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Crypto lending unit of Genesis files for U.S. bankruptcy

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Jan 20 (Reuters) – The lending unit of crypto firm Genesis filed for U.S. bankruptcy protection on Thursday, owing creditors at least $3.4 billion, after being toppled by a market rout along with the likes of exchange FTX and lender BlockFi.

Genesis Global Capital, one of the largest crypto lenders, froze customer redemptions on Nov. 16 after the collapse of major exchange FTX sent shockwaves through the crypto asset industry, fuelling concern that other companies could implode.

Genesis is owned by venture capital firm Digital Currency Group (DCG).

Its bankruptcy filing is the latest in a string of crypto failures triggered by a market collapse that wiped about $1.3 trillion off the value of crypto tokens last year. While bitcoin has rallied so far in 2023, the impact of the market collapse has continued to hit companies in the highly interconnected sector.

The bankruptcy “doesn’t come as a shock to the markets,” said Ivan Kachkovski, currency and crypto strategist at UBS. “It remains to be seen if the chain effect would go on.”

“However, given that the funds have already been frozen for over two months and no other large crypto company reported an associated weakness, it’s likely that the contagion would be limited.”

Genesis’ lending unit said it had both assets and liabilities in the range of $1 billion to $10 billion, and estimated it had more than 100,000 creditors in its filing with the U.S. Bankruptcy Court for the Southern District of New York.

Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit Genesis Asia Pacific.

Genesis Global Holdco said in a statement that it would contemplate a potential sale, or a stock-related transaction, to pay creditors, and that it had $150 million in cash to support the restructuring.

It added that Genesis’ derivatives and spot trading, broker dealer and custody businesses were not part of the bankruptcy process, and would continue their client trading operations.

CREDITORS’ CLAIMS

Genesis owes its 50 biggest creditors $3.4 billion, according to Reuters’ calculations from the bankruptcy filing. Its largest creditor is crypto exchange Gemini, which it owes $765.9 million. Gemini was founded by the identical twin cryptocurrency pioneers Cameron and Tyler Winklevoss.

Genesis was already locked in a dispute with Gemini over a crypto lending product called Earn that the two firms jointly offered to Gemini customers.

The Winklevoss twins have said Genesis owed more than $900 million to some 340,000 Earn investors. On Jan. 10, Cameron Winklevoss called for the removal of Barry Silbert as the chief executive of Digital Currency Group.

Representations of cryptocurrencies are seen in front of displayed decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration

About an hour after the bankruptcy filing, Cameron Winklevoss tweeted that Silbert and Digital Currency Group continued to deny creditors a fair deal.

“Unless Barry (Silbert) and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” Winklevoss said in his tweet thread.

DCG did not immediately respond to a Reuters request for comment on the tweets.

Amsterdam-based crypto exchange Bitvavo, said in December it was trying to recover 280 million euros ($302.93 million) which it had lent to Genesis.

Bitvavo said in a blog post on Friday that talks on the repayment “have not yet led to an overall agreement that works for all parties concerned” and that it would continue to negotiate.

The bankruptcy filing “brings the process of negotiations to calmer waters,” Bitvavo said.

LENDING BUSINESS

Genesis brokered digital assets for financial institutions such as hedge funds and asset managers and had almost $3 billion in total active loans at the end of the third quarter, down from $11.1 billion a year earlier, according to its website.

Last year, Genesis extended $130.6 billion in crypto loans and traded $116.5 billion in assets, according to its website.

Its two biggest borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company closely affiliated with FTX, a source told Reuters. Both are in bankruptcy proceedings.

Three Arrows debt to Genesis was assumed by its parent company Digital Currency Group (DCG), which then filed a claim against Three Arrows. DCG’s portfolio companies also include crypto asset manager Grayscale and news service CoinDesk.

Crypto lenders, which acted as the de facto banks, boomed during the pandemic. But unlike traditional banks, they are not required to hold capital cushions. Earlier this year, a shortfall of collateral forced some lenders – and their customers – to shoulder large losses.

($1 = 0.9243 euros)

Reporting by Tom Hals in Wilmington, Delaware, Akanksha Khushi, and Elizabeth Howcroft in London; Editing by Lananh Nguyen, Clarence Fernandez, Kim Coghill, Ira Iosebashvili and Sharon Singleton

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U.S. Trustee files objection to FTX’s planned asset sales

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Jan 7 (Reuters) – A U.S. Trustee filed an objection on Saturday to plans by bankrupt crypto exchange FTX to sell its digital currency futures and clearinghouse LedgerX, as well as units in Japan and Europe, according to a court filing.

