Greek austerity bill approved as eurozone fails to reach bailout agreement

BY Fraser Tennant

In the latest instalment of the saga that is the Greece austerity programme, the country’s parliament has approved a new austerity bill that is intended to assist in the release of the latest tranche of bailout funds from the country’s creditors.

The new austerity bill is worth €4.9bn and is designed to cover the period 2019 to 2021. The Greek parliament has also voted for a simultaneous relief package worth €7.5bn over the same period – to counterbalance the negative effect of pension cuts and a lower non-taxed threshold.

Unsurprisingly, the announcement of the proposed cuts was met with an angry response, with thousands of protesters clashing with police outside parliament.

The relief package also includes: (i) a decrease of tax and income rate, electricity and household grant for vulnerable social groups; (ii) broadening of public investment projects to combat unemployment and support small and medium size enterprises (SMEs); (iii) , opting-out from health coverage cost for weak income groups; and (iv) free access to primary healthcare services. Furthermore, Greece’s Syriza government is committed to implementing the package under the condition that creditors will proceed to the specification of mid-term debt relief measures.

However, following the announcement of the austerity bill and relief package, eurozone finance ministers failed to agree a debt relief plan for Greece – a breakdown in talks which has been blamed on an inability to agree on whether the country will be able to repay its debts in the long run. The failure also raises the possibility of a crisis for the single currency should Greece miss a loan repayment.

“The Greek government has been putting all efforts to drag the country outside the Memoranda in 2018,” says Dim Rapidis, a political and communications adviser. "Creditors share the same view, but the problem is that Germany's minister of finance, Wolfgang Schaeuble, seems reluctant to abide by the creditors commitment to provide debt relief.

"A possible deadlock in agreeing concrete mid-term debt relief for Greece could blow the entire deal. The Greek government, the European Commission and the European Stability Mechanism are pushing the German government to accept debt relief, but the latter wants to delay such decision and discuss it after domestic elections in September 2018," he adds.

Should a decision on debt relief be reached, the European Central Bank may then include Greece in its quantitative easing programme – a move which would give Greece the green light to seek funds from the markets and begin the process of rebuilding its shattered economy.

News: Greece tranche not contingent on IMF in bailout - Greek spokesman

Clariant and Huntsman clinch merger of equals

BY Richard Summerfield

Clariant and Huntsman Corporation have announced a merger of equals which will create a leading global speciality chemical company with an enterprise value of approximately $20bn, including debt.

Under the terms of the all-stock deal, Huntsman holders will get 1.2196 shares in the new company for each share they own. Clariant shareholders will have a 52 percent stake in the combined company, which will be known as HuntsmanClariant.

According to a statement announcing the deal, the two companies expect the merger to generate more than $400m in annual cost savings, leading to $3.5bn in value creation.

"This is the perfect deal at the right time. Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities,” said Hariolf Kottmann, CEO of Clariant. “This is in the best interest of all of our stakeholders. Peter Huntsman and I share the same strategic vision and I look forward to working with him.”

Peter R. Huntsman, president and CEO of Huntsman, who is expected to hold the same title at the combined group, said: “I could not be more enthusiastic about this merger and look forward to working closely with Hariolf Kottmann, a man I have admired and trusted for the past decade. We also look forward to a close association with his immensely talented colleagues around the world. Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

Dr Kottmann will serve as HuntsmanClariant’s chairman. The firm, once merged, will operate in more than 100 countries and employ around 32,000 people. HuntsmanClariant will have a global headquarters in Pratteln, Switzerland, and an operational headquarters in The Woodlands, Texas.

Rumours of a merger between the two companies have circulated for some time. Indeed, Clariant and Huntsman are believed to have ended merger talks in late 2016 over a disagreement about which firm would play the lead role. The two companies have been on friendly terms for a while, and their respective CEOs are said to have had a professional and personal friendship for around the last eight years.

The deal is expected to close by the end of 2017, pending shareholder and regulatory approval.

News: Clariant to Buy Huntsman for $6.4 Billion as M&A Surges

Hedge fund inflows reach $20bn

BY Richard Summerfield

Following five consecutive quarters of net outflows, Q1 2017 saw hedge funds attract net capital inflows of $19.7bn, according to a new report from Preqin. This pushed total assets held by hedge funds up 3.2 percent, and took assets under management (AUM)  to a record $3.35 trillion.

Further, all leading hedge fund strategies experienced a percentage increase in total assets during Q1. Further, macro strategies funds attracted $11.1bn of net inflows to expand beyond $1 trillion in AUM for the first time.

“Five successive quarters of net outflows have been reversed in Q1 2017, as the industry recorded the largest quarterly influx of capital since Q2 2015. Along with the continued run of positive returns being made by most leading strategies, this has helped propel the industry to a record size,” said Amy Bensted, head of hedge fund products for Preqin

She continued:  “2016 was undeniably a difficult year for the hedge fund industry, with net outflows reflecting a reduced appetite for the asset class from institutions following a sustained period of low returns to investors since 2014. However, following an extended run of improved performance since March 2016 – the 12-month return of hedge funds is 10.67 percent – investor sentiment seems to be improving in 2017, which is reflected by inflows over the start of the year.”

