Sailing clothes maker Gill may hoist for-sale sign

Nick Gill has hired Clearwater Corporate Finance to lead the review of the Nottingham-based brand that makes and sells waterproof gloves, jackets and trainers for sailors.

It is understood his preferred option is to sell a minority stake to a private equity firm to raise funds to extend Gill’s presence overseas.

Founded in 1975, Gill became the official supplier to the British team in the Americas Cup five years later. Team GB, including Ben Ainslie, wore its gear when they sailed to a gold medal in the Sydney Olympics in 2000.

Gill delivered increased pre-tax profits of £1.4m, on turnover of £11.2m, over the year to 30 September. All parties declined to comment.

Inflation spikes as Qatar gears up for spending spree

Five years ago, inflation in Qatar soared into the double digits after the tiny country spent heavily on hosting the 2006 Asian Games. Now, with another government spending spree and an even bigger sports event looming, inflation is on the rise again.

The country of just 1.9 million people plans to spend about $140 billion to build stadiums, roads, railways, a new airport, a seaport and other infrastructure before it hosts the 2022 soccer World Cup.

Spending on that scale could destabilise a much bigger economy. So recent data showing a sharp rise in inflation is unwelcome – and might, if it becomes a trend, threaten the smooth completion of some of the construction projects.

Government officials and company executives insist they have learned from the last inflation debacle and will be able to avoid another one, partly because they have given themselves more time to carry out the construction.


“In 2006, we saw a very different situation compared to what we have now. We had to execute all the projects within a tight time frame, and were faced with a very sudden inflow of people into the country,” R. Seetharaman, chief executive of Doha Bank, Qatar’s fifth-largest bank by market value, told Reuters.


“Now, we have enough time to execute these projects; it will be done gradually over the next five years. The time frame will help in acting as a stabiliser in preventing inflationary issues.”

Qatar’s inflation rate skyrocketed to a record 15.2 percent in 2008, partly because of a building boom for the Asian Games; logistical problems and bottlenecks, including difficulties in bringing enough building materials into the country, caused costs in the economy to spiral.

In a sense, the global financial crisis came to Qatar’s rescue. Inflation fell rapidly as housing rental prices plummeted in response to the global turmoil, and Qatar actually experienced deflation – falling consumer prices – in 2009 and 2010, underlining how vulnerable the wealthy gas-exporting economy is to global trends.

In the last few months, however, the spectre of high inflation has reappeared. The year-on-year rate jumped to 3.6 percent in March, from 3.2 percent in February and 2.6 percent in December. A major reason for the rise was a rebound in housing rents, which account for about a third of consumer expenses; they gained 5.5 percent in March.

One factor behind the inflation surge appears to be increased government spending on social welfare in the wake of the Arab Spring uprisings elsewhere in the region. In September 2011 the Qatari government boosted basic salaries and social benefits for state civilian employees by 60 percent.

Inflation would be higher at present if Qatar had been quicker to get its infrastructure projects into gear after winning the right to host the World Cup nearly 2-1/2 years ago. Partly because of bureaucratic delays, the government has been slower to award contracts than many companies had expected – disappointing many foreign businessmen, but limiting upward pressure on prices.

“The two-year delay has had the effect of controlling inflation,” said Abdulaziz al-Ghorairi, senior vice president and chief economist at Commercialbank Capital in Doha.

This year, however, infrastructure spending looks set to ramp up in earnest. Plans call for state expenditure to increase 18 percent to 210.6 billion riyals ($57.8 billion) in the 2013/14 fiscal year that started on April 1, and to stay at about this year’s level until 2017, Finance and Economy Minister Youssef Kamal said this month.

In January the International Monetary Fund’s mission chief for Qatar told Reuters that the economy’s ability to absorb heavy infrastructure spending was an issue, though he added there were no concerns about the economy overheating for the moment.

One of the government’s defences against inflation is its ability to regulate prices. In a statement in December, the government said it would use regulatory powers to prevent traders from imposing “unjustified” price hikes on consumers.

