Financial Times Europe - 11 12 2020

2020·7.3 MB·English

WORLD BUSINESS NEWSPAPER
FRIDAY 11 DECEMBER 2020 EUROPE
Borrowed time Digital defence line Beware the froth
Bailout loans risk drowning French Cyber laws need renewing to prevent Investor optimism requires a shot of
business in debt a tech crash realism
— BIG READ, PAGE 17 — JOHN THORNHILL, PAGE 19 — MARKETS INSIGHT, PAGE 12
Bloc lines up
Briefing
EU agrees to
i UK gives go-ahead to bank dividends
€1.8tn budget Britain’s banking regulator has given lenders the
green light to restart making dividend payments,
nine months after it asked them to suspend payouts
and preserve capital
.— PAGE 6; LEX, PAGE 20
European Commission leader Ursula
von der Leyen, second left, speaks to i Trump hails Israel-Morocco accord
French president Emmanuel Macron at Donald Trump tweeted “Another HISTORIC
yesterday’s EU summit before the bloc breakthrough today!” as Morocco and Israel agreed
finally agreed to its €1.8tn budget and to “full diplomatic relations”, the fourth regional
post-pandemic recovery package. deal to be brokered by the White House.
— PAGE 4
Hungarian prime minister Viktor
Orban, right, and his Polish counterpart i Vaccine news pushes oil back over $50
Mateusz Morawiecki, second right, Brent crude jumped above $50
opened the door to the deal after drop- a barrel for the first time since
ping objections to a mechanism tying March with some countries’
payments to rule of law principles. rollout of virus vaccines
Meanwhile, British prime minister outweighing concerns about
Boris Johnson last night told the UK to swelling oil inventories.
— PAGE 6
start preparing for a no-deal Brexit after
Brussels also published plans to keep i World’s richest banker dies, aged 82
trade moving if talks with the UK fail. Lebanese-born Joseph Safra, who — with estimated
Full stories and analysis pages 2 & 3 wealth of $27.2bn — had become the world’s richest
Editorial Comment page 18 banker after building a business empire from his
adopted home in Brazil, has died.
Olivier Matthys/Reuters — OBITUARY, PAGE 8
i Beijing curbs HK travel for US diplomats
Airbnb’s $87bn market debut
China has halted visa-free tourist travel for US
diplomats to Hong Kong in retaliation for sanctions
from Washington, which accuse Beijing of violating
democratic processes in the territory.
— PAGE 4
raises fears of fresh tech bubble i BlackRock pledges to push social issues
The world’s largest asset manager has vowed to back
more shareholder resolutions on climate and social
issues at annual meetings, as it faces pressure to use
its heft to change companies’ behaviour.
— PAGE 8
i Australia issues sub-zero treasury bills
3 IPO frenzy continues 3 Chesky’s stake worth $10bn 3 Lossmaking group’s shares double
Australia has sold short-term treasury bills at a
negative yield for the first time, joining Japan and
some European nations in being paid to borrow
Richard Waters, Dave Lee and its valuation above $70bn, Airbnb’s per- of Florida. “Back then the valuation of the damage to its business from the pan- money from investors.— PAGE 11
Miles kruppa — San Francisco formance sparked inevitable compari- internet stocks was divorced from the demic, which forced it to slash staff and
Wall Street’s bust-and-boom pandemic sons with the first internet bubble, general market. Once again we’re seeing raise an emergency financing round to
year will be capped by one of the biggest which peaked more than 20 years ago. this detachment.” stave off disaster early this year.
Datawatch
tech IPO bubbles in years, as shares in A flood of cash has buoyed fast- However, other analysts said that the Brian Chesky, Airbnb’s chief execu-
holiday-rentals company Airbnb growing tech stocks this year at a time latest stock market euphoria had been tive officer, struggled for words on
Close call
started trading yesterday far above when much of the stock market, and the largely confined to the IPO market and a Brian Chesky, CNBC as he looked back on the crisis. Joe Biden’s
Number of US states won by fewer
where they had been priced. global economy, is in the doldrums. handful of hot stocks like electric-car Airbnb’s chief “That price would have priced us success in the
than 2 percentage points
Shares in Airbnb started trading at Zoom, the emblem of working from maker Tesla, suggesting a different executive said of around 30 bucks,” he said of the emer- US presidential
12
$146, a leap from the $68 they were home and one of last year’s hottest IPOs, mentality was at work. his group’s gency financing. “I don’t know what else election was
priced at late on Wednesday, and more at one stage hit a $160bn valuation. But “This seems to be a phenomenon earlier funding to say. I’m very humbled by it.” 10 sealed by a string
of marginal
than three times the $44-$50 range the the year’s biggest IPO success of all driven by IPOs — we’re not back in crisis: ‘I don’t Mr Chesky will hold a stake worth 8
victories. Close,
company gave last week. The $146 price could be a company few people have 2000,” said Richard Clarke, an analyst know what else more than $10bn based on Airbnb’s
6 state-level wins
would value the lossmaking company at heard of — Snowflake, a San Francisco at Bernstein. to say. I’m very opening price. He and his co-founders,
are not new:
about $87.2bn, or more than twice the data analytics group. Its stock market “It’s at the end of the year, it’s a great humbled by it’ Joe Gebbia and Nathan Blecharczyk, 4
since 1824, a state
value of the world’s largest hotel group, value this week rose above $120bn, way of driving profits. You can’t afford will retain 42.2 per cent of the voting 2 has been decided
Marriott. eclipsing the once dominant IBM. to miss out.” Investors were partly look- rights in the public company. 0 by less than
Coming the day after delivery com- “[The first] internet bubble is increas- ing for ways to bet on a rebound in the Inside Business page 6 1824 1900 2020 2 percentage
pany DoorDash pulled off an equally ingly the apt comparison,” said Jay Rit- travel sector next year, he added. Elaine Moore page 19 Source: Pew Research Center points 187 times.
spectacular stock market debut, lifting ter, an expert on IPOs at the University Airbnb’s splashy debut comes despite Lex page 20
Lebanon’s prime minister charged with
criminal negligence over Beirut blast
Chloe Cornish — Beirut day, are seen as a boost for the investiga- Earlier, the office said Mr Diab had a
tion, which was opened shortly after the “clear conscience” and “clean hands”.
The judge leading Lebanon’s investiga-
explosion in August, but has been criti- Mr Diab, who was appointed prime
tion into the catastrophic Beirut blast
cised for its slow progress. minister in January, resigned days after
has charged the prime minister and
“It’s a positive development of course the disaster. He has remained in a care-
three former ministers with criminal
Facebook starts battle to because, before, [the judge] was saying taker role because lawmakers have
negligence causing hundreds of deaths.
fend off US break-up calls there was ministerial immunity,” said failed to form a new cabinet.
Hassan Diab, the caretaker premier, is Nizar Saghieh, director of The Legal Some 2,750 tonnes of explosives-
Analysis i PAGE 10; Lex i PAGE 20 scheduled to be questioned next week Agenda, an advocacy organisation. grade ammonium nitrate were brought
by judge Fadi Sawan, who is heading the Following pressure from protesters into Beirut’s port in 2014 by judicial
investigation. The judge will also ques- and legal campaigners, “he’s realised he order, over fears that the vessel in which
tion two former ministers of public can do it [indict ministers]”. Between they were contained would sink.
Austria €3.90 Malta €3.70
Bahrain Din1.8 Morocco Dh45 works and transportation, Ghazi Zaiter 30 and 35 people have been charged, Despite a paper trail of security and cus-
Belgium €3.90 Netherlands €3.90
Bulgaria Lev7.50 Norway NKr40 and Yussef Fenianos, and former Mr Saghieh said. toms authorities raising the alarm, the
Croatia Kn29 Oman OR1.60 finance minister Ali Hassan Khalil. Mr Diab’s office said the prime minis- chemicals were stored in a warehouse
Cyprus €3.70 Pakistan Rupee350
Czech Rep Kc105 Poland Zl 20 About 200 people were killed and ter had informed the judge that he had alongside flammable materials.
Denmark DKr38 Portugal €3.70
Egypt E£45 Qatar QR15 thousands wounded in August, when a nothing to add to a statement he had In August, President Michel Aoun
Finland €4.70 Romania Ron17 stash of neglected chemicals in Beirut’s given to the investigation as a witness. admitted having been informed about
France €3.90 Russia €5.00
Germany €3.90 Serbia NewD420 port erupted in one of the biggest non- The prime minister had “said every- the chemical stash. Although the
Gibraltar £2.90 Slovak Rep €3.70
Greece €3.70 Slovenia €3.70 nuclear explosions in modern history. thing that he had to say”, the office said, ammonium nitrate had been left where
Hungary Ft1200 Spain €3.70 The indictments, reported by the accusing the judge of violating Leba- it was for six years, no other prime min-
India Rup220 Sweden SKr39
Italy €3.70 Switzerland SFr6.20 state-run National News Agency yester- non’s constitution. ister has been charged.