FTX filed for bankruptcy protection in November and said last month it planned to sell its LedgerX, Embed, FTX Japan and FTX Europe businesses. On Tuesday, FTX founder Sam Bankman-Fried pleaded not guilty to criminal charges that he cheated investors and caused billions of dollars in losses, in what prosecutors have called an “epic” fraud.

The filing by U.S. Trustee Andrew Vara called for an independent investigation before the sale of the units, arguing that the companies may have information related to FTX’s bankruptcy.

“The sale of potentially valuable causes of action against the Debtors’ directors, officers and employees, or any other person or entity, should not be permitted until there has been a full and independent investigation into all persons and entities that may have been involved in any malfeasance, negligence or other actionable conduct,” the filing said.

FTX said in a court filing last month that the companies it planned to sell are relatively independent from the broader FTX group, and that each has its own segregated customer accounts and separate management teams.

Reporting by Anirudh Saligrama in Bengaluru
Editing by Matthew Lewis

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Business

Exclusive: Behind FTX’s fall, battling billionaires and a failed bid to save crypto

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Nov 10 (Reuters) – (This story contains language some readers may find offensive in paragraph 2)

On Tuesday morning, Sam Bankman-Fried, owner of cryptocurrency exchange FTX, caught his employees off-guard with a somber message.

“I’m sorry,” he told them. “I fucked up.”

The reason for the mea culpa: His announcement half an hour earlier that FTX’s arch-rival, Binance, planned to mount a shock takeover of its main trading platform to save it from a “liquidity crunch.” Binance founder Changpeng “CZ” Zhao, whom the billionaire had accused of sabotage, would now be his White Knight.

The seeds of FTX’s downfall were sown months earlier, stemming from mistakes Bankman-Fried made after he stepped in to save other crypto firms as the crypto market collapsed amid rising interest rates, according to interviews with several people close to Bankman-Fried and communications from both companies that have not been previously reported.

Some of those deals involving Bankman-Fried’s trading firm, Alameda Research, led to a series of losses that eventually became his undoing, according to three people familiar with the company’s operations.

The interviews and messages also shine new light on the bitter rivalry between the two billionaires, who in recent months competed for market share and publicly accused each other of seeking to hurt the one another’s businesses. It culminated on Wednesday, with Binance pulling out of its deal and throwing FTX’s future into uncertainty.

Stuck without a buyer, Bankman-Fried was now searching for alternative backers, two people close to him said. After Binance pulled out, he told FTX staff in a message that Binance had not previously told them of any reservations about the deal and he was “exploring all options.”

Neither Binance nor FTX responded to requests for comment. Bankman-Fried told Reuters on Tuesday that “I’ll probably be too swamped” to do interviews. He didn’t respond to further messages.

Binance earlier said it decided to pull out of the deal as a result of its due diligence on FTX and news reports about U.S. investigations into the company.

Zhao’s unveiling of the planned takeover capped a stunning reversal for Bankman-Fried. The 30-year-old had set up Bahamas-based FTX in 2019 and led it to become one of the largest exchanges, accumulating a near $17 billion fortune.

News of the liquidity crunch at FTX – valued in January at $32 billion with investors including SoftBank and BlackRock – sent reverberations through the crypto world.

The price of major coins plummeted, with bitcoin slumping to its lowest in almost two years, heaping further pain on a sector whose value has fallen about two-thirds this year as central banks tightened credit.

By ditching the deal, Binance had also avoided the regulatory scrutiny that would likely have accompanied the takeover, which Zhao had flagged as a likelihood in a memo to employees that he posted on Twitter.

Financial regulators around the world have issued warnings about Binance for operating without a license or violating money laundering laws. The U.S. Justice Department is investigating Binance for possible money laundering and criminal sanctions violations. Reuters reported last month that Binance had helped Iranian firms trade $8 billion since 2018 despite U.S. sanctions, part of a series of articles this year by the news agency on the exchange’s financial crime compliance.

RELATIONSHIP SOURS

Zhao and Bankman-Fried’s relationship began in 2019. Six months after FTX’s launch, Zhao bought 20% of the exchange for about $100 million, a person with direct knowledge of the deal said. At the time, Binance said the investment was “aimed to grow the crypto economy together.”

