Los Angeles Times - 11.03.2020

C2 WEDNESDAY, MARCH 11, 2020 LATIMES.COM/BUSINESS

RateCriteria:Rateseffectiveasof03/09/2020andmaychangewithoutnotice.RateSeeker,LLC.doesnotguaranteetheaccuracyoftheinformationappearingabove

ortheavailabilityofratesinthistable.Banks,Thriftsandcreditunionspaytoadvertiseinthisguide.NAmeansratesarenotavailableornotofferedatthetimerates

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Coronavirus fears and uncertainty are rocking financial mar-

kets,andoneofthemanyimpactsistankingmortgagerates.

Indeed,homeloanratesdroppedtotheirlowestlevelonre-

cord last week, as measured across 50 years of daily mort-

gagereadings.

Asaresult,refinancingwillpayoffforarecordnumberofU.S.

homeowners,witheachdropinthemortgagerateleadingto

morehomeownerswhocancost-effectivelybenefitfromlow-

er rates.According to mortgage data provider Black Knight,

nearly13millionborrowersshouldbeabletosavemoneyby

refinancing.

BlackKnightindicatesthatthosehomeownersshouldbeable

tolowertheircurrentratebyatleast75basispoints,whichis

generallymorethanenoughtooffsetrefinancingfees.Note,

however,thatthe75basispointsmeasureisjustanaverage

andwilldependontheborrower’sindividualsituation.

No-feerefinancingmayalsobeanoption,thoughno-feerates

areslightlyhigher.Eachborrowerwillwanttodothemathof

whichoptionismorecost-effectivefortheirsituation.

Freddie Mac’s weekly reading of the average 30-year fixed

mortgageratefellto3.29%lastweek.Thepreviouslowwas

3.31% in November 2012. Last week’s average on 15-year

mortgageswasdownto2.79%.

Thirteenmillioncandidatesforrefinancingisthehighestnum-

ber of potential refinance candidates on record. It is also an

increaseof1.7millioneligibleborrowersinjustthelastweek

anda60percentjumpyeartodate.Asaresult,thephoneis

ringingoffthehookatmortgagelenderoffices.

Whetherrateswillgolowerstillisdebatable.ButBlackKnight

estimatesthatadecreaseintheaverageofjust4morebasis

points—suchasfrom3.29%to3.25%—wouldmakeanother

1.7millionborrowerscandidatesforacost-savingrefinance.

Recordnumberofhomeownerscouldbenefitfromrefinancingnow

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BUSINESS BEAT

PG&E Corp. reached a deal with the Federal Emer-

gency Management Agency over $3.9 billion in relief that

Washington provided after the utility’s power lines

sparked devastating wildfires.

The settlement, which requires court approval, calls

for FEMA to reduce its claim to $1 billion and allow vic-

tims of wildfires blamed on PG&E equipment to be paid

in full first, lawyers for the two sides said outside a bank-

ruptcy hearing Tuesday in San Francisco.

The California Governor’s Office of Emergency Serv-

ices has agreed to withdraw its claims. Details of the set-

tlement, brokered by attorneys for fire victims, will be

filed with the court in the coming days.

“Those claims are no longer a threat to victims getting

paid,” said Eric Goodman, a lawyer for the victims.

The deal over emergency aid brings PG&E one step

closer to emerging from Chapter 11, which the company

entered last year as it faced $30 billion in claims from fires

blamed on its equipment. Victims of those blazes had

been fighting the payments to FEMA in court, saying the

agency would be taking money from a $13.5-billion pot

that PG&E had set aside for them.

PG&E shares closed up 10% at $13.90.

The federal agency argued it had an obligation to re-

cover costs of crucial services it provided in the aftermath

of blazes in 2015, 2017 and 2018, including medical expenses

and home repairs.

PG&E’s reorganization still needs approval from the

judge overseeing its bankruptcy and from a state utility

commission, whose members are appointed by the gover-

nor.

