is eating into Google’s mobile
Calls to the Financial Times Advertising Department may be monitored. champion of a new and invasive form of getting ready to launch a neighbour- service revenue. But it makes it highly
“surveillance capitalism”, Google needs hood-wide WiFi network (called likely that, for Google customers, gadg-
Acceptance of any advertisement for publication will be subject to the then current terms and conditions of insertion
to tread carefully. Sidewalk) that will ride on the back of ets will be part of the tech menu for
of advertisements in FT publications.
Contrast that with Amazon. A week all those Echo speakers and Ring years to come.
A copy of the terms and conditions of insertion of advertisements in FT publications can be obtained from ago, the ecommerce giant thought noth- doorbells in your vicinity, making it
[phone], or viewed at www.FT.com/advertising
ing of showing off its first indoor drone, possible to track devices (and their [email protected]
OCTOBER 2 2020 Section:Companies Time: 1/10/2020 - 19:03 User: andy.puttnam Page Name: COMP&MKTS1, Part,Page,Edition: USA, 6, 1
Friday 2 October 2020 ★ † FINANCIAL TIMES 7
OCTOBER 2 2020 Section:Ad Page Time: 1/10/2020 - 16:11 User: john.lee Page Name: AD FT AWARDS AD, Part,Page,Edition: EUR, 7, 1
8 ★ FINANCIAL TIMES Friday 2 October 2020
COMPANIES & MARKETS
Financials Media
H2O suffers bond payment problems Google in
pledge to pay
$1bn over
Investment linked to uations of its sizeable investments in backing a complicated series of trades filed semi-annual report. This docu- H2O’s portfolio, Latitude Finance, failed
financier Windhorst hard-to-sell bonds. The intervention with small brokerages. ment said the La Perla bond had still not to meet its redemption deadline this three years for
came more than a year after the Finan- La Perla has struggled for years and paid interest at the time of this June year. Filings show there has been a 90-
missed interest deadline cial Times revealed H2O had substantial the auditors of its holding company, La 2020 report, which under the terms of day maturity extension to November.
news content
investments in private bonds linked to Perla Fashion Holding, issued a warning the bond “would give rise to immediate H2O was the largest investor in this
Lars Windhorst, a flamboyant German over the company’s ability to continue repayment of capital and interest”. €500m bond, which Mr Windhorst
Cynthia O’Murchu and Robert Smith
financier with a history of legal trouble. as a going concern for 2019. Merit Capital, which manages the raised in 2017. It provided funding when
London
One of these investments — a bond H20 has consistently cited the sub- fund, said its position in La Perla had he was trying to settle a number of dis-
H2O Asset Management has faced seri- backing luxury lingerie maker La Perla stantial interest it earned on private now been sold with “accrued interest putes, including a lawsuit linked to Rus- Alex Barker — London
ous payment issues on illiquid bond — missed a 7.25 per cent annual interest bonds such as La Perla. H2O’s fund fil- including the coupon in full”. sia’s former energy minister.
Google has pledged to pay news pub-
investments, including an unpaid inter- payment in March, according to filings. ings and other recent public communi- H2O declined to comment on the sta- A spokesman for Mr Windhorst said
lishers about $1bn over the next
est bill from an Italian lingerie maker H2O’s funds have been the largest cations to investors do not appear to tus of its coupon payment, citing “confi- his firm had redeemed the “majority” of
three years, as it aims to establish new
that appeared to constitute a default. holder of this €500m bond, with its flag- make reference to the missed payment, dentiality”. “H2O always acts in the best both sets of bonds, with the rest to be
terms of trade with media groups and
The €22bn investment firm — a Lon- ship MultiBonds fund alone owning however. In contrast, another asset interest of its investors and will seek to paid in the “coming weeks”. “We expect
avoid potentially more costly action by
don-based subsidiary of French bank €162m at the end of 2019. The invest- manager holding a €2m position in the protect their rights with any appropri- the remaining Latitude bonds to be
regulators.
Natixis — froze a series of its funds at the ment firm is also a main shareholder of bonds — Belgium’s Merit Capital Global ate action,” it said. “H2O will continue to redeemed by November 11,” he added.
end of August after France’s financial the underwear maker, while using both Investment Fund — disclosed the pay- keep its investors informed.” “We are not aware of any bondholder The money will support the Google
regulator raised concerns about the val- La Perla’s bonds and shares as collateral ment failure by La Perla in its recently Another Windhorst-related bond in whose coupon has not been paid.” News Showcase, a mobile feature the US
tech group will roll out in Germany and
Brazil and “expand to other countries
where the right working framework
Technology. Consumer lending exists”.
Such payments to license news are a
change in approach for Google, which
Credit unit powers hopes for Ant’s $30bn IPO
has spent almost a decade staving off
complaints from publishers such as
News Corp and Axel Springer.
