Financial Times Europe - 12.03.2020

Thursday12 March 2020 ★ 11

The Financial Times Limited 2020© Week 11

Robust sales growth of electric cars in

China over recent years and generous

Beijing subsidies for buyers attracted a

flood of capital into local start-ups,

such as Alibaba-backed Xpeng. But

the impact of coronavirus has made

the future for many of them uncertain.

ReportiPAGE 14

Virus hits prospects for

China’s electric car groups

N E I L H U M E —LONDON

The cost of hiring large oil tankers has

surged in the wake of Saudi Arabia’s

decision toflood he market with heav-t

ily discounted barrels of crude.

The average cost of chartering a very

largecrudecarrier,capableofholdingat

least 2m barrels of oil, has jumped to

$85,000 a day, up more than 150 per

cent on this time a week ago, according

toshipbrokers.

Chartering a tanker for the route

between the Middle East and China is

even more costly, reaching $105,000 a

day yesterday afterBahri, the shipping

arm of state oil companySaudi Aramco,

made a rare appearance in the market

tohirevessels.

“Bahri owns its own ships and rarely

comes to the spot market for more ves-

sels. This is therefore a good indication

that the taps are opening again,” said

Erik Hovi, a research analyst at Clark-

sonsPlatouSecuritiesinOslo.

Mr Hovi said some vessels booked by

Bahri would be heading west and to the

US Gulf coast — a voyage nce commono

beforetheshaleoilrevolution.

SaudiAramcodeclinedtocomment.

AfterRussiarefusedtobackproposed

Opec production cuts last Friday, Saudi

Aramco launched an oil price war,

announcing plans to offer its crude at

deepdiscountstowincustomers.

That move was followed on Tuesday

withthe news hat Saudi Aramco wouldt

boost supplies to a record 12.3m barrels

per day in April, or 300,000 b/d more

than its maximum production capacity,

in an apparent attempt to punish Russia

andsqueezetheUSshaleindustry.

The spike in freight rates, which had

plunged in February as China’s corona-

virus outbreak escalated, has sent

shares insome shipping companies

sharply higher.Frontline, the Norwe-

gian oil tanker group, has risen more

than40percentsincelastweek.

The steep fall in crude oil prices to

about $36 a barrel has raised specula-

tion that traders and speculators could

scramble to hire vessels in an effort to

make profit by storing crude and selling

laterforahigherprice.

Riyadh orders lift in capacitypage 4

Energy bonds on the brink age 19p

Oil tanker hire rates surge 150% after

Saudis flood market with cheap crude

been hit by a growing aversion among

investors toward fossil fuels and, more

recently, a sharp decline in the price of

oil.

Many other distressed specialists are

suffering from bets on energy-related

companiesturningsour.

Investors who stick with Solus face

two options. They can switch over to

what the firm calls a “long-term oppor-

tunities” fund that looks to invest in

thinly-tradedassets.

Alternatively, they can lock up their

investments until 2021, by which time

Solus will sell its illiquid holdings and

reinvest the proceeds in more easily

tradeableassets.

comment. The fund emerged as one of

the most high-profile distressed invest-

ment firms in the US after its skirmish

withToys R Us mployees in 2018 and ae

legal battle over derivatives with a

Blackstone-owned hedge fund,GSO

CapitalPartners.

Now, though, it has become a victim

of a string of corporate collapses that

have tripped up US distressed invest-

ment funds, which look to profit from

buying stocks and bonds of struggling

companiesatbargainprices.

An investor report from January

showed that 22 per cent of Sola’s expo-

sure was to “energy equipment and

services” companies: a sector that has

as practicable”. The letter said: “Due to

the evolving state of the markets, this

has left our flagship fund Sola with a

highconcentrationoflessliquidassets.”

