Financial_Times_UK 28Jan2020

Tuesday28 January 2020 ★ 15

The Financial Times Limited 2020© Week XX

Companies / Sectors / People

Gazprom has opened a pipeline to

Turkey, settled a spat with Ukraine and

begun to build links to China. But the

Russian state-owned group’s shares

are languishing as it remains at the

mercy of two bigger factors — the

natural gas price and geopolitics.

AnalysisiPAGE 16

Geopolitics weighs on

Russia’s gas superpower

N I C H O L A S M E G AW

Amigo as put itself up for sale lessh

than two years after floating, sending

the subprime lender’s shares crashing

and making it London’s worst-per-

forming big listing in more than three

years.

The company saidyesterday that it had

launcheda “strategic review and formal

sale process” t the instruction of Jamesa

Benamor, its founder, a self-confessed

former petty criminal who briefly

joined the ranks of the world’s billion-

aires when Amigo floated in2018.

The group is the UK’s biggest provider

of so-called guarantor loans — made to

borrowers with bad credit histories but

who have a friend or family member

who will step in if needed. The clamp-

down byregulators onpayday lending

helped usher in a period of rapid growth

that led to Amigo’s flotation.

However, it hascome under increas-

ing scrutiny from regulators. The Finan-

cial Conduct Authority has questioned

whether guarantors comprehend the

risks they are assuming and whether

Amigo’s customers risk becoming

trapped indebt.

Shares in Amigo beganto fall last year,

afterHamish Paton, chief executive,

said he would overhaul its model in

response to the regulatory threat. The

proposed changes included investing to

strengthen its compliance and collec-

tions operations, while reducing its reli-

ance on cheaper repeat borrowers in

favour of chasing new customers.Mr

Patondeparted last Decemberafter Mr

Benamor, who controls 61 per cent of

Amigo, reasserted control and returned

to the board.

The company in November sought to

reassure investors utb esterday said ity

was “concerned that there may be

increased pressure on our business and

a continual evolution in the approach of

the Financial Ombudsman Service”.

Shares in Amigo, which floated at

275p, tumbled 29 per centyesterday, to

48.6p, and aredown 82 per cent since

the IPO.

Amigo said it would consider other

options in addition to a full sale, includ-

ing a disposal of parts of the group.

Lombard and analysis age 19p

Amigo shares tumble 29% after

subprime lender reveals sale plans

Companies
Airbus............................................................. 15
Air France-KLM...................................8,
Air India........................................................ 16
Aisats.............................................................. 16
Alibaba.......................................................... 25
Altran.............................................................. 18
Amazon....................................................16,
Amigo........................................................15,
Antofagasta................................................ 26
Apple.........................................................14,
Arconic.......................................................... 26
Arriva................................................................ 2
Avid Technologies.................................... 3
Bank of America.......................11,16,17,
Barclays........................................................ 26
Barrick Gold................................................ 18
Begbies Traynor....................................... 19
Blackstone..............................................11,
Boeing............................................................17,
Burberry.................................................14,
Canaan.......................................................... 25
Capgemini.................................................... 18
Casper............................................................ 16
ChartIQ.......................................................... 26
Citigroup.................................................17,
Computacenter......................................... 26
Credit Suisse..........................................8,
Cyrus Capital.............................................. 19
DR Horton................................................... 26
Datadog........................................................ 14

