From the Securities Lending Trading Desk

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As company valuations rebound in the oil and gas sector, the US desk is seeing some shorts close out their positions.  Demand has been strong for Angang Steel Co Ltd after the firm reported a 2015 net loss of 4.6 billion yuan ($711 million).  Meanwhile in Europe, strong demand continues for Vallourec as its rights issue nears.

Below please find the April 5 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.


Quotient Technology’s share price has more than doubled since reaching a 52-week low in February, and it bears questioning whether the post earnings rally is warranted.  Quotient, parent company of, rallied to a six-month high of $10.75 on March 31. In February, Quotient reported fourth quarter revenue of $69.4 million, an increase of 16% over last year.  The firm went on to report that coupon transactions rose 25% to hit a record 469 million transactions.  While Quotient’s CEO says the company is gaining momentum through its partnership with Retailer iQ, and transaction growth is expected to remain on pace, some investors question these claims and the current valuation of the stock.

As company valuations rebound in the oil and gas sector, some shorts have closed out their positions.  Recently, stocks such as Laredo Petroleum Inc., Sanchez Energy Corp., Chesapeake Energy Corp and Range Resources Corp have seen their stock prices rally amid speculation major producers could institute a production freeze.  Despite the short term rally it appears companies within the sector are not out of the woods amid a number of concerns — oil supply and demand, credit rations of specific companies and pressure for improved financial performance.

Asia Pacific

Problems continue to mount at Takata Corporation after reports in the media suggested that the supplier behind the auto industry’s historic airbag recall may have to allocate a larger than expected cost for the callback.  Sources familiar with the matter suggested that Takata, which produces airbags for some of the largest automakers in the world, has projected a worst-case recall scenario of 2.7 trillion yen ($24 billion). Although Takata officially refuted these claims, the estimated cost amounts to almost six-times more than the total assets on the company’s balance sheet and four-times more than the revenue forecast for the last fiscal year. Demand continues to be robust for the troubled airbag manufacturer which has seen its share price decline by almost 70% in the past year.

Angang Steel Co Ltd incurred a 2015 net loss of 4.6 billion yuan ($711 million) vs a net profit of 928 million yuan in 2014. China’s excess steelmaking capacity and slowing downstream demand have weighed heavily on steel prices which remain under pressure in 2016.  Angang Steel Co Ltd announced it will continue to reduce production costs and promote efficiency.  We have seen long term securities lending demand for Angang Steel.


Strong demand continues for Vallourec as its rights issue nears.  Vallourec announced that it has increased its syndicate of banks for the intended rights issue. The company also reached new credit agreements of €450 million and extended an existing credit line.

Spanish renewable energy firm Abengoa won support from creditors to allow more time to approve the firm’s €9.4 billion debt restructuring.  More than 75% of the company’s lenders agreed to continue talks for up to seven months, meaning the company may proceed with a proposed €400 million euro rights issue.  Borrower interest in the troubled energy company has been very strong and the desk is seeing historically very hard to borrow solar sector names heat up.  Germany’s SMA Solar and Switzerland’s Meyer Burger are trading at mid- to high- level difficulty while Germany’s Wacker Chemie is once again beginning to draw interest.