[1/4]U.S. Treasury Secretary Janet Yellen gives a statement to the press during her visit in Mexico City, Mexico December 6, 2023. REUTERS/Daniel Becerril Acquire Licensing Rights
MEXICO CITY, Dec 7 (Reuters) – The U.S. and Mexico agreed on Wednesday to cooperate on stronger screening of investments to reduce national security risks and discussed integrating cross-border payments systems, but U.S. Treasury Secretary Janet Yellen insisted that the moves were not motivated by concerns about China.
The Treasury and Mexican Finance Ministry signed an agreement to exchange information on technical information and best practices as Yellen wrapped up a three-day visit to Mexico City.
The Biden administration is promoting Mexico as a premier investment destination for U.S. supply chains and wants to ensure that it has a robust screening regime in place to handle a growing influx of factory investment.
The effort is aimed at helping Mexico develop a screening body similar to the Treasury-run Committee on Foreign Investment the U.S. (CFIUS), which reviews purchases of American companies by foreign-owned entities and other inbound investments.
“Like our own investment screening regime, CFIUS, increased engagement with Mexico will help maintain an open investment climate while monitoring and addressing security risks, making both our countries safer,” Yellen said in announcing the memorandum of intent with Mexican Finance Minister Rogelio Ramirez de la O.
FENTANYL VS WEAPONS
Yellen’s trip focused on enhancing economic ties and boosting cooperation to stem the flow of the deadly opioid fentanyl to the United States via Mexico, where precursor chemicals from China are often mixed.
Ramirez asked for help in fighting the flow of weapons from the United States into the hands of Mexican criminal gangs that he said often outgun police departments and Mexico’s military.
“On this side of the border we’re doing everything we can to detect and prevent” the shipping of fentanyl to the U.S., he said. “So we have also asked for the same level of cooperation from the U.S. with these (arms) shipments.”
“NEAR-SHORING” BOOM
Mexico is attracting a major influx of manufacturing investments to supply the U.S. market, raising concerns that China or other countries could use it as a back door to get around restrictions on U.S. export controls for sensitive technologies such as semiconductors.
The near-shoring boom brought Mexico $32.2 billion in foreign direct investment in the first three quarters of 2023, close to the full-year 2022 total of $36 billion.
High-profile projects include an estimated $5 billion Tesla (TSLA.O) electric vehicle factory in northern Mexico that has prompted Chinese suppliers to announce plans to invest over $1 billion nearby.
While CFIUS’ increased scrutiny in recent years has sharply reduced Chinese investment in the United States, Yellen said the investment screening talks with Mexico were “not just China-focused.” She said China was welcome to make investments in Mexico to supply the U.S. as long as these could pass national security screenings and meet new tax credit content rules limiting EV battery value chains to 25%.
“If Chinese involvement triggered those rules, which are meant to avoid undue dependence on China, then that’s a no,” Yellen said earlier.
Ramirez, asked whether Mexico was worried increased cooperation with the U.S. would strain its relationship with China, Ramirez said Mexico’s trading relationship with its northern neighbor was “overwhelmingly dominant” and a higher priority than with other countries.
The Treasury and other members of CFIUS, which include the U.S. departments of State, Defense, Homeland Security, and Commerce, regularly work with governments to improve their investment screening, including recently in Europe, Yellen said. More than 20 countries have implemented or enhanced their regimes over the past decade.
PAYMENTS COOPERATION
Yellen said that Treasury and Mexican Finance Ministry officials on Thursday also discussed cross-border payment systems, including possibly integrating them more deeply, which could enhance trade and investment benefits.
Possible deeper integration of the payment systems between the two countries was “not about China,” Yellen said.
Financial cooperation with the U.S. enabled Mexico to look at issues of interest to the country “in particular digital payments and reducing costs to send remittances,” Ramirez said.
Reporting by David Lawder; Additional reporting by Kylie Madry; Editing by Richard Chang
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Dec 5 (Reuters) – Ratings agency Moody’s cut its outlook on China’s government credit ratings to negative from stable on Tuesday, in the latest sign of mounting global concern over the impact of surging local government debt and a deepening property crisis on the world’s second-largest economy.