North America-based hedge fund managers attracted the greatest amount of capital over Q1 2017, with net inflows of $19.9bn. Europe was the only region to lose assets over Q1 with net outflows of $8.5bn. Asia-Pacific had inflows of $2.2bn

Q1 was a successful period for all fund sizes, which were able to attract new capital . Fifty-three percent of funds between $500m and $999m saw inflows, however smaller funds were also successful. Forty-seven percent of funds with less than $100m saw inflows, while just 36 percent of funds endured outflows.

Forty-six percent of outflows in 2016 were from equity strategies, a trend that continued in Q1 2017 due to $10bn worth of investor redemptions.

Report: Q1 2017 Hedge fund asset flows

Industry leaders agree $3.1bn deal to accelerate 5G deployment

BY Fraser Tennant

In a deal designed to scale and accelerate the deployment of next-generation broadband services throughout the US, Verizon Communications Inc. has announced it has signed an agreement to acquire Straight Path Communications Inc., a holder of millimeter wave spectrum configured for 5G wireless services.

The definitive agreement will see Verizon purchase Straight Path for $184 per share, or a total consideration of $3.1bn, in an all-stock transaction. The deal has been approved by the boards of directors of both Straight Path and Verizon.

Concurrently, Verizon is to pay (on behalf of Straight Path) a termination fee of $38m to the US multinational telecommunications conglomerate AT&T. Announced in April 2017, the previous definitive agreement between AT&T and Straight Path was cancelled after the Straight Path board of directors determined, following consultation with its financial advisers and outside legal advisers, that the transaction with Verizon constituted a superior proposal.

Based in Virginia, US, Straight Path holds millimeter wave spectrum licences configured for 5G services, including 39 GHz licences that serve the entire country and 28 GHz assets in major markets. A proposed telecom standard that will succeed the current 4G standards, 5G is expected to provide wireless internet speeds 40 times faster than at present.

Once complete, Verizon’s acquisition of Straight Path will give the wireless giant a significant nationwide portfolio of millimeter-wave spectrum, which is viewed as being particularly important for the deployment of the next generation of wireless services.

"Verizon now has all of the pieces in place to quickly accelerate the deployment of 5G," said Hans Vestberg, executive vice president and president of global network and technology at Verizon. "Combined with our recent transactions with Corning Incorporated, XO Communications, and Prysmian Group, this is another step to build the next-generation network for our customers."

Acting as legal counsel to Verizon in connection with the transaction is Debevoise & Plimpton LLP. For Straight Path, Evercore served as exclusive financial adviser while Weil, Gotshal & Manges LLP served as company counsel.

The Verizon/Straight Path transaction is anticipated to close within nine months and is subject to review by the Federal Communication Commission (FCC).

News: Verizon beats AT&T to buy spectrum holder Straight Path

Perspectives on the future of risk highlighted in new report

BY Fraser Tennant

Displacement by technology is among the potential threats to the future of risk management, according to a new report by the Institute of Risk Management (IRM).

In ‘Risk Agenda 2025: Perspectives on the future of risk’, the IRM sets out two future scenarios for risk management. The first, which involves risk managers working closely with their boards, sees a future in which risk controls are fully embedded in the frontline which, in turn, frees risk functions to focus on strategic risk, mitigate emerging threats and optimising opportunities.

The second scenario, a much bleaker vision, has risk management merely as a back office, compliance function, remote from the board and possessing no discernible leadership role, with displacement by technology the ultimate worst-case scenario.

That said, the IRM report is quick to reconcile these potential scenarios by observing that it is largely within the power of risk managers to choose and shape the future of their profession.

“The publication of ‘Perspectives on the Future of Risk’ marks the beginning of IRM’s Risk Agenda 2025 project,” said Clive Thompson, IRM board member and chair of the Risk Agenda 2025 project group. “The purpose of this initiative is to stimulate debate within the risk community by examining how enterprise risk management (ERM) might be delivered in 2025 and by then proposing different ways that the risk management profession might prepare itself for the possible future scenarios.”

Alongside the report, the IRM is conducting a survey to gauge the views of risk management professionals as to the future of the profession and how it is likely to evolve in the future. Mr Thompson continued: “The contribution of IRM members and other stakeholders will be critical for the quality and inclusiveness of the project’s output.”

Working alongside the IRM is the ERM solution provider Sword Active Risk, which is acting as technology partner on the Risk Agenda 2025 project, as well as helping to gather opinions and suggestions that will feed into the conversation on the future direction of our industry and inform the IRM’s thinking and strategy in the years to come.

"Such research provides an important long-run perspective on the issues and opportunities facing the risk landscape," said Keith Ricketts, vice president of marketing at Sword Active Risk. "As a company, we believe in innovation and that the way you attain this is you fund research and you learn the facts. Ultimately the IRM research is creating new knowledge for us all.”

Report: Risk Agenda 2025: Perspectives on the future of risk