But the rollout of the programme,
which includes groups such as Der
Spiegel and Die Zeit in Germany and
Alipay is a draw for investors
Folha de S.Paulo in Brazil, has stoked
but its selling technique is controversy, with critics casting it as a
way to divide the industry, blunt copy-
trying the patience of users right law and underpay for content.
Sundar Pichai, Google chief executive,
said the $1bn was to support “quality
Ryan McMorrow and Nian Liu
journalism” and a news industry “criti-
Beijing
cal to a functioning democratic society”.
Lu Lindi became an avid online shopper He said in a blog post: “The busi-
during China’s coronavirus lockdown ness model for newspapers — based on
this year, using the Alipay app on his ads and subscription revenue — has
smartphone to pay for goods from milk been evolving for more than a century
powder to Chinese medicine. as audiences have turned to other
But the 54-year-old did not realise for sources. The internet has been the
weeks that instead of debiting his latest shift, and it certainly won’t be
account, Alipay was actually funding his the last . . . We want to play our part by
shopping spree by issuing him credit. helping journalism in the 21st century.”
Mr Lu was not alone. Alipay’s credit
business is so huge that it now issues ‘Google can dictate terms
one-tenth of all of China’s non-mortgage
and conditions . . . while
consumer loans. And a number of other
customers told the Financial Times they claiming they are helping
felt the app was designed so that people
to fund news production’
took out loans, sometimes unwittingly.
As Alipay’s owner, Ant Group,
approaches a $30bn IPO in Hong Kong Google and Facebook are facing regu-
and Shanghai, the rapid growth of its latory pressure to make systematic pay-
credit business has been a key selling ments for news, notably through the
point to investors. EU’s copyright directive and a radical
In its listing documents, Ant revealed code of practice proposed in Australia.
that revenues from its credit unit, which Australian publishers have suggested
largely consist of the fees that partner US tech groups pay the sector as much
banks pay to Ant for arranging the as $500m a year under the national
loans, had grown 59 per cent in the six code, expectations Google has described
months to the end of June and now as “completely extraordinary”.
made up 39 per cent of its total sales. Some publishers in France and Ger-
Kevin Kwek, an analyst at Bernstein, many are refusing to participate in
estimated that Ant received a fee of Google’s news programme unless it
about 2.5 per cent for each loan it set up. upholds Europe’s new copyright laws,
The credit business, which also lends A sculpture on “Once you’ve accidentally paid with their accounts at the end of the interest- ‘Sometimes In August, China’s supreme court ruled which give media groups the “right” to
to small businesses, has transformed display at Ant Huabei, it becomes set as the default,” free period. that the maximum interest rate on seek licensing fees.
even if my
Ant, which originally amassed its base Group said Mr Cheng. Mr Kwek said he did not expect the loans should be capped at four times the Angela Mills Wade, executive director
of more than 700m monthly users by headquarters in About 500m users borrowed from growth of the loans business to continue credit loan prime rate, or 15.4 per cent annu- of the European Publishers Council,
being an easy mobile payments app. But Hangzhou. Huabei and Jiebei in the year to June 30; at the pace of the past two years, but ally, which could affect the small por- said many of her members were “quite
balance
with Chinese regulators circling con- About 500m the average Huabei outstanding balance noted that China’s overall loan growth tion of loans Ant makes directly or secu- cynical”. She said: “By launching a prod-
sumer lending, analysts are unsure users borrowed was about Rmb2,000 ($295) at June 30. was 12 to 14 per cent a year and that Ali- was not ritises. Ant said most of its borrowers uct, Google can dictate terms and condi-
whether such rapid growth can con- from its Janine Wong said she so frequently pay had some powerful techniques to already paid about this rate or less and a tions, undermine legislation designed to
supposed to
tinue. consumer ended up paying with Huabei that she keep people borrowing. “With the link person familiar with the matter said the create conditions for a fair negotiation,
Ant’s consumer lending business is lending arm in set a Rmb500 credit limit to minimise to payments you have a unique basis for be enough court ruling would be immaterial. while claiming they are helping to fund
made up of two products: Huabei, which the year to June using it by mistake. But it did not solve growth,” he said. But Zhao Xijun, a finance professor at news production.”
to pay for
is similar to a traditional credit card, 30 the problem. “They would temporarily Meanwhile, Beijing has tightened its Renmin University in Beijing, said its The Google News Showcase will fea-
— Qilai Shen/Bloomberg
and Jiebei, which are small unsecured raise my credit limit automatically, so regulation of online lending in recent something, banking partners might face even ture story panels prepared by publish-
loans made through the Alipay app. sometimes even if my credit balance years, putting 99 per cent of peer-to- stricter interest rate caps in future. ers which will first appear in Google
it still got
Users say they are funnelled towards was not supposed to be enough to pay peer lenders out of business but “It is a general trend for China to con- News on Android mobile phones, before
these two products with discounts and for something, it still got paid with Hua- entrenching the positions of Ant, Ten- paid’ trol and lower interest rates on being expanded to Apple’s iOS operating
offers, and sometimes that Alipay uses bei if I didn’t pay attention,” she said. cent and a number of other big apps. loans . . . licensed institutions are under system and eventually to Google search.