Within 18 months, however, their relationship had soured.

FTX had grown rapidly and Zhao now viewed it as a genuine competitor with global aspirations, former Binance employees said.

When FTX in May 2021 applied for a license in Gibraltar for a subsidiary, it had to submit information about its major shareholders, but Binance stonewalled FTX’s requests for help, according to messages and emails between the exchanges seen by Reuters.

Between May and July, FTX lawyers and advisors wrote to Binance at least 20 times for details on Zhao’s sources of wealth, banking relationships, and ownership of Binance, the messages show.

In June 2021, however, an FTX lawyer told Binance’s chief financial officer that Binance wasn’t “engaging with us properly” and they risked “severely disrupting an important project for us.” A Binance legal officer responded to FTX to say she was trying to get a response from Zhao’s personal assistant, but the requested information was “too general” and they may not provide everything.

By July of that year, Bankman-Fried had tired of waiting. He bought back Zhao’s stake in FTX for about $2 billion, the person with direct knowledge of the deal said. Two months later, with Binance no longer involved, Gibraltar’s regulator granted FTX a license.

That sum was paid to Binance, in part, in FTX’s own coin, FTT, Zhao said last Sunday – a holding he would later order Binance to sell, precipitating the crisis at FTX.

Reuters Graphics

“TRYING TO GO AFTER US”

This May and June, Bankman-Fried’s trading firm, Alameda Research, suffered a series of losses from deals, according to three people familiar with its operations. These included a $500-million loan agreement with failed crypto lender Voyager Digital, two of the people said. Voyager filed for bankruptcy protection the following month, with FTX’s U.S. arm paying $1.4 billion for its assets in a September auction. Reuters could not determine the full extent of losses Alameda suffered.

Seeking to prop up Alameda, which held almost $15 billion in assets, Bankman-Fried transferred at least $4 billion in FTX funds, secured by assets including FTT and shares in trading platform Robinhood Markets Inc, the people said. Alameda had disclosed a 7.6% share in Robinhood that May.

A portion of these FTX funds were customer deposits, two of the people said, though Reuters could not determine their value.

Bankman-Fried did not tell other FTX executives about the move to prop up Alameda, the people said, adding he was afraid that it could leak.

On Nov. 2, however, a report by news outlet CoinDesk detailed a leaked balance sheet that allegedly showed that much of Alameda’s $14.6 billion in assets were held in FTT. Alameda CEO Caroline Ellison tweeted that the balance sheet was merely for a “subset of our corporate entities,” with over $10 billion of assets not reflected. Ellison did not return requests for comment.

That failed to douse growing speculation over what Alameda’s financial health might mean for FTX.

Then Zhao said Binance would sell its entire share in the token, FTT, worth at least $580 million, “due to recent revelations that have come to light.” The token’s price collapsed 80% over the next two days and a torrent of outflows from the exchange gathered pace, blockchain data show.

WITHDRAWAL SURGE

In his message to staff this week, Bankman-Fried said the firm saw a “giant withdrawal surge” as users rushed to withdraw $6 billion in crypto tokens from FTX in just 72 hours. Daily withdrawals normally totaled tens of millions of dollars, Bankman-Fried told his employees.

After Zhao’s tweet that Binance would sell its FTT holding, Bankman-Fried projected confidence that FTX would weather its rival’s attacks. He told staff on Slack that withdrawals were “not shockingly, way up,” but they were able to process the requests.

“We’re chugging along,” he wrote. “Obviously, Binance is trying to go after us. So be it.”

But by Monday the situation became dire. Unable to quickly find a backer, or sell other illiquid assets short-notice, Bankman-Fried contacted Zhao, according to a person familiar with the call. Zhao later confirmed that Bankman-Fried had called him.

Bankman-Fried signed a non-binding letter of intent for Binance to buy FTX’s non-U.S. assets. This valued FTX at several billion dollars, two people familiar with the letter said – enough for the exchange to cover all withdrawal requests but a fraction of its January valuation.

Zhao announced the potential deal several hours later, with Bankman-Fried tweeting “a huge thank you to CZ.”

“Let’s live to fight another day,” Bankman-Fried told staff on Slack.

His employees were shocked. Even executives had been in the dark about the Alameda shortfall and takeover plan until Bankman-Fried informed them that morning, two people working with him said. Both people said they had been unaware that the withdrawal situation was so serious.

