Dec. 13 (Bloomberg) -- The following are the day's top business stories:
1. Covered Bonds May Save Australian Banks 40% as Swan Pledges to Revoke Ban 2. Japanese Stocks Fluctuate; Exporters Retreat on Yen, Inpex Climbs on Oil 3. Tankan Points to Contraction as Bond Market Signals Recovery: Japan Credit 4. Pimco's Gross Purchases Shares of Five Municipal-Bond Funds Run by Firm 5. Air New Zealand Is in Talks to Sell Lie-Flat Coach Seats to Other Carriers 6. AGL Energy Slumps After Failing in Bid to Buy New South Wales Power Assets 7. Lehman Creditors, Paulson Said to Mull Filing Rival Payout Plan This Week 8. Pakistan Central Bank Chief `Worried' Rate Increases May Hurt Investment 9. Irish, Portugal Bonds Outpace Peers as ECB Hastens Purchases: Euro Credit 10.Boston Scientific Said to Abandon Sale of Pain-Management Unit Over Price 11.Naspers Scours Emerging Markets to Replicate Success With Tencent Stake 12.Foreclosed U.S. Home Sellers Target Australians as Currency Reaches Parity
1. Covered Bonds May Save Australian Banks 40% as Swan Pledges to Revoke Ban
Australia´s four biggest banks may cut borrowing costs by as much as 40 percent selling covered bonds after European lenders pushed sales of the asset-backed debt to a record. Westpac Banking Corp., Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. may be able to issue three-year covered bonds priced to yield about 50 basis points more than the bank bill swap rate, less than the 85 basis-point spread on senior debt, according to Royal Bank of Scotland Group Plc. Moody´s Investors Service estimates savings of 20 percent. Covered bonds are "essential weapons as banks look for cheaper and more diversified sources of funding," John Manning, a credit analyst at RBS in Sydney, said in a telephone interview. Even when global credit markets seized up, European banks "had good access to covered bond markets and were able to access the funding they required at quite commercially acceptable rates," he said. The Australian government will amend the law to let financiers issue the securities for the first time, Treasurer Wayne Swan said Dec. 12 as he announced an overhaul package aimed at spurring competition in the banking industry. Global sales of the securities, including Pfandbriefe, as they are known in Germany, have surged 33 percent to a record 329 billion euros ($435 billion) in 2010, according to data compiled by Bloomberg, as investors seek the relative safety of debt backed by both the issuer and an underlying pool of assets.
2. Japanese Stocks Fluctuate; Exporters Retreat on Yen, Inpex Climbs on Oil
Japanese stocks fluctuated as the yen strengthened against the dollar, reducing the outlook for overseas earnings, while oil producers advanced. Nissan Motor Co., a carmaker that counts North America as its biggest market, slid 0.5 percent. Fanuc Corp., a maker of industrial robots which earns about 80 percent of its revenue outside Japan, dropped 0.6 percent. Inpex Corp., Japan´s No. 1 oil explorer, advanced 0.6 percent after oil prices increased yesterday. Olympus Corp., an optical-equipment maker, climbed 1.9 percent after Deutsche Bank AG recommended the stock. Prime Minister Naoto Kan´s call for a corporate tax cut helped support the market. The Nikkei 225 Stock Average fell 0.1 percent to 10,288.05 as of 9:15 a.m. in Tokyo. The broader Topix index rose 0.1 percent to 897.93 with about eight stocks advancing for every five that declined. "The yen´s appreciation will weigh on exporters," said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. "A tax cut would be positive for Japanese companies and expectations for corporate earnings will increase. This should support the market."
3. Tankan Points to Contraction as Bond Market Signals Recovery: Japan Credit
Japanese bond yields are rising the most since June 2008 as traders look toward faster global growth just when the nation´s economy is showing signs of starting to contract. The Bank of Japan´s December Tankan report may show an index of sentiment among large manufacturers slid to 3, from 8 in September, according to the median forecast of 20 economists in a Bloomberg News survey before tomorrow´s announcement. Data for October showed industrial output fell by the most since February 2009, export growth slowed and the jobless rate rose. At the same time, three-month euroyen rates for September delivery, which indicate investor expectations for interest rates, touched 0.42 percent on Dec. 9, the most since April, and 10-year government bond yields have risen to 1.24 percent from 0.93 percent on Sept. 30. The mismatch shows growing conflict between investors dumping bonds and analysts and executives concerned that Japan´s year-long recovery may be ending. "There´s no evidence that Japan´s economy is gaining strong momentum at the moment," said Jun Fukashiro, who helps oversee about $18 billion as chief fund manager at Toyota Asset Management Co. "The current wave of selling in Japan´s short- term market can´t be justified as deflation is persisting and corporate sentiment is starting to dwindle."
