October 14, 2011 at 11:19am
UPDATE 3-KT Corp in talks on $600 mln Telkom stake
By Hyunjoo Jin and Helen Nyambura-MwauraSEOUL/JOHANNESBURG, Oct 14 (Reuters) - KT Corp
is in talks to buy a 20 percent stake in South Africa’s Telkom
for about $600 million, giving South Korea’s No. 2
mobile operator a foothold in the fast-growing continent as
opportunities to expand at home slow.After scouring Africa for natural resources for years, Asian
companies are now looking beyond commodities deals as African
consumers have more money to spend.Telkom said that if talks are successful, it would issue new
shares at 36.06 rand each to KT, South Korea’s top fixed-line
provider. That represents a 12 percent premium to Telkom’s
closing price on Thursday.Shares of South Africa’s biggest fixed-line firm surged as
much as 7 percent, as investors took the news as a much-needed
vote of confidence in the struggling company.KT has been looking for overseas acquisitions as it has
fewer growth opportunities in its crowded home market.”The deal, if agreed, would have an implication, as KT is
advancing overseas as the domestic market is maturing and facing
regulations. What is important is how it will grow its overseas
operations,” said Yang Jong-in, an analyst at Korea Investment &
Securities.Battered in recent years by steadily falling fixed-line
revenue and expensive blunders in Nigeria, Telkom has been
looking to offset shrinking demand for its core business by
pushing into new businesses and new markets.It last year launched a mobile unit that has yet to turn a
profit. Analysts have said it will face an uphill battle in a
market dominated by Vodafone unit Vodacom and
MTN Group .Telkom expects earnings to fall at least 40 percent in the
six months to end-September.Almost 40 percent owned by the South African government,
Telkom is aiming to recast itself as a converged multimedia
provider offering mobile, fixed-line and data services.”Telkom has been moving toward a next-generation network
infrastructure, which would allow it to become a multimedia
player in the market,” said Dobek Pater, a telecoms analyst at
consultancy Africa Analysis.”Korea Telecom has been in that position for a while as
well, and has obviously progressed along that path further than
Telkom has to date.”KT has said it would step investments in emerging markets
such as Africa, Latin America and eastern Europe.In May it agreed to sell a 79.96 percent stake in its
Russian unit to local operator Vimpelcom for $346
million, adding it would use the proceeds for new
investments.STUMBLING BLOCKSouth Africa’s government could be a potential stumbling
block to the effectiveness of the partnership, said one analyst,
who declined to be identified.As a substantial shareholder, the government might resist
any attempt by KT to streamline Telkom and push for job cuts,
the analyst said.South African media has reported Telkom’s former acting CEO
stepped down this year because the government would not allow
him to make sweeping changes, including job cuts.Unemployment hovers about 25 percent and President Jacob
Zuma’s growth plan calls for state-owned enterprises and state
spending to create 5 million jobs over the next decade.While not a rapidly expanding economy, South Africa offers
foreign companies an entry point into the continent.In June, U.S. retailer Wal-Mart finalised a $2.4
billion bid for 51 percent of local retailer Massmart ,
and said it was looking to expand further in Africa.Japan’s Kansai Paint this year finalised control of
local paint firm Freeworld Coatings . A Kansai executive
told Reuters last year it could look to expand into other
regions of Africa.Deutsche Bank (DBKGn.DE) is Telkom’s lead financial adviser
for the deal. It is also being advised by UBS .Shares of Telkom were up 1.5 percent at 1426 GMT, having
given up most of its earlier gains. Telkom’s shares are down
more than 15 percent this year, underperforming a 4 percent drop
in Johannesburg’s All-share index .($1 = 7.928 rand)
(Writing and additional reporting by David Dolan; Editing by
David Hulmes)
October 13, 2011 at 7:17pm
TEXT: S&P: Spain Downgraded To ‘AA-’ On Growth, Bank Risks
— The financial profile of the Spanish banking system
will, in our opinion, weaken further, with the stock of
problematic assets rising further, as highlighted by the recent
revision in our Banking Industry Country Risk Assessment on
