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The US high-grade firms are financing new M&As with less debt and more equity, but also cash.
Bankers and investors say that top-rated U.S. firms have mostly financed their acquisitions with cash and equity instead of debt in the past year. This trend could continue, even as M&A activities and expectations of interest rate reductions rise. They said that high debt costs, and the fear of credit rating downgrades due to taking on debt, made funding acquisitions through cash and stocks with high valuations more appealing. Analysts expect that Union Pacific will finance its $85 billion deal with Norfolk Southern primarily through stock and some cash. The deal is expected to be financed by debt of $15 to $20 billion. This deal could be the biggest buyout ever in the sector. According to Piers Ronald, co-head, debt capital markets, at Atlanta's Truist Securities, such cash-and stock deals are becoming more popular because the gap between equity and debt costs has narrowed. According to LSEG, stock funding accounted for $250 billion or 11% of the total M&A funding in this year. Meanwhile, 15.3% of the deal volume was financed by a combination of cash and stocks. The data revealed that in 2024, stock funding will account for $441 billion or 14% of M&A financing, while cash and stock will make up 7%. Ronan pointed out that equity was more attractive than debt at the moment, due to its high earnings yield. Natalie Trevithick is the head of investment grade strategies at Los Angeles asset manager Payden & Rygel. She said that many corporations have generated healthy free cash flows and posted strong earnings. This has led to an increase in equity funding of M&A deals and a decrease in debt financing. Companies with investment-grade ratings are also wary about adding debt in order to avoid a downgrade, which would increase their financing costs. Moody's S&P and Fitch have warned that their ratings for Union Pacific may be downgraded in the event of a company's increased leverage due to its planned acquisition of Norfolk Southern. Mike Sanders, the head of fixed income for Madison Investments, a Madison-based asset management firm, said that a ratings downgrade would have a significant impact on the secondary market. Sanders cited the poor performance of Warner Bros Discovery bonds after its announcement to split into two publicly-traded entities and downgraded to junk status in July. Bankers say that if M&A-intent firms rely less on debt, the end-of-year volume of investment-grade issuance could fall below $1.5 trillion in 2024. According to the ICE BofA U.S. Corporate Index, the average spread for investment-grade bonds is 82 basis points. This is just a few basis points below the 77-bps mark it reached in 1998. Kyle Stegemeyer of Minneapolis-based U.S. Bank's investment-grade capital markets and syndicate expects M&A related bond supply to reach $225 billion by 2025. Stegemeyer stated that as the year progresses, it is less likely we will be able to finance large-scale transformational M&As this year in order to drive numbers higher. (Reporting and editing by Shankar Ramakrishnan & Rod Nickel; Matt Tracy)
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Tesla and Elon Musk sued over Robotaxi claims
Elon Musk, Tesla and other companies were accused of securities fraud by investors who claimed that they had concealed the risk associated with the self-driving cars, such as the Robotaxi. The class action lawsuit was filed Monday night following Tesla's public demonstration of its robotaxis at the end of June in Austin, Texas. The test revealed vehicles that were speeding, breaking suddenly, driving on a curb or entering the wrong lane and dropping passengers in the middle multilane roads. Tesla's stock price dropped 6.1% in two days of trading after the test, wiping $68 billion from its market value. Musk and Tesla's electric vehicle maker have been accused of overstating their autonomous driving technology and its prospects, and inflating Tesla’s financial prospects. The shareholders cited Musk's assurances on a conference call on April 22 that Tesla "was laser-focused on bringing Robotaxi to Austin in the summer" and Tesla's claim on that day that it would be "scalable and safe across diverse geographies, use cases and technologies." Tesla did not respond to comments on Tuesday. Viabhav Tania and Zachary Kirkhorn, the former Chief Financial Officer of Tesla, are also named as defendants. Expanding Robotaxis is You can also find out more about the importance of this by clicking here. Tesla is facing a declining demand for its older electric vehicles, as well as a backlash against Musk's political views. Musk, the richest man in the world, wants to provide the service to the half of the U.S. by the end of the year, but he must convince regulators that his technology is safe and assure the public. Denise Morand is the lead plaintiff in Monday's federal court lawsuit filed by Tesla shareholders. The suit seeks damages between April 19, 2020 and June 22, 2025. A Florida jury found Tesla 33 percent responsible for a crash in 2019 involving its self driving software. The crash killed a woman aged 22 and injured her boyfriend. It ordered Tesla to pay $243 million to the victims. Tesla has blamed the driver for the crash and intends to appeal. This case is Morand v Tesla Inc et al., U.S. District Court for the Western District of Texas. 25-01213. Reporting by Jonathan Stempel, New York; editing by Giles Elgood
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Telecom Italia announces a 5% increase in core earnings for H1
