The Wall Street Journal - 17.08.2019 - 18.08.2019

THE WALL STREET JOURNAL. *** Saturday/Sunday, August 17 - 18, 2019 |B

A federal judge ordered

Volkswagen AG and the Secu-

rities and Exchange Commis-

sion to seek a settlement over

allegations the auto maker de-

frauded U.S. investors, rather

than continue an expensive le-

gal fight.

U.S. District Judge Charles

Breyer told the SEC and Volks-

wagen to return as soon as Oct.

4 with an idea of how to re-

solve the dispute, which could

engender a battle over evidence

on two continents and whether

the company should face liabil-

ity for securities fraud after

settling similar claims with the

U.S. Justice Department.

“Whatever you work out to-

day will be less expensive to

everybody than what you

would work out in the future,”

Judge Breyer said at a hearing

Friday in San Francisco. The

Macy’s said sales to foreign travelers were down 9% in the latest quarter and the trend is

accelerating. The company’s Bloomingdale’s luxury department-store chain is popular among tourists.

GABBY JONES/BLOOMBERG NEWS

BUSINESS & FINANCE NEWS

Former CEO Martin Winterkorn also was sued by the agency.

ODD ANDERSEN/AGENCE FRANCE-PRESSE/GETTY IMAGES

Apollo Global Management
LLC has approached broad-
casting company Tegna Inc.
about a deal as the private-eq-
uity firm looks to bulk up its
ownership of television sta-
tions, according to people fa-
miliar with the matter.
Apollo first contacted Tegna
about a potential transaction at
the beginning of the year, some
of the people said. It sent a let-
ter to the board in February,
expressing interest in buying
the company at a premium,
and it has remained in regular
contact despite so far being re-
buffed, the people said. Apollo
would also consider other op-
tions, such as merging its sta-
tions with Tegna or selling
them to the company.
Tegna has a market value of
roughly $3 billion.
The broadcasting company
said in a statement that its
board of directors and man-
agement are committed to cre-
ating value for shareholders.
Tegna’s shares are up about
38% so far this year, including
a gain of roughly 10% Friday
after The Wall Street Journal
reported on the approach.
Apollo envisions combining
Tegna’s assets with those of
Cox Media Group, in which it
agreed to acquire a majority
stake in February, the people
familiar with the matter said.
Apollo also struck a deal ear-
lier this year to acquire 20
stations owned by closely held
Northwest Broadcasting Inc.,
which would be merged into
the larger TV-station group.
Together, the deals would
quickly make Apollo one of the
nation’s biggest owners of lo-
cal TV stations.
Apollo expects both trans-
actions to close in September,
according to people familiar
with the matter.
By getting bigger, broad-
casters can gain leverage when
negotiating with content own-
ers, with cable and satellite
companies for distribution and
with advertisers. Station own-
ers are also responding to the
consolidation happening in the
entertainment and distribution
businesses. In March, Walt
Disney Co. closed a deal to ac-
quire the majority of 21st Cen-
tury Fox Inc.’s entertainment
assets and last year AT&T Inc.
acquired Time Warner Inc.
Apollo’s approach comes in
the wake of a wave of consoli-
dation in the local-TV market.
Last year, Nexstar Media
Group Inc. agreed to acquire
Tribune Media Co. for $4.1 bil-
lion. To secure regulatory ap-
proval, Nexstar agreed in March
to sell 19 stations to Tegna and
E.W. Scripps Co. for a total of
$1.32 billion and struck another
deal in April to sell two India-
napolis stations to a smaller op-
erator for $42.5 million. Apollo
had also been a bidder for those
stations, the Journal reported.
The latest round of tie-ups
have been fueled in part by
regulatory changes. Under
President Trump, the Federal
Communications Commission
has rolled back limits on TV-
station ownership, allowing
even the biggest companies to
continue to bulk up.
—Dana Cimilluca
contributed to this article.

BYCARALOMBARDO
ANDMIRIAMGOTTFRIED

Apollo

Courts

Tegna

Fo r D e a l

“We continue to clearly see

challenges with bricks-and-

mortar traffic like both full-

price and outlets including for-

eign-tourist volatility,” Patrice

Louvet, president and CEO of

Ralph Lauren, said on an earn-

ings call July 30.

Among the fashion retailers

reporting their quarterly earn-

ings in the coming week are

Urban Outfitters Inc., L Brands

Inc. and Nordstrom Inc.

Exacerbating the woes are

the decline in inbound U.S.

travel by Chinese tourists—a

major slice of the tourist clien-

tele—and the yuan’s deprecia-

tion, which weakens Chinese

currency holders’ spending

power.

