Good morning

Yesterday was Mr Mugabe’s birthday. Who celebrated his birth as one amongst many of his subsequent rebirths. Crazy – who knew?

For the record – having written what’s about to follow, it seems that I’ve been having a capslocked morning. There are just a couple of things I read in the news today that really made me question whether I’m suffering under my own delusion of rationality – because clearly my version of rationality is different to that of Republican candidates in general.

The headlines:

  1. Details about how the Euro-Area central banks will avoid losses on their Greek bond investments are emerging. The banks are engaging in a bond-swap with the Greek Central Bank, and the bonds they receive back will be immune to Collective-Action Clauses (CACs). This will mean that potential new Greek legislation to force the haircut on non-participating bondholders (via a CAC) will not affect the central banks, or the ECB (which already has that immunity, from what I can tell). This will obviously result in some profits for the banks, as the bonds have either been written down previously, or were purchased at distressed prices. Part of the deal is that these profits will then be contributed through to the Greek bailout package. Link: Central Banks in Greek Bond Swap.
  2. The Euro Bailout plan has turned the attention back to CDS instruments on Greek debt. According to the CNBC news report – the monetary impact has now been quantified – and thankfully, it doesn’t seem nearly as bad as it could have been (see my previous doom and gloom post here). The legislation of CACs by the Greek government would certainly suggest that the CDS instruments are going to be triggered. Nearly $70 billion of default swaps are held over Greek bonds (according to the report). The report also talks about a net number of $3.2 billion – their explanation doesn’t make sense to me – but I would assume that some investment banks will both write and purchase credit protection – so once you net that off, you end up with a much easier number to bear. Link: Greek Crisis raises CDS fears.
  3. Ltd is continuing to bid for buybacks of its shares. The Yahoo deal has been on pause – but a bid has recently been announced for the purchase of the remaining 27% of minority shareholder interest. The offer was at a 46% premium to the last closing share price. In the separate deal with Yahoo, Ltd is trying to buy back Yahoo’s 40% shareholding. It’s interesting that the former Yahoo CEO Carol Bartz, who was forced out in September, was very opposed to the deal. Conspiracy theory anyone? I tried to check out what actually does – and for the world’s largest online business-to-business trading platform, the information available is astonishingly scarce. But I did see that Paypal terminated their relationship with the company in 2011. Paypal voluntarily terminated its relationship (giving no reason) with the WORLD’S LARGEST ONLINE BUSINESS-TO-BUSINESS TRADING PLATFORM?! How bad could it have really been? Since then, has been licencing its own pay platform – Alipay. Interesting… Link: buyback.
  4. America is still wrangling over its tax system, with the Obama Administration announcing that they will release their corporate tax-rate plan tomorrow. What is a constant source of amazement to me is the open shamelessness of the politics involved. Obama wants to do the democrat thing and close loopholes, taxing the rich and foreign-based companies to support American businesses that operate in America. Which makes sense – even if it’s not overly efficient. The Republicans, on the other hand, seem determined to cut the rate from its current 35% to anything between 25% (presidential-candidate hopeful Mitt Romney) and 12.5% (presidential-candidate hopeful Newt Gingrich). Rick Santorum wants to eliminate corporate tax for manufacturers. Are these people out of their minds?! WHAT ABOUT THE AMERICAN DEFICIT? Link: Obama Administration Corporate Tax Rate Plan.
  5. South-African retailer Shoprite announced mid-year results that show profits in the 6 months ended 31 Dec 2012 increased by 18.6%. I will admit that Shoprite has had a soft place in my heart since I first did a valuation project on it in my undergrad. And since then, I’ve watched its share price do the grand surge. The awesome thing about Shoprite is its African expansion. The buzzword in McKinsey quarterly and special reports on Africa is “Africa’s rising middle class”. They need to eat, and they can increasingly afford to pay for it. Go Shoprite. Link: Shoprite First Half Sales Increase.
  6. Mining Companies are building their own infrastructure in Africa – with West African Railways being rebuilt with $25 billion from the Iron-Ore boom. The most interesting part of this article was talking about how the key business criteria for miners in Africa are having a world-class deposit, and owning your own infrastructure. African Minerals Ltd rebuilt the railway system in Sierra Leone, and is now set to help the country achieve a projected GDP growth of 51% in 2012 (accorded to IMF estimates). That’s fifty-one percent – there’s no missing decimal point. The fastest growing in the world. Link: West African Railways rebuilt.
  7. And finally, the Africa Business News. Link: ABN briefs. The key points:
    • Oil production is up in Nigeria and Uganda, and is expect to keep increasing.
    • Engen and Shell have been fined by the Competition Commission in South Africa for price-fixing of bitumen. Sasol escaped a fine via conditional immunity for coming forward first.
    • Kengen (Kenya’s Electricity Generating Company) has announced plans to raise $12 billion to build 6 new geothermal power plants that will produce 585 megawatts by 2016.
That’s all for today.
Happy Wednesday.