The Financial Times reported in

December that Sola had suffered big

lossesaftermakinganumberofill-fated

bets on companies including satellite

operatorIntelsat nda Pacific Gas & Elec-

tric. The fund finished the year down

more than 8 per cent, following a 15 per

cent drop in 2018. It had assets of about

$4bnattheturnoftheyear.

Solus’s letter to investors said that

“unexpected withdrawal requests” had

followed reports of the firm’s difficulties

in the financial press.Solus declined to

R O B E RT S M I T H— LONDON
O RT E N C A A L I A J— NEW YORK

Solus lternative Asset Management,A
one of the best known specialists in dis-
tressed investments, is closing its flag-
ship fund after suffering a combination
of heavy redemptions and poor per-
formance.
The hedge fund, which as recently as
November managed $4.3bn in assets, is
one of the first casualties of a collapse in
thepriceofriskierassetsthisweek.
In a letter to investors in its Sola vehi-
cle , the firm offered them the option to
transfer their investments into new
funds or face “an orderly liquidation”
that would return their funds “as soon

Solus fund closes flagship vehicle

3 Redemptions hit US investment group 3 Casualty of collapse in price of riskier assets

PepsiCo sseekingtoboostitspresencei

inthefast-growingenergydrinks

market,announcingitwillbuyRockstar

EnergyBeverages or$3.85bn.f

Bigbeveragecompaniessuchas

PepsiCoandCoca-Cola reincreasinglya

shiftingawayfromtheirtraditionalfizzy

drinkswithmovestowardsalternatives,

includingtea,coffeeandwater,which

appealtoyoungerconsumers.

NeitherPepsiConorCoca-Colaowna

majorbrandintheenergydrinkssector,

whichisforecasttogrowtomorethan

$80bnoverthenextfiveyears.

RamonLaguarta,PepsiCochief

executive,saidthatthedealwouldlet

thegroup“bothaccelerateRockstar’s

performanceandunlockourabilityto

expandinthecategorywithexisting

brands”. heacquisitionwouldmarkT

oneofthefirstbigmovesforMr

Laguarta,whotookthereinsfromIndra

Nooyi n2018,andcomesatatimewheni

sharpmovesinfinancialmarketshave

promptedinvestorsandbankersrapidly

to reassesstheoutlookformergerand

acquisitionactivity.

PepsiCosharesweredown2.9percent

inearlytradingyesterday,compared

withadeclineofmorethan4percentfor

the S&P500equitiesindex.Peter Wells

Lex age 10p

Rockstar status

PepsiCo in $3.9bn

energy drink deal

The fund

finished

down more

than 8 per

cent last

year, after a

15 per cent

drop in

2018

Companies / Sectors / People

Companies
AMS................................................................ 20
Abu Dhabi National Oil......................... 4
Adidas......................................................12,
Airbus............................................................. 14
Alibaba.......................................................2,
Amazon.......................................................... 13
American Airlines.................................... 10
Amundi.......................................................... 19
Apache.......................................................... 20
Apple.............................................................. 20
Aveva............................................................. 20
Aviva............................................................... 10
Axa................................................................... 10
BHP................................................................... 11
BNP Paribas................................................ 12
BT.................................................................... 20
Bahri................................................................. 11
Baidu............................................................... 14
Balfour Beatty....................................10,
Bank of America......................................... 1
Bayer............................................................... 13
Blackstone.................................................... 11
Boeing...................................................1,12,
Brevan Howard........................................ 14
Brighthouse................................................ 10
Callon Petroleum..................................... 19
Carnival.........................................................
Cathay Pacific........................................... 14