4. Pimco's Gross Purchases Shares of Five Municipal-Bond Funds Run by Firm
Bill Gross, the co-chief investment officer of Pacific Investment Management Co., spent $4.4 million of his own money this month to purchase shares of five municipal-bond funds run by his firm after tax-exempt debt tumbled. Gross, 66, who manages the world´s biggest bond fund at Pimco, has more than doubled his holdings of the firm´s closed- end municipal bond funds, according to Securities and Exchange Commission data. He bought about 451,000 shares of Pimco municipal bond funds in December, bringing his total holdings to about 878,000 shares. The municipal bond market has dropped in the past two months due to a jump in new bond issuance and rising Treasury rates. Tax-free holdings lost 2.29 percent in November, the third consecutive monthly slide and the longest since 2004, according to the Bank of America Merrill Lynch Municipal Master Index, which accounts for price changes and interest income. "Bill Gross´s leadership in being a buyer is notable as it reflects his optimism about a recovery in the underlying fundamentals of municipal bonds," said Cecilia Gondor, an analyst at Thomas J. Herzfeld Advisors Inc. in Miami, in a telephone interview.
5. Air New Zealand Is in Talks to Sell Lie-Flat Coach Seats to Other Carriers
Air New Zealand Ltd. said it´s in talks to sell its lie-flat economy-class seat technology to other carriers ahead of the delivery of the first plane fitted with the new units. The carrier is "hopeful" it will be able to license out the system, which it developed, Chief Executive Officer Rob Fyfe told reporters yesterday in Queenstown, New Zealand, where the Star Alliance is holding a meeting. He declined to elaborate further on the talks. Air New Zealand will next week receive the first Boeing Co. 777 fitted with the SkyCouch system, which enables three coach- class seats to be converted into a lie-flat bed. The airline is rolling out the new product and seeking to form a venture with Virgin Blue Holdings Ltd. to fend off competition from Qantas Airways Ltd. and Emirates Airline. Bookings for the SkyCouch are in line with traditional seats, even though the new product can only be booked through the Auckland-based company´s website, which accounts for less than half of total sales, Fyfe said.
6. AGL Energy Slumps After Failing in Bid to Buy New South Wales Power Assets
AGL Energy Ltd., Australia´s largest electricity retailer, fell the most in almost two years in Sydney after saying its bids to buy power assets from the New South Wales government failed. The power and gas provider declined as much as 4.7 percent to A$15.11, the most since Jan. 23, 2009, while the benchmark S&P/ASX 200 Index was little changed. The shares traded at A$15.15 at 10:32 a.m. local time. AGL said today it plans to build a new gas-fired power plant in New South Wales as part of an alternative strategy amid reports that Origin Energy Ltd. and TRUenergy Holdings Pty will buy the key units the state put up for sale. New South Wales may raise as much as A$8 billion ($8 billion) selling assets, including power retailers EnergyAustralia, Country Energy and Integral Energy, according to Citigroup Inc. "AGL has said it would only bid for assets at prices that achieved the required returns for shareholders," the Sydney- based company said in a statement. "AGL´s bids for assets were at prices consistent with this principle."
7. Lehman Creditors, Paulson Said to Mull Filing Rival Payout Plan This Week
Lehman Brothers Holdings Inc. creditors including hedge fund Paulson & Co. are mulling a payout plan that would share an estimated $57.5 billion more equally than the defunct firm´s proposals, according to a person familiar with the matter. The competing plan may be filed as early as this week, said a second person familiar with the matter. Lehman shares rose as much as 4 percent on the news. A group including New York-based Paulson, which has about $33 billion in hedge funds, and the California Public Employees´ Retirement System, the nation´s largest public pension fund, previously faulted Lehman´s proposals in filings in U.S. Bankruptcy Court in Manhattan. Under Lehman Chief Executive Officer Bryan Marsal´s original plan filed in March, payouts would range from about 15 cents on the dollar to 44 cents. Senior bondholders would get 17.4 cents, some commercial paper holders would receive 44.2 cents, and the firm´s Lehman Brothers Special Finance unit would pay 24.1 cents. Derivatives creditors of LBSF have included Goldman Sachs Group Inc., Morgan Stanley, Credit Suisse Group AG, Deutsche Bank AG and Bank of America Corp., according to court filings.
8. Pakistan Central Bank Chief `Worried' Rate Increases May Hurt Investment
Pakistan´s inflation-fueling government borrowing is forcing the central bank to raise interest rates, "crowding out" investment and undermining economic growth, Governor Shahid Kardar said. "I am worried about the growth aspect, what is going to happen to the private sector," Kardar, 58, said in Karachi yesterday in his first interview since taking charge in September. "We need 8 percent to 10 percent growth just to absorb the annual increase in the labor force." The last time Pakistan´s economy grew at more than 8 percent pace was in 2005, and a failure to generate jobs for the two million people entering the nation´s labor force each year makes the country a recruiting ground for Taliban militants, analysts said. Kardar said narrowing the budget deficit will help ease borrowing costs. "It´s absolutely critical that we get back to a fast growth path," said Nasim Beg, who manages the equivalent of $170 million in stocks and bonds as chief executive at Arif Habib Investments Ltd. in Karachi. "If we don´t, we are headed for serious unrest. No one in the world would like to see us immerse into financial chaos."