Then came Binance’s announcement on Wednesday scrapping the takeover. “The issues are beyond our control or ability to help,” Binance said. Zhao tweeted “Sad day. Tried,” with a crying emoji.

Reporting by Angus Berwick in New York and Tom Wilson in London; additional reporting by Hannah Lang in Washington and Elizabeth Howcroft in London; Editing by Paritosh Bansal and Chris Sanders

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Musk sells Tesla shares worth $3.95 bln days after Twitter takeover

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Nov 8 (Reuters) – Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk has sold $3.95 billion worth of shares in the electric vehicle maker, according to U.S. regulatory filings, days after he completed his purchase of Twitter Inc for $44 billion.

Musk, whose net worth dropped below $200 billion after investors dumped Tesla stock, unloaded 19.5 million shares between Friday and Tuesday, filings published by the U.S. Securities and Exchange Commission showed.

The latest share sale leaves Musk with a stake of roughly 14% in Tesla, according to a Reuters calculation.

The purpose of the sale was not disclosed.

The latest sale dump comes as analysts had widely expected Musk to sell additional Tesla shares to finance the Twitter deal.

Musk, the world’s richest man, had asserted in April he was done selling Tesla stock. Still, he went on to sell another $6.9 billion worth Tesla shares in August and said the sale was conducted to pay for the social media platform.

Musk, the world’s richest man, had about $20 billion in cash after selling a part of his stake in Tesla, including the sales made last year. This would have required him to raise an additional $2 billion to $3 billion to finance the takeover, according to a Reuters calculation.

Tesla has lost nearly half its market value and Musk’s net worth slumped by $70 billion ever since he bid for Twitter in April.

Twitter and Tesla did not immediately respond to Reuters’ requests for comment.

Musk took over Twitter last month and has engaged in drastic measures including sacking half the staff and a plan to charge for blue check verification marks.

The billionaire pledged to provide $46.5 billion in equity and debt financing for the acquisition, which covered the $44 billion price tag and the closing costs. Banks, including Morgan Stanley (MS.N) and Bank of America Corp (BAC.N), committed to provide $13 billion in debt financing.

Musk’s $33.5 billion equity commitment included his 9.6% Twitter stake, which is worth $4 billion, and the $7.1 billion he had secured from equity investors, including Oracle Corp (ORCL.N) co-founder Larry Ellison and Saudi Prince Alwaleed bin Talal.

Musk had tried to walk away from the deal in May, alleging that Twitter understated the number of bot and spam accounts on the platform. This led to a series of lawsuits between the two parties.

Reporting by Akriti Sharma in Bengaluru and Hyunjoo Jin in San Francisco; Editing by Sherry Jacob-Phillips

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Canada orders three Chinese firms to exit lithium mining

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  • China says Canada breaks trade and market rules
  • Chinese companies’ shares fall
  • Companies say do not expect major impact on performance

OTTAWA/BEIJING, Nov 2 (Reuters) – Canada ordered three Chinese companies on Wednesday to divest their investments in Canadian critical minerals, citing national security.

China in response accused Ottawa of using national security as a pretext and said the divestment order broke international commerce and market rules.

As countries compete to shore up reserves of materials needed for a transition to a cleaner economy, the news pushed down the Chinese companies’ shares on Thursday, although they said in stock exchange filings they did not expect a major impact on their performance.

The three ordered to divest their investments are Sinomine (Hong Kong) Rare Metals Resources Co Ltd, Chengze Lithium International Ltd, also based in Hong Kong, and Zangge Mining Investment (Chengdu) Co Ltd.

The Canadian government ordered the divestiture after “rigorous scrutiny” of foreign firms by Canada’s national security and intelligence community, Industry Minister Francois-Philippe Champagne said in a statement.

“While Canada continues to welcome foreign direct investment, we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad,” Champagne said.

Sinomine was asked to sell its investment in Power Metals Corp (PWM.V), Chengze Lithium was asked to divest its investment in Lithium Chile Inc (LITH.V) and Zangge Mining required to exit Ultra Lithium Inc (ULT.V).

‘UNREASONABLE’

Chinese foreign ministry spokesperson Zhao Lijian said the Canadian government was using national security as a pretext to block normal cooperation between Chinese and Canadian companies and was damaging global supply chains.

