Chris's Feed
Mar 4, 2011
via Breakingviews

Glencore story is striking but not yet compelling

By Chris Hughes
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — It feels like 2007 again over at Glencore towers in Baar. The Swiss commodities trader says earnings in the fourth quarter were $1.26 billion, just 3 percent below the quarterly average in the boom of four years ago. It looks auspicious for this year’s likely initial public offering. But the impressive financial performance isn’t in itself a guarantee that Glencore can get a float away at the $60 billion equity valuation being mooted in the market.

Feb 3, 2011
via Breakingviews

Technology is a two-edged political sword

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

By Chris Hughes

The conventional wisdom that modern revolutions are powered by the Internet and mobile phones faces a challenge. Vodafone and other mobile networks in Egypt have found themselves instruments of the state as much as of the people. Using powers that are surprisingly common in operating licenses, the authorities sent blanket text messages without attribution, possibly creating the impression that the operator was behind them. The messages, for example, urged customers to confront what were referred to as criminals and traitors, according to one website.

Jan 10, 2011
via Breakingviews

DuPont’s $6 bln Danisco bid looks safe

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

LONDON — M&A has resumed in 2011 with a textbook deal — DuPont’s $5.8 billion agreed cash offer for Danish enzymes group Danisco. Initially, the market got carried away with the transaction, pushing Danisco stock above the value of the U.S. chemical giant’s 665 crown-a-share offer. But expectations of a counterbid proved short lived.

Dec 20, 2010

London slides, again, because of Heathrow, again

By Chris Hughes

LONDON (Reuters Breakingviews) – London is sliding, again, because of Heathrow, again. The snow and ice in Europe is extreme but the situation at the region’s most important airport is still shocking. The logistical failings are bad, the customer service woeful — even for premium travellers. London must get a grip of its gateway to the global business community.

There were problems on Friday, before the snow hit in earnest. One British Airways flight with New York-bound financiers on board sat on the runway for four hours. Passengers were told that 45 planes needed de-icing, which could be done at a rate of only six to seven an hour. That was later revised two an hour. Some trucks then “ran out of fluid”. The passengers were shunted back — through passport control, even though the plane hadn’t left the ground — into a terminal full of confused travellers being told by a BA customer service rep to check the website. The internet connection, no joke here, was frozen.

Oct 6, 2010

Kerviel: the crime that really didn’t pay

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

By Chris Hughes

LONDON (Reuters Breakingviews) – French courts know the meaning of “crime doesn’t pay”. When Jerome Kerviel completes his three-year prison sentence for racking up massive derivatives losses at Societe Generale, he will face a demand to repay the 4.9 billion euros his trades cost the bank. Even with a book deal, a Hollywood movie spin-off and return to employment in the next trading boom, he stands no chance of clearing the debt. Barring a successful appeal, the affair has ruined him.

Jul 16, 2010
via Breakingviews

Goldman and BP suffer costly reputational hangover

It’s nearly over. Wall Street bank Goldman Sachs has settled fraud allegations with the U.S. Securities and Exchange Commission with a $550 million slap on the wrist. BP has shown it can halt the flow of oil from its bust well in the Gulf of Mexico, giving confidence to recent research that the leak could cost the UK oil group less than $30 billion. But shareholders have paid a far heavier price for these episodes than the quantifiable damage suggests. That deficit has one obvious explanation: the cost of reputational damage.

Take Goldman. Its shares rose only modestly on Thursday’s deal with the regulator, leaving its market capitalisation at $74.8 billion, 21 percent lower than its value on April 15, the last day before the SEC filed charges. Almost half of that is attributable to the fall in global equity markets, taking the MSCI World Index as a benchmark. After backing out the paltry fine, there is $9.7 billion of value destruction to explain — 11 percent of Goldman’s value adjusted for falling markets.
It’s a similar story at BP. The group is worth 77.6 billion pounds, 36 percent less than its value before the Gulf well blew on April 20. Adjust for the fall in global markets over the course of the spill, and back out 19 billion pounds for the latest estimate of the known costs of the clean up and compensation, and there’s still 16.1 billion pounds of value destruction to account for. That is 14 percent of BP’s adjusted market value.

