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Our briefing for Friday June 18, 2021:
Jun 18, 2021 3:19:17 PM
- In the United States, Americans now have a few more destinations to travel to, if they so choose. The European Union (EU) updated their travel list on Friday and the United States were added to the “white list”, allowing leisure travel within a few days. Some European countries were already allowing vaccinated Americans to visit but being added to the “white list” means restrictions on fully inoculated United States residents can be lifted across the 27-member EU bloc. The move is expected to be a major boost to American airline carriers like United Airlines and Delta, which fly the most profitable routes. The EU is now looking for America to reciprocate; allowing fully vaccinated EU citizens to travel to the United States.
- Canadian Prime Minister Justin Trudeau and his government aren’t caving in yet to outside pressure to reopen the land border with the United States, extending the non-essential travel ban for another month on Friday. The announcement means the world’s longest undefended border will remain closed to only essential travel until at least July 21st. Canadian Public Safety Minister Bill Blair said the government would start to outline a plan for fully vaccinated Canadians on Monday. The Canadian Chamber of Commerce was not impressed with news on Friday calling the move another nail in the coffin for the summer tourism season for Canadians.
- In the United Kingdom, Prime Minister Boris Johnson’s move to delay a full reopening on June 21st, seems to be a wise one following the latest data released on Friday from Public Health England (PHE). For the week of June 16th, PHE has reported 33,630 new cases of the Delta variant first identified in India, taking the number of confirmed cases to 75,593, which is a 79% increase from the previous total. “Cases are rising rapidly across the country and the Delta variant is now dominant,” said Jenny Harries, Chief Executive of the UK Health Security Agency. “It is encouraging to see that hospitalizations and deaths are not rising at the same rate, but we will continue to monitor it closely.”
- Seeing what is happening in the UK, German health authorities are predicting the Delta variant will become the dominant coronavirus strain in their country by autumn at the latest. Lothar Wieler, head of the Robert Koch Institute for infectious diseases, said the Delta variant only makes up for 6% of German cases right now, but it is not a question of if Delta will become dominant, but a question of when. Wieler is urging the German public to continue wearing masks indoors and get vaccinated. Restaurants, bars, beer gardens, hotels and concert halls have all been reopening in recent weeks in Germany to coincide with the hot weather and upcoming summer holidays.
- The World Health Organization (WHO) official for Africa has called for an urgent acceleration in the supply of coronavirus vaccines to curb a new wave of COVID-19 infections and the evolution of new, potentially dangerous variants. “Africa is in the midst of a full blown third wave… “We’ve seen in India and elsewhere how quickly COVID-19 can rebound and overwhelm health systems,” said Matshidiso Moeti, the WHO’s regional director for Africa. Officials are pleased by the G7 pledge made last weekend to provide one billion vaccine doses to the developing world, but they say a much greater supply is needed immediately with cases rising by more than 30% across the continent in the last week. Among the hardest hit countries are South Africa, Tunisia, Zambia, Uganda, and Namibia.
- The Indian Medical Association (IMA) was planning to hold a nationwide protest on Friday that was expected to draw over 350,000 doctors. The IMA are protesting the treatment of health officials in the country and are demanding a central law to protect doctors against violence. Last month, a doctor was attacked by relatives of a coronavirus patient who died in northeastern Assam state. The IMA is using the COVID-19 pandemic to draw attention to their cause as close to 750 doctors died during 2020 trying to look after patients and another approximate 700 died during the deadly second wave just a few months ago.
Covid-19 – Due Diligence And Asset Management
Renaissance Suffers $11 Billion Exodus with Meager Quant Returns
Brief : Investors are still headed for the exits at Renaissance Technologies, pulling $11 billion from the quant giant in seven months. Disgruntled by subpar returns, clients have now redeemed -- or asked to redeem -- more than a quarter of the capital that Renaissance manages in hedge funds with outside money, according to investor documents seen by Bloomberg. The firm now is mostly managing its own internal capital, a person with knowledge of the matter said. The exodus marks a setback for legendary investor Jim Simons, the military codebreaker and mathematician who started Renaissance and turned it into one of the industry’s most successful hedge fund firms. It’s also put the spotlight on a discrepancy not lost on clients: They’ve been losing money on struggling funds while Renaissance insiders have been reaping fat returns, with Simon himself making billions of dollars last year alone. From December to February, clients pulled, or asked to pull, about $5 billion from the funds, Bloomberg reported. That was followed by about $6 billion more through June, the documents show. While redemptions peaked in April, they slowed in May and June.