Citigroup.......................................................... 1

Clifford Chance......................................... 12

Coca-Cola............................................2,10,

Costain....................................................10,

Danske Bank.............................................. 12

Delta Air Lines......................................... 10

Dentsu.............................................................. 2

Deutsche Bank.......................................... 13

Dymon Asia................................................ 14

EasyJet........................................................... 12

Enagas............................................................ 13

Equitable Holdings................................ 10

EssilorLuxottica........................................ 12

Facebook..................................................... 13

Ferrari............................................................. 12

Fiat Chrysler............................................... 12

Finablr........................................................... 20

Fortescue Metals...................................... 11

Frontline........................................................ 11

G4S................................................................. 20

GSO Capital Partners............................ 11

GenMark...................................................... 20

General Electric.......................................... 2

GrandVision................................................ 12

H2O.................................................................. 19

Helloworld Travel................................... 14

Horseman Capital................................... 14

Inditex............................................................. 13

Intelsat............................................................ 11

JPMorgan........................................................ 1

Jaguar Land Rover................................. 12

K&S................................................................. 20

Lincoln........................................................... 10

Luxottica....................................................... 12

M&G................................................................. 19

MGM Resorts............................................ 20

Marathon Petroleum............................ 20

McKinsey.......................................................

Mirae Asset................................................. 19

Monsanto...................................................... 13

Monster Beverage.................................. 10

Morgan Stanley........................................... 1

NMC Health............................................... 20

Natixis............................................................ 19

Nio.................................................................... 14

Noble Energy............................................ 20

Norwegian Air Shuttle.......................... 12

Norwegian Cruise Line....................... 20

Novartis........................................................... 9

Oasis Petroleum....................................... 19

Occidental Petroleum....................19,

Osram............................................................ 20

Pacific Gas & Electric............................ 11

Panasonic....................................................... 2

Partler............................................................. 13

PepsiCo....................................................10,

Pontegadea................................................. 13

Prudential...............................................10,

Puma............................................................... 12

Qantas............................................................ 14

RG Niederhoffer Capital..................... 14

Red Bull........................................................ 10

Rio Tinto........................................................ 11

Rockstar Energy Beverages........10,

Royal Caribbean Cruises.................... 20

Ryanair........................................................... 12

SM Energy,.................................................. 19

Saudi Aramco..................................4,11,

Schroders..................................................... 19

Solus................................................................. 11

Standard Life Aberdeen..................... 19

Swedbank..................................................... 12

Telefónica..................................................... 13

Telxius............................................................ 13

Tencent......................................................... 14

Tesla................................................................