Chediak and Church write for Bloomberg.

PG&E, FEMA

reach deal on

wildfire claims

By Mark Chediak and Steven Church

Airbnb Inc. is making adjustments to its refund policy

in an attempt to balance the needs of hosts and guests on

its home-sharing site amid the global coronavirus out-

break that has severely reduced travel demand.

Because Airbnb operates as an online platform — con-

necting people who want to rent out all or part of their

home with travelers seeking accommodations — it’s

choosing to take a lighter touch with hosts.

The San Francisco company said it will reward hosts

who are more flexible or generous on offering refunds. It

will offer promotions for those listings to drive new book-

ings and will waive the standard 3% host fee on new reser-

vations for those listings through June 1.

“When a crisis like coronavirus hits, we know both

hosts and guests are affected,” Airbnb said in a statement

Tuesday. “Hosts lose earnings that they rely on to make

ends meet. Guests are losing hard-earned vacation sav-

ings.”

Airbnb’s policy is that all reservations are able to be

canceled within 48 hours of booking for a full refund. Be-

yond that, it’s up to hosts to determine the refund policy,

which are stated on the listings and range from flexible to

strict.

Since the coronavirus became more widespread,

Airbnb has been granting full refunds to people traveling

to China, South Korea and Italy.

Airbnb also announced some changes Tuesday meant

to encourage people to keep booking trips on its platform.

The company will return the service fee guests pay to

Airbnb as a coupon for future reservations if people

cancel their trips on bookings made from now through

June 1.

Carville and Newcomer write for Bloomberg.

Airbnb changes

policy on refunds

By Olivia Carville and Eric Newcomer

On Feb. 28, questions about the coronavirus swirled

around Google’s offices. The company was being criti-

cized for YouTube’s handling of hoax videos, a major com-

pany conference was canceled and an employee in Zurich,

Switzerland, tested positive.

In the midst of this, Chief Executive Sundar Pichai

sent a memo reminding thousands of his workers about

Google’s important role as a provider of timely and accu-

rate information in uncertain times.

“You’ve heard me talk about helpfulness in the context

of moments big and small. This is one of those big mo-

ments,” he wrote.

Since COVID-19 began to spread, Google has aggres-

sively intervened in some of its most popular online serv-

ices to limit the spread of misinformation. This is a depar-

ture for a company that has relied heavily on software and

automation to index and rank information throughout its

22-year existence.

Google searches related to the virus now trigger an

“SOS Alert,” with news from mainstream publications in-

cluding National Public Radio, followed by information

from the U.S. Centers for Disease Control and Prevention

and the World Health Organization displayed promi-

nently.

The coronavirus has killed more than 4,200 people out

of 119,000 confirmed cases. Online platforms have been in-

undated with rumors and misinformed concerns about

the pathogen as it spread west from Asia, particularly in

floods of messages on Twitter, said Carl Bergstrom, a pro-

fessor at the University of Washington.

On YouTube, Google’s video service, the company is

trying to quickly remove videos claiming to prevent the

virus in place of seeking medical treatment. And some

apps related to the virus have been banned from the

Google Play store.

Bergen and De Vynck write for Bloomberg.