The downgrade reflects growing evidence that authorities will have to provide more financial support for debt-laden local governments and state firms, posing broad risks to China’s fiscal, economic and institutional strength, Moody’s said in a statement.
“The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said.
China’s blue-chip stocks slumped to nearly five-year lows on Tuesday amid worries about the country’s growth, with talk of a possible cut by Moody’s denting sentiment during the session, while Hong Kong stocks extended losses.
China’s major state-owned banks, which had been seen supporting the yuan currency all day, stepped up dollar selling very forcefully after the Moody’s statement, one source with knowledge of the matter said. The yuan was little changed by late afternoon.
The cost of insuring China’s sovereign debt against a default rose to its highest since mid-November
“Now the markets are more concerned with the property crisis and weak growth, rather than the immediate sovereign debt risk,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
The move by Moody’s was the first change on its China view since it cut its rating by one notch to A1 in 2017, also citing expectations of slowing growth and rising debt.
While Moody’s affirmed China’s A1 long-term local and foreign-currency issuer ratings on Tuesday, it said it expects the country’s annual GDP growth to slow to 4.0% in 2024 and 2025, and to average 3.8% from 2026 to 2030.
Analysts say the A1 rating is high enough in investment-grade territory that a downgrade is unlikely to trigger forced selling by global funds. The other two major rating agencies, Fitch and Standard & Poor’s, rate China A+, which is equivalent to Moody’s. Both have a stable outlook.
China’s Finance Ministry said it was disappointed by Moody’s decision, adding that the economy will maintain its rebound an positive trend. It also said property and local government risks are controllable.
“Moody’s concerns about China’s economic growth prospects, fiscal sustainability and other aspects are unnecessary,” the ministry said.
STRUGGLING FOR TRACTION
Most analysts believe China’s growth is on track to hit the government’s target of around 5% this year, but that comapres with a COVID-weakened 2022 and activity is highly uneven.
The economy has struggled to mount a strong post-pandemic recovery as a deepening crisis in the housing market, local government debt concerns, slowing global growth and geopolitical tensions have dented momentum.
A flurry of policy support measures have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus.
Analysts widely agree that China’s growth is downshifting from breakneck expansion in the past few decades. Many believe Beijing needs to transform its economic model from an over-reliance on debt-fuelled investment to one driven more by consumer demand.
Last week, China’s central bank head Pan Gongsheng pledged to keep monetary policy accommodative to support the economy, but also urged structural reforms to reduce a reliance on infrastructure and property for growth.
DEEPER IN DEBT
After years of over-investment in infrastructure, plummeting returns from land sales, and soaring costs to battle COVID, economists say debt-laden municipalities now represent a major risk to the economy.
Local government debt reached 92 trillion yuan ($12.6 trillion), or 76% of China’s economic output in 2022, up from 62.2% in 2019, according to the latest data from the International Monetary Fund (IMF).
In October, China unveiled a plan to issue 1 trillion yuan ($139.84 billion) in sovereign bonds by the end of the year to help kick-start activity, raising the 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%.
The central bank has also implemented modest interest rate cuts and pumped more cash into the economy in recent months.
Nevertheless, foreign investors have been sour on China almost all year.
Capital outflows from China rose sharply to $75 billion in September, the biggest monthly figure since 2016, according to Goldman Sachs.
($1 = 7.1430 Chinese yuan renminbi)
Reporting by Gnaneshwar Rajan in Bengaluru and Kevin Yao in Beijing; Editing by Tom Hogue and Kim Coghill
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FILE PHOTO: The logo of SBB is seen at company’s headquarters in Stockholm, Sweden, September 14, 2023. REUTERS/Marie Mannes/File Photo/File Photo Acquire Licensing Rights
COPENHAGEN, Nov 22 (Reuters) – Fitch on Wednesday downgraded Swedish property company SBB’s (SBBb.ST) long-term issuer default rating to CCC+ from B-, and its senior unsecured debt rating to B from B+, driving the group’s bonds deeper into speculative or ‘junk’ territory.
