From the Securities Lending Trading Desk

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Broker demand for Pandora Media (P) is increasing as the share price declines on the back of monthly usage falls. Shares in Singapore-listed Noble Group, the beleaguered commodities trading firm, continue to slide and its woes deepened further as several brokerages suspended research coverage of the company. In Europe, a resurgence in rights issues gives rise to securities lending demand.

Below please find this June 6’s 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

Increased fundamental interest is surrounding retailers. Recently, Fox Business reported that new research from Credit Suisse shows “roughly 220 to 275 shopping centers (or between 20% to 25% of the nation’s 1,100 shopping malls) would close by 2022.” E-commerce continues to be blamed as the biggest headwind for brick and mortars. The note goes on to point out the recent bankruptcy filings by once popular retailers including: American Apparel, Limited, BCBG, Wet Seal, and Payless ShoeSource. Bloomberg recently reported that “North American Retail traffic fell 8% in the week ended May 27, steeper than the year-to-date 6.8% drop.” Familiar names that remain in play include: Nordstrom Inc (JWN), JC Penny Co (JCP), and Tailored Brands (TLRD).

Broker demand for Pandora Media (P) is increasing as the share price declines on the back of monthly usage falls. Reports claim that competition from Apple and Spotify are to blame as “monthly total time spent on Pandora in the US has fallen since 2015, according to ComScore data.” In addition, the company reported a 3.4% drop in monthly active listeners in Q1. Shares of P hit a 52-week low on May 31, closing at $8.90. There is also strong speculation that Sirius XM is looking to make a deal with Pandora. Analysts seem split on the likelihood of this merger, however, one suggests Pandora’s fundamentals are “choppy” and it is unlikely that a premium would be paid for the company. Pandora remains a strong focus name with many dynamic drivers of demand.

Asia Pacific 

Shares in Singapore-listed Noble Group, the beleaguered commodities trading firm, continue to slide and its woes deepened further as several brokerages suspended research coverage of the company. Noble Group’s decline of over 70% in value since early May has prompted several brokerages to no longer provide coverage for the firm. Investors remain concerned over its long-term future after a series of credit-rating downgrades as it struggles to restructure its debt. According to media reports, the company has hired Chicago-based law firm Kirkland & Ellis LLP as legal counsel, and it is looking into the possibility of restructuring in an effort to convince its bankers that it has a viable long-term plan for survival. We continue to witness robust securities lending demand for Noble Group.

Kawasaki Kisen Kaisha Ltd’s chief executive officer Eizo Murakami may fail to win reelection at an upcoming shareholder meeting due to shareholder opposition. Effissimo Capital Management Pte, has increased its stake since it voted against Murakami’s reappointment last year. Kawasaki Kisen Kaisha Ltd, Japan’s third-largest shipping line, encountered investor discontent in 2016 after posting an annual loss due to difficult shipping industry conditions. The company’s shares have, however, gained almost 70% since hitting a three-year low in February last year. We have seen long term lending interest in Kawasaki Kisen Kaisha Ltd.

Europe 

A resurgence in rights issues gives rise to securities lending demand. French oil services company CGG said it reached an agreement, in principle, on a financial restructuring plan. The company is planning a $125 million rights issue, up from $75 million proposed on May 12, at a price of $1.75. DNCA will backstop the issue with $70 million in cash, CGG says. Strong demand has been seen on the back of the news and we expect fees to continue to tighten. Elsewhere, Eltel, the Swedish company that owns and operates critical infrastructure networks in the areas of power, communication and transport, announced its intention to raise approximately SEK 1,500 million. The subscription period will run from 8th June up to and including June 22. Danske Bank A/S, Helsinki Branch, OP Corporate Bank plc and Skandinaviska Enskilda Banken AB are acting as joint lead underwriters in connection with the rights issue.

Italy may have no time to rest on its laurels after brokering a deal to keep Banca Monte dei Paschi di Siena SpA in business. While BMPS has struck a deal with the European Union Competition Commissioner, there are two other banks, Banca Popolare di Vicenza and Veneto Banca, which have yet to have their fates decided. In addition, Banca Carige’s share price has fallen recently and sparked renewed securities lending demand after the bank’s top investor criticized Chief Executive Officer Guido Bastianini and the lender’s chief financial officer for their management. The bank has already said it is seeking to replenish capital through a 450 million-euro stock sale and reduce bad loans to stay afloat. Securities lending demand remains strong.