In September 2011 the country’s ruling emir directed the Ministry of Business and Trade to establish a committee to monitor prices of goods, in order to curb arbitrary price increases following that year’s state salary hike. It is not clear, however, whether the committee could if needed introduce widespread price controls or whether they would be effective.

Another weapon against inflation is monetary policy. In March, the central bank introduced quarterly issues of riyal-denominated bonds, giving it a tool to manage excess funds in the banking sector.

The central bank governor told Reuters this month that these issues could be adjusted flexibly. Officials and some analysts say such tools will be sufficient to avoid another burst of double-digit inflation in the next few years.

“We do foresee inflation going up, but we expect it to remain in the single digits,” Ghorairi said.

Others are less sure, given Qatar’s heavy dependence on imports – except for energy, most of the basic goods which it consumes are imported – and the fact that the Qatari riyal is pegged to the U.S. dollar.

The peg constrains Qatar’s ability to raise interest rates to fight inflation, and prevents it from appreciating its currency to offset any rise in import costs.

“I don’t there is much the central bank can do about the kind of inflation Qatar faces from population growth and project spending,” said a Doha-based economist at a major financial institution, declining to be named under briefing rules.

“Also, it can’t influence imported inflation because of the dollar peg. If you have a dollar-pegged currency, you’ve effectively abdicated all monetary control to the host country. Effectively we have U.S. monetary policy in Qatar now.”

A burst of inflation could disrupt the infrastructure programme by raising the costs and crimping the profit margins of companies building the projects.

However, the impact would probably be bearable for Qatar’s affluent population of local citizens, who number only about 250,000 of the total population of 1.9 million.

“Who is really damaged by single-digit inflation? Most corporates have cost-of-living adjustments, and people who own assets see the benefit of it,” said Steve Troop, chief executive of Doha-based Barwa Bank, adding “3.6 percent isn’t the end of the world in a place where people don’t pay tax.”

Dubai developers talk tall and big amid property recovery

The Dubai builder of the world’s highest tower, the Burj Khalifa, hinted it might develop an even taller skyscraper and two conglomerates outlined grandiose real estate plans, underscoring recovery in the emirate’s bombed-out property sector.

The plans would have appeared fanciful three years ago, when a crash in the inflated real estate market triggered a corporate debt crisis and a slew of company restructurings.

But Dubai, home to an archipelago of man-made islands and an indoor ski slope in one of its shopping malls, staged a dramatic economic recovery last year, partly because of a tourism boom.

Tourist arrivals grew 10 percent and hotel revenue rose 19 percent in the first half of 2012. Some state-linked companies have been working through their debt loads while some property prices have started to rebound.


“Maybe we will try to build something a little taller,” said Mohamed Alabbar, the chairman of Dubai’s largest developer Emaar Properties, which built the 828-metre Burj Khalifa.


The tower, which dominates Dubai’s spectacular high-rise skyline, was opened in 2010 but is set to be overshadowed by the 1,000-metre Kingdom tower under construction in the Saudi city of Jeddah.

“Dubai needs another tall building. Dubai is only about 30 years old. So we have a lot of time and lot of investment left, Alabbar told journalists at a conference.

Meydan Group and the Sobha Group, two Dubai conglomerates, separately announced a joint venture to develop a major leisure, retail and residential complex near the city’s downtown area.

The complex will include a 350,000 square metres water park, a 7-km lagoon, retail spaces, leisure and sports attractions as well as 1,500 villas.

It will be the cornerstone of a huge urban development plan announced last November by Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum, which included the largest shopping mall in the world, a park 30 percent bigger than Hyde Park in London, and over 100 hotels.

Other grandiose projects announced recently include a replica of the Taj Mahal and billion-dollar theme parks including one modelled on the India’s so-called “Bollywood” film industry.

Saeed Humaid al-Tayer, Meydan’s chairman and chief executive, said the complex would be funded through company capital, investors paying for off-plan property and bank loans.

“We have some financial institutions that are happy to work with us,” he said.

Residential property prices have boomed in the past year, according to the latest REIDIN residential sale index showing an 17 percent rise for villas and an 18 percent increase for apartments.