Google proactive

on virus searches

By Mark Bergen and Gerrit De Vynck

Saudi Arabia escalated
its oil price war with Russia
on Tuesday as its state-
owned company pledged to
supply a record 12.3 million
barrels a day next month, a
massive increase to flood the
market.
The supply hike — over
25% higher than last
month’s production — puts
Aramco above its maximum
sustainable capacity, indi-
cating the kingdom is tap-
ping its strategic inventories
to dump as much crude as
possible on the market
quickly.
Moscow responded with-
in minutes, with Energy
Minister Alexander Novak
saying Russia had the ability
to boost production by
500,000 barrels a day. That
would put the country’s out-
put potentially at 11.8 million
barrels a day — also a record.
“There is a significant
amount of market posturing
going on between Saudi Ara-
bia and Russia,” said Jaafar
Altaie, managing director of
Abu Dhabi-based consult-
ant Manaar Group. “They’re
both getting ready to fight a
pretty aggressive price war.”
It was the latest maneu-
ver in what’s set to be a long,
bitter conflict between the
former allies. Other mem-
bers of the Organization of
the Petroleum Exporting
Countries followed suit, with
Iraq saying it would cut
prices and raise shipments
by up to 350,000 barrels a day
next month, and Nigeria
adding about 100,000.
The market faces an un-
precedented situation: a
huge supply surge plus a his-
toric demand slump due to
the coronavirus. Crude
slumped almost 25% on
Monday, the largest one-day
drop in almost 30 years, cre-
ating mayhem in global eq-
uity and bond markets.
Oil prices rebounded

Tuesday alongside a rally in

global markets. U.S. crude

rose 10.4% to $34.36 a barrel.

The United States,

meanwhile, ramped up its

response to the market-

share war as the collapse of

the OPEC+ alliance threat-

ens the U.S. shale industry.

The U.S. suspended the

sale of 12 million barrels of oil

from the nation’s emergency

reserves. President Trump

also spoke with Mohammed

bin Salman by phone before

the Saudi crown prince in-

creased his nation’s oil pro-

duction, according to two

people familiar with the call.

The outcome of the price

war will be determined by

each side’s ability to inflict

damage, but also by their

ability to absorb it.

Saudi Arabia has greater

offensive capabilities thanks

to about 2 million barrels a

day of idle production ca-

pacity. Riyadh can also use

its strategic oil stocks to

boost supplies on short no-

tice, according to people fa-

miliar with its strategy. It

also stores crude near con-

sumption hubs in the Neth-

erlands, Japan and Egypt.

Russia doesn’t have such a

network of oil stocks.

Russia may have the de-

fensive advantage. The

Kremlin can dip into its $150-

billion wealth fund to offset

the slump and bolster the

ruble. Those reserves are

sufficient to cover lost reve-

nue “for six to 10 years” at oil

prices of $25 to $30 a barrel,

the Finance Ministry said.

In Saudi Arabia, if Brent

crude remains at $35 with-

out an adjustment in gov-

ernment spending, the king-

dom would run a deficit of

nearly 15% of economic out-

put in 2020, while its net for-

eign reserves could run out

in about five years unless it

uses other funding sources,

according to Abu Dhabi

Commercial Bank.

For decades, the oil mar-

ket has been largely regu-

lated. First by Americans,

who set production quotas

for their companies through

the Texas Railroad Commis-

sion in the first half of the

20th century, and later by

the OPEC cartel. Through

that time, Texas and later

OPEC acted as swing pro-

ducers, upping output at

times of scarcity and reduc-

ing it at times of lower de-

mand, to keep prices stable.

“Welcome to the free mar-

ket,” said Bob McNally,

founder of consultant Rap-

idan Energy Group and a

former White House official.

“The world is about to learn

very swiftly how important a

swing producer is for stabil-

ity, not only for the global oil

market but the broader

economy and geopolitics.”

With demand for oil fall-

ing due to the economic im-

pact of the coronavirus epi-

demic, the Saudi production

hike, followed potentially by

one from Russia, is likely to

force companies to store

rather than process crude.

Traders are seeking tankers

to store the glut.

The International Ener-

gy Agency said this week

that global oil demand will

shrink this year for the first

time since the global finan-

cial crisis in 2009.

Western countries are

starting to worry about the

price war between two of the

world’s most powerful petro-

leum nations. On Monday,

the U.S. Energy Department

denounced in a rare state-

ment “attempts by state ac-

tors to manipulate and

shock oil markets.”

Even as he responded in

kind to the Saudi escalation,

Novak reiterated his posi-

tion from last week’s failed

conference: Russia hasn’t

closed the door on co-

operation with OPEC.