About 689,000 tourists from

mainland China visited the U.S.

in the second quarter, down

from more than 717,000 in the

same quarter last year, accord-

ing to the Commerce Depart-

ment’s National Travel and

Tourism Office.

After the Chinese govern-

ment cut its tariffs on con-

sumer goods last year, Chinese

consumers may have been

more inclined to buy luxury

goods in their home market in-

stead of in the U.S., Morning-

star equity analyst David

Swartz said in an interview.

“If the Chinese person

wants to buy a Louis Vuitton

handbag, they don’t necessar-

ily have to go to the U.S. to

buy it,” Mr. Swartz said.

The tariff cut, coupled with

international brands’ expan-

sion into China, also ends the

heyday for daigou, a gray-mar-

ket practice in which Chinese

intermediaries buy consumer

goods abroad and resell them

back home. The Chinese gov-

ernment has also started a

crackdown on the practice.

Despite lower traffic from

international tourists, retailers

still have a major market to

rely on: U.S. shoppers. Retail

sales, a measure of purchases

at stores, restaurants and on-

line, climbed a seasonally ad-

justed 0.7% in July from a

month earlier, the Commerce

Department said Thursday.

could be significant, as it isn’t

expected to improve in the

next year, Jennifer Redding, a

consumer-retail analyst at

Wedbush, said in an interview.

“It’s not something that turns

on and off,” she said.

Macy’s Inc. Wednesday said

its sales from foreign travelers

were down 9% for the latest

quarter. With such sales down

3.1% in the first quarter com-

pared with a year earlier, the

trend is accelerating, said

Paula Price, Macy’s finance

chief, in the company’s earn-

ings call. The decline was par-

ticularly damaging for the

company’s Bloomingdale’s lux-

ury department-store chain,

which is popular among tour-

ists.

“While consumer spending

remains healthy, there is sig-

nificant noise in the macro-

economy—tariffs, currency

fluctuations, declining interna-

tional tourism to name a few,”

Macy’s Chief Executive Jeff

Gennette said on the earnings

call.

Tapestry Inc., which owns

handbag and accessory brands

including Coach and Kate

Spade, cited lower spending

from tourists for flat compara-

ble sales in its latest quarter.

Fashion company Ralph

Lauren Corp. reported a 3%

drop in foreign-tourist traffic

in its latest quarter.

Retailers are seeing fewer

tourists in their stores this

summer with no signs of im-

provement, on top of chal-

lenges tied to volatile trade

policies and geopolitical ten-

sions.

Prolonged trade anxiety, a

faltering global economy and a

strengthening dollar could

soften travel to and within the

U.S., a U.S. Travel Association

report said earlier this month.

The reading of the Travel

Trends Index, the association’s

metric that tracks the direc-

tion and pace of travel volume

involving the U.S., was 51.2 in

June, up 2.4% compared with

the same month last year and

its worst performance since

September 2018.

The association said travel

will likely moderate through

December due to softer growth

in domestic travel and stag-

nant international inbound

travel, which has contracted

for three of six months in 2019.

International tourists are a

major driver of sales in desti-

nations such as New York, Los

Angeles and San Francisco,

particularly in luxury stores

and outlets offering apparel

and handbags, according to ex-

ecutives and analysts.

The impact of less robust

traffic on flagship-store sales

BYDAVESEBASTIAN

Slower Tourist

Traffic Adds to

Retailers’ Woes

judge said a settlement would

be better for the SEC, which

has “scarce resources.”

Judge Breyer previously

questioned why the SEC sued

Volkswagen years after other

government agencies resolved

their litigation over the auto

maker’s diesel-cheating scan-

dal. The judge in May sug-

gested the agency looked like

a “carrion hawk” picking over

the remains of a crime.

The SEC’s lawsuit, filed in

March, centers on claims that

Volkswagen defrauded inves-

tors by selling billions of dol-

lars of bonds while making mis-

leading statements about the

environmental impact of the

company’s “clean diesel” fleet.

The SEC also sued Martin Win-

terkorn, Volkswagen’s former

chief executive. Mr. Winterkorn,

who lives in Germany, has been

indicted in his home country

and in the U.S. in connection

with the emissions scandal.

Volkswagen paid a hefty

price for rigging diesel engines

to pass U.S. emissions tests.

The German auto maker

pleaded guilty to the charges in

2016 and has paid more than

$25 billion in fines, penalties

and compensation to settle

criminal and civil litigation.