Loss-making SBB is at the centre of a Swedish property crash, having racked up vast debt by buying public real estate, including social housing, government offices, schools and hospitals.
“The downgrades reflect SBB’s third quarter results and its tight liquidity, including insufficient existing liquidity to reduce refinancing risk after the end of the third quarter 2024, and unfavourable real estate and capital market conditions,” Fitch said in a statement.
“SBB continues to undertake asset disposals but execution risk remains high,” the ratings agency added.
SBB did not immediately respond to a request for comment.
Fitch already in May cut the group to below investment grade status for the first time and again downgraded the company in August.
Fitch on Wednesday said SBB was unlikely to have capital market access to refinance its unsecured bonds, adding that without an ability to tap bond markets, the real estate company would have to sell assets to meet debt maturities.
Rival ratings agency S&P on Friday said it had placed SBB on credit watch for a potential downgrade to a selective default over the company’s offer to use proceeds from a property sale to buy back debt for up to $650 million.
If debt is bought at a substantial discount to the original value, this could be considered tantamount to default, S&P said.
($1 = 10.4988 Swedish crowns)
Reporting by Louise Breusch Rasmussen in Copenhagen, Marie Mannes in Stockholm, editing by Anna Ringstrom, Terje Solsvik and Bernadette Baum
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The logo of property developer Shimao Group is seen on the facade of Shimao Tower in Shanghai, China January 13, 2022. REUTERS/Aly Song/File Photo Acquire Licensing Rights
HONG KONG, Nov 16 (Reuters) – A court auction to sell vast commercial land plots owned by defaulted Shimao Group (0813.HK) in Shenzhen failed for a second time on Thursday as there were no bidders, highlighting weak demand in China’s property market.
Twelve land plots totalling 243,602 square metres, together with some uncompleted buildings on them, have asked for 10.4 billion yuan ($1.4 billion), 20% lower than the 13 billion yuan starting price in the first auction in July, according to e-commerce company JD.com’s (9618.HK) online auction platform.
China’s property sector, which has seen many company defaults since it slipped into a debt crisis in mid-2021, is struggling to stabilise due to a bleak economic outlook.
The Shenzhen plots were part of the land parcel bought by Shanghai-based Shimao in 2017, which planned to build a new landmark complex in China’s tech hub with the city’s tallest skyscraper.
Many of the assets of Shimao, which defaulted its $11.8 billion of offshore debt last July, were being sold to raise funds or were seized by creditors.
Media reports said the land plots, valued at 16.3 billion yuan, were the most valuable assets being auctioned by Chinese courts in seven years.
China’s government land sales revenue and property sales both fell at a faster pace in October, down 25.4% and 20.33% respectively from a year earlier, official data showed this week, suggesting the crisis-hit sector is yet to emerge from its decline despite Beijing’s support efforts.
Authorities have been ramping up measures to support real estate, including relaxing home purchase restrictions and lowering borrowing costs.
($1 = 7.2594 Chinese yuan renminbi)
Reporting by Clare Jim; Editing by Stephen Coates
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Nov 14 (Reuters) – U.S. law firm Buchanan Ingersoll & Rooney said on Tuesday it will combine with intellectual property law firm RatnerPrestia.
Pittsburgh-founded Buchanan will bring on 22 lawyers and two patent agents from RatnerPrestia in Philadelphia, Washington, D.C., and Wilmington effective Jan. 1.
Buchanan, a law and lobbying firm, has about 450 lawyers and government relations professionals in 15 U.S. offices.
Jonathan Spadt, who was CEO and president of RatnerPrestia, will serve as a co-chair of Buchanan’s IP section. Buchanan said the combination increases its IP group by 65% and boosts its presence in the mid-Atlantic region.
While IP used to be more of a standalone practice, IP work is now “part of a much larger puzzle” and increasingly integrated with other areas, including trade, regulatory and antitrust, Spadt said.
RatnerPrestia, which was founded in 1981, wanted to find a larger firm that could offer additional areas of expertise, he said.