Lithuania €4.30 Tunisia Din7.50
Luxembourg €3.90 Turkey TL19
North Macedonia Den220 UAE Dh20.00
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DECEMBER 11 2020 Section:FrontBack Time: 10/12/2020 - 19:20 User: nick.miller Page Name: 1FRONT USA, Part,Page,Edition: EUR, 1, 1
2 ★ FINANCIAL TIMES Friday 11 December 2020
INTERNATIONAL
Eurozone Rule of law
ECB unveils fresh stimulus to aid recovery EU seals deal
with Hungary
and Poland
Central bank to buy more ceeds until at least the end of 2023. rolled out, she said. “We have good rea- for banks had become “slightly more ing many measures into 2022, including
bonds and extend offer of Christine Lagarde, ECB president, sons to believe that by the end of 2021 challenging”. recently loosened collateral require- to unlock
said that if the economy recovered we will have achieved sufficient herd The pandemic plunged the eurozone ments and refinancing facilities for
funding at negative rates quickly from the pandemic the Pepp immunity so that . . . the economy will into its deepest recession for a genera- com­mercial lenders and other central
€1.8tn budget
“need not be used in full”, but it could be begin to function under more normal tion and a double-dip downturn is banks.
expanded even further if required. circumstances,” she added. expected in the final three months of “I understand what they are trying to
Martin Arnold — Frankfurt
The bank also extended until June 2020 after a fresh surge in infections. do — giving markets more confidence —
The European Central Bank has 2022 its offer to finance banks at nega- ‘I don’t think it will be The ECB cut its eurozone growth fore- but I don’t think it will be enough and it
launched a fresh burst of stimulus to tive rates as low as minus 1 per cent, in cast for next year to 3.9 per cent and is quite likely they will have to come Michael Peel, Mehreen Khan
enough and it is quite
help the eurozone economy recover effect paying them to borrow money, assumed there would be no post-Brexit back and do more,” said Randall and sam fleming — Brussels
from the pandemic, promising to buy provided they maintain the credit flow. likely they will have to trade deal between the UK and EU. But Kroszner, a former US Federal Reserve The EU has settled a dispute over its
€500bn more bonds over a longer The eurozone economy will contract it raised its forecast for 2022 to 4.2 per governor who is now deputy dean of the €1.8tn budget and post-pandemic
come back and do more’
period and providing extra cheap fund- 2.2 per cent in the fourth quarter and cent, while predicting growth of 2.1 per University of Chicago’s business school. recovery package after Hungary and
ing for banks. the downturn will continue into early cent in 2023. It also lowered its inflation Frederik Ducrozet, a strategist at Poland dropped objections to a new
The lender increased the size of its next year, Ms Lagarde said, adding that Paul Diggle, an economist at Aber- forecast. It expects prices to rise 0.2 per Pictet Wealth Management, said the mechanism tying payments to rule of
pandemic emergency purchase pro- inflation remained “disappointingly” deen Standard Investments, said Ms cent this year, with the pace of growth decision was “underwhelming” and a law principles.
gramme from €1.35tn to €1.85tn and low. Lagarde’s comments had “an unhelpful increasing to 1.4 per cent in 2023, still sign of “compromise between dovish
pushed back the end of its main crisis- Although “risks remain tilted to the whiff of hawkishness”, including her under its target of just below 2 per cent. and hawkish members of the governing Charles Michel, European Council pres-
fighting tool from next June until at least downside”, they had “become less pro- suggestion that Pepp may not be fully The ECB kept its deposit rate un­chan­- council”. ident, announced the deal yesterday at a
March 2022, while reinvesting any pro- nounced” since vaccines started to be spent and her remark that ECB funding ged at minus 0.5 per cent while extend- See Editorial Comment summit in Brussels, saying the accord
meant the EU could now “start with the
implementation and build back our
economies.”
Interview. Luigi Di Maio Hungary and Poland were won over
with a non-binding declaration
designed to assure them they would not
Italy pledges to honour pandemic debts
be singled out under the new rules,
which allow EU funding to be held back
when countries endanger the bloc’s
budget by violating the rule of law.
The agreement follows weeks of
uncertainty, as the economic recovery
Foreign minister commits to
package agreed by leaders in July was
repayment but says EU rules overshadowed by the threat of vetoes by
Budapest and Warsaw. The dispute has
on spending need changing exposed a deepening crisis over what
critics see as the slide towards authori-
Miles Johnson and Davide Ghiglione tarianism in Hungary, Poland and some
Rome other member states.
Italy must pay back all of the extra pub- The agreement means the EU can
lic borrowing it has taken on to combat push forward legislation aimed at enact-
the Covid-19 crisis and does not need to ing the seven-year budget, as well as the
cancel any of its government debt, says €750bn recovery fund, which should
Luigi Di Maio, foreign minster. start paying out to stricken member
In an interview with the Financial states in the second half of next year.
Times, Mr Di Maio played down recent The European Commission had been
debate inside the government over the examining alternative plans to force
possibility that Rome could ask the through the recovery fund without
European Central Bank to wipe out pan- Poland and Hungary — a fallback option
demic-linked borrowing. that would have sent a damaging signal
He argued that the large public sector about the bloc’s ability to unite behind a
debt of the eurozone’s third-biggest response to the crisis.
economy was sustainable. “The objec- Yesterday’s deal was unlocked after
tive has to be a sustainable debt and a negotiators drafted an “interpretative
good debt,” he said. declaration” to break the stalemate. The
“There has been a great debate about text is designed to give reassurances to
the debt incurred during the pandemic. Poland and Hungary that the rule of law
I believe instead that we must now focus mechanism will apply only to the next
on spending this money in the best pro- EU budget — starting from 2021. It also
ductive way for Italy. We need to make gives a role to the European Court of Jus-
sure that these debt investments can be tice to rule on the legality of the tool, if it
repaid and that they are productive is challenged by a member state in court
investments.” even before it is used.
Italy’s public debt is forecast to rise The ECJ would have to deliver its judg-
above 160 per cent of gross domestic ment before the European Commission
product this year as a result of the sharp Reflecting: therefore the old parameters of the sta- Mr Di Maio and a more radical wing that ‘All with other political realities,” Mr Di draws up guidelines on how to trigger
economic contraction caused by the Luigi Di Maio, bility pact don’t work. We could even is uncomfortable with the party’s sup- Maio added. the mechanism — a requirement that
countries,
pandemic and the big stimulus pack- below, says review the temporary framework for port of its coalition partner, the centre- “This does not mean that everything would be likely to delay any sanctions
ages launched by the government to Rome now sees state aid on some strategic sectors.” left Democratic party. more or is going well in Europe. Indeed [on] process. The question of when measures
combat it. the EU in a Mr Di Maio was previously joint dep- Now Mr Di Maio says that the Five immigration and asylum, both as Italy to curb budget funds can come into
less, had to
Last month, a political adviser to better light uty prime minister in a coalition gov- Star Movement — whose MPs on and as a political party, we expect much force is significant for Viktor Orban,
Giuseppe Conte, prime minister, sug- because of the ernment between Five Star and Matteo Wednesday helped the coalition govern- get into more.” Hungary’s prime minister, who faces
gested the ECB should consider cancel- recovery fund Salvini’s anti-migration League party ment pass a parliamentary vote on He praised European Commission national elections in 2022.
debt, and
ling Italian government bonds it has Alberto Pizzoli/AFP/Getty that repeatedly clashed with Brussels reforming the European Stability Mech- president Ursula von der Leyen for her Earlier in the day, Mr Orban signalled
bought to help the country recover. over Italy’s budget deficit. anism that some of its politicians had therefore response to the Covid-19 crisis, and said he was on the cusp of dropping his objec-
Mr Di Maio, who as foreign minister is In October 2018, he staged an air- threatened to block — has adjusted its that the perception of the EU in Italy had tions, saying an agreement would be
the old
the most senior member of the formerly punching victory celebration from a once hostile approach to Europe. improved as a result. “good for the unity of the EU”. Mateusz
anti-euro populist Five Star Movement balcony at the prime minister’s resi- “I believe that Italy should not be left parameters “In Europe, what we have always Morawiecki, prime minister of Poland,
in the current coalition govern- dence in Rome when the government in the hands of [Hungarian premier asked for were expansive policies, no said the deal would be “a prerequisite to
of the
ment, said that while Italy’s debts agreed to an increase in public spend- Viktor] Orban’s friends, because what more austerity, and a different social go forward with the process”.
should be honoured, the ing, prompting a showdown with the we saw on the veto for the recovery fund stability policy, and I must say that for the pan- Angela Merkel, German chancellor,
EU’s public spending and European Commission. puts Italy and Europe in trouble,” he demic the reaction was there,” he said. said as she arrived at the summit that
pact don’t
borrowing rules, known as Last year, he prompted a diplomatic said. “I am glad that Ursula von der Leyen finalising the accord and releasing the
the stability and growth pact, row with France by meeting gilets “The nationalism that was in season work’ apologised to Italy. She showed great funds would be a “very important sign
were no longer fit for purpose. jaunes protesters. in the last two or three years, and that sensitivity in the first phase of the for the EU’s ability to act”.
“I believe that after this pan- This year, Mr Di Maio stepped Italy is still living with, is a form of pandemic. Supporters of the compromise insist
demic we can no longer think of down as leader of the Five Star national selfishness that has done noth- “There was a time when the European the EU has not capitulated to the
the stability and growth pact as Movement, which has not yet ing but continuously prove to be harm- institutions were scattered,[there was] demands of Warsaw and Budapest,
we have done in recent years. I appointed a permanent ful to Italy and the European Union. a great crisis in the perception of the because the text of the underlying pro-
believe that it would be unsustain- replacement. It continues to be “The Five Star Movement has become European Union. Instead, now there is a posed legislation remained unchanged.
able for any country. All countries, roiled by public disagreement aware of its role [in Europe] and is try- good perception of the European Union Additional reporting by Guy Chazan in
more or less, had to get into debt, and between moderates such as ing to exercise it, reaching agreements because of the recovery fund.” Berlin
Global trade
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Covid-19 triggers ‘perfect storm’ for shipping supply chains
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George Steer and Robert Wright As a result “productivity slows down”, chief executive at Hapag-Lloyd, another until the last week of December in order
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DECEMBER 11 2020 Section:World Time: 10/12/2020 - 18:47 User: john.conlon Page Name: WORLD1 USA, Part,Page,Edition: EUR, 2, 1
Friday 11 December 2020 ★ FINANCIAL TIMES 3
BREXIT
Gloom signals
No-deal contingency
Emergency
acrimonious plans revealed
by Brussels to
denouement
prevent chaos
Both sides downcast as Sunday becomes JIM BRUNSDEN — BRUSSELS
GEORGE PARKER — LONDON
deadline to decide on further talks Brussels has published emergency
plans to keep planes flying, trucks
moving and prevent other chaos in the
event that trade talks with Britain fail,
GEORGE PARKER AND PETER FOSTER clear overall impression from the UK as it warned of “significant uncer-
LONDON prime minister was that he was not tainty” over the fate of the Brexit talks.