Telecom Italia reported a 5% rise in its core earnings on Tuesday as the fast-growing Brazilian operations offset sluggish Italian growth. Piergiorgio Peluso was named CFO by the company to replace Adrian Calaza. This confirms an earlier report. Peluso was previously the CFO at TIM for seven years, until 2019. He is currently CFO of Autostrade per l'Italia. The appointment takes effect on November 6. TIM announced that Eugenio Sangata, its Chief Public Relations and Security Officer, had resigned with immediate effect. An earlier report stated that Italian shipbuilder Fincantieri was poised to name Santagata as the head of its defence division. Why it's important Poste Italiane, a financial conglomerate, replaced France's Vivendi, as the largest shareholder in TIM. It now holds a 24.8% share. TIM, having sold its landline network in a bid to reduce debt last year, is expected play a key role in the consolidation of Italy's Telecoms sector. The sector has been under intense pressure due to stiff competition for years. By the Numbers The largest Italian telecoms company reported that its EBITDA (earnings before interest and taxes) rose to 2.0 billion euros in the first six months of the year. Around 0.8 billion euro came from its Brazilian operations, an increase of 6.1% over the previous year. The domestic EBITDA, after leasing, was 1 billion euros in 2013, up 4.2% on the previous year. The total revenue for the semester was 6.6 billion Euros. As of June 30, TIM's total net debt, including leases, was 7.5 billion euro. TIM has confirmed its annual financial targets, which it announced in February. These included a return to cash-generation and a 7% increase in the group's core profits. $1 = 0.8655 euro (Reporting and editing by Matt Scuffham, Elvira pollina)
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Frontier Group reports bigger than expected Q3 loss due to soft domestic demand
Frontier Group, the parent company of discount airline Frontier Airlines, announced a larger-than-expected third-quarter loss on Tuesday due to a softening domestic travel market. This caused its shares in early trading to drop 9%. In April, several major U.S. airlines, including Frontier Airlines, revised their financial projections, citing the uncertainty caused by President Donald Trump's tariffs and cuts to government spending, which prompted consumers to reduce travel plans. Budget-conscious travelers are still cautious despite the fact that airline executives and analysts claim there is a stabilization in demand. This year's summer season, which is traditionally the most profitable for the industry, has been underwhelming. The low demand for economy seats forced airlines to cut fares. LSEG data shows that the carrier's third-quarter adjusted loss will be between 26 and 42 cents per share, compared to analysts' estimates of 11 cents. The executives are betting on the fact that the capacity reductions this year will improve airfare and pricing power. Frontier expects that its third quarter capacity will fall between 3% and 5% compared to the same period last year. Barry Biffle, CEO of Frontier Markets, said that the balance between domestic supply and demand is expected to improve over the next few months. It reported a loss of 31 cents for each share during the quarter ending in June. This compares to a profit of 14 cents per shares a year ago. Analysts predicted a loss between 27 and 30 cents. The total revenue dropped 4.5%, to $929.12 million. This was lower than the $946.12 millions expected by Wall Street. Reporting by Shivansh Tiwary from Bengaluru, and Doyinsola Oladipo from New York. Editing by Shilpa Majumdar.
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Expeditors reports positive results on increased freight volumes and customs fees
The global freight forwarder, Expeditors of Washington, reported Tuesday that its second-quarter revenue and profit were above Wall Street expectations. This was due to higher ocean and air container volumes as well as larger custom fees. The quarter ended June 30 saw an increase of 7% in airfreight and ocean container volumes, as companies raced to import goods before the new U.S. Tariffs take effect. It also gained from the increasingly complex policies of trade, which allowed it to charge higher fees for processing. Customs brokers are increasingly being used by U.S. importers to stay up to date with the ever-changing policies of President Donald Trump. The booming demand for these services has led to a higher price, according to industry players. The revenue from Expeditors’ customs brokerage segment increased 10.5%, from $927 to $1.02 Billion. CEO Daniel Wall stated that "Airfreight increased due to growth in tonnage, higher rates and customers shipping technology and high-value inventories ahead of trade deadlines." He added that "ocean business grew on the back of increased volumes and exports, especially out of South Asia as customers moved their sourcing to this region and moved freight ahead of extended tariff deadlines." The Bellevue-based company, which reported quarterly revenues of $2.65 Billion, beat analysts' estimates of $2.44 Billion, according to LSEG data. The second-quarter earnings of $1.34 per shares was also higher than the $1.24 expected. The company still expects the freight market to be volatile for the remainder of the year. (Reporting and editing by Sahal Muhammad in Bengaluru, with Abhinav Paramar reporting from Bengaluru)
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Tesla and Musk sued by shareholders for Robotaxi claims
Elon Musk, Tesla and other companies were accused of securities fraud by investors who claimed that they had concealed the risk associated with the self-driving cars, such as the Robotaxi. The class action lawsuit was filed in federal court in Austin, Texas on Monday night after Tesla's robotaxis were shown to speed, brake suddenly, drive over a curb and enter the wrong lane. They also dropped passengers in the middle multilane highways. Tesla's stock price dropped 6.1% in two days of trading after the test. Shareholders accused Tesla of exaggerating the effectiveness of its self-driving technology and inflating the company's business prospects. The lawsuit is seeking unspecified damages from April 19, 2023 to June 22, 2025. Tesla did not respond to a comment request on Tuesday. (Reporting and editing by Giles Elgood in New York. Reporting by Jonathan Stempel)