“China urges Canada to stop the unreasonably targeting Chinese companies (in Canada) and provide (them) with a fair, impartial and non-discriminatory business environment,” Zhao told a regular news briefing, adding that Beijing would resolutely defend the legitimate rights and interests of Chinese companies

Spot lithium prices have risen by more than 200% in the last year, driven by supply constraints that are expected to endure.

Rystad Energy forcast primary lithium minerals supply to be 8.5% short of the total lithium demand 2025, compared with about 10% short of demand this year.

“The latest attitude from Ottawa underscores the global competition of critical battery minerals in light of projected EV battery demand boom,” Susan Zou, a senior analyst at Rystad Energy, said of Canada’s decision.

The share price of Sinomine Resources fell 7.8% to 86.74 yuan ($11.86) on Thursday, while Chengxin’s share price fell by as much as 4% but closed at 0.7% higher at 45.65 yuan. Zangge Mining’s share price slid 3.7% during the day before edging 1.1% up to close at 28.96 yuan.

Last week, Ottawa said it must build a resilient critical minerals supply chain with like-minded partners, as it outlined rules meant to protect the country’s critical minerals sectors from foreign state-owned companies.

“The federal government is determined to work with Canadian businesses to attract foreign direct investments from partners that share our interests and values,” Champagne said.

Canada has large deposits of critical minerals such as nickel and cobalt essential for cleaner energy and other technologies. Demand for the minerals is projected to expand in the coming decades.

Earlier this year, countries including Britain, Canada and the United States established a partnership aimed at securing the supply of critical minerals as global demand for them rises.

($1 = 7.3163 Chinese yuan renminbi)

Reporting by Ismail Shakil in Ottawa and Siyi Liu in Beijing, additional reporting by Eduardo Baptista in Beijing
Editing by Chris Reese, Sandra Maler and Barbara Lewis

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Nissan takes $687 mln loss as sells Russian business for 1 euro

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  • Sale to Russian state-owned entity NAMI
  • Nissan has right to buy back business within six years
  • Renault sees 331 mln euro hit to H2 net income from move

TOKYO, Oct 11 (Reuters) – Nissan Motor Co Ltd (7201.T) will hand over its business in Russia to a state-owned entity for 1 euro ($0.97), it said on Tuesday, taking a loss of around $687 million in the latest costly exit from the country by a global company.

The Japanese automaker transfer its shares in Nissan Manufacturing Russia LLC to state-owned NAMI, it said. The deal will give Nissan the right to buy back the business within six years, Russia’s industry and trade ministry said.

The deal makes Nissan the latest major company to leave Russia since Moscow sent tens of thousands of troops into Ukraine in February. It also mirrors a move by Nissan’s top shareholder, French automaker Renault (RENA.PA), which sold its majority stake in Russian carmaker Avtovaz (AVAZI_p.MM) to a Russian investor in May.

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The sale to NAMI will include Nissan’s production and research facilities in St Petersburg as well as its sales and marketing centre in Moscow, the ministry said.

Nissan said it expected an extraordinary loss of around 100 billion yen ($687 million), but maintained its earnings forecast for the financial year ending in March.

Renault, which owns 43% of Nissan, estimated the decision by its Japanese partner would lead to a 331 million euro hit to its net income for the second half of 2022.

Nissan had suspended production at its St. Petersburg plant in March due to supply chain disruptions. Since then, the company and its local unit had been monitoring the situation, it said. But there was “no visibility” of a change to the external environment, Nissan said, prompting it to decide to exit.

Junior alliance partner Mitsubishi Motors Corp (7211.T) is also considering exiting Russia, the Nikkei newspaper said. A spokesperson for Mitsubishi said nothing had been decided.

The exit comes as Nissan has embarked on a major shift in its relationship with Renault. The two said on Monday they were in talks about the future of their alliance, including Nissan considering investing in a new electric vehicle venture by Renault.

Those talks, which could prompt the biggest reset in the alliance since the 2018 arrest of long-time executive Carlos Ghosn, have also included the possibility of Renault selling some of its controlling stake in Nissan, two people with knowledge of the talks have told Reuters.

Renault reportedly sold its stake in Avtovaz for one rouble ($0.02).

The Nissan deal was “of great significance for the industry,” Russia’s Industry and Trade Minister Denis Manturov said in a statement.