Jun 14, 2010
via Breakingviews

BP escrow idea further muddies oily waters

BP escrow idea further muddies oily waters   Rationally speaking, the escrow idea is flawed. There should be no doubting BP’s intention to pay legitimate claims. Despite its other failings, the company has always had a “no quibble” attitude to this. Nor can there be any real doubt about its ability to pay — unless the U.S. administration creates massive new obligations that make bankruptcy loom larger.

Rationally speaking, the escrow idea is flawed. There should be no doubting BP’s intention to pay legitimate claims. Despite its other failings, the company has always had a “no quibble” attitude to this. Nor can there be any real doubt about its ability to pay — unless the U.S. administration creates massive new obligations that make bankruptcy loom larger.

Jun 8, 2010
via Breakingviews

Hayward should say he’ll leave BP post-spill

The moment has arrived for Tony Hayward to call time on his career at BP. The UK oil major’s chief executive clearly does not have the credibility with shareholders, regulators or consumers to continue in his role once the Gulf of Mexico crisis is over. BP, and Hayward’s own career prospects, will be better off if he admits this simple truth today.

Hayward has made too many slips since the tragic accident on the Deepwater Horizon rig on April 20. At the lower end of the scale, he was unwise to boast of the superlative scale of BP’s response as if to suggest the company was well prepared for the disaster. Worse were comments that he “wanted his life back”, and the suggestion that the spill was a drop in the ocean.

May 13, 2010
via Breakingviews

BP spill could soon put CEO’s job on the line

BP’s efforts to focus global attention on its all-out response to the Gulf of Mexico oil spill are flagging. U.S. congressional hearings have raised tricky questions about the UK oil group’s conduct prior to the tragic explosion on the rig last month. With the well still leaking, the credibility of BP chief executive Tony Hayward is being tested.
It would be wrong to draw premature conclusions from smatterings of evidence raised at highly charged hearings so soon after the disaster, when any formal probe is far from being concluded.
But there is no dispute that it was only after the accident that BP became aware that the well’s blow-out preventer — the supposedly failsafe device that malfunctioned and caused the leak — had been modified. We also know now that the well failed certain operational tests on the day of the explosion.
BP has long maintained that it was not directly responsible for the accident, since the rig and the drilling had been outsourced to deep-sea expert Transocean. But that defence would be undermined if it became clear that BP sanctioned drilling on a rig known to have had problems.
Moreover, it reflects badly on BP’s response effort if it turns out that the company’s engineers did not realise that they were working on a modified blow-out preventer.
Having tried to argue that BP should be judged only on the clean-up effort and its success in stopping the leak, Hayward would be in big trouble if it turned out that BP procedures were implicated in the accident itself. After all, Hayward got the top job at BP precisely because he was seen as the best person to address BP’s poor safety record.
Hayward has always said that the spill will be stopped within 90 days of when BP started to drill on relief wells to ease the pressure from the main well. That means the beginning of August. He had better deliver on that promise. If he doesn’t, someone else may end up defending BP against any other attacks that emerge.

May 3, 2010
via Breakingviews

BP makes itself easy to demonize

BP wants to be “judged by its response” to the Gulf of Mexico disaster. The politicians and the public already seem to be concluding the UK oil giant has failed in its duty to address the consequences of the accident. BP should not be surprised that authorities with an interest in diverting attention from their own failings want it to take all the blame. But it hasn’t helped itself either.

The company has made much of its overkill response, including record-breaking amounts of dispersant for tackling the oil slick. But that simply reflects the size of the calamity. Results are what counts – and oil is fast approaching the Louisiana shoreline.

    • About Chris

      "Chris Hughes is EMEA Editor of Reuters Breakingviews. Chris started his career as a researcher in BBC Television’s documentaries department and then became a financial journalist. He was previously Investment Banking Correspondent and Senior Corporate Reporter at the Financial Times, Financial Editor of The Independent and a companies writer at the Investors Chronicle. Chris has also worked at communications consultancy Financial Dynamics (now FTI), as an Associate Partner."
    • Follow Chris