Huabei to pay by default, even if they do Ant said if users had any questions, Ant has disbursed more loans as a a lot of supervision and their risk pre- Robert Thomson, chief executive of
not intend to use credit. the company’s customer service was result and had issued a total of Rmb1.7tn mium is lower, so they are likely to be News Corp, said “there are complex
“It induces you to use Huabei all the there to help. In its IPO prospectus the of outstanding consumer credit as of given a maximum rate that’s even lower negotiations ahead but the principle
time,” said 38-year-old Vincent Cheng. company said it would automatically June 30, larger than the retail loan book than four times the LPR,” he said. and the precedent are now established”.
“As soon as your default payment deduct funds from users’ Alipay of any Chinese bank. Still, Ant’s business has faced regula- “We applaud Google’s recognition of a
method is not Huabei, the app will accounts or connected debit cards, so But regulation has also forced it to tory hurdles and grown new business to premium for premium journalism and
continually push discounts and promo- that if consumers paid with Huabei partner with banks, who together with offset curtailed areas. “Innovations hap- the understanding that the editorial
tions at checkout to get you to pay with unintentionally they did not pay inter- Ant’s affiliate MYbank, provided 88 per pen when you have lots of challenges,” eco-system has been dysfunctional,
Huabei.” est as long as they had enough money in cent of the consumer loans as of June 30. said one person close to the company. verging on dystopian.”
Automobiles Support services
BlackRock attacks Volkswagen governance Suez backs late Ardian bid to resist takeover
Joe Miller — Frankfurt holds 53.1 per cent of VW’s voting rights, The scandal has since cost VW €32bn — David Keohane — Paris Ardian said yesterday that it had told began in July when Engie said it was will-
while the state of Lower Saxony holds almost the same amount as its entire Engie it wanted to buy the stake in Suez ing to consider offers for its full 32 per
BlackRock, the world’s biggest fund Suez is trying to derail a takeover by its
20 per cent, and Qatar 17 per cent. electric vehicle investment package. and had the backing of the company’s cent stake in the company.
manager, has criticised Volkswagen’s rival Veolia by backing an eleventh-
All three are entitled to nominate rep- However, Larry Thompson, a US board. Veolia’s bid arrived at the end of
management and supervisory boards, hour bid led by French private equity
resentatives to VW’s 20-person supervi- court-appointed monitor who spent The fund said it “wishes to form a con- August, sitting just below the manda-
saying there is still a lack of independ- group Ardian for the up-for-grabs
sory board, which is led by the com- three years at VW overseeing the over- sortium of private and public institu- tory offer level and coming with the
ent governance five years after the die- stake in its own shares held by Engie.
pany’s former chief executive Hans haul of its corporate culture, said this tional investors, predominantly French, stated intention to snap up the rest of
sel emissions scandal was revealed.
Dieter Pötsch, who also runs Porsche SE. month he was confident the company The push is likely to be too late to upset to carry out this project and launch a the shares if successful. An improved
The US group, which is the fourth larg- “We have on numerous occasions was a “better organisation” than when Veolia’s €3.4bn bid for the 29.9 per cent friendly public offer”. People close to offer of €18 a share lodged on Wednes-
est VW shareholder, said it had voted encouraged the company to improve he arrived at its headquarters in 2017. stake, which was welcomed by Engie on Ardian said the offer was conditional on day was welcomed by Engie,
against members of both boards at the the number of independent directors on “There will be other problems, but I Wednesday. Engie and Veolia have Veolia’s bid falling through. Suez has called Veolia’s approach
German group’s annual meeting on the supervisory board to enhance the am absolutely convinced that Volkswa- agreed to finalise the deal by Monday. Suez confirmed its support for the “particularly hostile”.
