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BW Businessworld

Globescan: Time’s Ripe?

The shares in the rights offering will be sold at a 35 per cent discount to 10 March’s closing price, and the family of CEO Lakshmi Mittal will maintain their 37 per cent holding in the company. The firm said it would offer shares.

Photo Credit : Bloomberg

Barely a month ago Federal Reserve chair Janet Yellen cut an isolated figure in her semi-annual testimony to Congress, forced to defend the US central bank’s data-dependent approach while around her stocks plunged and oil prices sagged. But a recent string of positive economic news has dragged markets back closer to the Fed’s overall outlook, allaying recession fears and suggesting the Fed will have more credibility at its meeting next week when it says further rate hikes this year remain firmly on the table. “Financial markets for a while were completely out in the weeds, running around looking at things that turned out not to be real risk,” said Torsten Slok, chief international economist at Deutsche Bank. When the Fed raised its benchmark interest rate in December for the first time in a decade from near zero, its so-called “dot plot” of policymakers’ forecasts penciled in four quarter-point hikes this year. Markets at the time priced in three increases.

Tech Talk
The US Justice Department said Apple’s rhetoric was “false” in a high-profile fight over the government’s bid to unlock an encrypted iPhone belonging to one of the San Bernardino shooters. Last month, the Federal Bureau of Investigation obtained a court order requiring Apple to write new software and take other measures to disable passcode protection and allow access to shooter Rizwan Farook’s iPhone. Apple has not complied. It said the government request would create a “back door” to phones that could be abused by criminals and governments, and that Congress has not given the Justice Department authority to make such a demand. The filing was the Justice Department’s last chance to make its case ahead of a hearing set for March 22 in a Riverside, California federal court.

In The Dock
A highly anticipated trial over whether McDonald’s could be on the hook for its franchisees’ alleged retaliation against employees who participated in fast-food worker protests across the US began. The issue is whether McDonald’s US, a unit of Illinois-based McDonald’s, is a “joint employer” of workers at its independently-owned franchises, as the National Labour Relations Board says. That would make the company liable for labour law violations by the franchisees, which operate 90 percent of McDonald’s US restaurants. The trial before an administrative NLRB judge in New York has attracted national attention because it is expected to show how the board’s new standard for joint employment applies to the franchisor-franchisee relationship, although the ruling in the case will apply to McDonald’s only.

Loan Laws
China’s central bank is preparing regulations that would allow commercial lenders to swap non-performing loans of companies for stakes in those firms. The new rules would reduce commercial banks’ non-performing loan (NPL) ratios, and free up cash for fresh lending for investment in a new wave of infrastructure products and factory upgrades that the government hopes will rejuvenate the world’s second-largest economy. NPLs surged to a decade-high last year as China’s economy grew at its slowest pace in a quarter of a century. Official data showed banks held more than $614 billion in NPLs and “special mention” loans, or debts that could sour, at the year-end. The release of a new document explaining the regulatory change was imminent.

Booster Dose
The European Central Bank delved deep into its remaining arsenal of stimulus options, cutting all three of its interest rates and expanding asset-buying to boost the economy and prevent ultra-low inflation becoming entrenched. In moves that initially pushed the €1 per cent down against the dollar before recovering, the ECB cut its deposit rate deeper into negative territory and increased monthly asset buys to €80 billion from €60 billion, above market expectations of an increase to 70 billion.

Royal Sale
Royal Dutch Shell has appointed investment bank Lazard to advise it on a $30-billion asset sale programme following its acquisition of BG Group last month. The Anglo-Dutch company has also picked Bank of America, Merrill Lynch and Morgan Stanley to work on proposed sales of assets noting that more banks could yet be added to the lineup. A Shell spokesman confirmed Lazard has been brought in under a new mandate to advise its merger and acquisition team on the company’s divestment strategy.

Full Faith
Germany’s economy ministry has “great trust” that carmaker Volkswagen will clear up all allegations and achieve a solution with US authorities in the car emissions probe. “We see that VW is a very strong, important company and have greatest trust that it will handle the whole informing process in the best manner and that it will yield good results in the US,” the ministry said. It faces an ongoing US criminal investigation. The Justice Department sued VW in January seeking up to $46 billion for violating environmental regulations and sent a civil subpoena under a bank fraud law.

Steeling For Sale
ArcelorMittal will sell new stock to shareholders at €2.20 each as the biggest steelmaker raises about $3 billion to cut debt. The Luxembourg-based company will sell seven new shares for every 10, it said in a statement. The shares in the rights offering will be sold at a 35 per cent discount to 10 March’s closing price, and the family of CEO Lakshmi Mittal will maintain their 37 per cent holding in the company. The firm said it would offer shares.

ArcelorMittal is tapping up shareholders to help pare its $15.7 billion debt pile.