Davide Campari-Milano....................... 17

De Beers....................................................... 19

Deutsche Bahn............................................ 2

Devon Equity Management.............. 17

Domino’s Pizza........................................... 8

DuPont............................................................. 8

EHang Holdings...................................... 25

EasyJet............................................................ 8

Ebac................................................................... 3

Elliott Management............................... 18

Ericsson......................................................... 14

Estée Lauder............................................. 26

Facebook.................................................14,

Far Point...................................................... 25

Ferrexpo....................................................... 26

Flybe............................................................... 19

Fortress Investment Group.............. 25

Freeport-McMoRan................................ 18

Gambling.com.............................................. 8

Gazprom....................................................... 16

Geely................................................................. 8

General Motors........................................... 8

Glencore........................................................ 18

Glue42.......................................................... 26

Goldman........................................................ 11

Goldman Sachs........................................ 26

Google.......................................................16,

Gucci............................................................... 14

HSBC..........................................................8,

Honda............................................................... 8

Huawei.......................................................2,

Hudson Bay Capital M’gmt.............. 25

IAG..................................................................... 8

Invesco........................................................... 19

JPMorgan Chase......................11,16,17,

James Benamor........................................ 19

Jupiter............................................................ 17

Kaz Minerals.............................................. 26

Kering.......................................................14,

Kumas Manyezit Sanayi..................... 26

LVMH............................................................. 26

Laredo Petroleum................................... 15

Lizhi.................................................................