Wednesday. level of independent oversight of man- gen will handle those problems differ- The letter detailing the intention to approach and the “all-cash takeover bid The group also attempted to use a poi-
It said VW had not addressed prob- agement,” BlackRock said, disclosing ently than they did the Dieselgate scan- put together an offer was sent by Ardian that would immediately follow for all son-pill defence by putting its French
lems that played a “major role” in the that it had voted against certain execu- dal,” the former Enron prosecutor said. to Engie before its board meeting on Suez shareholders, under the same water assets in a protected founda-
Dieselgate scandal, adding that it was tives since 2016, the first annual meet- BlackRock was joined by German Wednesday, after which Jean-Pierre treatment conditions” without giving tion. Those assets were central to Veo-
concerned about the composition of the ing following the scandal in 2015. asset manager DWS in not voting to Clamadieu, Engie’s chairman, said the further details. lia’s attempt to pre-empt competition
company’s ownership, in which just “In our assessment, the insufficient approve the actions of members of the time for alternate bids had passed. Engie’s chairman told Le Figaro yes- concerns, having put in place an agree-
three shareholders hold more than 90 independent oversight provided by management board, and by institu- The Veolia approach, which is the first terday that the letter from Ardian was ment to sell them to a French fund once
per cent of the voting rights. VW’s supervisory board played a major tional investors Deka and Union in step to a full takeover offer, has been “only a sign of interest, of which we do a deal had been done.
The fund manager also criticised the role in the events, which led to the com- refusing to ratify the entire supervisory aggressively fought by water and waste not know the initiators, the project, the Engie and Veolia intend to try to get
fact that individuals who were VW exec- pany employing what has become board. group Suez from the start. price, or the financial capacity”. The full Suez to undo the foundation by the new
utives at the time of the discovery of known as a ‘defeat device’ in some of its Despite BlackRock’s misgivings, 94.33 The affair also has become highly value of a deal for Suez, including debt, deadline for an acceptance of the Veolia
“cheat devices” were still in charge. diesel engine cars,” the investor added. per cent of VW’s preferential sharehold- political. Engie’s largest shareholder, the would be above €20bn. offer next Monday, according to people
Through VW’s unique two-tier capital Mr Pötsch and chief executive Her- ers voted to approve the actions of the French government, has said the com- This is the latest volley in the increas- familiar with the matter. However, if the
structure, Porsche SE, the investment bert Diess were executives at VW when management and supervisory boards in panies should take their time to find a ingly complicated and fraught three- foundation cannot be reversed, Veolia
vehicle of the Porsche-Piëch families, the Dieselgate scandal was revealed. the 2019 fiscal year. way forward. way battle for the future of Suez, which will still push ahead, say the people.
OCTOBER 2 2020 Section:Companies Time: 1/10/2020 - 18:56 User: cathy.pryor Page Name: CONEWS1, Part,Page,Edition: USA, 8, 1
Friday 2 October 2020 ★ FINANCIAL TIMES 9
COMPANIES & MARKETS
Shell slashes costs to shape up for energy shift
Up to 9,000 jobs face axe with annual savings of $2.5bn as van Beurden lines up bigger moves in chemicals and lower-carbon areas
Anjli Raval
Total returns for oil & gas majors
Senior Energy Correspondent
have plummeted
A year ago, Royal Dutch Shell had a per-
suasive strategy for thriving through the Indices rebased
energy transition.
The first major to outline emissions- 250
cutting targets, it planned slowly to lift
spending on low-carbon tech while sus-
taining its legacy oil and gas operations
200
as it pledged $125bn in investor payouts
in coming years.
Since then, the group has been forced
into previously unthinkable moves, sus-
150
pending share buybacks, slashing
spending and cutting its dividend for the Shell
first time since the war. Its shares have
more than halved, and rivals have 100
caught up on climate messaging.
“All Shell is thinking about is, ‘How do
we maintain our position as a market
50
leader in every sense, from climate
action to staying competitive in the oil 2010 15 20
and gas space?’” one company insider
said. “The fear is that we go from being a CO2 emissions from fossil fuels
leader to a laggard.” Tonnes (bn)
Shell, which is pursuing a net-zero
40
emissions goal as pressure to tackle cli-
mate change and scrutiny of its capital
allocation plans mount, is scrambling to Other
come up with an updated plan. In the Gas
30
meantime, it cuts costs and streamlines. Oil
On Wednesday it offered a glimpse Coal
into Project Reshape, its restructuring
in which up to 9,000 jobs will be cut
from its 83,000-strong workforce to 20
save $2.5bn a year.
“Our traditional business will be more
focused,” Ben van Beurden, chief execu-
10
‘How do we maintain our
position? The fear is we go
from leader to laggard’ 0
Company insider 1959 70 80 90 2000 10 17
Sources: Refinitiv; Global Carbon Porject
tive, said. “We have to be a simpler, The Anglo- Another company insider said: Slumps in their companies’ share prices grow fossil fuel production. With a new ‘It’s only into legacy businesses, with opposition
more streamlined, more competitive Dutch group is “Everyone knows that if you’re in the make it clear that they will not be net- zero announcement, how is this to fossil fuels only rising.