9. Irish, Portugal Bonds Outpace Peers as ECB Hastens Purchases: Euro Credit
European Central Bank purchases ensured Irish and Portuguese bonds beat their euro-region peers this month even as Deutsche Bank AG predicted Portugal will be the next country forced to seek aid. Irish bonds handed investors a 6.9 percent return since the end of November, trimming losses this year to 10.3 percent. Portuguese debt advanced 3.7 percent, compared with a gain of 1 percent for Spanish securities and 1.04 percent for Italian bonds. Investors lost money on AAA rated German and French debt, according to data compiled by Bloomberg and the European Federation of Financial Analysts Societies. "The outperformance of Irish and Portuguese bonds was probably pretty much down to reported aggressive buying from the ECB," said Mohit Kumar, a fixed-income strategist at Deutsche Bank AG in London. "I don´t see the improvement in spreads as a turning point. The bigger picture of the debt crisis, especially for Portugal, hasn´t changed." Investors are demanding less additional yield to hold Irish and Portuguese debt than German bunds, and those premiums have dropped more than for Italy or Spain. The Irish 10-year yield spread to German bunds of equivalent maturity narrowed to 512 basis points from 616 at the start of the month, while the Spanish spread declined just 3 basis points to 248.
10.Boston Scientific Said to Abandon Sale of Pain-Management Unit Over Price
Boston Scientific Corp. has halted efforts to sell its pain-management business after disagreements over the value of the unit, said four people familiar with the matter. Boston Scientific, based in Natick, Massachusetts, tried for several months to sell its neuromodulation business and was seeking from $1.5 billion to $2 billion for it, said the people, who declined to be named because the talks were private. Boston Scientific halted the process a few weeks ago and is unlikely to pursue a sale of the unit, one person said. Johnson & Johnson, the world´s largest health products company, explored a purchase of the pain unit for a little more than $1 billion and decided not to proceed, said two of the people. Other interested parties were willing to pay from $1 billion to $1.5 billion, three people said. Boston Scientific spent most of 2010 seeking buyers for the pain unit and its stroke-device business. Stryker Corp., the maker of artificial hips and knees based in Kalamazoo, Michigan, agreed Oct. 28 to buy the stroke-device unit for about $1.5 billion. At the time, Boston Scientific anticipated completing the pain-management sale within a few weeks, said three people familiar with the matter. Bank of America Merrill Lynch advised Boston Scientific on both processes.
11.Naspers Scours Emerging Markets to Replicate Success With Tencent Stake
Naspers Ltd., whose $32 million bet on Tencent Holdings Ltd. has swelled in value to more than $14 billion, aims to replicate that success by scouring emerging markets where the two companies are jointly the biggest Internet investors. Naspers, South Africa´s biggest media company, and Shenzhen-based Tencent jointly spent $688 million this year for a stake in Mail.ru Group Ltd., the Russian e-mail company that owns parts of Facebook Inc. Tencent has also followed Naspers in investments in India and Thailand, and said it´s considering further opportunities with its biggest shareholder. The alliance combines Naspers´s experience in investing overseas with the financial muscle behind Tencent´s 637 million user accounts as they search for budding dot-coms. That may give them an edge for their next purchase in the fastest-growing regions of the worldwide Web as Google Inc., the world´s most acquisitive Internet company, focuses on U.S. acquisitions. "Naspers has been very successful for a long time investing in markets that established western investors have ignored," said Bill Bishop, a Beijing-based independent media consultant. "Naspers created on its own an incredibly powerful portfolio across the developing world that fits well with Tencent´s own plans for going out of China."
12.Foreclosed U.S. Home Sellers Target Australians as Currency Reaches Parity
Vincent Selleck, whose Sydney-based 888 U.S. Real Estate started finding foreclosed U.S. homes a year ago for Australian investors, received almost half of all inquiries in the last two months. "We´ve been swamped since the Australian dollar reached parity with the U.S. dollar," said Selleck, 52, who handled 1,300 queries in the last 12 months, more than 530 of them in the past two. "At the beginning, people were quite skeptical. In the past two months, the spike we´ve seen is incredible." Selleck is among a growing number of real estate agents who have set up to lure Australians -- who are armed with a currency that surpassed the U.S. dollar in October for the first time since 1982 -- to buy in the U.S., where an average home costs 62 percent less than its local equivalent. Morgan Stanley estimates about 6.5 million U.S. homes face repossession, on top of the 2.5 million that have been seized since 2005. The median U.S. home price has declined 26 percent since a June 2007 peak to $170,500, according to data from Washington- based National Association of Realtors. The average house in Australia´s eight capital cities cost A$460,000 ($453,000) in the September quarter, according to RP Data, a Brisbane-based property researcher.
For the complete stories summarized here, and for more of the day's top news, see TOP <Go>.