JIM BRUNSDEN — BRUSSELS
going to compromise because that
It was a dinner that was supposed to pro- would be politically too costly,” the dip- The European Commission adopted the
vide “political impetus” for a post- lomat said. proposals yesterday, temporarily ensur-
Brexit trade deal but Boris Johnson Two officials briefed on the talks said ing that airlines could continue to fly
emerged from three hours of sterile that Mr Johnson and Ms von der Leyen their normal routes between the EU and
talks with Ursula von der Leyen in Brus- — neither of whom are known for their UK and that hauliers could continue to
sels with one British official muttering grasp of the negotiating details — did not cross the English Channel after Britain
simply: “No deal.” engage in a private discussion. leaves the single market on January 1.
The omens were bad from the start; Mr Barnier and UK counterpart David “While the commission will continue
from the moment on Wednesday night Frost were in the room throughout. The to do its utmost to reach a mutually ben-
that Ms von der Leyen, the European result was stalemate. Some British offi- eficial agreement with the UK, there is
Commission president, instructed cials railed at Mr Barnier and Ms von der now significant uncertainty whether a
Mr Johnson to put on his face mask, it Leyen’s refusal to budge and the tension deal will be in place on January 1 2021,”
was clear this was going to be an awk- was quickly relayed to the media. the EU executive said.
ward encounter. The general conclusion, as dawn Brussels had spent weeks resisting
The photo-call brought the clash of broke in Brussels and London yester- In a jam: EU’s insistence on an “evolution mecha- ‘There is question is what’s the balance of bene- pressure from member states to publish
political cultures into sharp relief: day, was that Britain’s Brexit transition freight trucks nism” to make sure that Britain does not fits/obligations. If UK is not prepared to the plans, arguing that doing so could
frankly a
Mr Johnson, the champion of British period would end in an acrimonious queue on the undercut the European regulatory accept ANY obligations, well.” disrupt the trade negotiations with Brit-
sovereignty, baggy-suited, hair askew, divorce, with no trade deal in place. main route into model in future, gaining a competitive lack of Britain argues that the proposal ain by giving the impression that the EU
alongside the sleek figures of Ms von der The pound fell more than 1 per cent the port of advantage. The EU insists that if the UK tabled by the EU is overly prescriptive, would create a safety net for when the
trust, a lack
Leyen and her chief negotiator, Michel against the dollar to $1.3246, while the Dover yesterday fails to mirror improved regulations on undermining the country’s sovereign country’s Brexit transition period ends.
Barnier, defenders of the EU’s rules- chances of a trade deal before the end of Justin Tallis/AFP/Getty the continent, it should have the right to of energy’ right to design its own regulations and But EU officials said the commission
based order. the year slid to 43.4 per cent on the bet- impose punitive tariffs. Mr Johnson leaving it vulnerable to unilateral “light- had been forced to act as little time
The jocular menu of scallops and tur- ting platform Smarkets, down from regards this plan as an unacceptable Diplomat ning” tariffs. Mr Johnson has specifi- remained until the end of the year.
bot — a none-too-subtle nod to the row 64.5 per cent on December 7. attack on British sovereignty. cally criticised the “automatic” nature The precariousness of the trade talks
over post-Brexit fishing access to UK In spite of the gloom, there were glim- But if Mr Johnson rejected a deal on of such a mechanism, seen by some in was underlined at a dinner on Wednes-
waters — seemed less amusing as the mers of hope that a deal could be sal- those grounds, the economic rationale Brussels as a hint he might be willing to day between Boris Johnson, UK prime
evening drew on. vaged, not least because both sides want would be far from clear. He appears will- accept a compromise including some minister, and Ursula von der Leyen,
British officials claim Mr Johnson had one and Lord Frost and Mr Barnier were ing — under a no-deal scenario — to kind of arbitration mechanism. commission president, that laid bare
gone to Brussels hoping to find a com- instructed to carry on talking in Brus- accept tariffs across the whole economy As EU leaders met in Brussels yester- the gulf separating the sides.
promise in talks that have stalled on a sels. Downing Street said: “The PM does in just three weeks’ time to avoid the day for their quarterly summit, one sen- Ms von der Leyen said yesterday that
fair competition “level playing field” not want to leave any route to a possible theoretical risk of punitive tariffs on ior EU diplomat said the mood was the bloc had a responsibility “to be pre-
and fishing rights, but got nowhere. deal untested.” Both sides would take some goods under theoretical circum- increasingly resigned to a “no deal”. pared for all eventualities”.
“They didn’t really respond at all,” stock on Sunday to see if there was any stances at some point in the future. “There is frankly a lack of trust, a lack Brussels insisted it was doing the bare
lamented one person briefed on events. point in further talks. Jonathan Jones, former head of the of energy and a lack of commitment to minimum necessary to prevent signifi-
A senior EU diplomat directly briefed The issue of fisheries is principally a UK legal service, argued that Mr John- reach a deal,” a diplomat said. cant disruption for European citizens
on the dinner said Mr Johnson had dem- haggle: the number of years in which EU son’s claim that Brexit was all about “We’re down to the bottom of our and businesses. The aim, it said, was to
onstrated no obvious appetite to reach a boats would be guaranteed continued regaining sovereignty was also flawed. mandate, and the aspects of that man- “provide a transitory solution, while
deal, reproducing old proposals that access to UK waters and the amount of “The argument about ‘sovereignty’ is date that protect the EU’s internal mar- negotiations on a future partnership
failed to respect the basic principles of fish they could catch. Both sides believe fatuous,” he tweeted. “It is sovereignty ket we won’t let go. We can’t ruin the EU. continue, and not look to mitigate the
the EU single market. “It was described the issue can be resolved. which gives the UK power to enter into So what can we do?” negative impacts of Brexit in a sustained
as an almost apathetic performance; the The main sticking point remains the any trade deal (or choose not to). The See Editorial Comment manner”.
4 ★ FINANCIAL TIMES Friday 11 December 2020
INTERNATIONAL
Diplomatic relations Labour market
Trump hails Israel accord with Morocco US jobless
claims rise
sharply amid
US president describes of Morocco have agreed to full diplo- peace”, saying there would be direct announced last month that it was aban- unseemly. “It is the height of transac-
fourth deal in region as matic relations — a massive break- flights between the countries and the doning a ceasefire that ended 16 years of tional diplomacy, in which an issue as new virus
through for peace in the Middle East!” opening of diplomatic missions, accord- fighting with Morocco in 1991. important as relations with Israel is
‘historic breakthrough’ Mr Trump’s administration has ing to Reuters. Mr Trump took the decision to recog- being used as a bargaining chip in pur-
restrictions
announced similar deals between Israel Mr Kushner said Morocco was a “tol- nise Western Sahara as Moroccan terri- suit of wholly unrelated goals,” he said.
and the United Arab Emirates, Bahrain erant society” whose leaders had been tory because of strong ties between the “As one of the persistent faultlines in
Katrina Manson — Washington
and Sudan, a significant shift in regional good to Jewish people in the past, but US and Morocco, and because there had regional integration and co-operation,
Heba Saleh — Cairo
relations between Israel and Arab states that “for whatever reason, diplomatic been “no progress on a resolution” on the US is trampling over African equi-
Morocco and Israel agreed to “full that threatens to leave the Palestinians relations did not exist” until now. the issue, said Mr Kushner. “This is ties for a short-term win for its Israel Matthew Rocco — New York
diplomatic relations” yesterday, in a with dwindling support. Morocco has controlled most of West- something that’s been talked about for a policy,” said Judd Devermont, who was
New US jobless claims accelerated last
US-brokered deal under which Wash- Jared Kushner, a senior aide to ern Sahara, a disputed desert territory, long time but it’s something that seems national intelligence officer for Africa
week to their highest level since mid-
ington recognises Moroccan sovereignty Mr Trump, and Mike Pompeo, secretary since 1975 when Spain, the occupying inevitable at this point, it’s something during the Obama administration.
September, jumping to 853,000 after a
over the disputed territory of Western of state, have been putting pressure on power pulled out. Since then the Polisa- that we think advances the region and Mr Devermont, now Africa director at
surge in coronavirus cases spurred a
Sahara. Saudi Arabia to normalise ties, but the rio Front, an Algeria-backed move- helps bring more clarity to where things the Center for Strategic and Interna-
new round of shutdowns that stymied
“Another HISTORIC breakthrough Gulf kingdom has expressed caution. ment, has been seeking independence are going.” tional Studies, said the decision to rec-
the labour market recovery.
today!” Donald Trump, the US presi- Benjamin Netanyahu, the Israeli for the territory. The UN has for decades But Robert Malley, former senior offi- ognise Western Sahara would “pose an
dent, wrote on Twitter. “Our two prime minister, welcomed yesterday’s been trying to organise a referendum cial in Barack Obama’s administration, immediate problem for many African Initial applications for unemployment
GREAT friends Israel and the Kingdom announcement as “another great light of on self-determination. Polisario said the deal would strike many as countries” as well as the African Union. benefits increased from a seasonally
adjusted 716,000 in the previous week,
the US labour department said yester-
day. Economists were expecting a
Healthcare system. Funding shortfalls smaller rise to 725,000 claims.
There were 5.76m actively collecting
state jobless aid as of November 28 com-
Pandemic pressures fuel nurses’ strike
pared with 5.53m a week earlier, buck-
ing economists’ expectations for
another decline. The insured unem-
ployment rate, considered an alterna-
tive measure of joblessness, rose to
3.9 per cent from 3.8 per cent.
New York staff halt work over
Continuing claims had fallen for
labour shortages and poor 10 consecutive weeks, from 12.7m in
mid-September, although economists
personal protective equipment partly attributed the decline to unem-
ployed workers exhausting regular
benefits.