the new
organisation that is more nimble.” involved in upstream [oil exploration and produc- rewarded for intention alone. But if they possible?” “The economics of the energy busi-
Shell has said greater efficiencies and power trading, tion] business, that’s where the cuts invest heavily, they will suffer finan- Shell executives have signalled that energies ness has changed,” said Ben Caldecott,
simpler methods of working have ena- biofuels and are going to come. It’s only the new cially as it will take years to scale up declining production is inevitable director of the Oxford Sustainable
guys that
bled it to cut expenses in its US shale solar, and is a energies guys that are seeing cash going these businesses. if the Paris climate goals are to be Finance Programme. “On top of this,
business 40 per cent this year. It is seek- leader in the their way.” Energy analysts have said that BP’s met. But they say a firm target is mean- are seeing there is more and more pressure from
ing to replicate this across other parts of emerging Investors have demanded greater move to reduce its oil and gas produc- ingless if sales of fossil fuel products — governments, shareholders and civil
cash going
the company. hydrogen sector, clarity. After the two-thirds cut to Shell’s tion 40 per cent by 2030 would put including those made with third-party society.”
While oil will remain a crucial cash but its chief dividend in April, executives were una- greater pressure on Shell to follow suit, crude — grow. their way’ Observers say clarity on the investor
generator and the company plans to executive says a ble to explain how capital allocation something Mr van Beurden is loath to “The climate doesn’t care where in proposition needs to be a priority, par-
expand its gas business, Shell will use deeper push is plans would change and what this do. His “single biggest” regret, he told the value chain, and from whose point ticularly in the absence of buybacks and
the cash to make bigger moves in chemi- needed meant for its energy transition plans. It the FT last year, would be abandoning of sale, those emissions came,” De la a lower dividend.
—Robin
cals and lower-carbon areas. It is Utrecht/ANP/AFP via Getty faced similar criticism after its the oil business prematurely. Rey Venter, head of integrated gas ven- “Shell has a hugely profitable core
involved in power trading, biofuels and Images announcement in July of lower longer- Two-thirds of Shell’s free cash flow tures, told the FT’s Commodities Global business — from LNG to deepwater
solar development, and is a leader in the term energy price assumptions and has traditionally been tied to its oil busi- Summit this week. “We need to go on oil . . . It took decades to build that,”
emerging hydrogen sector. nearly $17bn in impairments. ness, and Mr van Beurden yesterday a journey with customers to help them said Biraj Borkhataria at RBC Capital
“It is not enough, though. It all needs European oil executives say that if said that oil and gas would still be decarbonise.” Markets. “What you don’t want as an
to accelerate,” said Mr van Beurden. their renewable investments are low among the products Shell sold in 2050. Privately, Shell executives have ques- investor is for Shell to turn its back on
“Our low-carbon investments will compared with their fossil fuel opera- Andrew Grant at Carbon Tracker tioned whether committing ever larger decades of work for a less proven busi-
increase significantly over time.” tions, they will not get the recognition said: “Until now, Shell has tried to sums to lower-margin businesses is a ness model. The company needs to find
Shell said it would put at least five out from environmentalists and ethical have its cake and eat it too. They tried responsible use of funds. But they won- the right balance.”
of its 15 refineries up for sale. investors that they believe they deserve. to implement emissions targets but der if they can justify pouring more cash China’s net-zero target see Opinion

Contracts & Tenders
Technology
Facebook tightens election advertising rules
Hannah Murphy — San Francisco berg, Facebook chief executive, not to should “not be the arbiter of truth”.
fact check political ads. It came after However, in recent weeks, Facebook
Facebook will prohibit political adver-
President Donald Trump made announced bans on new political adver-
tising that “seeks to delegitimise an
unproven claims in a televised debate tisements in the week leading up to the
election”, including claims of wide-
with Joe Biden, the Democratic nomi- US presidential election and on any
spread voting fraud or corrupt voting
nee, that there was going to be “fraud adverts that prematurely claim victory
methods, in a concession to critics
like you’ve never seen” in the election. in the days or weeks that follow.
ahead of the US presidential election.
Mr Trump cited several small inci- The new policy also includes a ban on
The social media network updated its dents to suggest that postal votes cast ads that “claim the election date or the
rules late on Wednesday to “ban ads for him were being illicitly discarded, at mechanism for electing the president
that claim voter fraud . . . is wide- a time when a big rise in mail-in ballots can be changed in ways not permitted
spread” as well as those that “delegiti- is expected because of the coronavirus by the constitution or federal law”.
mise any lawful method or process of pandemic. The president also reiterated Facebook will also bar ads that seek
voting or voting tabulation as illegal, a refusal to honour a peaceful transfer of to discredit the election because the
inherently fraudulent or corrupt”. power if he were to lose. results cannot immediately be deter-
This included claims about mail-in Despite pressure from activists, mined on the day.
and absentee voting, as well as in- leftwing critics and some staff, Mr Zuck- The rise in postal voting could delay
person voting, it added. erberg has refused to overturn Face- the count, raising concerns that Mr
The changes mark a softening of the book’s political advertising policy on the Trump might claim victory before the
contentious decision by Mark Zucker- grounds that private sector companies result is verified.