The comeback in Dubai’s real estate market is mainly due to speculative investors pushing property prices higher and Alabbar said that “flipping” – the practice of buying speculatively for quick resale, needed to be controlled.

“There is very strong demand in Dubai. I see this continuing provided we control this flipping situation,” he said.

But he did not expect another bubble in Dubai’s real estate market.

“Banks are being very cautious and companies are cautious,” he told reporters.

Abu Dhabi says financial zone to bridge gap in global day

Abu Dhabi said its planned financial free zone would offer a wide range of services, from banking to fund management and commodities trading, and would aim to fill a gap in financial markets’ coverage of the global day.

In February, United Arab Emirates President Sheikh Khalifa bin Zayed al-Nahayan passed a federal decree to create the zone on Al Maryah island, close to Abu Dhabi’s downtown area.

Announcing details of the plan on Wednesday, the emirate left little doubt that its zone, to be called the Global Marketplace Abu Dhabi, could become a competitor to Dubai, currently the Gulf’s premier financial centre.

Abu Dhabi’s zone will have an independent regulator with its own board, the Financial Services Regulations Bureau, as well as two courts with a chief justice, the emirate’s Office of Government Communications said in its first public statement on the subject.


The zone, to be launched in the fourth quarter of 2013, will offer benefits similar to the Dubai International Financial Centre (DIFC), such as zero tax, easy repatriation of profits and exemption from customs duties on imports.


“Under the law there will be independent authorities that have their independent budgets and mandates under the regulations of the Global Marketplace Abu Dhabi,” the statement said.

Institutions operating in the zone will include various types of bank, trading companies, foreign exchange and commodity trading companies, prime brokerages, pension and investment funds, Islamic financial firms, companies handling stock trading, financial consultancies and others, it said.

“The free zone will bridge the gap in the global markets between 7 a.m. and 11 a.m., between Asia and Europe, due to the strategic location of the UAE,” the statement said.

Neighbouring Dubai launched the DIFC in 2004 with its own independent civil and commercial laws, its own courts and a financial exchange, Nasdaq Dubai.

Abu Dhabi is keen to diversify its economy beyond oil and although it is starting well behind Dubai as a financial centre, it has advantages such as its oil wealth – which Dubai lacks – and one of the world’s largest sovereign wealth funds.

“It is an important step in attracting foreign direct investment into Abu Dhabi…It will be interesting if it finds its niche in commodities or forex, which have prospects,” Mohammed Yasin, head of National Bank of Abu Dhabi’s brokerage unit, said of the emirate’s plan.

“We also need to see the relationship of the free zone’s regulator with other local regulators such as the central bank and the Securities and Commodities Authority, and that there is coordination between them.”

Dubai’s DIB eyes double-digit profit growth, acquisitions

Dubai Islamic Bank (DIB) has dealt with much of its balance sheet weakness and should see profits for 2013 grow in the high double digits, allowing it to eye acquisitions in new markets in Asia, officials said on Wednesday.

Leaders at the world’s oldest sharia-compliant lender told Reuters it had put aside around 5 billion dirhams ($1.36 billion) against the sort of soured property loans and transactions which drew into question Dubai’s future as a financial hub in 2009.

In his first media interview since taking over to deal with the fallout of the 2008 global crisis, Chief Executive Abdulla Al Hamli said the bank was now anxious to expand but was being held back in part by the unrest dominating the Middle East.

His deputy Adnan Chilwan said the bank expects to see close to 17 percent growth in net profit this year after spending the last five years cleaning its books and strengthening its core banking operations.


“I can confidently say that Dubai Islamic Bank has nothing to hide. We are very strong, clean and ready for the next growth phase,” Al Hamli told Reuters in the interview on Wednesday.


“2013 has started positively, with first quarter results up by 17 percent compared to last year,” Chilwan said. “We anticipate similar growth for the remaining part of the year.”

DIB shares are up 43 pct so far this year to 2.88 dirhams, giving it a market capitalisation of about 10.9bn dirhams. Investment firm Arqaam Capital last month raised its target price for the bank to 3 dirhams from 2.6 dirhams.