($1 = 145.6200 yen)

($1 = 63.8500 roubles)

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Reporting by Gleb Stolyarov, Caleb Davis and Satoshi Sugiyama; Writing by Alexander Marrow and David Dolan; Editing by Louise Heavens and Mark Potter

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Indian billionaire Adani seeks to control NDTV; media group says move without consent

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  • India’s richest man, Adani, seeks to expand media business
  • NDTV says Adani unit moved without its consent
  • Adani takeover may not be friendly -legal expert
  • Deal to buy NDTV could heat up competition among billionaires

BENGALURU, Aug 23 (Reuters) – Indian billionaire Gautam Adani’s conglomerate on Tuesday said it seeks to control a majority stake in the popular New Delhi Television (NDTV.NS) (NDTV), a move the TV news group said was executed without its consent.

A unit of the Adani Group said it had used financial rights in a bid to purchase a 29.18% stake in NDTV, laying out plans for a subsequent open offer for a stake of another 26% in line with Indian regulations.

Hours after the announcement, NDTV issued a statement saying the move by the Adani Group “was executed without any input from, conversation with, or consent of the NDTV founders.”

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One of the nation’s most popular news organisations, NDTV is regarded as one of the few media groups that often takes a critical view of the ruling administration’s policies. It operates three national channels: NDTV 24×7 in English, NDTV India in Hindi and a business news channel. read more

“From NDTV’s statements, it seems this may not be a friendly takeover which generally is as per agreed terms and mechanism, and in fact, may end up being a hostile takeover,” said Dipti Lavya Swain, founder and managing partner, DLS Law Offices. He is not connected to the situation.

Adani Group did not immediately respond to a request for comment on NDTV’s statement.

While Adani did not disclose financial details of the group’s planned 29.18% stake purchase, it said its subsequent open offer would be for 294 Indian rupees ($3.68) per NDTV share, which would be worth 4.93 billion rupees.

That open offer price is at a 20.5% discount to NDTV’s Tuesday’s close of 369.75 rupees.

NDTV was founded by one of India’s most famous TV news personalities, Prannoy Roy, and his wife in 1988. Other than TV news channels, the group also runs online news websites.

On Monday, NDTV said in a stock exchange disclosure that Radhika and Prannoy Roy were not in discussions with any entity for a change in ownership or a divestment of their stake in NDTV.

They individually and through their company continue to hold 61.45% of NDTV, the statement said.

BATTLE OF BILLIONAIRES

In March, Adani, who is Asia’s richest man, made his first bet in the media sector by taking a minority stake in local digital business news platform Quintillion. But the proposed NDTV transaction marks Adani’s highest-profile media bet to date.

“NDTV is the most suitable broadcast and digital platform to deliver on our vision,” Adani Group executive Sanjay Pugalia said in the statement.

The move could set the stage for Adani to face off in the sector with fellow tycoon Mukesh Ambani.

Ambani, chairman of oil-to-telecom conglomerate Reliance Industries (RELI.NS), controls Network18 (NEFI.NS) which runs business channels including CNBC TV18.

Adani Group has several publicly listed companies in sectors including airports and ports, power generation and transmission, coal and gas trading.

India’s TV news industry is worth $351 million, Elara Capital said in a note, adding that 70% of this market was dominated by Hindi news. Other than Ambani, the other big player is Times Group which runs many news channels and newspapers.

Elara Capital said Adani’s planned bid to control NDTV was at “very premium valuations” but added “this move will enable a large corporate house backing for a news channel.”

Adani Group said NDTV had recorded a revenue of 4.21 billion rupees and a net profit of 850 million rupees in the fiscal year that ended in March 2022, with negligible debt.

Fitch Group’s debt research unit CreditSights on Tuesday published a report that said Adani Group is “deeply overleveraged” and that its many investments in capital-intensive businesses could pose long-term risks to investors. read more

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Reporting by Nallur Sethuraman, Chris Thomas in Bengaluru and M. Sriram and Shilpa Jamkhandikar in Mumbai
Writing by Sudarshan Varadhan and Aditya Kalra
Editing by Krishna Chandra Eluri, Mike Harrison and Matthew Lewis

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SoftBank’s Alibaba sale could end breakup taboo

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Japan’s SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon

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LONDON, Aug 10 (Reuters Breakingviews) – Masayoshi Son is thinking the unthinkable at SoftBank Group (9984.T). His $63 billion technology and telecom empire will slash its stake in Alibaba (9988.HK) to 15% from 24%. The long-overdue shrinkage offers a blueprint for what to do next: break up the conglomerate.