Industrial goods
Nippon Paint prepares for flurry of deals
Kana Inagaki and Leo Lewis — Tokyo Like others in the sector, Nippon that will be difficult to survive on their
Paint has been pressured by Covid-19 as own,” added Mr Tanaka.
Nippon Paint is gathering firepower for
the global shutdown of car factories hit Mr Tanaka, the former deputy presi-
a worldwide deal spree and will assume
its automotive paint business, causing a dent of Mitsubishi UFJ Financial Group,
a central role in the consolidation of a
19 per cent year-on-year fall in net profit engineered a complex deal with Singa-
$150bn global industry hit hard by the
for the first six months of the year. pore’s Wuthelam Holdings, its largest
coronavirus, said its chief executive.
But in an interview with the Financial shareholder. Under the agreement Nip-
A fresh acquisition drive by Nippon Times, the Japanese group’s chief execu- pon Paint will issue new shares to
Paint would follow a $12bn deal with its tive Masaaki Tanaka said the crisis Wuthelam, the paints business founded
largest shareholder — a private com- offered opportunities it may not have by Goh Cheng Liang that has already
pany founded by one of Singapore’s had otherwise. The downturn, he said, built a 39.6 per cent stake in the group.
richest billionaires — that will combine provided a chance for Nippon Paint to The $12.2bn third-party share allot-
two of Asia’s biggest paints and coatings make global acquisitions across a still ment will by January raise Wuthelam’s
groups into a regional titan. fragmented paints industry. stake in Nippon Paint to 58.7 per cent of
To ready itself for a potential flurry of “When the entire market is down, outstanding shares, building on a 50-
mergers and acquisitions, Nippon Paint there will be industry realignment year relationship under which the Sin-
said it would restructure its worldwide opportunities for a company like us gaporean group has steadily increased
automotive coatings operations into a with financial firepower and stable its stake and taken an active role in its
single unit. management since there will be players strategic direction.
OCTOBER 2 2020 Section:Companies Time: 1/10/2020 - 17:26 User: cathy.pryor Page Name: CONEWS2, Part,Page,Edition: USA, 9, 1
10 ★ FINANCIAL TIMES Friday 2 October 2020
COMPANIES & MARKETS
Equities. Flotations Equities
Tokyo bourse
Silicon Valley debuts
to reboot
challenge rule book trading after
worst outage
since 1999
Leo Lewis and Kana Inagaki — Tokyo
The Tokyo Stock Exchange has
announced that trading will resume
today after a hardware glitch caused
equity trading to be suspended for a full
day in the worst outage since the world’s
third-biggest bourse shifted to a fully
electronic system in 1999.
The TSE admitted that the decision to
restart trading on the $6tn market
would involve some risk.
By yesterday evening, the operator
had yet to establish what went wrong
when the main system failed, before the
switch to the back-up system also
malfunctioned — raising concerns of a
repeat.
The shutdown, which fell on a critical
day of economic data releases and port-
folio rebalancing, affected more than
3,000 stocks listed on exchanges run by
TSE’s parent, Japan Exchange Group.
The group is Asia’s largest operator by
overall market capitalisation of listed
companies, and foreign investors
account for about two-thirds of its aver-
age daily trading volumes and value.
The exchange announced the halt
shortly before the market was due to
open at 9am. It later said the closure
would last the full day.
At a news conference, bourse officials
Direct listings, Spacs and new US Spacs zoom to record in banner year Software group tion on how to allocate the capital. ‘We’ve always aimed
Asana joined “It is the option that puts the most
technologies offer growing Proceeds raised in special purpose acquisition companies ($bn) NYSE via a control in management’s hands, to operate the market
40 direct listing although certainly they will still take stably . . . with the system
alternatives to traditional IPOs
this week advice from the bankers,” said Ms
slogan of Never Stop’
30 Courtney Crow/AP Buyer, who advised Unity on its IPO.
Richard Henderson — New York Unity ultimately settled on a slightly
Miles Kruppa — San Francisco 20 lower price than the top end of investor said they discovered a fault with a piece
US companies are taking greater control demand, to make sure certain investors of hardware just after 7am. When its
over their stock market debuts by were included, according to people system switched to back-up infrastruc-
10
turning to direct listings and new briefed on the process. ture, the process did not work and the
technologies to price their shares, “There is a tremendous amount of exchange was unable to distribute
0
pushing back on the strictures of initial interest in moving the process forward,” market information as normal.
