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Bloomberg the Company

(Bloomberg) — Allied Nevada Gold Corp., a miner that finds itself on the wrong side of a currency swap, hired a financial adviser to negotiate with lenders as its access to cash wanes, according to three people with knowledge of the situation.

Moelis & Co., the New York-based investment bank, is set to lead talks for the Reno, Nevada-based company as it prepares to restructure $543 million of borrowings, said the people, who weren’t authorized to speak publicly.

Allied Nevada has had to draw down on its $75 million short-term loan as its liability on the swap grows while the Canadian dollar depreciates versus its U.S. counterpart, according to a Nov. 3 regulatory filing. The gold and silver miner’s swap converts Canadian dollars from a C$400 million ($319 million) bond underwritten by Scotiabank and GMP Securities LP into U.S. dollars.

Tracey Thom, a spokeswoman for Allied Nevada, didn’t return messages left for comment. Andrea Hurst, a spokeswoman for Moelis, declined to comment, as did Myra Reisler, a spokeswoman for Scotiabank in Toronto.

Debtwire reported Allied Nevada’s hiring of Moelis last month.

The troubles with its out-of-the-money currency swap have exacerbated the company’s cash-flow issues as it seeks to build out its Hycroft gold and silver mine in Nevada. Allied Nevada has just over a half month at current spending rates before it exhausts its cash on hand, according to data compiled by Bloomberg.

Currency Bet

The company began amassing what on Sept. 30 was a $36.8 million out-of-the-money swaps liability as the Canadian dollar weakened. The currency depreciated 13 percent relative to the U.S. greenback in the past six months, according to data compiled by Bloomberg.

It must post the equivalent of 22 percent of its mark-to-market liability on the swap to two banks that serve as counterparties, according to the Nov. 3 filing. It had posted $11.9 million in cash and letters of credit against its revolving loan as collateral on the $54 million liability on Sept. 30.

Allied Nevada increased the amount it posted for the swap collateral to at least $14.2 million on Nov. 30, borrowing further against the revolving loan to do so, according to a Dec. 5 statement.

Shares Drop

Allied Nevada didn’t always have to post collateral for its swap liabilities. The requirement came into force in December 2013 when two banks pulled out as lenders of its revolving loan. When they left, the security they held as lenders couldn’t be used as collateral anymore for any swap liability the company incurred.

Bank of Nova Scotia, lead underwriter of Allied Nevada’s bond, arranged the swap and took on counterparty risk as part of the bond-financing package it offered the company in May 2012, when the Canadian dollar was trading near parity with its U.S. counterpart.

Proceeds of the bond were used to fund the expansion of the company’s Hycroft Mine, according to a May 16, 2012 statement.

Allied Nevada shares plunged 11.4 percent to 93 cents at 3:32 p.m. in New York. That’s the same price the stock closed at on Dec. 9, when it sold shares and warrants at heavily discounted prices on Dec. 9 to raise $21.5 million.

The company is the most-shorted publicly traded stock among gold miners, according to data compiled by Bloomberg. Allied Nevada’s market capitalization of $117 million today compares with more than $3 billion in 2012.

Forecast Downgraded

Allied Nevada has struggled to turn a profit at Hycroft. It downgraded its gold and silver sales forecast for 2014 after encountering difficult conditions at the mine. It said Jan. 21 it expects 2015 production will be “very similar” to last year while the company focuses on improving costs and efficiencies.

The company isn’t expected to generate any meaningful free cash flow this year, Brian Quast, a Toronto-based analyst at Bank of Montreal, said in a note later that day. Quast, who had previously predicted increased gold and silver output this year, said his expectations now looked “optimistic.”

It’s also running low on funds, with just $1.3 million of cash and cash equivalents at the end of November. It could borrow just $12.8 million more on its revolving loan on Nov. 30, according to the Dec. 5 statement.

Allied Nevada is trying to arrange financing for a mill project at the Hycroft mine that would allow the company to recover more metals and boost profits at its operation. While it’s received “significant” interest, progress has been hindered by volatile markets and commodity prices, the company said in the Jan. 21 statement.

The price of gold dropped 28 percent in 2013, the first annual decline in 13 years, declined another 1.7 percent last year and remains 36 percent below the September 2011 record of $1,923.70.

To contact the reporters on this story: Laura J. Keller in New York at; Cecile Gutscher in Toronto at

To contact the editors responsible for this story: Dave Liedtka at; Shannon D. Harrington at Kenneth Pringle


How Yahoo Might Sell Billions in Alibaba Stock and Pay No Taxes


Yahoo! Inc. (YHOO) on Tuesday is expected to reveal something most companies usually try to keep secret: how it plans to avoid a multibillion-dollar tax bill.