The 38-year-old bank, 30 percent-owned by Dubai ruler Sheikh Mohammed’s Investment Corporation of Dubai, needed government support after the global credit crisis burst the emirate’s property bubble, reducing real estate prices by more than 60 percent over three years after 2008.

Chilwan said the bank had cut real estate investment to 27 percent of its portfolio from 45 percent in 2008 and that it would be happy to trim that exposure further.

“The crisis has made us more aware of our key strengths and focus areas,” he said. “The bank’s portfolio has changed and will continue to shift away from being real estate specific towards more consumer and wholesale banking.”

DIB’s non performing loans peaked at 14.5 percent after the crisis and dropped to 12 percent by the end of 2012. It hopes to reduce that figure to 10 percent this year.

“Geographically, expansion into Asia makes a lot of sense from where we are placed. One would want to look at Malaysia, Indonesia and maybe India,” Chilwan said. The bank is also interested in the European markets but won’t be active before the dust settles in the euro zone, he said.

DIB expects to finalise its buyout of Tamweel through a share swap by mid May, Chilwan said, with the sharia-compliant mortgage lender due to be delisted right afterwards.

The bank does not plan to issue more sukuk this year. It was the second Gulf bank to issue a hybrid perpetual sukuk when it priced a $1 billion Islamic bond to enhance its Tier 1 capital ratio in March. Its Tier 1 ratio rose to 17.7 percent at the end of March, compared to 13.9 percent as of Dec. 31, 2012.

Egypt bank EFG Hermes to sell assets as Qatar deal fails

EFG Hermes, one of the largest investment banks in the Middle East, plans to cut costs, sell non-core assets, and return cash to shareholders after a planned tie-up with Qatar’s QInvest failed on Wednesday.

EFG had agreed the deal in May last year to spin-off part of its assets to create an investment bank with operations spanning the Middle East, Africa and Turkey. QInvest would have pumped in $250 million for a 60 percent stake.

On Wednesday, the two parties said in a joint statement that the deal had been terminated due to lack of regulatory approval from Egypt and that they would continue to operate as independent entities going forward.

In a separate statement to the Egypt bourse EFG said it will seek to reduce its “expenditure structure” by 35 percent to 500 million Egyptian pounds ($72.11 million) in 2014 from 780 million pounds for 2013.


It also plans to sell non-core assets and will distribute cash proceeds to shareholders, it said.


Shareholders were promised a one-off dividend of 4 Egyptian pounds per share after the deal had closed.

“In aggregate terms, everyone was waiting for the deal, so this could have negative implications on the market,” said Egypt-based economist Mona Mansour.

The combination would have given EFG much-needed capital to bolster its business, which was hard hit by political turmoil in the country. QInvest would have gained access to the expertise and reach of the region’s most prestigious investment bank.

“A failed deal is not going to bode well for EFG as they could have benefited from the Qatari cash injection,” a banking source familiar with the deal said.

“With senior management executives under scrutiny by the government, there is a big question mark over future leadership of the firm. It’s unfortunate.”

EFG said in its statement that Karim Awad will continue in his role as head of investment banking and appointed him to the board.

The deal was seen as politically sensitive in Egypt because both of EFG’s co-chief executives, Hassan Heikal and Yasser El Mallawany, are on trial, along with the two sons of ousted President Hosni Mubarak, over allegations of illegal share dealings in relation to a 2007 transaction.

EFG had said last month the deal would lapse on May 3 without long-awaited approval from Egyptian regulators. It had received approval from a number of countries for the deal, which included spinning off EFG’s brokerage, research, asset management, investment banking and infrastructure businesses.

Qatar is Egypt’s main political and financial backer in the Gulf and has pledged $5 billion to Cairo in loans and grants to help keep the most populous Arab country afloat. QInvest is majority-owned by Qatar Islamic Bank.

EFG’S business has been hard hit by political events in the country. Its share price is down 27 percent in the last year.

The bank reported a fourth-quarter net loss of 21 million Egyptian pounds ($3 million) in April, compared with a profit of 31 million Egyptian pounds for the year-ago quarter.