2005 08 10 12 14 16 18 20
public offerings that have defined said Matt Walsh, who leads technology, The TSE added that it was planning to
equity capital markets for decades. 2020 data is year to Sep 30 media and telecoms equity capital mar- replace the affected hardware and pre-
Software companies Palantir and Source: Refinitiv kets for Credit Suisse — a lead under- paring to ensure normal trading from
Asana both sidestepped the traditional writer on the Unity deal. today onwards. The group ruled out
IPO process to join the stock market of company that is able to list without investors and companies have yet to test Mr Walsh said executives feel they hacking or a cyber attack as a cause for
through direct listings this week, raising money — well-known tech the new route. have a greater view of shareholder the system failure.
building on similar moves from Slack names with prominent backers. The approach would skip the step of demand with this approach. “It’s a huge “We’ve always aimed to operate the
last year and Spotify in 2018. Several The oldest of the four, Palantir, was meting out shares to specific investors, a step forward.” market stably . . . with the system slo-
other companies have chosen to go founded 17 years ago and had raised bil- task handled by the banks in an IPO, The recent spurt of innovation comes gan of ‘Never Stop’,” Koichiro Miyahara,
public through mergers with listed lions of dollars from private investors limiting the ability for companies to alongside the thunderous rise of Spacs, TSE’s chief executive, said at a news
blank-cheque vehicles known as Spacs. over that time. select those such as mutual funds that which raise capital from investors and conference. “In that sense, we deeply
These changes form a new playbook “We aren’t direct listing zealots,” said may hold the stock for the long term. sit on the stock market until they merge regret causing trouble to so many
for companies looking to list on the Palantir chief operating officer Shyam Instead, new shares would be floated with a target company, giving it a listing. people with today’s incident.”
stock market, promising executives a Sankar. But the process offered the com- in an auction on the first day of trading. Of late, these so-called blank cheque The full-day closure is unprecedented
greater say in the exercise while pany closer discussions with potential “I’m completely puzzled by the con- companies have attracted high-profile for the bourse since it upgraded its
dimming the role of investment banks. investors and “a little more control” cept of a company that wants to directly sponsors, including Bill Ackman, who in systems and switched to fully electronic
“There is a desire for companies to than a traditional IPO, he said. raise capital, perhaps take on significant July raised $4bn in the largest Spac to trading 21 years ago. The company said
have a more open and transparent “We felt the price discovery was much incremental liability and have no say date. it chose to do so out of concerns of “con-
process,” said Neil Kell, chairman of better and the cost of capital was lower,” whatsoever over the share price or the Investors have ploughed $41.7bn into fusion” among investors if it rebooted
global equity capital markets for Bank said Dustin Moskovitz, chief executive first round of shareholders,” Lise Buyer, US Spacs this year, triple the sum raised its systems midway through the day.
of America. of Asana. an IPO adviser in Silicon Valley, said of ‘We felt the last year, the prior high water mark, and Oki Matsumoto, chief executive of
Direct listings let existing sharehold- Shares in Palantir closed below their the proposed direct listing process. close to the $52.8bn raised by IPOs. Monex, one of Japan’s three largest
price
ers, including employees, sell their opening price on Wednesday while Banks are also employing technology Mr Walsh said Spacs offered another online brokerages, said the TSE had
stock on the open market on the first Asana’s rose more than 10 per cent. to refine the IPO. Last month, video discovery way for companies “to remove ineffi- probably made the right decision not to
day of trading but do not allow compa- The big difference between direct list- game software company Unity raised ciencies” from their stock market FastFT reboot trading yesterday. “It could have
was much
nies to raise capital by selling newly cre- ings and an IPO — the raising of capital — $1.3bn after would-be investors submit- debut. “The commonality between Our global made the situation more complex,” he
ated shares. This is a departure from the may soon disappear. In August, US secu- ted the prices they were willing to pay better and direct listings . . . is that they establish a team gives you added.
IPO, where investment banks typically rities regulators granted the New York for blocks of stock into a portal man- true demand curve and set a clearing market-moving Instead, TSE executives have decided
the cost of
allocate new stock to institutional inves- Stock Exchange approval for companies aged by Goldman Sachs, the lead under- price for a company’s shares.” news and views, that orders placed yesterday would be
tors, picking out participants that are to raise money alongside a direct listing. writer on the listing. capital was Additional reporting by Richard Waters in 24 hours a day invalidated, meaning that, if trading
likely to hold shares for the long term. But the decision has been challenged The company was able to set its price San Francisco ft.com/fastft resumes as planned today, it will do so
lower’
Recent direct listings typify the kind by a group representing institutional after the bids came in and had discre- See Lex based on Wednesday’s closing prices.
