From the Securities Lending Trading Desk

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Borrowers are seeking shares of German-based sugar producer, Suedzucker, which is in a not-so-sweet legal situation. In Asia, Daihatsu Motor Co shares surged last week on the news that Toyota Motor Corp was considering a buyout offer.  The desk is also seeing strong bids per share on US-based Intrawest Resorts Holdings “Take No Action” elections.

Below please find the February 2 edition of From the Trading Desk, which provides timely commentary about top security earners, revenue drivers and other factors influencing the securities lending market from the BBH Securities Lending Trading Team.

Americas

The desk is seeing strong bids per share on Intrawest Resorts Holdings “Take No Action” elections.  We have seen the share price rally for the Denver-based firm amid reports that the company plans to buy up to $50 million of its common stock via a dutch auction with an expiration date of February 10. The share price has rallied as much as 20% on the news, however, the stock value remains below the auction range of $9.00 to $10.00. For positions where long holders enter a “Take No Action” election, brokers are bidding on a per share basis.

Recall pressure and increased bearish sentiment is pushing fees higher for Vale. This week Vale SA, the world’s largest iron-ore producer, saw its share price fall to a 52-week low of $2.15. Weak demand from China has caused metal prices to collapse, putting pressure on Vale’s margins. Also, Vale is based in Rio De Janeiro, which is reportedly one of the riskiest mining jurisdictions in the region, due to Brazil’s political and economic climate.

Asia Pacific

The continued slump in oil prices has prompted the Singapore government’s state investment company to undergo a review of its stakes in two major holding companies based in the city state. News reports last week suggested that Temasek Holdings Pte is mulling over its options for its holdings in Keppel Corp and Sembcorp Industries Ltd, which may include raising capital through a rights offer or divesting non-core assets. In particular focus are the marine units of both firms as falling oil prices have resulted in a sharp decline in oil rig drilling equipment.  We continue to witness strong long-term securities lending demand for Sembcorp Marine Ltd.

Daihatsu Motor Co shares surged last week on the news that Toyota Motor Corp was considering a buyout offer.  Daihatsu Motor Co said it’s cooperating with Toyota Motor Corp and that the buyout is an option. The announcement led to shares of Daihatsu Motor Co posting their biggest gain since November 1999. Lending demand increased for Daihatsu Motor Co following the news.

Europe

Saipem’s rights issue started trading this week. The diversified drilling services firm is looking to raise $3.8 billion – 60% of its market capital — in order to shore up its balance sheet amid a slump in crude prices.  It follows smaller rival CGG who also raised a similar percentage of its market cap in January.  Demand for Saipem has risen on the back of competing strategies of hedge funds.  The stock has been a hot directional play for most strategic oil fundamental strategies, while event driven hedge funds are now looking to monetize the €10 cent spread between the ordinary shares and the rights.

Borrowers are seeking shares of sugar producer, Suedzucker, which is in a not-so-sweet legal situation. The firm is being sued by more than 30 companies for a sum that may total at least €315 million. Suedzucker is also feeling the pinch of low commodity prices and its stock price is down 25% year to date.  Securities lending demand continues to increase.