Turkish crisis
A sharp plunge in the value of the Turkish Lira against the US dollar meant the emerging market economy dominated business headlines this week. The currency fell to a near-record low before rebounding slightly, after the country’s Banking Regulation and Supervision Agency tightened rules enabling foreign accounts to sell out of the currency and make bets against it. A spat with the US has proven the tipping point in investor confidence, with President Trump approving the doubling of steel and aluminium tariffs after Turkey failed to free American pastor Andrew Brunson. However, Turkey’s high level of foreign-denominated, non-corporate debt seems to have set it up for a fall, not only making it more vulnerable to a downturn in foreign investor sentiment but also rising US rates, which have pushed up the value of that debt.
Sure offer
Detracts from weakness
Poor weather, meagre investment returns and increasing competition may be driving down profits for insurers, but that hasn’t deterred private equity giant Bain Capital making a bid for esure (ESUR). At 280p, the recommended offer represented a 37 per cent premium to the general insurer’s share price the day prior to the potential deal being revealed. Chairman Sir Peter Wood – the group’s largest shareholder, with almost a 31 per cent stake – will continue in his role if the deal completes. He, along with 17 per cent shareholder Toscafund, both approve of the offer.
Wheels in motion
Board formed
Speculation around Tesla’s (US:TSLA) future – following founder and chief executive Elon Musk’s bombshell tweet that he was considering taking the group private at $420 (£331) a share – continued as the electric vehicle manufacturer’s board of directors said it has formed a special committee to evaluate any buyout proposal. However, the board said it had not yet received any formal offer to do so. That announcement came a day after Mr Musk said – again via Twitter – he had lined up financial and legal advisers, including Goldman Sachs and Wachtell, Lipton, Rosen & Katz, to secure a deal.
Armaments tragedy
Expectations cut
Shares in Chemring (CHG) were marked down heavily this week after the defence contractor said it expected the impact of a fatal explosion at its Chemring Countermeasures facility near Salisbury to lower the group’s underlying operating profit for the full year by two-thirds to £10m. There would be a corresponding knock-on effect on operating cash flows and net debt, management said. The explosion, which killed one employee and left another badly injured, has suspended manufacturing at the site. A full investigation into the cause of the incident has been launched.
Job-rate rises
Wages stagnate
UK unemployment may have fallen to a near-record low during the three months to June, but pay also continued to weaken. The number of people out of work fell by 65,000 to 1.36m during the second quarter, according to data from the Office for National Statistics, representing 4 per cent of those active in the labour market. That compares with a record low of 3.4 per cent in 1973. However, growth in average weekly earnings fell to 2.4 per cent, down from 2.5 per cent during the three months to the end of May. Given that inflation was also 2.4 per cent in June, real wages were flat.
Astra-nomical debt
Pharma giant issues bond
The UK’s interest rate hike last week may have been miniscule, but when you’ve borrowed $15.3bn from various banks, interest rate rises start to look a bit concerning. That may explain why AstraZeneca (AZN) has issued a $3bn four-tranche bond to investors, which management has said may be used to pay back some of its existing debt. It’s important that the pharma giant keeps its finances in order and retains its premium credit rating during a period of heavy investment in new products which has stunted its ability to generate cash.
Telit strengthens board
Chairman appointed
Troubled technology provider Telit Communications (TCM) has appointed a permanent independent non-executive chairman. Paolo Dal Pino – previously chief executive of Prometeon Tyre Group – will take up the role from 1 September this year, subject to routine due diligence. Telit’s interim chairman Simon Duffy – who was appointed as such on 25 June 2018 – will step down and return to his role as senior independent non-executive director. The group remains under investigation by the Financial Conduct Authority over the timeliness of announcing certain matters within 2017’s half-year results.