Fixed income Asset management
Volvo Cars ready to sell rivals CO2 SVP bets on wave of pandemic-driven
credits thanks to hybrid success defaults with $1.6bn stress fund launch
Peter Campbell and Nikou Asgari Cars’ chief financial officer Carla de Gey- green bond after Daimler and Volkswa- Robin Wigglesworth cial Times. “If the economic recovery poor shape that near-certain defaults
seleer told the FT. “We will definitely gen entered the market last month. slows down, or we have a second wave, mean even yield-hungry investors are
Volvo Cars has sold so many hybrid Strategic Value Partners, an invest-
not pay fines. In fact, we actually can Volvo’s first battery-only model, the then markets are vulnerable.” shunning them.
models in Europe that the Swedish car- ment group focused on the debt of dis-
support our competitors if they want.” XC40, was launched this year but the The aggressive intervention of central “Central banks have healed markets,
maker is open to selling environmental tressed companies, has raised a $1.6bn
While the company is open to selling group plans that half of all its cars will be banks led by the Federal Reserve has but the healing has mostly happened in
credits to rivals that are struggling to “dislocation fund” to take advantage of
its excess credits, it is not in talks with pure electric by 2025. helped buoy credit markets and ease the investment-grade world, not in high
meet new emissions rules. opportunities thrown up by the coro-
any current competitors, she added. The projects earmarked as “green many of the acute stresses seen in yield or leveraged loans,” Mr Khosla
navirus crisis, as investors bet that a
As the group announced its first €500m Volvo yesterday announced it raised investments” account for about a quar- March, nurturing the biggest corporate said. “The rising tide has helped those as
wave of defaults is still to come.
“green bond” to fund electric vehicle €500m through a green bond with the ter of its annual spending of SKr20bn bond issuance spree in history. well, but the bottom end of high
development, Volvo said almost one in money set aside for investment into (£1.7bn). In time, Volvo plans to phase The new fund lifts SVP’s assets under Analysts expect the scale of defaults yield . . . that’s where the crunch is.”
three of its cars sold across Europe this electric — not hybrid — cars. out all bonds other than its “green” management to almost $10bn — more Standard & Poor’s has counted 88 cor-
year had been a hybrid, as well as a The Swedish company became the bonds, Mrs de Geyseleer said. than double its size five years ago. SVP ‘Central banks can porate bond defaults globally in the sec-
smaller number of pure battery cars third European carmaker to issue a Volvo’s inaugural green bond offered manages a more opportunistic hedge ond quarter of the year, treble the
help solve liquidity
under its Volvo and Polestar brands. investors a coupon of 2.5 per cent for an fund, and private equity-like “special number seen at the start of the year, and
Carmakers with sales in Europe have issue set to mature in 2027. situations” funds, which seek to take problems, but not a level outdone only in the first three
to reduce their average CO2 emissions The company received €2.5bn in control of struggling but fundamentally months of 2009. Analysts warn that
solvency problems’
to 95g/CO2 per km this year or face orders, five times more than it sold, healthy companies through debt-for- many more are likely to succumb in the
large fines. The new rules are a steep highlighting the strength of demand for equity swaps in restructurings. coming months, given the scale of the
drop from the 130g required in 2015. green debt even at a time of great The dislocation fund will take a in light of that support to be muted. Citi- economic shock.
Under the EU emissions rules, car- economic uncertainty. hybrid approach, a mix of tactical credit group forecasts that the trailing 12- “The credit profiles of corporate issu-
makers generate credits by selling elec- Vivek Bommi, portfolio manager at trades and seizing control of companies month default rate for companies rated ers most affected by the economic crisis
tric or some hybrid cars. Credits can be Neuberger Berman, said the interest in in debt restructurings. The firm’s below investment grade will fall from are still under pressure and the rate of
used to help the company meet the new green finance helped junk-rated Volvo founder said that this is the best envi- the current 8.6 per cent to 5.1 per cent by defaults is likely to remain high
CO2 rules, or can be sold to rivals. launch and price the deal on the same ronment for distressed debt investing in the end of the year, while loan defaults throughout 2020 and potentially into
Fiat Chrysler aims to meet the rules day, a move more typical of investment the past decade, while credit markets will slip from 7.3 per cent to 5 per cent. 2021,” Fitch, another rating agency, said
this year by buying credits from Tesla grade than high-yield deals. remain at risk of setbacks. Nonetheless, many smaller or riskier in a recent report.
while VW entered a deal with MG to give “This showed investors’ appetite for “Central banks can help solve liquid- companies are still struggling to raise The money for the new fund — of
it access to credits because of delays to green bonds, driven to a large extent by ity problems, but not solvency prob- money to tide them over until the global which a quarter has already been
its electric car programme. Volvo has sold a green bond worth increased demand for green/ESG lems,” Victor Khosla, SVP founder and economy recovers from the shock invested — was raised from 15 institu-
“We are in a good position,” Volvo €500m to invest in electric cars funds,” he added. chief investment officer, told the Finan- caused by Covid-19. Others are in such tional clients.
OCTOBER 2 2020 Section:Markets Time: 1/10/2020 - 18:03 User: stephen.smith Page Name: MARKETS1, Part,Page,Edition: USA, 10, 1