Lufthansa....................................................... 8

Lyft................................................................... 14

MGM.................................................................. 8

McDonald’s.................................................... 8

Metinvest Group.................................... 17

Moncler......................................................... 26

Morgan Stanley..............................11,17,

Mosaic Acquisition Corp.................... 25

Naftogaz....................................................... 16

National Oil Corporation.................... 25

NewDay......................................................... 19

Newmont Corporation.......................... 18

Nissan........................................................1,3,

Nokia............................................................... 14

Non-Standard Finance......................... 19

Northern Rail............................................... 2

OpenFin........................................................ 26

PSA.................................................................1,

Partners Group......................................... 25

Peloton........................................................... 16

Petra Diamonds........................................ 19

Prada.............................................................. 26

Provident Financial................................ 19

RHI Magnesita.......................................... 26

Range Resources..................................... 15

Renault...................................................1,8,

Richemont................................................... 26

Rio Tinto...................................................... 26

Rosh Engineering...................................... 3

Royal Bank of Scotland.................18,

Royal Caribbean Cruises.................... 26

Ryanair............................................................. 8

SCVX............................................................... 25

Salvatore Ferragamo............................. 14

Sberbank...................................................... 16

Serco................................................................. 2

Silver Lake.................................................. 25

Slack................................................................ 14

Smile Direct Club.................................... 16

SoftBank....................................................... 25

Sonangol......................................................... 6

South Western Railway......................... 2

Starbucks....................................................... 8

Stobart Air................................................... 19

System Capital Management........... 17

The Gores Group.................................... 25

Tiger Brokers............................................ 25

UBS.................................................................... 8

US Bancorp................................................. 16

Uber................................................................. 14

Ucommune.................................................. 25

United Capital............................................ 11

Virgin Atlantic........................................... 19

Virgin Galactic.......................................... 25

Vivint Smart Home................................ 25

WeWork.............................................14,16,

Wells Fargo......................................16,17,

Wienerberger............................................. 26

Wirecard........................................................ 17

Wynn Resorts........................................8,

Zoom............................................................... 14

Sectors

Aerospace & Defence.....................15,

Airlines................................................17,19,

Automobiles............................................... 26

Banks..................................................16,25,

Basic Resources....................................... 18

Construction.............................................. 26

Financial Services........................15,16,

Financials................................................17,

Food & Beverage..................................... 17

Healthcare.................................................... 13

Industrials.................................................... 26

Media.............................................................. 25

Mining.................................................18,19,

Oil & Gas.......................................6,15,16,

Personal & H’hold Goods............16,

Property...................................................17,

Retail............................................................... 18

Retail & Consumer.......................14,15,

Support Services..................................... 26

Technology..........................14,16,18,25,

Telecoms....................................................... 14

Transport...................................................2,

Travel & Leisure................................14,

People

Adkerson, Richard.................................. 18

Akhmetov, Rinat....................................... 17

Anderson, Mark........................................ 19

Bartlett, Manuel......................................... 8

James Benamor...................................15,

Bezos, Jeff................................................... 18

Branson, Richard..................................... 25

Bristow, Mark............................................. 18

Calhoun, David.......................................... 17

Crawford, Glen.......................................... 19

Dar, Mazy..................................................... 26

Darwall, Alexander.................................. 17

Farley, Thomas......................................... 25

Glasenberg, Ivan...................................... 18

Hermelin, Paul........................................... 18

Jañez, Claudia............................................. 8

Loeb, Dan.................................................... 25

Miller, Alexei............................................... 16

Modi, Narendra......................................... 16

Moynihan, Brian....................................... 16

Muilenburg, Dennis................................ 17

Palihapitiya, Chamath.......................... 25

Paton, Hamish......................................15,

Sanalla, Mustafa...................................... 25

Santos, Isabel dos..................................... 6

Thornton, John......................................... 18

Wilcke, Stephan........................................ 19

Woodford, Neil.......................................... 19

The SFO’s investigation was launched

in 2016 afterAirbus revealeddiscrepan-

cies in disclosures about third-party

consultantson some aircraft deals.The

French regulator launched a probe the

following year and the US Department

of Justice opened an inquiry in 2018.

The SFO is still expected to pursue

charges against individuals in relation to

Airbus subsidiary GPT, which has been

under investigation sinceit was accused

of making illicit payments to secure a

£2bn UK government contract to pro-

vide communications and intranet serv-

ices for the Saudi National Guard.

The SFO and Airbus declined to

comment.

end of a near four-year corruption

probe that has claimed omes senior

executives, even though they were not

implicated in any wrongdoing. The

board took the view that the company

would have a better chance ofa settle-

mentif a ew senior management teamn

wasin place. The process was helped by

several executivesapproaching retire-

ment age. Tom Enders, chief executive,

and Fabrice Brégier, chief operating

officer, both stepped down last spring.

The company has also overhauled its

ethics and compliance procedures, set

up an independent review panel of out-

side experts andcut he number oft

third-party agents used to secure deals.

largest fine imposed by British regula-

tors on a company for criminal conduct.

The so-called deferred prosecution

agreement struck with Airbus would

mark amilestone for theSerious Fraud

Office as it faces pressure over theretrial

of threeBarclays bankers charged in

connection with the bank’s dealings

with Qatar during the financial crisis.

Under a corporate plea deal, compa-

nies are able to avoid criminal prosecu-

tion if they admit to wrongdoing, agree

to overhaul their businesses and pay a

penalty. The SFO has signed fiveDPAs

but hasbeen criticised for failing tocon-

vict the companies’ senior executives.

For Airbus, the deal would mark the

K AT E B E I O L E Y A N D P E G GY H O L L I N G E R

Airbus s on the brink of settling ai brib-
ery and corruption probe with regula-
tors in the UK, France and the US, in a
move that could see the aerospace group
paybillions of dollars in penalties.
A dealis expected in the coming days,
according topeople familiar with the
matter, with analysts forecasting fines of
more than €3bnafter complex negotia-
tions between the three agencies.
The settlement is set to surpass the
£671mplea bargain struck by Rolls-
Royce in 2017 to settle similar allega-
tions. At the time, the UK share of the
settlement, at about £500m, was the

Airbus to settle corruption probe

3 Planemaker’s fines could reach billions 3 Deal nears with three countries’ watchdogs

Agreement

would mark

milestone

for Serious

Fraud

Office

Investors are looking back at previous
epidemics in an effort to anticipate how
badly the coronavirus outbreak could
affectalready shaky lobal markets.g
“It’s important that we don’t panic but
really look to history as a guide,” said
Kristina Hooper, chief global market
strategist at Invesco. “At the moment, so
little is known that it’s difficult to even
pull in experts.”
JPMorgan has assessed the effects of
past outbreaks, notably Sars (November
2002 to July 2003); swine flu (March
2009 to August 2010); Ebola (December
2013 to June 2016); and the Zika virus
(March 2015 to November 2016).
In each of those cases, a sharp initial
market fall quickly gave way to a recovery.
The MSCI China index fell 8.6 per cent
on the Sars outbreak, but it rebounded by
more than 30 per cent in the three months
after April 2003. Stocks in Hong Kong fell
by a fifth, butrecovered with significant
gains. Similarly, swine flu led to a 4 per
cent fall in the MSCI Mexico index, which
then gained more than 25 per cent.
“The more equities fell initially, the
more they subsequently rebounded,”
wrote Mislav Matejka, head of global and
European equity strategy at JPMorgan in
London. “These episodes did not lead to a
prolonged period of selling, and were a
buying opportunity within weeks.”
But Ms Hooper said that shorter-term
investors “should expect that if they don’t
move to safe-haven asset classes they will
be negatively impacted”.
Anna Gross, London

