Breakingviews - Corona Capital: Bad debt, Qiagen, Lawyers, Daimler
LONDON/HONG KONG (Reuters Breakingviews) - Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
– Nordic banks’ bad debts
– Thermo Fisher’s Qiagen boost
– Sick Melbourne lawyers
– Daimler’s cash boost
NORDIC NOIR. In case European bank investors weren’t confused enough about coronavirus bad debt, the Nordic contingent muddied the waters further with second-quarter results. At one end of the spectrum, Nordea Bank on Friday booked a hefty 698 million euro charge for expected dud credit. That was 11 times more than a year ago, taking provisions this year to 28 basis points of its loan book. Svenska Handelsbanken, however, on Wednesday set aside basically nothing. Denmark’s Danske Bank and Stockholm-based Swedbank were somewhere in the middle.
As Breakingviews has written, the biggest determinant of first-quarter bad-debt charges was exposure to unsecured consumer finance. Handelsbanken’s book of mortgages is safer by comparison. Scandinavian lenders have historically eschewed riskier types of lending, making them a poor benchmark for the broader industry. Still, investors have been pulling their hair out trying to get a handle on pandemic bad debt. The growing disparity between Nordic lenders won’t help. (By Liam Proud)
BOOSTER SHOT. Thermo Fisher Scientific may have to give its $12.5 billion takeover target a second shot in the arm. The $155 billion U.S. healthcare firm on Thursday increased its offer for German Covid-19 test maker Qiagen by $1 billion, as Breakingviews had predicted. But if enough shareholders agree with outspoken hedge fund Davidson Kempner Capital Management, which owns 3.6% of Qiagen, Thermo Fisher CEO Marc Casper may have to sweeten the deal again.
The new offer of 43 euros a share, an increase of 4 euros per share, seems to be closer to what investors want. Qiagen shares were trading at around 42 euros on Friday morning. The Germany company also tweaked the terms to increase its chances of getting the deal over the line, reducing the threshold of investors support from 75% to 67%. Given Qiagen’s popularity with retail investors, however, Thermo Fisher may still struggle to get the numbers at a vote on Aug. 10. (By Aimee Donnellan)
LEGAL TROUBLES. There is a long, bumpy, road back to the office, and HWL Ebsworth is learning this the hard way. Six Covid-19 cases linked to the Aussie law firm’s Melbourne office have been labelled a “key outbreak” by the Victorian health department, the Australian Financial Review reported on Thursday, forcing the firm to revise its preference that all employees work on site.
When the first three cases were identified last week, HWL Ebsworth essentially told staff they were expected to return to the office after its deep cleaning, according to the report. But the Victorian health department’s chief medical officer said the six cases showed why people should not return to city offices. Globally, more attention to date has been paid to such stop-starts on factory floors. But hard-driving white collar firms are unlikely to get an easier pass. (By Alec Macfarlane)
PIMP MY RIDE. German carmakers have stopped haemorrhaging cash. Fierce cost control by Daimler boss Ola Källenius lifted the Mercedes-Benz maker’s shares 4% on Friday morning after it reported positive free cash flow of 685 million euros during the second quarter. That was much better than the outflow of roughly 2.1 billion euros analysts had expected. Despite the pandemic fallout, the Stuttgart-based company’s net cash pile expanded to a healthy 9.5 billion euros – close to Källenius’s 10 billion euro target at the beginning of the year.
Any financial cheer is limited: Daimler still reported an underlying operating loss of 708 million euros, though this was also better than the gloomy market consensus. But at least when Daimler releases sales and operating margin figures next week – followed by rivals Volkswagen and BMW – investors can focus on sales rather than having to fret about the health of automakers’ balance sheets too. (By Christopher Thompson)
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