Taylor Nicole Rogers — New York Pandemic Unemployment Assist-
The Montefiore medical centre in the ance, a government programme that
New York City suburb of New Rochelle offers benefits to the self-employed and
is known as a safety-net hospital as it others who would not qualify for regular
cares for patients regardless of their benefits, received 427,609 new claims
ability to pay. For nurses at the facility, last week on an unadjusted basis, com-
that has translated into a crushing bur- pared with 288,234 a week earlier.
den during the pandemic. While some of the jump could be
This month, about 200 union-repre- attributed to a backlog of claims after
sented nurses at the privately owned Thanksgiving, “the trend of more
hospital staged a two-day strike, picket- Americans losing jobs is clearly rising
ing against working conditions they said over the past month”, said Robert Frick,
had made their lives nearly impossible. corporate economist at Navy Federal
As the number of Covid-19 patients Credit Union.
surged, they claimed, the hospital “The Thanksgiving holiday may still
pushed nurses to care for too many at a be wreaking some havoc with the data
time and issued personal protective but the underlying picture is still one of
equipment that gave off a harsh chemi- weak labour market conditions as the
cal smell and left some staff with rashes. coronavirus surges,” analysts at Oxford
“If you can safely care for one or two Economics said.
patients, but you’re given four or five, The US added 245,000 jobs in Novem-
you have to make some decisions about ber, the slowest rate of hiring since a
who you’re going to rescue,” said Judy combined 22m jobs were lost in March
Sheridan-Gonzalez, president of the Ms Sheridan-Gonzalez, who works a Signs of stress: Bea Grause, president of the Health- and April during the height of early
nurses’ union at the hospital. “That is Grim record The US reported more than 3,000 few miles south of New Rochelle in a members of care Association of New York State, said coronavirus-related shutdowns.
just a horrible thing for health profes- More than coronavirus deaths in a single day Montefiore hospital in the Bronx, New the New York member hospitals including Montefiore The economy has now recouped
sionals to confront.” for the first time on Wednesday, as York City’s poorest borough, said staff- State Nurses were working to recruit nurses from out 12.3m jobs.
3,000 Covid
Shortages of staff and PPE have tor- rising fatalities followed a record ing shortages existed even before the Association on of state and lure others out of retirement The slowdown in jobs growth has
deaths
mented healthcare workers nationally surge in cases and hospitalisations pandemic. After Covid-19 hit, she said, the picket line to avert shortfalls, but budgets are tight stoked concerns that the labour mar-
during the outbreak. But such problems reported during the past month. conditions grew worse and some outside the as bans on lucrative elective pro­cedures ket’s rebound has stalled, at a time when
are acute at overburdened hospitals in one day States attributed a further 3,054 patients were left lying in their own city’s Montefiore earlier this year reduced revenues. many states are reimposing curbs on
serving poor and minority communi- deaths to the virus, according to waste until a nurse or assistant arrived. New Rochelle Marcos Crespo, a Montefiore execu- businesses in an effort to combat a rise
ties, said Dr Linda Aiken, a nursing pro- the Covid Tracking Project, passing “It’s extraordinarily painful,” she said, Hospital tive, said before the strike that the in infections.
fessor at the University of Pennsylvania. the 2,977 from the September 11 adding she was reminded of a dystopian this month nurses’ union was “selfishly putting the New applications for jobless benefits
Each nurse in pre-pandemic New terrorist attacks in 2001. film when she compared her emergency Mike Segar/Reuters community at risk and using Covid-19 climbed the most in California and Illi-
York City was responsible for an average The figure eclipsed the 2,752 room with outposts of the Montefiore in as a political football”. He said the hospi- nois last week, based on advance figures
of 6.5 patients, the highest anywhere in deaths recorded on May 7, when wealthier suburbs. “It’s like you see the tal network had offered a pay rise, fully that are not seasonally adjusted. The
the state, found a study by Dr Aiken in states in the US north-east rich in the sky and the poor in the funded health insurance, tuition reim- pace of claims also picked up in Texas,
the BMJ medical journal. New York including New York and New Jersey ground,” she said. “It’s two worlds.” bursement and other benefits but would New York, Pennsylvania, Virginia and
state does not cap how many patients were hardest hit. The national If the US does not bring the pandemic not negotiate on staffing levels. Georgia. Only five states and the US Vir-
can be assigned to one nurse; California, death toll stands at 280,454, the under control, Dr Aiken warned that the Ms Sheridan-Gonzalez said their gin Islands reported a smaller number
in contrast, mandates that nurses care highest in the world by far. problems facing nurses in places like the offers were “too little, too late”. of first-time claims.
for no more than five each. Studies have Fatalities tend to lag behind Bronx could spread. “You expect this in “What has Montefiore done since “Rising numbers of Covid-19 cases
shown that mortality rates jump 7 per cases and hospitalisations, and the minority-serving hospitals,” Dr Aiken June?” the union quoted New Rochelle and the resulting containment meas-
cent for each additional patient a nurse latter two metrics have repeatedly said. “What’s unexplainable is how it’s nurse Maria Castillo on the second day ures are once again wreaking havoc on
is assigned. Hospitals do not typically set new peaks in recent weeks. started to happen everywhere.” ‘[Hospitals] of the strike. “They put a bunch of bill- the economy,” said James Knightley,
make their staffing ratios public. Public health officials have asked At least 213 registered nurses nation- boards up on the highway. They bought chief international economist at ING.
would
“This is a bad commentary on how US people to stay at home during the wide had died of Covid-19 by Septem- TV commercials calling us ‘heroes’. The jobless claims report showed that
hospitals are trying to manage staffing holiday season and state leaders ber, found National Nurses United, a rather spend They want the community to think they 19m people were claiming benefits in all
even in normal circumstances,” Dr have reimposed curbs on union. They estimate another 258,768 appreciate us. The reality is, they would state and federal programmes as of
millions on
Aiken said. “They’re very much in love businesses and social gatherings. had been infected. Nurses’ mental rather spend millions on their public November 21, down from 20.2m,
with this idea of just-in-time staffing Hospitalisations hit a record health has also suffered, with 86 per their image, image, instead of making sure we have according to unadjusted figures that are
and supplies. It’s a manufacturing idea 106,688 on Wednesday. States cent of the 1,100 surveyed by non-profit enough nurses to care for everyone!” reported on a two-week delay.
instead of
that doesn’t work out in hospitals.” reported 209,822 new cases, below Mental Health America citing anxiety. Dr Aiken said solutions could include In other economic data, consumer
This keeps hospitals from maintain- the single-day record of 224,831 set At Montefiore New Rochelle, a nurse ensuring we state legislation to cap nurse-to-patient prices ticked up 0.2 per cent in Novem-
ing stockpiles of PPE beyond the 90-day on Friday, and bringing infections and an assistant died from Covid-19 this ratios and an expansion of reciprocal ber against the previous month. The
have enough
supply mandated by the state or sched- confirmed over the past week to year, and a handful of older nurses were licensing agreements that allow nurses consumer price index was flat in
uling more than the minimum number 1.43m. Peter Wells, New York so afraid of getting sick that they retired nurses’ to move across state lines. October. Economists had anticipated a
of workers, Dr Aiken pointed out. early, Ms Sheridan-Gonzalez said. The hospitals did not comment. 0.1 per cent gain last month.
Tit-for-tat sanctions Accounting fraud
China curbs HK access for US diplomats Wirecard shorting ban put watchdog off scent
Yuan Yang — Beijing other’s officials since Beijing abruptly who have “displayed malicious behav- Olaf Storbeck — Berlin for two months, the first such ban on an were in line with such a picture,” he said.
imposed a national security law on iour and bear major responsibility on individual stock. Two weeks after the FT report was
China has halted visa-free tourist travel After BaFin, Germany’s financial
Hong Kong in June. Critics said the law the Hong Kong question”. It brushed aside concerns from Ger- published in January, two senior
for US diplomats to Hong Kong in retal- watchdog, decided early last year to
rolled back freedoms promised to the “It’s very rare to see such actions from many’s Bundesbank over the move. The employees of EY Germany, Wirecard’s
iation for sanctions from Washington, ban the shorting of Wirecard shares
territory on its handover to China from China,” said Wu Xinbo, dean of the insti- central bank had told BaFin that such a auditor, contacted Apas and briefed the
which accuses Beijing of violating dem- and to file a criminal complaint against
the UK in 1997. tute of international studies at Fudan decision could not be justified on the watchdog about the Singapore allega-
ocratic processes in the territory. Financial Times journalists, senior
The US sanctions have hit some Hong University, saying he could not recall grounds of protecting financial stability. tions. Mr Kanwan stressed that the call
staff at the country’s audit oversight
Diplomats stationed in Hong Kong have Kong officials hard given the interna- any similar sanctions on personnel from In April 2019, BaFin reported two FT from EY did not constitute an “early
body concluded that fraud allegations
work visas but US diplomatic passport other countries. warning” by the auditor. “Both
against the payments company might
holders not based in the territory have Last week, Hong Kong jailed three ‘My impression was: described the information that was pub-
have been unwarranted.
until now been able to travel there for US diplomatic young pro-democracy activists on licly available in the press, and told us
passport holders somebody is on the case,
holidays without visas. charges related to protests last year that At a parliamentary hearing yesterday that they will address the issues during
will lose the right
Announcing the measure yesterday, to take holidays involved millions of the region’s 7m into the Wirecard scandal, Naif Kan- has been looking at the their annual audit,” said Mr Kanwan.