For QInvest, the banking source said it had the finance to put the failed deal behind it and build a franchise by hiring talented people, a process already begun.

QInvest hired ex-Credit Suisse banker Michael Katounas to run its investment banking division in April. The firm is headed by Tamim Hamad Al-Kawari, previously the head of Goldman Sachs in Qatar. [ID: nL5N0CT07Q]

Goldman Sachs was advising QInvest and J.P. Morgan Chase was advising EFG.

Fight for Kings NBA team not over, Seattle investor vows


Tue Apr 30, 2013 10:50pm EDT

(Reuters) – A Seattle hedge fund manager whose bid to move basketball’s Sacramento Kings to the Pacific Northwest city was rejected by a committee of NBA owners vowed on Tuesday to push forward with efforts to buy the team.

A day earlier, the National Basketball Association’s relocation committee unanimously recommended against approving a request by Chris Hansen and partners, who include Microsoft CEO Steve Ballmer, to move the Kings from Sacramento, California, to Seattle.

The recommendation was widely seen as a victory for the California state capital, whose mayor – himself a former NBA player – led a hastily assembled team of investors backing a rival bid for the team.

But the champagne corks had barely finished popping in Sacramento when Hansen, in a statement posted on his website, vowed to fight on.

Unlike the group led by Sacramento Mayor Kevin Johnson, Hansen has a signed agreement to purchase the team from its majority owners, the Maloof family, in a deal worth about $357.5 million.

“We remain fully committed to seeing this transaction through,” Hansen wrote. We “have offered a much higher price than the yet to be finalized Sacramento Group, and have placed all of the funds to close the transaction into escrow.”

Hansen said his group would continue to make its case to the owners of 30 NBA basketball teams, who will take their final vote on the proposal between now and May 13.

Neither Hansen nor the Maloof family, which owns 65 percent of the team, would comment on the group’s strategy for salvaging their proposal. But a letter recently sent by the Maloofs’ sports business company to NBA officials shows that the family strongly supports Hansen’s bid over that of the Sacramento group.

“There is no acceptable deal possible,” a family representative wrote of the Sacramento bid, “and no serious desire by the Sacramento group to arrive at one. It has become too onerous for us to continue spending time and resources on a process that cannot succeed.”

NEW GAME PLAN

A source close to the proposed deal said the Maloof family and the Seattle group have been talking about strategy since the committee vote on Monday.

The idea, this source said, would be for Hansen to persuade NBA owners to support his efforts to buy the team, even if they do not immediately allow him to move it.

Under the NBA’s rules, a decision to relocate a team is separate from a decision to sell a team. So under this scenario, the league could support its committee’s recommendation against moving the Kings to Seattle, while still supporting the Hansen group’s efforts to purchase it.

The league could require Hansen to work in good faith with the city of Sacramento to try to keep the team there, setting a deadline for the construction of a new arena and working to keep attendance high at the games.

But if the arena wasn’t built according to the schedule, or if attendance slipped at the games, Hansen could apply again for permission to move the team – and it could be more likely to be granted, this source said.

David Carter, a professor of sports business and marketing at the University of Southern California, said the strategy could work.

Moreover, he said, it could provide a graceful way out of the situation for the NBA, which on one hand prefers to avoid the public relations fallout that occurs when a team is moved, but on the other might prefer the larger media market and wealthier fan base that Seattle would provide.

“It allows the NBA to have a strong exit strategy,” Carter said. “They’ve done everything they could to protect a home market, but if it doesn’t perform, they’ve protected themselves.”

Johnson, a former NBA all-star who played with the Cleveland Cavaliers and the Phoenix Suns, said he understood Hansen’s desire to keep fighting for the team.

“If I were them, I would keep fighting too,” the Sacramento mayor said. “I don’t look down or begrudge anybody who’s fighting for something they desperately want.”

(Reporting by Sharon Bernstein in Los Angeles and Eric Johnson in Seattle; Editing by Dan Whitcomb and Eric Beech)

Exclusive: Investor wants buybacks, spinoffs on Tim Hortons menu


NEW YORK |
Tue Apr 30, 2013 11:09pm EDT

NEW YORK (Reuters) – Canadian coffee-and-doughnut chain Tim Hortons Inc has come under pressure from a large investor to aggressively boost returns through debt-funded share buybacks and a scaling back of U.S. expansion plans, according to documents seen by Reuters and two sources familiar with the matter.