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Frontier Group reports bigger than expected Q3 loss due to soft domestic demand
Frontier Group, the parent company of discount airline Frontier Airlines, announced a larger-than-expected third-quarter loss on Tuesday due to a softening domestic travel market. This caused its shares in premarket trading to drop 3%. In April, several major U.S. airlines, including Frontier Airlines, revised their financial projections, citing the uncertainty caused by President Donald Trump's tariffs and cuts to government spending, which prompted consumers to reduce travel plans. Budget-conscious travelers are still cautious despite the fact that airline executives and analysts claim there is a stabilization in demand. This year's summer season, which is traditionally the most profitable for the industry, has been underwhelming. The low demand for economy seats forced airlines to cut fares. LSEG data shows that the carrier's third-quarter adjusted loss will be between 26 and 42 cents per share, compared to analysts' estimates of 11 cents. The executives are betting on the fact that the capacity reductions this year will improve airfare and pricing power. Frontier expects to see a 3%-5% decline in its third quarter capacity compared to the same period last year. Barry Biffle, CEO of Frontier Markets, said that the balance between domestic supply and demand is expected to improve over the next few months. It reported a loss of 31 cents for each share during the quarter ending in June. This compares to a profit of 14 cents per shares a year ago. Analysts predicted a loss between 27 and 30 cents. The total revenue dropped 4.5%, to $929.12 million. This was lower than the $946.12 millions expected by Wall Street. Reporting by Shivansh Tiwary from Bengaluru, and Doyinsola Oladipo from New York. Editing by Shilpa Majumdar.
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Analyst: Ukraine reopens the Danube Canal after explosion
Analyst ASAP Agri stated on Tuesday that the Ukrainian Seaport Authority would reopen Bystre Canal, at the mouth the Danube from Wednesday. The canal had been closed since late July after a dredger explosion. In the first year following the Russian invasion of 2022, Ukraine was forced to use alternative routes for exports. This included the Bystre as well as the Danube. Ukraine has seen a sharp decline in its use of the Danube since the ports were opened up in 2023. In a press release, the consultancy stated that Ukraine will allow vessels up to 4.5 meters in depth to transit through the canal. The move will reduce the disbursement cost for shipowners, and help support negotiations regarding Danube-origin cargo by narrowing bid/offer differences," said Pavel Lysenko at ASAP Agri. The Seaport Authority has declined to comment. Last month, it announced that the Bystre had been closed after a dredger explosion on 23 July. It did not provide any further explanation. Traffic was diverted via the Romanian Sulina canal. ASAP Agri reported that the cost of using Sulina for shipowners was higher, and that many have raised their freight rates for Danube shipments in order to offset losses. It said: "Market participants expect a partial rebound in Danube cargo flows, as negotiations become more equalized." (Reporting and editing by Kevin Liffey; Pavel Polityuk)
US wants to rename UN Aviation Program over 'gender.'
As the Trump administration focuses on diversity policies in advance of a gathering of high-level aerospace regulators this fall, it wants to rename a UN Aviation Agency's "gender program" that encourages women's participation in aviation and defund it.
In a paper published ahead of the U.N. agency’s triennial meeting, which begins on September 23, the U.S. suggested that the International Civil Aviation Organization's Gender Equality Programme be renamed the Empowerment Program for Women. "In order to remove ideological term 'gender ,'",," the U.S. stated.
The agency also requested confirmation from the secretariat that "no regular contributions budget" will be used to fund the program with the current name.
The Gender Equality Programme of ICAO aims to promote equality in a sector where, for example the vast majority pilots and aeronautical mechanics are men.
The paper of July 30 states that "the United States acknowledges future personnel shortages, including future needs for highly-trained professionals" in the aviation industry.
"However we do not support any programs that give preference based on gender or other characteristics, other than individual merit."
In addition to the aviation industry, the Republican president's administration has now made it a priority to eliminate any policy that supports diversity.
The newspaper comes at a time when Trump has nominated former Delta Air Lines pilot Jeffrey Anderson as the U.S. Ambassador to the Montreal-based organization, a move that is opposed by a large airline pilots union.
Trump released an executive memo earlier this year directing his administration assess and undo diversification initiatives in aviation safety roles.
The Federal Aviation Administration reinstated "Notice to Airmen", reversing a decision made by the former president Joe Biden, who renamed NOTAM to include "all aviators".
The paper reported that the Trump administration wants to rename ICAO "to focus on the perspectives and needs of women."
The Federal Aviation Administration sent requests for comments to the U.S. Department of State which did not respond immediately.
ICAO refused to comment. The agency was formed in 1944 after the United States invited over 50 allies to create a common air navigational system. (Allison Lampert, Montreal; David Shepardson, Washington; David Holmes' editing)
(source: Reuters)