Hua Chunying, China’s foreign ministry in Hong Kong people. Joshua Wong, the 24-year-old wan, executive director for enforce- Apas in early 2019 saw no indication
allegations’
spokesperson, warned the US to “stop without a visa face of the pro-democracy movement, ment and market monitoring at Apas, EY might have violated its professional
meddling in Hong Kong’s affairs and was sentenced to 13-and-a-half months the audit watchdog, told MPs: “My duties, said Mr Kanwan. He acknowl-
China’s internal politics, stop walking tional reach of the dollar-based Ameri- in prison. impression was: somebody is on the journalists to criminal prosecutors in edged the watchdog at the time was una-
further and further along this danger- can financial system. Carrie Lam, Hong On Tuesday, Donald Trump’s admin- case, has been looking at the allegations Munich, accusing them of colluding ware of earlier allegations against Wire-
ous and mistaken path”. Kong’s chief executive, has said she has istration imposed sanctions on 14 high- and came to certain conclusions.” He with short sellers and manipulating card raised by short sellers in 2016 in the
The travel curbs will also apply to the no access to banking services as a result level Chinese officials for allegedly vio- added that this “subconsciously influ- financial markets. Prosecutors dropped so-called Zatarra report. That only
autonomous region of Macau, the of the sanctions and is forced to keep lating democratic processes in Hong enced my thoughts about the matter”. their investigation this year after Wire- changed in October 2019 after the FT
former Portuguese colony neighbouring “piles of cash” at home. Kong, whose autonomy from the main- Two weeks after the FT reported in card collapsed in one of Europe's biggest published internal Wirecard docu-
Hong Kong that is a gambling centre In addition to the travel curbs, Ms land was enshrined in a joint declara- late January 2019 that a senior Wirecard postwar accounting frauds. ments pointing to a concerted effort to
with significant investment from US Hua said China would enforce unspeci- tion signed by London and Beijing on executive in Singapore was suspected of Asked if he believed in early 2019 that fraudulently inflate sales and profits.
casino groups. fied “countermeasures” against those the handover. using forged and backdated contracts, FT journalists colluded with short sell- “As a lesson learned, we have
China and the US have been engaged “US government officials, lawmakers, Additional reporting by Nian Liu in Bei- BaFin, in an unprecedented move, ers, Mr Kanwan pointed to BaFin’s ban improved our press monitoring,” Mr
in tit-for-tat sanctions against each and NGO workers and their families” jing and Nicolle Liu in Hong Kong banned the shorting of Wirecard shares and criminal complaint. “These moves Kanwan told MPs.
DECEMBER 11 2020 Section:World Time: 10/12/2020 - 18:46 User: john.conlon Page Name: WORLD3 USA, Part,Page,Edition: USA, 4, 1
Friday 11 December 2020 ★ FINANCIAL TIMES 5
DECEMBER 11 2020 Section:Ad Page Time: 10/12/2020 - 10:31 User: john.lee Page Name: AD LOMBARD, Part,Page,Edition: LON, 5, 1
6 ★ FINANCIAL TIMES Friday 11 December 2020
y
China default shock Yongcheng’s plight shows Beijing will no longer act as backstop for reckless borrowing
ANALYSIS, PAGE 8
Watchdog says
Brent crude
Spac track Supercar maker McLaren ponders
breaches $50
blank-cheque listing in race to raise £500m
UK banks can
for first time
since March
resume paying
Anjli Raval — LONDON
Brent crude yesterday jumped above
dividends $50 a barrel for the first time since
March with the rollout of Covid-19 vac-
cines outweighing concerns about
swelling oil inventories.
The UK began a mass vaccination pro-
gramme this week and it is expected
that immunisations will start soon in
3 PRA pushed for suspension in March
the US and Canada, fuelling optimism of
a recovery in oil demand.
3 Guidelines set on size of distributions
“Fast-tracking vaccinations is raising
hopes that oil demand will benefit
quicker,” said Bjornar Tonhaugen, head
Matthew Vincent and Owen Walker The regulator set a dividend limit of of oil markets at Rystad Energy.
london 25 per cent of a bank’s cumulative prof- Brent crude, the international oil
The UK banking regulator has given its over the previous two years or 0.2 per benchmark, rose 4.3 per cent to $50.95 a
lenders the green light to resume divi- cent of its risk-weighted assets — which- barrel in afternoon trading in London.
dend payments, nine months after it ever is the higher. West Texas Intermediate, the US
asked them to suspend shareholder The PRA pressured banks in late marker, increased 4.6 per cent to $47.63
payouts and preserve capital at the March to suspend dividends and share a barrel.
height of the pandemic. buybacks until the end of 2020, and can- Governments imposed lockdowns
The Bank of England’s Prudential cel any unpaid 2019 distributions, to and travel bans earlier this year to curb
Regulation Authority said yesterday prevent the depletion of capital at a time the virus, slowing the global economy
that its latest test of banks’ capital posi- when lending was needed to support the and leading to a collapse in oil demand
tions had found they were resilient to “a economy. They were also asked to that took Brent to an 18-year low.
wide range of economic outcomes, restrict cash bonuses to senior staff. The price crash reversed only after
including economic scenarios that are The regulator yesterday urged banks major producers, including the Opec
materially more severe than current to use a “high degree of caution and pru- cartel and Russia, called an end to a
central expectations.” dence” when deciding on cash bonuses price war and agreed in April to a record
As a result, it has concluded that there for senior staff. The watchdog said it 9.7m barrels a day in supply cuts to bring
was now scope for banks to recom- would “scrutinise proposed payouts the market into balance. The reduction
mence distributions to shareholders closely to ensure large banks have in output has since eased to 7.7m b/d.
applied the PRA’s rigorous remunera- Oil prices rose yesterday even though
Payouts will be scrutinised tion regime in an appropriate fashion”. the most recent weekly report on US
The UK’s five largest banks initially McLaren’s Carlos Sainz Jr in qualifying for Formula 1’s Styrian Grand Prix in Austria in July inventories showed a more than 15m
to ensure the regulator’s — Leonhard Foeger/Reuters
resisted pressure from the BoE to halt barrel increase in stockpiles. This far
regime is applied in an their dividends voluntarily, but eventu- Peter Campbell — Woking seeking ways to cut its debt pile before ereign wealth funds and private exceeded expectations of a 1.4m barrel
ally announced they were cancelling refinancing bonds that mature in equity”, as well as at least one US- drop.
appropriate fashion McLaren, the British supercar manu-
dividends worth £7.5bn so they could 2022, said Mike Flewitt, McLaren based Spac, he said. A deal with a Spac “It seems that cheap money, good
facturer, is in talks to raise up to
“serve the needs of businesses and Automotive chief executive. would put McLaren alongside Aston sentiment on the stock market and
£500m in fresh equity that could
“within an appropriately prudent households”. “We need to restructure the total Martin and Ferrari as a publicly listed hopes that demand will soon normalise
pave the way to a listing through a
framework.” UK bank share prices have fallen business,” he said. “We went into this supercar group. thanks to corona vaccines count for
blank-cheque company.
Among the factors considered by the sharply as the economy suffered during year having two very successful years Mr Flewitt said McLaren’s investors more than the reality,” said analysts at
regulator were the recent approval and the pandemic. Shares in Barclays are A deal with a special-purpose acquisi- in automotive, but the total business would decide on the most appropriate Commerzbank.
rollout of a vaccine in the UK, and the down 23 per cent since the start of the tion company, or Spac, which is spe- did not have the liquidity to survive new shareholder. Traders and oil analysts are watching
extension of government loan and fur- year, while HSBC’s are down 32 per cent cifically used to take a private group this kind of crisis.” “We will look for investors who market moves more closely as the
lough support schemes for businesses. over the same period, Standard Char- public through a reverse merger, is McLaren’s sales over the first nine have a common vision to our share- Opec+ group seeks to taper their curbs
“We know more and things look bet- tered’s and NatWest’s both down 34 per one of the options the carmaker is months of the year fell by more than holder base, both in terms of the further, adding 500,000 b/d into the
ter than March,” one person familiar cent and Lloyds’ are 44 per cent lower. considering to raise cash. 60 per cent to £389.2m, with its pre- structure, direction of the company market from January.
with the process said. “We are still in the EU banks were also prevented from The pandemic-hit group, which has tax loss swelling to £312.9m from and medium-term plans,” he said. The increase was much smaller than
midst of a pandemic and Brexit so, while paying out dividends this year and the a long and illustrious racing heritage, £68.2m a year earlier. The automo- McLaren is also pressing on with a initially planned as delegates in last
the case for a full ban is weak, you do not European Central Bank is expected to wants to shore up and refinance its tive unit, which Mr Flewitt leads, sale and leaseback of its headquarters week’s meeting took a cautious
want a huge amount of capital flow- decide whether it will lift its ban next business over the coming 12 months. accounts for more than 80 per cent of in Woking, Surrey. The cash raised approach to avoid knocking the fragile
ing out.” week. The PRA had been in dialogue This includes the possible sale of a the business. will be used to pay down debt, which recovery in oil prices off course.
As part of the approval, the PRA set with the ECB prior to making its own minority stake in its racing arm, as The company is in talks with stood at £661m at the end of the third Shares in global oil and gas compa-
out guidelines to determine the size of a decision yesterday. Swiss banks UBS well as options for the future of its several parties about raising quarter, after the company raised nies, which have been hit dramatically
payout. It said it would “expect to be sat- and Credit Suisse have already applied division, which sells racing £300m-£500m in equity over the £150m in an emergency loan over the this year amid market turmoil, rose on
isfied that any distributions would not announced their intention to resume and car technology to third parties. next few months. summer. The company will then seek the back of the crude rally. Royal Dutch
create excess vulnerabilities to stress for dividend payments next year. After laying off a quarter of its staff The business is “not ruling anyone to refinance the remaining bonds next Shell jumped 3.7 per cent, BP increased
a given bank or impede its ability to sup- Additional reporting by Nicholas Megaw during the pandemic and raising out” and is considering investments year, Mr Flewitt said. 4.5 per cent, ExxonMobil rose 3.5 per
port households and businesses”. See Lex emergency funding, the company is from “individuals, family groups, sov- See Lex cent and Chevron climbed 3.7 per cent.
Airbnb and DoorDash IPOs leave gig economy issues unresolved
economy. That includes giving more fees charged by delivery companies.