Hedge fund Highfields Capital, which owns about 1.5 percent of the company and which has a track record of bringing about change at other firms, wants Tim Hortons to borrow $3.4 billion to buy back more than one-third of its outstanding shares at $59 apiece, the documents show.

Highfields’ behind-the-scenes agitation, which was previously unknown, shows how even large and relatively healthy companies are vulnerable to activist investors demanding bold strategies – and even financial engineering – to boost shareholder returns in the absence of growth.

It also highlights how U.S. activist investors are increasingly trying to shake up Canadian companies that have historically not faced such challenges from across the border.

Tim Hortons, which says it is responsible for eight of every 10 cups of coffee sold in Canada, has a market value of $8.3 billion. Its shares closed at $54.58 on Tuesday, and are up nearly 12 percent so far this year.

Highfields also wants Tim Hortons to spin off or sell its distribution business, create a real estate investment trust to house its property assets and revamp its board with new directors who have more financial experience, according to the documents.

Tim Hortons declined to comment on the discussions with Highfields, which have been going on at least since March 8.

“We are focused on continuing our track record of creating shareholder value and always welcome constructive dialogue with our shareholders,” it said in a statement.

A spokeswoman for Highfields declined to comment on the matter, except to note that the firm did not provide a copy of the documents to Reuters. The documents include correspondence between Tim Hortons and Highfields executives since March and a Highfields presentation to the restaurant chain.

UNDER PRESSURE

U.S. activists have had mixed results in pushing for change at Canadian companies. Last year, Bill Ackman’s Pershing Square shook up the board of Canadian Pacific Railway Ltd after a public battle. But earlier this year, fertilizer company Agrium Inc fended off a bid by its biggest shareholder, U.S. hedge fund Jana Partners LLC, to break up the company.

Tim Hortons itself was spun off from U.S. fast food chain Wendy’s International in 2006, following pressure from Pershing Square and billionaire investor Nelson Peltz.

Highfields’ demands come at weak moment for Tim Hortons.

Analysts have questioned whether the company, the largest of its kind in Canada, will be able to continue growing in its home market amid increasing competition from fast food brands like McDonald’s Corp. Tim Hortons has tried to expand in the United States to offset sluggish growth and saturation in Canada, but results there have been mixed.

The chain has also been without a permanent chief since 2011, when CEO Don Schroeder resigned abruptly. Paul House, the interim CEO, is expected to stay on until the end of 2013 or until a new CEO is named.

During their meeting last month, House told Highfields that implementing any strategy change would have to wait until a new CEO takes over, and that some aspects of the hedge fund’s plan, such as forming a REIT, were not workable, according to one of the letters. The company is working with Citigroup Inc and RBC Capital Markets, the documents show.

RBC and Citigroup declined to comment.

The Highfields executives told House in that letter that his responses were disappointing.

“We came away concerned that the company and its board lack both understanding and a sense of urgency,” they wrote.

Boston-based Highfields, which manages more than $11 billion, is no stranger to activism. In 2007, the hedge fund pushed for Wendy’s to sell itself, which the chain later did to Triarc, a holding company owned by Peltz, for around $2.4 billion.

In June last year, Highfields called for a breakup of insurer Genworth Financial Inc. Genworth later sold its wealth management business and its San Francisco-based alternative investment businesses, as well as separated its mortgage insurance business into a new company.

HIGHFIELDS’ PLAN

Highfields bought 2.4 million shares in Tim Hortons in the fourth quarter of last year, making it the chain’s tenth-largest investor as of December 31.

Arguing for a massive share repurchase, Highfields said in the documents that it would allow the company to take advantage of historically low interest rates without having an impact on the underlying business.

It argued that Tim Horton’s debt levels are much lower than rivals such as Burger King Worldwide Inc, Dunkin’ Donuts and Domino’s Pizza Inc, and taking on the additional debt would bring leverage more in line with its peers, the documents show.

