One Greensill update to start: Senior Credit Suisse executives overruled risk managers to approve a $160m loan to Greensill Capital, which the collapsing finance group now has “no conceivable way” to repay. More here.
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Is Eurostar going bust? Are the days of wasabi peanuts in the St Pancras lounge in London nearly over? On paper, yes. In practice, maybe not.
Passenger numbers have fallen 95 per cent since last March. The high-speed rail operator drew down £350m in bank loans last year and raised at least £100m from its shareholders, which include the French national railways SNCF, the Belgian railways SNCB, Canadian pension fund Caisse de Dépôt et Placement du Québec (CDPQ) and Hermes Asset Management.
But cash will run out “in June”, Eurostar’s chief executive Jacques Damas tells the FT’s Henry Mance (read the full feature here — it’s a good one).
A proposed rescue package involves shareholders putting in more cash, and banks offering more loans. But it also needs the UK government, which sold its shareholding in 2015, to agree to offer loan guarantees worth £60m.
That would give the company enough cash to continue until 2022, even with no pick-up in traffic. Things are moving slowly on the UK’s end. Damas says that, if all else fails, he will go to the Queen, who rode the first Eurostar train back in 1994. Sadly, she may be preoccupied with other problems.
If Eurostar did go bankrupt, its prime assets would be its 17 Siemens e320 trains — which cost £1bn and which, having been ordered in 2010 and 2014, are still relatively new. (It also has eight refurbished Alstom trains.) Some of these are already collateral on loans.
Before the pandemic, Eurostar had been doing decently — with operating profit of £92m in 2019, and net debt less than twice ebitda. But business travel faces a long-term threat.
Thanks to Brexit, there are no Members of the European Parliament travelling from London to Brussels. Thanks to the pandemic, there may be fewer business travellers full-stop.
Is there hope for high-speed rail? Perhaps if business travellers decide they’d rather settle in for a longer train journey than endure the drudgery of air travel in a post-pandemic world.
Taking the train from London to Paris is a no-brainer. But journeys from London to Amsterdam (4 hours 7 minutes direct), or London to Frankfurt (5 hours 29 minutes, with a change at Brussels), require a more thoughtful decision.
Train or plane, whichever terminal you find yourself waiting in, you might be lucky enough to pick up a print copy of the FT.
We’ve talked a lot about Wall Street’s hottest investment — special purpose acquisition companies, or Spacs. But we haven’t looked too deeply at the capital source behind the frenzy, which is the focus of this report by DD’s Ortenca Aliaj and Miles Kruppa.
The simple answer is hedge funds. Everyone from Izzy Englander’s Millennium Management to Seth Klarman’s Baupost Group has embraced investing in blank-cheque vehicles for their prospects of lofty returns with little risk — at least if you get in early.
They’re enticed by a unique quirk baked into the Spac structure that allows many of these groups to dispose of their shares while keeping a potentially lucrative economic interest in the vehicle.
Here’s how it works: hedge funds are allocated shares in the Spac prior to its listing at $10 a unit. There’s a big safety net built in here because Spac investors can ask for their money back at any point before a merger has been completed.
The money raised is put into a trust account that earns interest. Once the Spac has listed, the unit separates into a common share and a warrant. Anyone can buy shares in the company at this point.
Now hedge funds can either ask the Spac to return their original investment or sell the shares on the open market if they’re trading at a premium.
Whichever they choose, they get to keep the warrant. If the Spac strikes a successful deal, the warrants, which are typically worth a fraction of a share, can be worth a lot of money. The best part? Those warrants are essentially handed out for free to early backers.
Even better for hedge funds, Spacs’ shares often skyrocket before they’ve even found a target or announced a deal.
To explain how insane that is: a Spac is a blank cheque company with no operations, so it’s only worth the cash it has raised, that is, $10 per share. Yet Spacs have started trading at huge multiples because a lot of retail investors want in on the action but they can’t get in early.
This lets hedge funds, who previously just earned interest on the cash redeemed when a deal was announced, sell out at a massive premium while keeping the free warrant for another spin of the roulette.
While the rest of the world was debating whether masks work, South Korea was already flattening its curve with a robust testing and contact tracing programme — a characteristic response for a country that has its own word for getting stuff done really quickly: “ppalli ppalli”.
So it’s no wonder the US debut of ecommerce group Coupang, whose market value soared past $100bn after completing the largest listing by an international company on a US exchange since China’s Alibaba went public in 2014, would emerge from a society of such efficiency.
Trading in the company opened at $63.50 per share on Thursday, an 81.4 per cent rise from the $35 that shares were priced at during an IPO on Wednesday, where it raised $3.5bn.
Coupang’s “rocket delivery” membership, offering same-day delivery and Amazon-esque limitlessness to the products it offers, have made it a hit in its home country. It also offers a meal delivery service and a video streaming app.
The listing is the latest big win for SoftBank’s Vision Fund, one of Coupang’s largest investors. The Japanese conglomerate (hedge fund?) now owns a stake worth almost $28bn at Coupang’s closing price.
But is Coupang’s billionaire chief and Harvard dropout Bom Kim really the Jeff Bezos of South Korea, as he’s made out to be?
Portrayals of the ecommerce group as “the Amazon of South Korea” are overblown, our colleagues at Lex reckon.
Amazon turned free cash flow positive eight years after it was founded, and used its own cash to fund its growth. More than 10 years in, Coupang is still reliant on external investors to stay afloat, reporting negative free cash flow of $182.5m last year.
What they do share are concerns over precarious workplace conditions. Either way, Wall Street doesn’t seem too bothered.
In one ear, out the other Spotify’s Gimlet Media is a pillar of the audio boom. Reply All, its podcasting pièce de résistance, sought to investigate the diversity issues that upended Bon Appétit magazine. But the network’s own problems with race would surface before the project’s completion. (New York Magazine)
The price of fame As TikTok and Instagram feeds grow increasingly crowded, digital influencers have found new revenue streams — from commodifying their lives into pay-to-play choose-your-own-adventure scenarios to sophisticated non-fungible token trading rings. (NYT)
Ma marches on As long as it can distance itself from outspoken founder Jack Ma, Alibaba may face a less severe crackdown from the Chinese Communist party than its fintech affiliate Ant Group (WSJ). Meanwhile, a peek into the tech billionaire’s private jet records suggests he has no intentions of slowing down. (FT)
BNP Paribas proposes buying up all of partner Exane (FT)
Barclays faces £33m legal bill for Amanda Staveley case (FT)
Grab Is in talks to go public through a Spac merger (WSJ)
Renault to sell Daimler stake for €1.2bn (FT)
British American Tobacco takes stake in Canadian cannabis producer (FT)
Hedge fund manager Crispin Odey found not guilty of indecent assault (FT)
CVC seals £365m Six Nations rugby deal (FT)
Rolls-Royce plunges to £4bn full-year loss (FT)
Hertz: bankruptcy to create Wall Street winners (Lex)