INSIDE BUSINESS
people scope to join a part-time labour The stock market has a way of exerting
force (this is the “gig” part of it) and discipline. Even if the current euphoria
TECHNOLOGY
extending the use of assets like private rewards profitless IPO candidates, the
cars and homes (the “sharing” part). pressure will build to hone and refine
Richard But that has not translated into prof- their business models. Uber’s stock price
its. Even the flattering financial metric has more than tripled since its low point
Waters these companies prefer — adjusted in March but it is still not above making
earnings before interest, tax, deprecia- sensible financial decisions. This week, it
tion and amortisation — showed all four gave up on its expensive in-house
to be lossmaking in the 12 months lead- attempts to develop autonomous driving
ing up to their listings, with some $3.3bn and flying cars.
T he gig economy — aka the in red ink between them. There are two obvious avenues to get
sharing economy — has So are their business models half- to profitability. Consolidation has
been one of the most baked, or just half-evolved? already swept through the ride-sharing
important online phenom- While Airbnb has a solid gross margin and delivery apps, and there is more to
ena of the decade. This above 80 per cent, the pre-IPO range of come. Survivors will be in a better posi-
week it also made a big splash on Wall 45-57 per cent for the other three shows tion to raise prices.
Street, as the stock market listings of how much their supposedly “light- The other avenue is to exercise their
delivery company DoorDash and home weight” marketplace models are power as intermediaries to squeeze
rental company Airbnb met a euphoric weighed down with the costs of trying to more for themselves out of the value
Businesses reception. generate demand. chain. The history of the internet has
But for a sector that is already getting These include Even the flattering been one of ceaseless disintermediation
long in the tooth, there are a surprising the subsidies that and reintermediation. That is, of new-
For Sale financial metric these
number of unresolved questions. Of have been lavished comers cutting out old businesses to
particular interest this week: are these on consumers dur- groups prefer showed they supposedly “free” consumers, before
good businesses? And, as their some- ing vicious battles inserting themselves as the new bottle-
were lossmaking in the
times deleterious impact on society for share. This may necks. As they aggregate consumer
prompts a backlash, will they make not have generated 12 months before listing orders, mobile apps are starting to find
good businesses in future? clear returns for themselves in a powerful position.
This is an important transitional shareholders, but it has undoubtedly This may not be a welcome develop-
moment. Following last year’s initial generated consumer benefits. For many ment for some providers of services that
public offerings of ride-hailing compa- people, getting a ride whenever you are being sucked into the gig economy’s
nies Uber and Lyft, the main exemplars want or ordering a meal from a smart- orbit. Restaurants, for example, have
of this new style of online marketplace phone are now just part of everyday life. come to rely on online ordering and
are now on the public markets. Regulation will undoubtedly increase deliveries during the pandemic. But if a
It’s hard to argue with the gig econ- costs further and limit the companies’ handful of apps comes to represent a sig-
omy’s impact. In the year before they room for manoeuvre. The benefits of nificant share of their sales — and if
went public, the four companies gener- labour market arbitrage — paying lower those apps have the power to redirect
ated more than $100bn worth of rides, costs for informal workers — are likely customers to other meal providers
Business for Sale, Business Opportunities, deliveries and home rentals between to erode as the political heat intensifies. offering better terms — the results could
Business Services, them (though some bookings have Meanwhile, city authorities are start- be painful.
Business Wanted, Franchises
fallen back during the pandemic). ing to realise it may not be in their resi- For investors in the newly public gig
Runs Daily
............................................................................................................................. Using apps to organise informal mar- dents’ best interests if the streets are full sector, it looks like being a work in
Classified Business Advertising kets has undoubtedly resulted in impor- of empty ride share cars, apartments are progress for some time to come.
UK: [phone] | Email: tant new forms of competition unavailable for rent to local workers, and
[email protected] and unleashed extra resources in the restaurants close down because of high [email protected]
DECEMBER 11 2020 Section:Companies Time: 10/12/2020 - 18:58 User: andy.puttnam Page Name: COMP&MKTS1, Part,Page,Edition: USA, 6, 1
Friday 11 December 2020 ★ FINANCIAL TIMES 7
DECEMBER 11 2020 Section:Ad Page Time: 10/12/2020 - 16:38 User: john.lee Page Name: AD SAMSUNG, Part,Page,Edition: LON, 7, 1
8 ★ FINANCIAL TIMES Friday 11 December 2020
COMPANIES & MARKETS
Financials Oil & gas
BlackRock vows to push climate message Church fund
joins effort to
force change
Asset manager plans ing for shareholder proposals on issues ardship at the asset manager, said Fink said that sustainability would be at holder resolutions because the wording
more support for investor such as climate change. BlackRock had traditionally given com- the heart of the group’s investment of proposals has become “more spe- on Exxon
However, BlackRock said yesterday panies the “benefit of the doubt” that strategy, warning that issues such as glo- cific”, such as asking for a plan on how a
resolutions on change that supporting investor resolutions will they treated issues such as climate bal warming posed huge financial risks company would manage climate risks.
play an “increasingly important role in change seriously, but there is a “sense of for companies and investors. The pledge was given a cautious wel-
our stewardship efforts around sustain- urgency now” that businesses must take Since then, however, critics have come by critics. “It’s clear that Black-
Attracta Mooney — LONDON
ability”. The shift in approach followed a faster action. accused the asset manager of hypocrisy, Rock’s previous vague ‘engagement’ Ortenca Aliaj, Derek Brower
BlackRock has vowed to back more “significant review” of its policies “The dialogue with companies has after it failed to back several key climate was not changing companies’ approach and Myles McCormick
shareholder resolutions on climate and around AGM voting and discussions changed so much in the course of this resolutions in Australia and elsewhere to climate action,” said Diana Best of the The Church of England has joined an
social issues at annual meetings, as the with companies, the New York-based year,” said Ms Boss, who joined the at annual meetings this year. BlackRock’s Big Problem campaign, a investor campaign demanding sweep-
world’s largest asset manager faces group added. group in May and oversaw the review. Ms Boss said BlackRock has tradition- network of climate activist groups. ing changes at ExxonMobil, saying it
growing pressure to use its clout to The move is likely to have significant “The pandemic risk has brought social ally focused on engaging privately with Ms Boss cautioned that BlackRock was backing calls for the appointment
change companies’ behaviour. repercussions across the corporate risk to the forefront. Climate risk is at companies as well as voting against was not “pressing the button to support of new directors and for the oil super-
The $7.8tn asset manager has faced world given BlackRock is a large share- the forefront,” she said. directors. all climate resolutions”, but “what we major to develop a pragmatic strategy
years of criticism after overwhelmingly holder in many public companies. The pledge comes less than a year But she added that BlackRock was will do is support a proposal if it is rea- for the transition to cleaner fuels.
backing management rather than vot- Sandy Boss, head of investment stew- after BlackRock chief executive Larry now more willing to support share- sonable”.
The Church Commissioners for Eng-
land, who manage the CofE’s invest-
ment fund, said yesterday they were
Mining. Bond defaults “pleased to lend their support” to pro-
posals from investment fund
Engine No 1 designed to “re-energise
Yongcheng woes show perils of reckless borrowing
ExxonMobil”.
The announcement came a day after
news that US hedge fund DE Shaw had
acquired a sizeable stake in ExxonMobil
and was pushing for the company to cut
costs, adding another source of share-
HECG unit learns painfully
holder pressure on management.
that authorities no longer rush New York-based DE Shaw, which has
in recent years become more prominent
to rescue ailing enterprises as an activist, told Exxon it was con-
cerned that the company’s spending
could put its dividend at risk, said peo-
Sun Yu in Yongcheng and
ple familiar with the matter.
Tom Mitchell — Singapore
The hedge fund was concerned that
Less than a decade ago, Yongcheng Coal Exxon was underperforming rivals such
and Electricity Holding was one of as Chevron, which had managed to
China’s most celebrated energy groups. weather the industry’s crisis better, the
It was blessed with ample reserves of people said.
high-grade coal at its mines in Henan. Energy groups are struggling to cope
Government-controlled banks were with the fallout from the pandemic and
eager to hand over cheap credit. At its low oil prices.
height in 2013, the business’s annual DE Shaw’s move emerged days after
revenue was Rmb127.4bn ($19.5bn). Engine No 1 launched its activist cam-
“We were the most profitable coal paign against Exxon, at one time the big-
mine, with the highest salaries in the
nation,” said one Yongcheng executive. The supermajor is
All that has changed. Yongcheng,
enjoined to ‘pivot its
where the group is based, is today pock-
marked with half-built and dilapidated strategy to support the
buildings. Struggling workers at the
energy transition’
company, many of whom have not been
paid for months, have taken to packing
and selling flour to make ends meet. gest oil company, and named four peo-
Yongcheng’s woes did not take on ple it wanted to nominate for board
national significance until last month, positions.
when the company defaulted on bonds The activist pressure has been build-
worth Rmb3bn. That disturbed China’s ing amid perceptions that Exxon
$15tn public debt market, the second- remains wedded to a model of increas-
biggest, and kicked off defaults at other ing fossil fuel production, despite
local-government-controlled busi- mounting doubts about long-term oil
nesses, which account for a big chunk of demand and deepening concerns about
the economy. The defaults have rico- climate change.
cheted through the financial system. Washed out: workers refine coal at a coal washing facility in China, which is the largest producer and consumer of coal in the world Yesterday’s backing from the Church
— Nelson Ching/Bloomberg
Analysts say state-linked companies Commissioners, which has previously
face difficulties raising capital as a campaigned for reform at Exxon, adds
result. The episode has obliterated long- an expansion into coal-derived chemi- said Qi Dan, an analyst at Baiinfo. HECG But Yongcheng also turned to trust fading as the provincial government momentum to the effort.