This year’s tech selloff has punished the Japanese holding company, pushing it to a $23 billion net loss last quarter read more . Son’s new watchword is discipline: His Vision Funds, effectively giant venture-capital vehicles, invested just $600 million in the three-month stretch ending in June, compared with some $21 billion a year earlier.

The same focus on cash preservation seems to have informed the decision unveiled on Wednesday to cut the Alibaba holding, which has a totemic significance at SoftBank as one of the world’s most lucrative tech investments. Through derivatives deals with banks, Son could have retained the Alibaba stake by settling so-called prepaid forward contracts in cash. Instead, he handed over the shares. SoftBank is dramatically reducing its position to “eliminate concerns about future cash outflows”.

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It’s the sensible move. The Chinese e-commerce titan started by Jack Ma has lost roughly two-thirds of its value over the past two years amid Beijing’s broad tech crackdown, creating a massive distraction for SoftBank investors as Son tries to redirect attention to his stable of Vision Fund unicorns and other startups. The Alibaba holding, as of June 30, was worth $33 billion in net terms and accounted for more than one-fifth of SoftBank’s $160 billion gross asset value. Liquidating it entirely would help narrow SoftBank’s 55% discount to the theoretical sum of its parts.

The same can be said of selling down ownership of SoftBank’s eponymous Japanese mobile operator, which was worth $18 billion in June after deducting the parent company’s margin loan, and a $7 billion T-Mobile US (TMUS.O) holding. Spinning off chip designer Arm, rather than pursuing plans to list a small stake, would likewise simplify the group and lift its valuation. What’s left would be the Vision Funds, making SoftBank a way for public-market investors mainly to gain exposure to Son’s hodgepodge of private tech outfits.

It may not look so appealing under the current circumstances, but at least SoftBank would have a clear purpose. The Alibaba sale could be the first step in breaking some destructive taboos.

Follow @liamwardproud on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

CONTEXT NEWS

SoftBank Group on Aug. 10 said it would settle derivatives contracts held against its Alibaba stake by handing a chunk of the shares to banks. The move effectively cuts its stake in the Chinese e-commerce company to 14.6% from 23.7%.

The technology conglomerate controlled by billionaire Masayoshi Son said that settling the contracts early in the form of shares would “eliminate concerns about future cash outflows, and furthermore, reduce costs associated with these prepaid forward contracts”.

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Editing by Jeffrey Goldfarb and Amanda Gomez

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.



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Spirit ends sale to Frontier as JetBlue talks continue

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July 27 (Reuters) – Spirit Airlines Inc (SAVE.N) canceled its $2.7 billion sale to Frontier Group Holdings Inc (ULCC.O) on Wednesday after Spirit shareholders balked at supporting it, leaving JetBlue Airways Corp (JBLU.O) with an opening to clinch a deal.

The development, first reported by Reuters on Wednesday, came after Spirit pushed back a shareholder vote on the Frontier deal four times, hoping it could muster enough support. Spirit had earlier argued that antitrust regulators were unlikely to clear JetBlue’s $3.7 billion bid.

The outcome was a setback for Frontier and its chairman Bill Franke, who was instrumental in kicking off talks between the sides last year. Franke’s airline-focused buyout firm, Indigo Partners, is a major shareholder in Frontier.

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“While we are disappointed that Spirit Airlines shareholders failed to recognize the value and consumer potential inherent in our proposed combination, the Frontier board took a disciplined approach,” Franke said in a statement.

A Frontier-Spirit combination would have reshaped the domestic travel landscape and marked the most consequential U.S. airline industry merger since Alaska Air Group bought Virgin America Inc for $2.6 billion in 2016.

JetBlue sees Spirit as an opportunity to expand its domestic footprint at a time when the U.S. airline industry is dogged by labor and aircraft shortages.

A sale of Spirit to Frontier or JetBlue would create the fifth-largest U.S. airline. Negotiations between JetBlue and Spirit are progressing favorably and a deal is possible in the next few weeks, according to people familiar with the matter.

“We are pleased that the merger agreement with Frontier has been terminated and we are engaged in ongoing discussions with Spirit toward a consensual agreement as soon as possible,” JetBlue said in a statement.

But Spirit also could choose to remain independent.

