Stock Takes

A closer look at the markets by Tamsyn Parker

Stock Takes: Alarm bells ringing over debt

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Walking down 35 flights of stairs at the ANZ Centre takes a fair bit of time. Photo / Dean Purcell
Walking down 35 flights of stairs at the ANZ Centre takes a fair bit of time. Photo / Dean Purcell

A fire alarm going off in the plush ANZ Centre offices of Chapman Tripp put a dampener on its seminar on New Zealand's debt markets this week.

Dozens of attendees had to traipse down 35 flights of stairs after the alarm went off, which ate into the one-hour timeslot needed for the presentation.

On finally reaching the ground, many opted to quit while they were ahead and saunter off back to their respective offices. Chapman Tripp resumed proceedings for those who remained but is rescheduling the event for those who dipped out.

HEALTH CHECK

Ivor Dunbar's curriculum vitae reads like a Who's Who of the world's biggest initial public offers (IPOs).

He was involved in last year's gargantuan IPO for General Motors but he's also had a hand in other big fund-raising exercises for Agricultural Bank of China, Industrial & Commercial Bank of China, China Life and Asian insurance company, AIA.

The London-based head of global capital markets for Deutsche Bank, in Auckland for a brief stopover, said the global economy has bounced back quite strongly from the global financial crisis, but that risks remained.

He said confidence could also be taken from the way markets have taken Europe's sovereign debt crisis, revolutions in parts of the Middle East, and major earthquakes in New Zealand and Japan, in their stride.

"Any one of those events 18 months ago would have forced people to down tools for four weeks to assess the implications, to worry and to fret about it, but the time lag between these events occurring, and people assessing them and then moving on, has been relatively short," he said. "So we have seen very healthy capital markets throughout the first quarter of this year, with debt and equity."

The United States was looking better and Europe was not quite the "basket case" that people were saying it was.

"The financial markets have also come to the conclusion that whatever the problems are in the peripheral states in Europe - they are contained now to the three countries that are in negotiations around financial packages. People do not now think it is going to extend to Spain, which was a big worry, and the emerging markets are also very robust," he said.

"So overall, as far as one can see, the economic performance of the global economy looks to be pretty strong - in marked contrast to where we were in 2007-2008."

But given the speed with which the world seems to have recovered what about the chances of it recurring?

"I don't think it's a likely immediate phenomenon, but it is fair to say that some of the fundamental causes are still to be addressed."

BE PREPARED

Markets and commentators tend to underestimate how much the banks have done themselves to put their houses in order.

In Deutsche Bank's case, the bank - which was heavily involved in the American sub-prime loan market at the centre of the global financial crisis - has shored up its balance sheet and eliminated proprietary trading, or trading on its own account.

But problems remain and the balance sheets of many second-tier financial institutions still need work.

"There are still things there that may give rise to problems in the future if they are not addressed, but it is work in progress," Dunbar said.

"I would not want to make it sound too rosy or to be too imprudent about it, but if we have learned anything about the last few years it has been to expect the unexpected," he said.

"So there are no grounds for complacency, but equally there are no grounds for undue pessimism or fear."

COUILLAULT FUND

Former sharebroker and analyst Warren Couillault has launched a new funds management company, Richmond Investment Management GP, which is a partnership between himself and the Spencer Family Group.

Richmond's initial offering comprises two fund-of-fund products (Richmond International Funds) which will invest in a selection of global hedge fund managers.

Joining Couillault on the Richmond board will be Berridge Spencer, who is managing director of the Spencer Family Group, Auckland business consultant and company director Steve Allbon and corporate adviser David Cameron-Brown.

Couillault is a former chief investment officer and shareholder in Fisher Funds Management, a sharebroker for the then Warburg Dillon Read, and an analyst for UBS Warburg in London.

SHARES CUT DOWN

Rubicon's share price plummeted in the days following news that its 33 per cent owned associate ArborGen has pulled an initial public share offer in the United States, citing market conditions.

ArborGen, a forestry biotechnology company, wanted to sell 5.12 million new shares to the public at between US$16 and US$18 a share to raise between US$82 million and US$92 million.

ArborGen said its other owners - International Paper and MeadWestvaco - with Goldman Sachs and Citigroup Global Markets, who were acting as joint book-running managers for the offer, had decided not to proceed.

Rubicon, a biotechnology investor, was formed from remnants of the old Fletcher Challenge group in 2001. Rubicon's shares started to weaken at $1.07, then dropped as low as 68c. The stock had partly rebounded by yesterday's close, gaining 12 cents to close at 80c.

WATERMAN INVESTS

Auckland-based Waterman Capital has taken a 50 per cent stake in Working In - a company that provides skilled labour for blue-chip Australian and New Zealand corporates.

Working In assists skilled migrants from Britain, South Africa and Canada to move to, work and live in Australia and New Zealand. Waterman is a New Zealand owned and based private equity firm established by Matt Riley and Chris Marshall in 2004.

WUHAN JOINT VENTURE

China's Wuhan Venture Capital Co and Wellington-based Endeavour Capital have set up a $120 million joint venture fund to invest in companies that require scale to compete in world markets.

The partnership provides for joint 50/50 investment on an international basis, including New Zealand, into companies that need additional equity to achieve scale for competing in world markets.

NEW MAN AT HSBC

HSBC has appointed Noel McNamara as its chief executive for New Zealand. McNamara, head of Commercial Banking for HSBC Bank Australia, will succeed David Griffiths, effective from September 1. McNamara has worked for HSBC Bank Australia since 1995 in various roles including commercial banking.

LEAKY TAP

Tap and showerware manufacturer Methven has seen its share price head south since last November, but the company was dealt an additional blow when its biggest customer in Britain, Focus (DIY), went under early this month.

Methven estimated the immediate financial implications to be in the range of a $1.3 to $1.7 million reduction in profit after tax, plus a non-cash intangible asset impairment in the order of $400,000 after tax. Methven said the British market had experienced difficulty since 2008.

It was the second downward revision to earnings since March, when the firm said full-year net profit would be 10 to 15 per cent below - instead of in line with - the prior year's result.

- NZ Herald

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