standing assumptions that authorities cals. It earned HECG a spot on 2011’s struggled to service its bank loans. It loans with rates between 6.5 and 7.5 per struggles with a growing fiscal deficit. Bess Joffe, head of responsible invest-
will bail out state-owned enterprises. Fortune 500. HECG aimed to be a turned to China’s nascent bond market, cent. According to people familiar with Two Yongcheng bondholders said ment for the church fund, said that
“The biggest impact has been on “world-class” group, Chen Xiang’en, where it has raised Rmb60bn ($9.1bn) Yongcheng’s fundraising activities, a HECG assured them early in November action was “urgently needed for the
other state-owned issuers,” said Chen president at the time, said of its pivot to over the past five years. “We paid a price significant portion of its bond and trust that the local government would inject company to improve its ability to
Long at Plenum, a Beijing-based consul- high-end chemical products, which for expanding our footprint without loan proceeds were used to pay off Rmb15bn. But less than half of that has create long-term sustainable value and
tancy. “SOEs from Henan haven’t been were to cause heavy losses. Prices of eth- taking into account profitability,” said HECG’s debts. Yongcheng was not forth- arrived, according to people with pivot its strategy to support the energy
able to issue any bonds in the last few ylene glycol, one of HECG’s biggest one HECG manager. coming with its investors about this, knowledge of the situation. “We main- transition”.
weeks. The longer their companies are products, have fallen almost two-thirds HECG began pressing Yongcheng, its often telling them it was raising cash to tained faith in government backing Exxon has dialled back spending
not able to issue bonds, the bigger the since it began making it in 2011, with lit- best-performing subsidiary, to tap bond replenish working capital or pay down until the last moment,” before the since the pandemic and a Saudi-Russia
problem.” tle respite on the horizon. “China’s coal markets. Yongcheng has raised debt. China’s National Association of default, one of the investors said. price war prompted a historic crash,
Some think Yongcheng’s difficulties chemical industry is facing an oversup- Rmb66bn in debt since 2018, typically Financial Market Institutional Investors Since Yongcheng’s default, more than sending US oil prices negative in April
are a harbinger of problems at other ply that could take many years to ease,” paying interest of about 6 per cent. last month accused four of Yongcheng’s 260 SOEs have suspended bond issues. and leaving producers across the coun-
state-linked groups. Such a failure bond underwriters, its auditor, a rating Those that have gone ahead are having try reeling.
“could happen to any state-owned China yields jump after spate China domestic debt market agency and HECG of breaking capital to pay higher interest rates. “Now that It said last week that it would write off
enterprise with weak fundamentals”, market rules. Yongcheng and HECG government guarantees are gone, up to $20bn worth of assets in North
of defaults by issuer
said an investor who bought the group’s declined to comment. underperforming SOEs must pay higher America and Argentina.
Average yield on triple-A rated bonds Mar 2020 ($tn)
bonds. “A lot more defaults could be in Some Yongcheng creditors say they interest or they won’t gain access to the The company has announced plans to
the pipeline.” in China (%) 0 2 4 6 knew the miner was propping up HECG, credit markets,” said the head of credit cut spending next year, to $16bn-$19bn,
Yongcheng’s downfall was sown by 3.7 but assumed Henan’s government ratings at a Beijing-based bond investor. before rising to $20bn-$25bn a year
the unravelling of its parent, Henan Government would stand behind both groups For many employees, Yongcheng’s until 2025.
3.6
Energy and Chemical Group. HECG because of their strategic importance to fall has been a humbling experience. It originally planned to spend
forced the miner to issue increasingly 3.5 the local economy, which thrives on “Ten years ago I could earn Rmb12,000 $30bn-$35bn a year.
pricier bonds and borrow from the less- exports of coal and flour. But they did a month when my friends at other com- Exxon plans to sack 14,000 workers,
3.4 Financial
regulated shadow bank sector at a time not anticipate the pandemic, which has panies made less than Rmb2,000,” said about 15 per cent of its workforce, by the
Yongcheng defaults corporations
when the credit environment was tight- hammered local government finance. a Yongcheng engineer who has been end of 2022.
3.3
ening. That transformed Yongcheng “We knew HECG was dragging with the company 15 years but has not Despite the fallout, the group has
from what its bankers regarded as a low- 3.2 Yongcheng down,” said one investor. been paid for six months. He is selling rebuffed pressure to sacrifice its divi-
risk borrower to a much riskier proposi- Non-financial “But HECG is the biggest SOE in Henan flour to sustain himself. “Now I must dend. This year was the 37th in a row in
3.1 corporations
tion with myriad creditors. and the provincial government can’t live without a salary for half a year, and which the company raised the payout.
Sep 2020 Dec
The woes can be traced to more than a afford to let it go under.” there is no update on when my next pay The exact size of DE Shaw’s stake in
decade ago when the parent launched Source: Bank for International Settlements Hopes of a full bailout from Henan are cheque will arrive.” Exxon has not been divulged.
Obituary Prudent, publicity-shunning magnate who prized ‘strength to sail safely through any storm’
Lebanese-born Joseph Safra, who up there you will surely be watching the his father Jacob, who left in the after- tory, though critics complained it was private bank created out of the acquisi-
Joseph Safra became the world’s richest banker after whole business carefully,” Luiz Fern- math of the establishment of Israel, sometimes slow to innovate. tion of Sarasin. Their interests include
building a business empire from his ando Loureiro, a former employee of the fearing war. Jacob chose Brazil as a Safra’s oldest brother, Edmond, died Safra National Bank of New York and a
Financier
adopted country Brazil, has died at 82. bank, said on social media. haven and prospered in São Paulo, from in an arson attack in Monaco in 1999. 50 per cent share of banana grower
1938-2020
The scion of a dynasty that started by The Safras’ property portfolio where the family played a role in shap- Edmond’s nurse, former Green Beret Chiquita, the latter acquired in 2014.
financing caravans in Ottoman times includes London’s Gherkin, bought for ing global private banking. Ted Maher, was later convicted of start- A philanthropist and arts patron, the
from Syria, Safra followed his father to £726m in 2014. In New York holdings Jacob’s advice was the Safra Group’s ing the fire and jailed. The financier’s banker maintained a mansion in São
Brazil and helped build the family busi- include 660 Madison Avenue, which motto: “If you choose to sail upon the untimely death led to a family battle Paulo’s Morumbi district, where gated
ness into one of Latin America’s biggest housed the Barney’s department store seas of banking, build your bank as you over Edmond’s banking assets, accord- communities rub up against a favela. “If
financial institutions. until it filed for bankruptcy last year. would your boat, with the strength to ing to Brazil’s O Estado newspaper. I could go back in time I wouldn’t have
Known for his discretion and conserv- Safra shunned publicity. He rarely sail safely through any storm.” After his brother Moise refused to sell built such a big house,” he once said.
atism, Safra chaired until his death the gave interviews, stayed out of the social Rivals joked that Safra only lent to his share in the family business, Joseph Safra gave Rodin sculptures to a São
Safra Group, spanning banking, prop- columns, was married to the same people who did not need the money. His started a rival in São Paulo across the Paulo museum and money to two hospi-
erty, cellulose and bananas. Forbes esti- woman all his life and eschewed the life- prudence meant the empire avoided the street called J. Safra, competing for the tals, and funded construction of a syna-
mated his wealth this month at $23.2bn, style of some fellow billionaires. need for bailouts in the financial crises same clients. The pair only reached an gogue. The Jacob Safra Foundation gave
making him the 63rd richest person. “His legacy in the development of the that have punctuated Brazil’s recent his- agreement to resolve their differences Einstein’s manuscript on relativity to
Safra Group said Seu José, as he was national economy will forever be when Moise sold out to Joseph in 2006. the Israel Museum in Jerusalem.
known to friends, was an “affable and marked in the history of Brazil, a coun- ‘His legacy in development In 2016, prosecutors charged Safra The banker spent his final years in
perspicacious man who dedicated his try he adopted 58 years ago,” Isaac Sid- with corruption. They alleged that he Switzerland. Brazilian media reported
of the national economy
life to his family, friends, business and ney, head of banking association Febra- knew of plans to bribe tax officials to that he was suffering from Parkinson’s.
social causes”. ban, said. He was “an example as an will forever be marked drop the pursuit of large tax debts. Safra One of nine siblings, Mr Safra is sur-
In the office, Safra was renowned for entrepreneur and philanthropist”. denied the allegations, and the charges vived by his wife Vicky, four children
in the history of Brazil’
his attention to detail, an exacting work Of a Sephardi Jewish family, Safra was were dropped. In Switzerland, the fam- and 14 grandchildren. Michael Stott
ethic and careful analysis of risk. “Even born in Beirut in 1938 and was guided by ily’s interests include J. Safra Sarasin, a and Bryan Harris
DECEMBER 11 2020 Section:Companies Time: 10/12/2020 - 18:55 User: cathy.pryor Page Name: CONEWS1, Part,Page,Edition: USA, 8, 1
Friday 11 December 2020 ★ † FINANCIAL TIMES 9
DECEMBER 11 2020 Section:Ad Page Time: 10/12/2020 - 17:02 User: john.lee Page Name: AD VALE, Part,Page,Edition: EUR, 9, 1
10 ★ † FINANCIAL TIMES Friday 11 December 2020
COMPANIES & MARKETS
Facebook begins legal battle to avoid break-up
FTC and 48 state attorneys hope to convince courts that an allegedly ‘buy or bury’ approach has damaged competition
Hannah Murphy — San Francisco the government of wanting “a do-over”.