ANTITRUST RISK

Spirit has expressed concern about JetBlue’s Northeast Alliance (NEA) partnership with American Airlines (AAL.O). The U.S. Justice Department filed an antitrust lawsuit against American and JetBlue in September seeking to end the alliance, saying it would lead to higher fares in busy airports in the U.S. Northeast.

JetBlue so far has refused to pull out of the alliance and instead offered other sweeteners like a higher breakup fee and route divestments.

Frontier shares rose 6.4% to close at $11.27 as investors expressed relief that the company exited what had become a bidding war for Spirit. Spirit shares rose 4% to $24.30, while JetBlue shares rose 3.6% to $8.35.

With the end of the proposed Spirit-Frontier tie-up, Spirit will pay Frontier $25 million for merger-related costs that it incurred. As per the terms of the deal, Spirit would owe Frontier an additional $69 million if it ends up striking a merger deal with JetBlue or any other competitor within the next 12 months.

“Now that Spirit Airlines has terminated the Frontier merger agreement, we hope that Frontier management will put aside its merger distraction and invest the same amount of resources and focus to improving conditions at their own airline,” said the Frontier pilots’ union, which is a subset of the Air Line Pilots Association (ALPA).

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Reporting by Anirban Sen and Greg Roumeliotis in New York, additional reporting by David Shepardson
Editing by Chizu Nomiyama, Will Dunham, Matthew Lewis and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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EXCLUSIVE Credit Suisse weighs options to strengthen capital – sources

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The logo of Swiss bank Credit Suisse is seen at its headquarters at the Paradeplatz square in Zurich, Switzerland October 1, 2019. REUTERS/Arnd Wiegmann/File Photo

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ZURICH, May 30 (Reuters) – Credit Suisse (CSGN.S) is in the early stages of weighing options to bolster its capital after a string of losses have eroded its financial buffers, two people with knowledge of the matter told Reuters.

The size of the increase would be likely to exceed 1 billion Swiss francs ($1.04 billion), but this has not yet been determined, said one of the people, who declined to be named because the deliberations are still internal.

The cash injection would help Switzerland’s second-biggest bank to recover from billions of losses in 2021 and a series of costly legal headaches.

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Selling shares to some of its major existing investors is the preferred option, but Credit Suisse has not ruled out tapping all shareholders, this person said.

A sale of a business, such as Credit Suisse’s asset management division, is also a possibility, the other person said. The bank had not yet decided on any potential action, they said. Any transaction was envisaged for the second half of this year.

“Credit Suisse is currently not considering raising additional equity capital,” the bank said in a statement.

“The Group is robustly capitalised with a CET1 ratio of 13.8% and a CET1 leverage ratio of 4.3%. Asset Management is an essential part of our group strategy presented last November, with four core divisions.”

The CET1 ratio is a key gauge of a bank’s financial strength.

DEBT DOWNGRADES

Credit Suisse is reeling from billions in losses racked up in 2021 via failed investments, plus the impact of multiple legal cases, including a Bermuda court case that could cost around $600 million. read more

The bank has been trying to reform its risk management culture and also turn the page on a series of scandals, which have prompted several waves of management shake-ups, abrupt departures, and internal and external investigations.

The bank’s shares have fallen by more than a fifth in the past year.

Fitch and Standard & Poors both downgraded their debt ratings for Credit Suisse this month. read more

One of the sources said Swiss financial watchdog FINMA’s annual assessment of big Swiss banks had marked Credit Suisse at 4, unchanged from last year, the lowest possible grade.

One of the watchdog’s main concerns was capitalisation at group level, this source said.

FINMA declined to comment.

The deliberations over a capital boost come only a year after the Swiss bank raised around 1.75 billion Swiss francs from investors via mandatory convertible notes. read more

In April, Credit Suisse had played down the need for fresh capital even as it reported a first-quarter loss that intensified its financial pain. read more

Credit Suisse executives said at the time capital could remain constrained over the next six months as the bank continues to make significant outlays towards compliance and risk, but a source familiar with the matter said a capital increase was not under consideration at the time.

The bank’s core capital ratio weakened to 13.8% at the end of the first quarter 2022 from 14.4% at the end of 2021.

But a new capital increase would bolster Credit Suisse’s balance sheet and also send a positive signal. If well-known investors provided the bank with new cash, this could be seen as a sign of confidence, one of the sources said.

($1 = 0.9572 Swiss francs)

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Reporting by Oliver Hirt. Editing by Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

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