Third Point............................................10,

Toyota.............................................................. 2

Toys R Us..................................................... 11

United............................................................ 10

Vale................................................................... 11

Virgin Australia........................................ 14

WM Motor.................................................... 14

Walt Disney................................................. 12

Webjet............................................................ 14

Wells Fargo.................................................... 1

Xpeng............................................................. 14

Zara.................................................................. 13

Sectors

Aerospace & Defence.......................1,

Airlines...............................................10,12,

Automobiles..........................................12,

Banks.............................................................. 12

Construction........................................10,

Energy............................................................ 19

Financials..........................................13,14,

Food & Beverage...............................10,

Health............................................................... 3

Healthcare...................................2,3,8,9,

Insurance................................................10,

Media................................................................ 2

Mining.......................................................11,

Oil & Gas............................................4,19,

Personal & Household Goods...12,

Pharmaceuticals..................................9,

Property........................................................ 13

Retail....................................................12,12,

Support Services.................................... 20

Technology..........................................14,

Telecoms..................................................... 20

Travel & Leisure......................2,12,14,

People

Achleitner, Paul........................................ 13

Ackermann, Josef.................................... 13

Arnau, José.................................................. 13

Baumann, Werner.................................... 13

Calhoun, David............................................ 1

Chapek, Bob................................................ 12

Cibeira, Roberto....................................... 13

Clark, Russell.............................................. 14

Cryan, John................................................. 13

Del Vecchio, Leonardo......................... 12

Fitschen, Jürgen....................................... 13

Foley, John.................................................. 19

He, Xiaopeng............................................. 14

Healy, Patrick............................................ 14

Henriksson, Jens...................................... 12

Iger, Bob........................................................ 12

Jain, Anshu.................................................. 13

Karlsen, Geir............................................... 12

Laguarta, Ramon...................................... 11

Loeb, Dan...............................................10,

MacKenzie, Ken......................................... 11

Niederhoffer, Roy.................................... 14

Nooyi, Indra................................................. 11

Ortega, Amancio...................................... 13

Persson, Göran.......................................... 12

Pérez, Flora................................................. 13

Quinn, Leo................................................... 10

Rorsted, Kasper........................................ 12

Schram, Jacob........................................... 12

Sewing, Christian..................................... 13

Smith, Greg.................................................... 1

Wells, Mike.............................................10,

Wenning, Werner..................................... 13

Yong, Danny.............................................. 14

Bricks and mortarThe global property

empire of Inditex mogul Ortega— PAGE 13

Storm cloudFresh turbulence hits ailing

Norwegian Air Shuttle— INSIDE EUROPE, PAGE 12

Neil

Hume

Tail

Risk

Leading mining companies have not been spared in the

recentrout n stock markets but fears of widespread dropsi

incommodityprices—excludingoil—haveyettoplayout.

In fact, some of the sector’s biggest miners have seen the

priceoftheirkeycommodityincrease.

Take iron ore. Fears that mass disruption in China

caused by the coronavirus outbreak would weigh on prices

have not materialised, with the raw material for steelmak-

ingupalmost7percentoverthepastmonth.

Thesector’stopfourproducers—BHP,FortescueMetals

Group,RioTinto nda Vale canmineironoreforlessthan—

$15 a tonne. So with a spot price around $90, up about one

quarterfromNovemberlows,theywillbechurningoutbil-

lionsofdollars fcash.Forhowmuchlonger?o

The relative strength of iron ore, coal and other bulk

commodities, including alumina and bauxite (needed to

make aluminium) owes much to China’s draconian meas-

urestocontainthevirus.

Travel restrictions and extended shutdowns after the

LunarNewYearholidayhave

made it difficult to source

and transport material

domestically, so steel pro-

ducers have leaned more

heavilyonoverseassupplies.

“Business has been very

resilient,” saidKen MacKen-

zie, BHP chairman,this

week.“It’shardforChina,for

example, to get their work-

force out to their mines on

the supply side. But on the demand side, because most of

the steel mills were on the seaboard [away from the centre

of the outbreak], they can actually get the workforce back

intothesteelmills.”

Another prop for prices has been the lack of scrap steel

collection in China because of the reliance on migrant

workers.Thishasforcedmillstousemoreprimarymateri-

als, such as iron ore at a time when shipments from Aus-—

traliaandBrazilhavebeenweakbecauseofheavyrains.

The outlook is uncertain, though. The weather is set to

improve just as Chinese domestic production starts to pick

up and the longer-term effects of coronavirus become

clearer. Meanwhile, extremely weak steel demand during

the first two months of the year — down 25 per cent from

2019, according to Citigroup — has resulted in a big

build-upofinventoriesatmillsandtradinghubsacrossthe

country,whichwillhavetobecleared.

Companies will struggle to work through their backlogs

in the first half of the year, said Citi, adding: “Physical gluts

inthemarketshouldcontinueweighingdownsteelprices.”

For now, at least, fears of oversupply are being held in

check by an expectation that Beijing will counter the viral

outbreak withaggressive economic stimulus. If policy-

makers do go all out, which seems a fair bet based on

China’s record, iron ore could hold up. But if not, prices

couldbehithard.

[email protected]

Fears of iron ore

oversupply are

being held in

check by hopes

of aggressive

Chinese stimulus

PepsiCo is entering the energy drinks sector by buying Rockstar, which sponsors the Husqvarna Factory motocross team— Icon Sportswire via Getty

MARCH 12 2020 Section:2Front Time: 11/3/2020- 18:46 User:nick.miller Page Name:2FRONT USA, Part,Page,Edition:EUR, 11, 1