Kiran Stacey and Kadhim Shubber She argued that the success of both
Washington DC
Instagram and WhatsApp should be
Facebook’s chief executive Mark Zuck- credited to Facebook.
erberg told his staff last October he “The Instagram you see today is the
would “go to the mat and fight” if the US Instagram that Facebook built, not the
tried to break up his empire. Now the app it acquired. When Facebook bought
wrestling match has begun. Instagram, it had about 2 per cent of the
On Wednesday, the Federal Trade users it has today, just 13 employees, no
Commission and a group of 48 US attor- revenue and virtually no infrastructure
neys-general hit Facebook with its first of its own,” she said, while pointing to
antitrust charges on home soil. Citing the fierce competition that Facebook
scores of internal emails, the two law- faces from Apple, Google, Twitter, Snap,
suits allege that Facebook has defended Amazon, TikTok and Microsoft.
its social media monopoly for years with Still, some argue Facebook has a diffi-
a “buy or bury” approach to its rivals, cult defence. It must on the one hand
such as Instagram and WhatsApp. prove that it would have been able to
If the FTC and the state attorneys- achieve its success in those areas even
general can convince the courts that without those acquisitions, and at the
Facebook’s allegedly anti-competitive same time explain why it paid such
behaviour has damaged the market, the hefty fees for both companies.
default solution is nothing short of the “This case throws up a lot of interest-
dismantling of the company. ing legal questions,” said Doug Mela-
“We currently expect that [the rem- med, a law professor at Stanford and
edy] will include divestiture of Insta- one of the lawyers who brought a 1998
gram and WhatsApp,” the FTC said. antitrust case against Microsoft. “It
William Kovacic, a former FTC chair- looks on the face of it to be a pretty
man and a current law professor at strong case, and certainly a more impor-
George Washington University, said: tant one than the US case against
“The FTC is all-in on the pursuit of the Google.”
break-up. I think it is fully committed.” In pushing for a break-up, the FTC has
Joel Mitnick, a partner specialising in gone further than the Justice depart-
antitrust at law firm Cadwalader, Wick- ment’s similar case against Google in
ersham & Taft, said: “They are saying to October, which did not mention any
the court that anything short of a really specific remedies it was seeking.
dramatic restructure is not going to cure The Facebook action also differs in
other ways from that being brought
WhatsApp is ‘legitimately against Google. In focusing on Google’s
partnership deals with other technology
a better product for
companies, which the DoJ said harmed
mobile messaging’ competition, lawyers were leaning
heavily on arguments already explored
Mark Zuckerberg in a 2012 email in the case against Microsoft 20 years
ago.
Mark Zuckerberg’s Facebook must prove it would have achieved its success in the same areas as Instagram and WhatsApp without those acquisitions But by focusing on mergers — espe-
— FT montage
the anti-competitive effects here. It’s cially ones it previously approved under
kind of an all-or-nothing roll of the Facebook’s US ad revenues Influence of Instagram and WhatsApp the Obama administration — the FTC
dice.” will have to prove a complex case, argu-
Estimated ($bn) Estimated users (m) Estimated share
But the high-stakes legal battle will be ing that Facebook would not have been
a long one, and the case will be hard to Facebook exc. Instagram 50 150 60 able to achieve its market power in
prove. The FTC and the state attorneys- Instagram Instagram WhatsApp photo sharing and messaging without
general have both accused Facebook of 50 buying Instagram and WhatsApp.
40 WhatsApp
criminally breaching section 2 of the (% of mobile phone messaging app users) Others argue that a break-up would
Sherman Act, one of the oldest and 100 40 disrupt Facebook’s services for users,
30
broadest antitrust laws in the US, which and also hurt US competitiveness more
30
carries plenty of leeway for interpreta- broadly. “Companies and investors are
tion by the courts. 20
50 Instagram 20
Perhaps in recognition of the complex (% of social network users) ‘Companies and investors
and lengthy fight ahead, the social 10
10 are going to lose faith in
media company’s share price fell by less
than 2 per cent on the news. 0 0 0 regulators if policymakers
To illustrate Facebook’s allegedly
2018 19 20 21 22 2020 21 22 23 24 2020 21 22 23 24 want to reverse course’
anti-competitive behaviour, both cases
focus on Facebook’s acquisitions of Source: eMarketer
going to lose faith in regulators if policy-
Instagram in 2012 for $1bn and both the FTC and the state attorneys- of Representatives’ antitrust subcom- makers want to reverse course on prior
Legal Notices WhatsApp in 2014 for $19bn, cast by the general charge that it squashed rivals by mittee. Ms Khan tweeted on Wednes- decisions and call a mulligan this late in
complainants as a bid to neutralise first allowing access to its data and plat- day: “States’ complaint also reveals a the game,” said Robert Atkinson, presi-
threats. In its filing, the FTC repeatedly form, and then removing access to any- sophisticated understanding of harms. dent of Information Technology and
cites as evidence an internal email sent one it saw as a threat. It notes FB entered [the] market by Innovation Foundation, a non-partisan
by Mr Zuckerberg in 2008 in which he The lawsuit from the state attorneys- competing on privacy but degraded pri- think-tank.
says “it is better to buy than compete.” general listed seven apps, including vacy once it had eliminated rivals [and] However, the former FTC chairman
In 2012, an email from Mr Zuckerberg Vine, Path and Circle, that Facebook secured a safe monopoly position.” Mr Kovacic said the Biden administra-
acknowledged that WhatsApp is “legiti- had cut off from its platform “without a Facebook promised to defend itself tion would probably feel extra pressure
mately a better product for mobile mes- legitimate business justification”. “vigorously”. In previous cases testing to aggressively pursue the case as a way
saging than even our standalone Mes- The state attorneys, led by New York’s the Sherman act, the courts have recog- of rebuilding its reputation after Big
senger app” and that “[u]nfortunately Letitia James, also argued that Facebook nised that monopolies are not unlawful Tech had grown so powerful during the
for us, I don’t think there’s any way to had hurt its users, even while providing if they are the result of superior skill. Obama era.
directly minimise the advantage which free services, by forcing them to surren- “The successful competitor, having “To retreat from [seeking a divesti-
is their momentum and growth rate”. der more of their privacy than they been urged to compete, must not be ture] would be such an obvious betrayal
After buying WhatsApp, emails then might have done if there had been more turned upon when he wins,” ruled the of the evident purpose of the law-
showed Facebook employees celebrat- competition. judge in a 1945 case regarding Alcoa. suit . . . that if you’re seen as backing
ing the acquisition of “probably the only This argument had been advanced by In a statement on Wednesday, Face- off, wobbling at the knees, you lose your
company which could have grown into academics including Lina Khan of book’s general counsel Jennifer News- institutional legitimacy,” he said. “The
the next FB purely on mobile”. Columbia Law School, who helped write tead noted that the deals for both Insta- break-up possibility is genuine and fea-
In another illustration of Facebook’s the recent influential report on antitrust gram and WhatsApp had been cleared sible.”
allegedly anti-competitive behaviour, in the technology industry for the House by regulators at the time, and accused See Lex
Travel & leisure Technology
Tui hit by €3.2bn loss as it feels Sony buys anime streaming
strain more than online rivals service from AT&T for $1.2bn
Alice Hancock which has a fleet of 150 aircraft and 17 Kana Inagaki — Tokyo behind Netflix’s Hilda and Peter Rabbit
cruise ships, has struggled more than animated series, for $195m.
Tui has slumped to a €3.2bn loss after Sony has agreed to buy AT&T’s anime
online rivals such as Love Holidays and The group recently consolidated the
the pandemic forced it to slash holiday streaming service, Crunchyroll, for
On The Beach to cope with fallout from anime streaming services of Sony Music
and cruise itineraries and seek aid $1.2bn in its latest drive to expand
changing travel advice. It normally car- Entertainment Japan’s Aniplex with
from Berlin. its portfolio of video games, films
ries 21m travellers, which fell to 8.1m in Sony Pictures Television’s Funimation
and animation.
The tour operator, which also revealed it the year to September 30. unit, bringing together French platform
had net debt of €4.2bn, said yesterday it Despite the promise of mass vaccina- The sale would allow the US telecoms Wakanim and Australian distributor
had managed to increase cost savings tions before the 2021 summer season, group to reduce its debt following last Madman Entertainment under the
from €300m to €400m as it slimmed chief executive Fritz Joussen said that year’s $85bn acquisition of Time Warner same group.
down its asset-heavy structure. demanding customers be inoculated and focus its efforts on creating a The addition of Crunchyroll gives the
Revenues in the year to the end of before travelling would be “a mistake. It streaming service, HBO Max, to rival group a service with more than 3m sub-
September fell 58 per cent to €7.9bn, is not even 100 per cent clear if a vacci- Netflix. scribers. The platform boasts popular
resulting in a €3.2bn pre-tax loss, down nated person is infectious or not”. The deal with Sony’s Funimation anime franchises such as Naruto.
from a profit of €692m in 2019. Carriers such as Qantas and AirAsia Global Group coincides with an auction Tony Vinciquerra, chief executive of
Last week it secured a €1.8bn financ- have said that they are considering com- to sell AT&T’s satellite division DirecTV Sony Pictures Entertainment, said: “We
ing deal from a consortium of investors, pulsory vaccination for passengers. as part of a review of its assets. have a deep understanding of this global
banks and Germany’s support fund. As Tui said bookings for next year had For Sony, the purchase of Crunchyroll art form and are well-positioned to
part of the funding, Tui’s largest share- picked up and 50 per cent of its holidays is part of an acquisition drive led by deliver outstanding content to audi-
holder, Alexei Mordashov, will lift his 25 from May had been sold. It expected to chief executive Kenichiro Yoshida to ences around the world.”
per cent stake. It is Tui’s third govern- recover to pre-pandemic levels in 2022. cement its position as a supplier of con- Sony has been boosted by Demon
ment-backed financing since the crisis On The Beach, which reported yester- tent for films, music and games. Slayer: Mugen Train, which was pro-
began, bringing the total to €4.8bn. day that it had fallen to a £46.3m pre- Its deal activity has expanded into duced by its anime and music produc-
The group had €2.5bn of cash on its tax loss on revenues of £33.7m for the animation and content for children with tion unit Aniplex.
balance sheet at the end of November. It full year, said Tui was taking advantage Sony’s music unit 2018 purchase of a It is on course to be the most profita-
has fixed costs of €250m to €300m and of customers forced to postpone holi- $185m stake in Peanuts. ble film produced in Japan after raking
said it had paid out about €140m in cus- days from this year. Last year, Sony Pictures Television in ¥28.8bn ($276m) in the first 52 days
tomer refunds over the summer. Tui, ft.com/lombard acquired Silvergate Media, the producer following its release.
DECEMBER 11 2020 Section:Companies Time: 10/12/2020 - 18:45 User: cathy.pryor Page Name: CONEWS2, Part,Page,Edition: EUR, 10, 1