The two firms started talking in March, according to Joseph Dougherty, chairman and CEO of Buchanan. The tie-up brings together two already-strong IP groups and opens up opportunities to bring in new clients, he said.
There were 41 completed law firm mergers through the first three quarters of 2023, up from 37 at that point in 2022, according to figures released last month by legal consultancy Fairfax Associates.
Law firm Rimon on Tuesday also said it will acquire a small IP firm named Davidson Berquist Jackson and Gowdey.
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A piece of equipment called a distributor used to hold trays of limestone for capturing carbon is seen at the Heirloom Carbon Technologies facility in Brisbane, California, U.S. February 1, 2023. REUTERS/Nathan Frandino/File Photo Acquire Licensing Rights
Nov 9 (Reuters) – California climate technology company Heirloom on Thursday unveiled what is says is the first U.S. commercial plant to suck planet-warming carbon dioxide from the air, a milestone in the effort to scale up nascent carbon removal technologies and hit global climate goals.
Scientists expect the world will need to remove billions of tonnes of carbon-dioxide from the air annually. Direct Air Capture such as that used by Heirloom can secure the CO2, but it is not yet clear whether it can do so at a price that makes the technology practical.
The new facility, which uses crushed limestone to capture 1,000 tonnes a year, is part of a ramp up that Heirloom says will cut costs. Current industry prices for carbon removal by direct air capture are around $600-$1,000 a tonne, one person familiar with the situation said.
Some of Heirloom’s first sales for capture and storage, in 2021, were more than $2,000 per tonne, and the U.S. government is aiming eventually for $100 a tonne.
The new plant, about an hour and a half from San Francisco Bay in Tracy, California, has tall stacks of trays holding limestone open to the air. The rock naturally absorbs CO2 and Heirloom has treated it to do so in a few days. Rock that has captured CO2 is heated with renewable energy to release the gas, and then reused. Heirloom works with startup CarbonCure to store the gas from the new plant in concrete.
U.S. Secretary of Energy Jennifer Granholm, who was due to visit the site on Thursday, in a statement called the plant a blueprint for beating climate change. The Department of Energy is spending billions in grants to built Direct Air Capture demonstration hubs. Heirloom is one of the winners of the largest tier grant.
Occidental Petroleum (OXY.N), another hub grant winner, aims to marry acquired DAC technology with its own expertise managing resources underground, where most of the carbon dioxide is expected to be stored.
BlackRock Inc, the world’s biggest money manager, on Tuesday said it will invest $550 million in Occidental’s West Texas plant.
Reporting By Peter Henderson
Editing by Marguerita Choy
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LONDON, Nov 3 (Reuters) – The troubles faced by co-working titan WeWork (WE.N) are darkening the outlook for the world’s largest business hubs, where rising office vacancies are already heaping pressure on investors set to refinance big-ticket mortgages next year.
Media reports on Wednesday suggested the New-York listed flexible workspace provider – once privately valued at $47 billion – was weighing a petition for bankruptcy next week.
Backed by Japan’s SoftBank, WeWork aimed to revolutionise the office market by taking long leases on large properties and renting the space to multiple smaller businesses on more flexible, shorter arrangements.
But like other landlords, it has struggled to persuade some customers since the pandemic to swap working from home for the office at its 650-plus locations worldwide – a trend that has shaken confidence in the sector.
Global office vacancies are expected to climb, hurting rental prospects in cities like New York and London, eight industry executives, investors, lenders and analysts said.
Some leveraged property investors could struggle to earn enough rental income to service rising debt costs, they said.
“The loss of any tenant, especially during a time of relatively slow office leasing, will have a negative impact on office building cashflows and values,” said Moody’s Analytics’ Commercial Real Estate Industry Practice Lead, Jeffrey Havsy.
“This will add to the negative sentiment in the marketplace and make financing harder, especially those buildings that need to refinance in the next 12-18 months,” he said.
A WeWork spokesperson told Reuters the firm was in talks with landlords to address “high-cost and inflexible lease terms” and was striving to remain in the majority of its locations and markets.