Highfields also said Tim Hortons returns so far in the United States did not justify further investments there. It recommended that the chain either enter into franchise agreements in the United States that require less capital investments or scrap U.S. expansion plans altogether, according to the documents.

At the end of last year, Tim Hortons had 804 restaurants in the United States and more than 3,436 in Canada. The majority of the company’s restaurants are franchised, meaning individual restaurant owners own or operate the restaurants.

In recommending that Tim Hortons consider separating out its real estate assets into a new publicly traded REIT, the hedge fund cited the example of Canada’s largest grocer Loblaw Companies Ltd, which said in December it would spin off the majority of its property assets, creating one of the country’s largest REITs.

Analysts have said that Canadian retailer Hudson’s Bay Co could also look at spinning off its real estate to take advantage of a rally in Canadian REIT stocks. The SP TSX Canadian REIT index has risen more than 9 percent in the past 12 months, while Canada’s benchmark SP TSX composite index has risen just 1.8 percent.

(Editing by Soyoung Kim, Paritosh Bansal, Gary Hill and Edwina Gibbs)

Dollar pressured before Fed policy outcome


TOKYO |
Tue Apr 30, 2013 11:11pm EDT

TOKYO (Reuters) – The dollar eased on Wednesday as investors warily awaited the outcome of the U.S. Federal Reserve’s two-day policy meeting later, while the euro drifted on expectations for a rate cut when the European Central Bank meets later in the week.

Optimism over the U.S. recovery was the main driver behind this year’s rallies in riskier investments, especially U.S. stocks, overshadowing weak spots emerging in China and the euro zone’s deteriorating economy.

A report on Wednesday showed that growth in China’s manufacturing sector unexpectedly slowed in April, with the official purchasing managers’ index (PMI) falling to 50.6 from March’s 11-month high of 50.9 as new export orders and input prices contracted.

The PMI was also below the 51 forecast, but stayed above the watershed mark of 50 for seven straight months. The 50 level separates expansion from contraction.

The Australian dollar hit a session low of $1.0365, but reaction was generally muted, largely as many Asian markets were closed for the Labour Day holiday and trading was thin.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS inched down 0.1 percent, retreating from Tuesday’s seven-week high, and dragged down by a 0.3 percent fall in Australian shares .AXJO which reached their highest in nearly five years in the previous session.

“It looks like China is in a situation where sluggish growth is going to continue for longer, which is not great from a commodities point-of-view,” said Damien Boey, an equity strategist at Credit Suisse in Sydney. Australian markets are sensitive to data from China, its biggest trading partner.

Japan’s Nikkei stock average .N225 eased 0.2 percent on some disappointing earnings guidance. The Nikkei posted its best April in 20 years, reflecting a sharp improvement in investor sentiment as Japan promotes aggressive policies to end its stubborn deflation and bolster growth. .T

DOLLAR CONFIDENCE FALTERING

The dollar was vulnerable, staying near lows against a basket of six major currencies .DXY which hit its lowest since the end of February at 81.598 on Tuesday.

The dollar edged down 0.1 percent against the yen to 97.36, losing the momentum it needs to challenge the symbolic 100 yen after touching a four-year high of 99.95 yen last month.

The dollar has come under pressure recently after a mixture of weak manufacturing, jobs and growth data for the first three months of 2013 and more positive reports for the housing market.

“The recent weak data has cast doubt over upbeat economic views forecast at the start of the year which had led to speculation about the Fed tapering its aggressive stimulus later this year,” said Takao Hattori, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Investors are now concerned that data for the current quarter may be weaker than previously thought, and are starting to push back the timing of a shift in the Fed’s stance. This is prompting dollar selling.”

In this light, the U.S. non-farm payrolls report for April due on Friday is key in gauging the economic trend for the second quarter, Hattori said. March’s number came in well below expectations, at 88,000, triggering a sell-off in risk assets.