At the end of last week’s

gathering, he reminded fel-

low producers that Moscow

was prepared to continue its

existing output cuts until

the middle of the year. The

alliance’s next meeting is

planned June 9 and 10, but

Novak said Tuesday that it

could take place in May.

Other countries in the

network, such as Algeria, Ni-

geria and the United Arab

Emirates, have signaled that

reconciliation may be a bet-

ter way forward, as the im-

pact of last week’s acrimoni-

ous split on the market be-

comes clear.

Martin, Blas and Smith

write for Bloomberg.

Price war over oil escalates

Saudis vow to supply

12.3 million barrels

a day next month to

flood the market, and

Russia follows suit.

By Matthew Martin,
Javier Blas
and Grant Smith

AN OIL FIELDin Saudi Arabia, where state-owned Aramco appears to be tap-

ping its strategic inventories to dump as much crude as possible on the market.

Ali HaiderEPA/Shutterstock

In the throes of frantic
market uncertainty, traders
using Robinhood Markets
Inc. faced the ultimate frus-
tration: Their accounts kept
malfunctioning. Behind the
scenes, the online brokerage
was already bracing for fi-
nancial strains.
Robinhood drew its en-
tire $200-million credit facil-
ity from Barclays, Citigroup
Inc. and JPMorgan Chase &
Co., according to people fa-
miliar with the matter. It

made the move just as fears

of the coronavirus set off

more than two weeks of vi-

olent market swings and

heavy volume, during which

Robinhood’s trading plat-

form suffered three signifi-

cant outages.

“Our capital position re-

mains strong,” the Menlo

Park, Calif., firm said in an

emailed statement, and the

decision to borrow predated

and was entirely unrelated

to the outages. “We deter-

mined it was prudent to

draw on our credit line dur-

ing the week of Feb. 24 in

light of market volatility.

That capital was returned in

full last week.”

After Bloomberg’s initial

report on the drawdown and

repayment, a spokesperson

for the closely held company

disclosed it has other facili-

ties too. “Similar to most

broker dealers we have mul-

tiple revolving credit lines,” a

spokesperson said in a state-

ment. “We have additional

larger credit lines that re-

mained fully unused last

week.” Robinhood said it

wasn’t unusual for compa-

nies to take precautionary

measures during such mar-

ket conditions.

“Companies don’t tap

their credit line unless they

need to,” said David Ritter,

an analyst at Bloomberg In-

telligence, who spoke gener-

ally about the issue without

commenting directly on

Robinhood. When compa-

nies do, it’s “perhaps not a

good signal with regard to

their cash burn, which could

make creditors nervous.”

In the days since it

tapped the line of credit,

Robinhood’s platform has

repeatedly gone dark for

more than an hour at a time,

including an outage March 2

that spanned an entire U.S.

trading session, in which the

Standard & Poor’s 500 index

surged 4.6%.

Robinhood said last week

that a confluence of factors

— record account sign-ups

along with highly volatile

market conditions — led to

unprecedented stress on the

firm’s infrastructure.

That heavy load caused

the so-called domain name

system to fail. The system is

essentially the phone book

that computers use to turn a

domain name into an IP ad-

dress, and it’s how users ac-

cess websites.

On Monday, Robinhood

faced a fresh breakdown as

U.S. stocks plunged. Stocks

tumbled so hard they set off

a marketwide trading halt

minutes after the opening.

“We know this interrup-

tion was frustrating for our

customers — especially after

last week and on a day that

trading was halted,” the

company said in the state-

ment. “We’re working hard

to improve our service dur-

ing these historic and vola-

tile market conditions.”

Robinhood, founded in

2013, pioneered commission-

free trading, a move that’s

since been copied by larger

online brokers including

Charles Schwab Corp.

Surane, Massa and

Gittelsohn write for

Bloomberg.

Robinhood tapped credit as app failed

By Jenny Surane,
Annie Massa
and John Gittelsohn