The number and volume of real estate loans due for refinancing in 2024 is unclear because many deals are struck privately between borrower and lender, Ed Daubeney, co-head, debt and structured finance, EMEA, at real estate services firm Jones Lang LaSalle, told Reuters.
Analysts estimate the global commercial property lending market is around $2 trillion in size, roughly split 50:50 between banks and alternative lenders in the United States and 85:15 in Europe.
Several experts contacted by Reuters predicted a year of reckoning for property investors and lenders in 2024, with time running out for those turning a blind eye to assets that would be in breach of key lending terms if revalued today.
The value of all global real estate – residential, commercial, and agricultural land – was $379.7 trillion in 2022, Savills said in a report in September, down 2.8% on 2021.
TRANSACTION SLUMP
Real-estate loan refinancings have already been complicated by a plunge in transactions, which are crucial in tracking changes in asset values.
MSCI’s Capital Trends report for Europe showed third quarter volumes down 57% on 2022 levels – the lowest since 2010.
What’s more, the gap between what investors believe assets are worth and what prospective buyers are willing to pay is between 20% and 35% in core office markets – “far worse than the height of the global financial crisis”, MSCI said.
MSCI said prices in Europe’s two largest office markets, Britain and Germany, would have to fall another 13%-15% to bring market liquidity back to its long-run average.
Global lenders to UK real estate holding and development companies, which supplied credit risk assessments to data provider Credit Benchmark in October, said those firms were now 9% more likely to default than they estimated 12 months ago.
U.S. industrial and office real estate investment trusts (REITs) were seen 35.8% more likely to default, versus expectations a year ago.
RE-LETTING
WeWork has 3.25 million square feet of space in central London, with a total annual rent roll of 192 million pounds ($234 million), Jefferies said in a September note. Its biggest U.S. markets are New York and California, where it operates 49 and 42 sites respectively, according to WeWork’s website.
Industry sources said some of its most popular locations could be taken over by rivals at similar rental rates, minimising cashflow issues for landlords.
But flexible workspace demand in Britain is still 11% below pre-pandemic levels, the Instant Group’s 2023 State of the UK Flex Market report in September showed.
Lenders might view the WeWork debacle as a cautionary tale, sources said, potentially requiring borrowers to inject more equity into their properties to reduce the loan-to-value ratio.
But such a request could be problematic if the quantum and duration of rental income remain uncertain.
London office vacancies have surged to a 30-year high, Jefferies also said in September, with average lease lengths on central London offices sliding to six years from 11.6 years a decade ago, according to BNP Paribas Real Estate.
UK property company Helical said it was working on “next steps” for the space at one London property let to WeWork, after recouping rent it had failed to pay via a short-term licence arrangement.
Under-occupied urban offices are not only generating lower than expected rental income for owners but some are also ageing rapidly in a world increasingly sensitive to carbon consumption.
“We’re at a massive turning point in the real estate investment market globally,” Jose Pellicer, head of real estate strategy at M&G Real Estate, said.
“For the last 20 years, property yields have been higher than financing costs. But a far bigger percentage of a property return is going to have to come from growth in the 2020s.”
($1 = 0.9407 euros)
($1 = 0.8214 pounds)
Reporting by Sinead Cruise
Editing by Elisa Martinuzzi and Mark Potter
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PwC sign is seen in the lobby of their offices in Barangaroo, Australia June 22, 2023. REUTERS/Lewis Jackson Acquire Licensing Rights
SYDNEY, Oct 26 (Reuters) – PwC Australia said on Thursday that dozens of staff who had been set to move across to spin-off consultancy Scyne Advisory will no longer have roles at the new firm and have been told to look for jobs internally.
PwC Australia sold its government advisory business, responsible for a fifth of revenues, to private equity group Allegro Funds for a nominal A$1 in August after government agencies cut ties over a national scandal involving leaked tax plans.
Over 1,500 people out of PwC Australia’s more than 9,000 staff were expected to move to the new firm, PwC said in September.