The SEC opened its investi-

gation in 2015 and said Volks-

wagen stalled the probe with

long delays in producing docu-

ments and other information,

according to a court filing sub-

mitted last month. The regula-

tor tried to settle with Volks-

wagen years ago but was

excluded from the company’s

settlement talks with the U.S.

Department of Justice and

other agencies, according to

SEC court filings.

Judge Breyer’s latest in-

structions put pressure on the

SEC to resolve the lawsuit,

perhaps by accepting a re-

duced penalty. The judge said

Friday that he didn’t have an

opinion on the case’s legal

merits, but said “many aspects

of the case have already been

settled years ago.”

He said his goal is “to get

this thing resolved,” especially

given the limited resources at

the SEC.

An SEC spokesman didn’t

respond to a request to com-

ment. A spokesman for Volks-

wagen declined to comment.

An attorney for Mr. Winter-

korn declined to comment.

Judge Breyer, who handled

the earlier litigation against

the auto maker, said any penal-

ties that result from litigation

would likely be lowered to ac-

count for fines that Volks-

wagen already paid. He didn’t

allow the SEC’s lawyers or the

company’s attorneys to make

arguments in court Friday.

BYDAVEMICHAELS

Judge Prods SEC to Settle Fraud Lawsuit With Volkswagen

PG&E Corp. scored a crucial

win Friday, when the judge

overseeing its massive bank-

ruptcy allowed it to hold on to

sole rights to fashion a chap-

ter 11 exit plan.

Judge Dennis Montali of the

U.S. Bankruptcy Court in San

Francisco turned down re-

quests from two groups of

creditors who have been

rounding up billions of dollars

in financial commitments to

back their versions of a chap-

ter 11 exit proposal for PG&E.

Facing an estimated $

billion in damage claims from

wildfires linked to its equip-

ment, California’s largest util-

ity filed for bankruptcy pro-

tection in January. This past

week, PG&E outlined a chapter

11 exit strategy that brings in

new money and protects the

value of its shares.

The company said it would

file that plan by Sept. 9, the

first step in a series of bank-

ruptcy court events that are

necessary to get it out of

chapter 11. Creditors must

vote, and PG&E’s plan must

survive legal challenges.

PG&E argued it needed to

hang on to control to head off

a bankruptcy-court brawl

among rival plan proponents,

which could delay the pro-

ceedings.

Judge Montali sided with

PG&E, citing the need to speed

the bankruptcy case along, to

get money to fire victims.

“The inescapable fact is

that the fire victims and their

insurers should not need to

wait for conclusion of expen-

sive, lengthy and uncertain

disputes that only indirectly

concern them,” he wrote.

The ruling is a defeat for

bondholders including Elliott

Management Corp. and Pacific

Investment Management Co.,

which wanted to propose an

alternative plan, one which

would give them majority con-

trol of the company.

Also turned down were in-

surance companies that have

paid wildfire damage claims,

along with Baupost Group

LLC, an investment firm that

bought insurance claims. Like

the bondholders, they sought

court permission to lobby

other creditors in favor of

their preferred exit terms.

The effect of Friday’s ruling

is that bondholders and other

creditors will have to negoti-

ate with PG&E, which has the

exclusive right to determine

the shape of the chapter 11

plan that is put to the voting

creditors.

The key votes on PG&E’s

plan will come from thousands

of people hurt in the wildfires.

At a hearing Tuesday, their

lead lawyer said none of the

options that have been pro-

posed to date will get a “yes”

vote from the fire victims.

California lawmakers have

set a June 30, 2020, deadline

for PG&E to be out of bank-

ruptcy, if it wants to partici-

pate in a statewide risk-shar-

ing fund designed to cushion

the state’s utilities against es-

calated wildfire risks.

In a separate decision on

Friday, Judge Montali ruled

that the company must face a

jury in California in a trial that

will test whether it is liable

for damage from the Tubbs

fire, one of the most lethal of

the blazes that swept the state

in 2017 and 2018, and sent

PG&E to bankruptcy.

California fire investigators

concluded PG&E equipment

didn’t spark the Tubbs fire,

but lawyers for insurers and

fire victims say they can prove

otherwise. PG&E fought de-

mands for a jury trial outside

bankruptcy court, but lost.

BYPEGBRICKLEY

PG&E Keeps Control of Exit Plan

The utility argued it needed control of its reorganization to head off a bankruptcy-court brawl that could delay proceedings.

DAVID PAUL MORRIS/BLOOMBERG NEWS