So far in April, consumer confidence rebounded while the Institute for Supply Management-Chicago business barometer unexpectedly contracted to its lowest level since September 2009. The Standard Poor’s 500 Index .SPX settled at an all-time high on Tuesday, despite the mixed bag of economic reports.

While expectations for any change in the Fed’s policy were low, the dollar may be whippy after the Fed’s statement accompanying its monetary decision, with a bias to the weak side, Sean Callow, a senior currency strategist at Westpac in Sydney, said in a note to clients.

The euro held steady around $1.3163 against the dollar but eased 0.1 percent against the yen at 128.15 yen

“We think meaningful EUR moves will be driven by three fairly unrelated factors, none of which relates to monetary policy in the eurozone,” Barclays Capital said in a research note, referring to the effect of a weak yen on Germany’s growth, impact from Italy’s new coalition government’s austerity policies, and a recovery in the U.S. economy.

London copper dropped 0.5 percent to $7,021.25 a tonne as the weak PMI data from top consumer China fueled demand concerns.

“PMIs do tend to come off in April and May, so there is a seasonal aspect, but it’s still pretty negative and our Chinese economists are quite bearish right now so that’s not great for metals,” said analyst Natalie Rampono at ANZ in Melbourne.

U.S. crude futures eased 0.4 percent at $93.05 a barrel and Brent fell 0.8 percent to $101.55. O/R

(Additional reporting by Maggie Lu Yueyang and Michael Sin in Sydney and Melanie Burton in Singapore; Editing by Eric Meijer)

Kodak expects to exit bankruptcy as soon as July


Tue Apr 30, 2013 11:26pm EDT

(Reuters) – Eastman Kodak Co EKDKQ.PK said on Tuesday it expects to emerge from bankruptcy as soon as July as a commercial imaging business under the control of its creditors.

It said in court documents filed with the U.S. bankruptcy court in Manhattan that it expects to issue new stock with the majority of it going to its second-lien note holders.

The holders of the second-lien notes include investment funds P. Schoenfeld Asset Management, D.E. Shaw Group and Bennett Management Corp.

A new board will be appointed and the company said the new directors will be identified later.

The company did not say how much it expects to pay its unsecured creditors, who are owed as much as $2.2 billion, but they would also receive some shares in the reconstituted Kodak.

Kodak’s bankruptcy plan is subject to a vote of creditors and court approval. Kodak must first gain court approval for its disclosure statement which describes its bankruptcy plan and the risks associated with it and is meant to help guide creditors in their voting on the plan. A hearing on the disclosure statement is expected in June.

Kodak sought protection from creditors in January 2012 after it failed to embrace modern technology and became one of the biggest corporate casualties of the digital age. The company said it had $6.75 billion of liabilities when it entered Chapter 11 reorganization.

Kodak’s bankruptcy exit plan comes a day after it clinched a key deal to sell its personalized imaging and document imaging businesses to its UK pension fund for $650 million. The pension fund also agreed to give up a $2.8 billion claim against Kodak, resolving the biggest unsecured claim in the bankruptcy.

Rochester, New York-based Kodak launched its first camera in 1888 and grew to dominate the market for photographic film. Although Kodak invented the digital camera, it put the project on the back-burner and spent years watching rivals stake a claim to the market while physical film sales plummeted.

The company hopes to put all that behind it once it exits bankruptcy and focuses on selling printing equipment and services to businesses. It said on Tuesday that it expects its earnings before interest, tax, depreciation and amortization to increase to $494 million in 2017 from an estimated $167 million this year.

It expects revenue to climb from an expected $2.5 billion this year to $3.2 billion in 2017, although that would still be below the level in 2011, its last full year before it filed for Chapter 11.

Prior to its bankruptcy filing, the company had not had a profitable year since 2007.

Kodak’s pink-sheet shares fell 7 percent to 37 cents on Tuesday. Although the stock has risen from 30 cents per share on the day Kodak filed for bankruptcy, the company said shareholders will get nothing and their stock will be canceled when Kodak exits Chapter 11.

The bankruptcy case is In re: Eastman Kodak Co, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.

(Reporting By Tom Hals in Wilmington, Delaware; Editing by Daniel Magnowski and Matt Driskill)