Spain to Group 4 from Group 3.— As a consequence, we are lowering our long-term
sovereign credit ratings on Spain to ‘AA-’ from ‘AA’.— The outlook on the long-term rating is negative.LONDON (Standard & Poor’s) Oct. 13, 2011—Standard & Poor’s
Ratings Services today lowered the long-term rating on the
Kingdom of Spain from ‘AA’ to ‘AA-‘, while affirming the
short-term ratings at ‘A-1+’. The outlook is negative. The
transfer and convertibility assessment remains ‘AAA’, as it does
for all members of the eurozone.The lowering of Spain’s long-term rating reflects our view
of:— Spain’s uncertain growth prospects in light of the
private sector’s need to access fresh external financing to roll
over high levels of external debt amid rising funding costs and
a challenging external environment;— The likelihood of a continuing deterioration in
financial system asset quality as reflected in the recent
revision of our Banking Industry Credit Risk Assessment score
for Spain to group 4 from group 3 (see “Spain Banking Industry
Country Risk Assessment Revised To Group 4 From Group 3 On
Heightened Economic Risk”, published Oct. 11, 2011);— The incomplete state of labor market reform, which we
believe contributes to structurally high unemployment and which
will likely remain a drag on economic recovery.Under our recently updated sovereign ratings criteria, the
“economic” score was the primary contributor to the lowering of
Spain’s long-term rating. The scores relating to other elements
of our methodology—political, external, fiscal, and
monetary—did not directly contribute.While in our view the factors impeding a potential recovery
of domestic demand are not unique to Spain, they impact Spain
with particular force given its high level of private sector
leverage, much of which is funded externally. This is reflected
in Spain’s negative net international investment position,
estimated at 94% of GDP in Q2 2011. A key component of this is
short-term external debt, which, at around 50% of GDP in Q2
2011, we view as high. Spanish monetary and financial sector
institutions accounted for slightly over one-half of total
external debt at the end of Q2 2011, 57% of which is short-term
debt. In our opinion, this leaves the economy vulnerable to
sudden shifts in external financing conditions.External leverage at such levels increases uncertainty about
the trajectory of the economy, as much depends upon the access
of these Spanish borrowers to international markets, as well as
the state of external demand. We believe that these factors, in
turn, will be influenced by the direction of policy decisions
made by eurozone institutions, including the ECB, and Spain’s
eurozone partners. In 2011, we expect the Spanish economy to
grow around 0.8% in real terms, while for 2012, we expect real
GDP growth to be around 1%, weaker than the 1.5% we estimated in
our February 2011 research update (see “The Specter Of A Double
Dip In Europe Looms Larger”, published Oct. 4, 2011).These forecasts are, of course, estimates and subject to
various factors, including:— The possibility that the private sector’s protracted
deleveraging process may accelerate due to a further tightening
of credit conditions. This could hinder any recovery in private
investment, even though real fixed investment has already
declined by nearly 30% cumulatively between 2008 and end 2010.— Harsher repricing in the real estate market particularly
for new housing, to which the banking sector remains
particularly exposed, which may result in a
higher-than-previously-expected accumulation of problematic
assets in the financial system. This, in turn, could slow the
flow of financial resources to more productive sectors of the
economy and weigh on the recovery (see “Spain Banking Industry
Country Risk Assessment Revised To Group 4 From Group 3 On
Heightened Economic Risk”, published Oct. 11, 2011).— High unemployment, expected at around 20%-21% in
2011-12, which will remain a drag on private consumption.
Although the government has implemented some labor market reform
measures, their impact on reducing labor market rigidities
remains to be seen.— Economic growth in Spain’s main trading partners could
slow further or contract, which may result in more subdued
external demand for Spanish exports (see “The Specter Of A
Double Dip In Europe Looms Larger”, published Oct. 4, 2011).