Sharp shockGauging the impact of disease outbreaks

In previous outbreaks,

markets swiftly rebounded

Source: JPMorgan

Calculations based on MSCI China for Sars,

MSCI Mexico for swine flu, MSCI Africa for Ebola,

MSCI Brazil for Zika

-    

Sars

Swine

flu

Ebola

Zika

From start to crisis peak

 month after peak

 months after peak



 change

Fears over the spread of coronavirus

have reached as far as the New York

Stock Exchange —Justin Lane/EPA-EFE/Shutterstock

oeJ

Rennison

Tail

Risk

Range Resources rushed to refinance ts debt at the start ofi

this year, taking advantage of a rally in oil prices and

renewed investor demand for junk-rated energy bonds.

Despite the favourable backdrop, the gas-focused driller

based in exas, still had to pay up to raise fresh cash, sellingT

$550m of debt with an interest rate of 9.25 per cent. It

wanted to replace bonds that were due to expire in the next

couple of years but carried a much lower coupon, below

6 per cent.

For Range, it seems to have been smart to grab the

money when it was available. After just two weeks of trad-

ing, and with the oil pricefloundering, the new bond has

dropped to 92 cents on the dollar, pushing its yield above

10 per cent and into territory normally recognised as

“distressed”.

Range is not an isolated example. A $600m bond matur-

ing in 2025 sold byLaredo Petroleum lipped to 98 cents ons

the dollar in its first day of trading last week, and has sunk

to 93 cents on the dollar since. EQT Corporation as seenh

its new $750m bond matur-

ing in 2030 drop to 90 cents

on the dollar.

For investors who lapped

up the debt, it is a reminder

of the risks implied in those

higher returns.

Of course, if fund manag-

ers already own the bonds of

these companies, they have

an incentive to keep lending

to avoid default. But for the rest, it is probably a sign of the

excesses abounding in a world with more than $12tn of

negative-yielding debt, where the opportunity to earn

closer to 10 per cent by investing in a struggling US oil and

gas company is hard to turn down.

Global oil prices had rallied at the end of the year

because of announcements of cuts in production, followed

by a boost in early January due to tensions in the

Middle East. That set the scene for a modest rebound for

some struggling companies in the sector.

But Brent crude is now down almost 17 per cent from its

early January peak, while US natural gas prices are also

under pressure because of a mild winter.

That is prompting a lot of investors to consider deeper,

longer-term challenges for producers and refiners. Some

analysts warn that too many companies in the oil and gas

sector have unsustainable balance sheets, weighed down

by too much debt.

There is also the possibility of fossil fuels becoming

obsolete s the world shifts to more sustainable sources ofa

energy.

That means that any effort to ride a trend will probably

be vulnerable to sudden snap-backs.

“Investors are paying the price right now for being too

greedy,” said John McClain, a portfolio manager at

Diamond Hill Capital Management.

[email protected]

The chance to

earn 10 per cent

by investing in a

struggling US oil

and gas group is

hard to turn down

Flight numbersBoeing counts the cost

of the 737 Max grounding— ANALYSIS, PAGE 17

Big is bootifulWall St giants’ growing

appetite for retail banking— INSIDE FINANCE, PAGE 16

JANUARY 28 2020 Section:2Front Time: 1/202027/ - 20:25 User:adam.piggott Page Name:2FRONT, Part,Page,Edition:LON , 15, 1