PwC, one of the world’s “big four” consultancy and auditing firms, said on Thursday, however, that 78 of those staff will not have roles at Scyne because a number of PwC partners had opted not to transfer.
The 78 have been offered paid leave and encouraged to look at the internal jobs board, the firm said in a statement.
“PwC will do everything in its power to help support these individuals,” CEO Kevin Burrowes said in a statement.
A Scyne Advisory spokesperson said a delay in closing the deal, originally planned for September, changes to its “partner mix” and the need to establish Scyne as a “sustainable business” were factors in the decision.
The move comes as Scyne Advisory gears up to reclaim advisory work that netted PwC Australia A$680 million ($427 million) last financial year.
The Department of Finance, which sets procurement rules, this month gave Scyne the all clear to resume work with the government and said no staff involved in the tax leaks scandal had transferred to the firm.
($1 = 1.5929 Australian dollars)
Reporting by Lewis Jackson; Editing by Lincoln Feast and Edwina Gibbs
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Oct 18 (Reuters) – U.S.-based aviation consultant Seabury Capital Group has merged with aviation advisory firm Plane View Partners, expanding its offerings in the sector, the companies said in a statement on Wednesday.
The deal, whose financial terms have not been disclosed, will create a merged consultancy, Seabury Aviation Partners, and cater to a clientele that includes airlines, aerospace manufacturers, institutional investors and lessors.
Seabury said the combined company will offer services such as mergers & acquisitions, capital financing, aircraft acquisition and financing, and financial and operational restructuring.
New York-based Seabury Capital Group, which operates in over 20 countries, has over $1.5 billion in assets. Its investment banking arm has acted as an advisor on several large deals, including Malaysia Aviation Group’s purchase of 20 Airbus A330-900neo aircraft.
Plane View Partners has about 20 employees and has worked on several aircraft leasing and acquisition deals.
Seabury Capital Group’s CEO John Luth will serve as chairman and chief executive of the combined company, while Plane View’s Henri Courpron and Michael Cox will become co-chairmen.
Reporting by Aatreyee Dasgupta in Bengaluru; Editing by Tasim Zahid
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Rows of houses lie in front of the Canary Wharf skyline in London, Britain, March 19, 2023. REUTERS/Henry Nicholls/File Photo Acquire Licensing Rights
LONDON, Oct 12 (Reuters) – Britain’s housing market is stuck in the doldrums after a long run-up in borrowing costs but the Bank of England’s pause in interest rate hikes last month has offered the prospect of some relief, a survey showed on Thursday.
The Royal Institution of Chartered Surveyors (RICS) house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, edged down to -69 after August’s sharp drop to -68.
Echoing other gauges of British house prices, RICS’ latest figure was the weakest since February 2009 and was below the median forecast of -63 in a Reuters poll of economists.
Britain’s housing market boomed during the coronavirus pandemic as demand for homes with more space surged, but it has been a victim of the BoE’s run of 14 interest rate hikes, which began in December 2021.
In the near term, surveyors told RICS they saw further falls in sales and prices, although the expected declines were bit less severe than in recent months.
Expectations for sales volumes in 12 months’ time turned positive for the first since May.
Tarrant Parsons, senior economist at RICS, said subdued buyer activity reflected how the higher cost of mortgage borrowing was likely to remain a challenge for many households.
“Although the decision to pause monetary policy tightening a few weeks ago provided a glimmer of relief for the market, interest rates are likely now set to remain on hold for a prolonged period,” Parsons said.
“It appears there is little prospect of trends deviating much from the recent picture in the immediate future. That said, the outlook a little further ahead has improved slightly.”
The weak state of the housing market has hurt companies such as building materials supplier Travis Perkins (TPK.L), which on Wednesday downgraded its annual profit forecast by as much as 27%.
By contrast, the property rentals market is running hot with RICS’ demand balance standing at +43 while listings were down at -24, reflecting the lack of available properties.
Respondents to the survey predicted growth of almost 5% in the price of rents over the next 12 months.
Reporting by William Schomberg, Editing by Kylie MacLellan
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