Since 2009, exports have underpinned the economy’s modest growth
and contributed to a sharp reduction in the current account
deficit, which we expect to decline to 3.8% of GDP in 2011 from
10% of GDP in 2007.We have adopted a revised base-case macroeconomic scenario,
which we view as consistent with the downgrade and the negative
outlook. Compared with the February 2011 base-case (see “Kingdom
of Spain ‘AA/A-1+’ Ratings Affirmed On Budgetary Consolidation
And Structural Reforms; Outlook Negative” published Feb. 1,
2011), we expect GDP growth in 2011-13 will be weaker, with the
stock of domestic credit to the private sector, estimated at
around 165% of GDP in 2011, to decline somewhat faster. At the
same time, we expect the strength of net exports to cushion the
impact of a further tightening of fiscal policy.We have also adopted a downside scenario, consistent with
another possible downgrade. The downside scenario assumes a
return to recession next year, partly as a result of weaker
external and domestic demand, with real GDP declining by 0.5% in
real terms, followed by a weak recovery thereafter. Under this
downside scenario, the current account deficit would decline,
but the general government deficit would remain above 5.5% of
GDP, at odds with the government’s fiscal consolidation targets.We have also adopted an upside scenario, which, if it
occurred, we believe would be consistent with a change in the
rating outlook to stable. The upside scenario assumes stronger
growth next year, on the back of a pick-up in domestic demand,
and supported by an easing in financial conditions and continued
strength in exports. For details of all the scenarios, see our
analysis on Spain to be published soon.Under all three scenarios we expect that Spain’s high
private sector debt, and in particular the high stock of
external debt—largely euro-denominated—will remain the key
rating constraint for the foreseeable future. Narrow net
external debt would range between 290% and 325% of current
account receipts by 2014. Under our sovereign criteria these
values would continue to imply an initial external score at the
lowest possible level for a country with an actively traded
currency, like Spain.Our macroeconomic analysis also indicates what we consider
to be one of Spain’s main credit strengths: Even taking into
account additional government-financed bank recapitalizations,
we do not expect net general government debt to rise much above
70% of GDP, which compares favorably to Spain’s peers.In our view, the introduction of a ceiling for structural
deficit and debt in the Spanish constitution underscores the
authorities’ broad commitment to budgetary discipline. However,
in the near term (and under our base-case scenario), we believe
the government could miss its fiscal target due to budgetary
slippages at the local and regional government levels and in
social security, despite a better-than-expected
2:46pm
US infrastructure deal could come this year-LaHood
“I think we’ll get an infrastructure program and I believe
it will happen by the end of the calendar year,” LaHood said.House leaders are contemplating a six-year bill, while the
Senate is working on a two-year plan.Transportation construction programs have been kept alive
since 2009 by short-term funding the extensions. The current
one expires in March.
October 12, 2011 at 5:00pm
UPDATE 1- Universal Forest Q3 misses Street view
Oct 12 (Reuters) - Wood products maker Universal Forest
Products Inc posted lower-than-expected quarterly
results hurt by weakness in its residential construction and
retail building materials markets.The Grand Rapids, Michigan-based company posted
third-quarter net income of $5.6 million, or 29 cents a share,
compared with $2.6 million, or 13 cents a share last year.Net sales slid 2.4 percent to $468.9 million.Sales in the company’s residential construction segment
slipped 17 percent, while those in its retail building materials
division fell 5.4 percent.Analysts, on average, had expected earnings of 32 cents a
share on revenue of $471.5 million, according to Thomson Reuters
I/B/E/S.The company supplies lumber, plastic, and other building
materials for the so-called do-it-yourself market, providing
consumers with the tools needed for personal projects.Shares of the company closed at $25.94 on Wednesday on
Nasdaq.