‘Global GDP to Recover to Pre-Pandemic Levels in H1 2022’
Brief: Global GDP is likely to recover to pre-pandemic levels in the first half of 2022, an expert has said. Speaking at Federated Hermes’ outlook roundtable yesterday (June 17), Eoin Murray, head of investment at the investment manager, said recovery of global GDP will be "at some point within the first half of 2022". He added there are certain signs indicating whether economies will see long-term scarring. “There also appears to be an expectation that longer term economic scarring will most likely be down to, first of all, an incomplete recovery in the labor market. And secondly, bankruptcies,” he said. Murray expects the bankruptcies to be in zombie companies (a company that needs bailouts in order to operate) which have been created by quantitative easing. “We all know that the rate of bankruptcies has fallen during the pandemic, on the back of huge monetary support, contrary to my predictions of solvency problems at the beginning of the pandemic.
Middle-Market Dealmaking is Back
Brief: Middle-market private equity firms have bounced back from Covid-19 pandemic-related lows, with dealmaking, exit activity, and fundraising showing signs of continued strength. In PitchBook’s U.S. PE middle-market report published Wednesday, author and PitchBook analyst Rebecca Springer cited “robust” dealmaking in the first quarter of 2021 as one element of the sector’s success. According to the report, deal count and value in the first quarter of 2021 “easily exceeded” numbers in the first quarter of 2020. In 2021, U.S. PE firms closed 776 deals and spent a total of $119.5 billion, an amount the report deems the “second highest quarterly deal value figure” since the fourth quarter of 2020. PitchBook credits the successful dealmaking to increased vaccinations, the Federal Reserve, and an “ample supply” of cheap debt. “In Q4 2020, we saw a backlog from the pandemic, so deals that would’ve been done earlier but were delayed,” Springer told Institutional Investor. “In Q1, we saw a continuation of that.” As for the near future of deal activity in the middle markets, Springer expects the upward momentum to continue for the rest of the year. In the report, Springer lists the $1.9 trillion American Rescue Plan and subsequent increased consumer and business spending as reasons for increased activity.
2020-2021 Enforcement Report Published – Positive Results Amid the Pandemic
Brief :The Autorité des marchés financiers (AMF) today published its Enforcement Report for the 2020-2021 fiscal year. The report presents the highlights of the AMF’s enforcement activities and results for the past year. “Despite the unprecedented public health crisis caused by the pandemic, the AMF showed agility and resilience by continuing its operations remotely and reacting quickly to protect consumers and ensure market efficiency,” said Louis Morisset, AMF President and CEO. “Our inspection, investigation and prosecution teams were very proactive and able to maintain their operations, resulting in a large number of prosecutions and in important rulings that sent a deterrent message,” said Jean-François Fortin, Executive Director, Enforcement. In addition to providing a comprehensive picture of the past year’s enforcement activities, the report describes major technological advances to detect potential violations and more efficiently manage investigation matters and prosecutions, as well as the AMF’s continuing offensive on the crypto asset front. The report also touches on the teams’ efforts to integrate mortgage brokerage into its inspection activities while supervising the clienteles regulated by the AMF, including in order to assess the impacts of the pandemic on their activities. The Autorité des marchés financiers is the regulatory and oversight body for Québec’s financial sector.
Private Equity is Raising Dividend-Linked Debt Like It’s 2007
Brief: Europe’s private equity patrons are piling debt onto the books of their companies to support dividend payouts, a move which could threaten these firms’ prospects when the fiscal and monetary stimulus of the pandemic era starts to wind down. Just under 13 billion euros ($16 billion) of leveraged loan deals linked to dividend recapitalizations took place by early June -- the highest level in 14 years -- according to S&P Global Market Intelligence’s Leveraged Commentary & Data unit. That’s only 4 billion euros shy of the total for the same period in 2007, on the eve of the great financial crisis. The stimulus deployed since March last year has kept many companies afloat amid ruinous lockdowns. Some private equity owners have seized the chance to issue more debt from their companies, potentially jeopardizing how quickly they can bounce back as economies start to open up and policymakers mull tapering. “A dividend recap isn’t a positive credit scenario for any company,” said BlackRock Inc.’s Head of European Leveraged Finance James Turner. “But whether or not we decide to support them is dependent on each individual case.” German buildings material maker Xella International GmbH, for instance, was downgraded after it sought to borrow 1.95 billion euros in March this year, with nearly a third of that amount slated to go to private equity sponsor Lone Star Funds.