The Web portal has spent more than a year figuring out how to cash out a chunk of its $40 billion stake in China-based Alibaba Group Holding Ltd. (BABA) Typically, a U.S. company faces a federal tax bill of about 35 percent when it sells stock in another enterprise for cash.

Yahoo took a $3 billion tax hit last year when it sold about $10 billion in Alibaba shares. This time around, activist investors are leaning on the Sunnyvale, California-based company to be more savvy.

Alibaba: China’s E-Commerce Giant

Marissa Mayer, Yahoo’s chief executive officer, probably will maintain at least part of the Alibaba holding to keep a finger in China’s fast-growing Web market. Were Yahoo to sell the entire stake, it could face a federal tax bill of as much as $14 billion.

Here are some of Yahoo’s options to avoid capital-gains tax, both legal:

Mimicking Malone

Last summer, John Malone’s Liberty Ventures wanted to avoid taxes on selling its stake in travel website TripAdvisor Inc. Liberty did so by transferring that stake, as well as online costume-retailer BuySeasons, to a new unit created specifically for the deal.

Photographer: Andrew Harrer/Bloomberg

Yahoo! is under pressure from activist investors to minimize the costs, especially after triggering a $3 billion bill last year after it sold a $10 billion chunk of Alibaba shares. Close

Yahoo! is under pressure from activist investors to minimize the costs, especially… Read More


OpenPhotographer: Andrew Harrer/Bloomberg

Yahoo! is under pressure from activist investors to minimize the costs, especially after triggering a $3 billion bill last year after it sold a $10 billion chunk of Alibaba shares.

Under the plan, the new unit took out a $400 million bank loan. Most of that cash was destined for Liberty and the new unit’s stock spun off to Liberty shareholders.

The expectation was that TripAdvisor would acquire the new unit in exchange for the travel site’s own stock. TripAdvisor also agreed to repay the $400 million loan.

When it’s all wrapped up, Liberty Ventures gets cash and exits TripAdvisor — without incurring the tax bill a straight sale would trigger. Liberty’s shareholders get stock in TripAdvisor as though Liberty had distributed its holding in the site to its own investors. Liberty’s investors also don’t face taxes on the deal.

In Yahoo’s case, it would spin off its stake into a new entity, which would borrow money and distribute the cash to the Internet company.

“The tax savings sort of gets carved up between the two parties and they each get a chunk,” said Robert Willens, an independent tax-accounting analyst in New York City.

Channeling Buffett

Another option is to follow Warren Buffett’s lead, with what’s known in tax circles as the cash-rich split.

Berkshire Hathaway Inc. and Graham Holdings Co. (GHC) last March agreed to a deal that lets Buffett’s company unload its stake in the former Washington Post Co. while avoiding capital-gains tax.

That deal called for Graham to transfer cash and a Miami television business — combined, roughly equal to Berkshire Hathaway’s investment — into a new subsidiary. Graham then shifts stock in that new unit to Berkshire Hathaway, while Buffett’s company moves its Graham stake back to the media company.

Economically, it’s as though Berkshire Hathaway sold its Graham stake for cash — and a TV station. But because the deal is structured as an exchange of shares, not a straight-up sale, it gets tax-free treatment.

Were Yahoo to follow this route, it would exchange Alibaba shares for a stake in a new unit that would consist mostly of cash. Alibaba would have to shed some assets for Yahoo to get the advantage of such a deal; a cash-only transaction probably would trigger a tax bill. Accounting experts say it shouldn’t be difficult to find something to throw in the pot.

With assistance from Brian Womack in San Francisco and Alex Sherman in New York.

To contact the reporter on this story: Jesse Drucker in New York at

To contact the editors responsible for this story: Tom Giles at Tony Robinson, Reed Stevenson

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China’s PBOC Braces for New Year Cash Demand With Loan Rollover

The People’s Bank of China rolled over a 269.5 billion yuan ($43.4 billion) lending facility to banks and added 50 billion yuan in loans as it seeks to ease liquidity ahead of the Chinese New Year holiday.

The facility, first issued in October with an interest rate of 3.5 percent, was rolled over to keep the money market stable, the central bank said in a statement on its official microblog account. It said the move also aims to smooth liquidity before the holiday, which begins Feb. 18.

The PBOC has sought to shore up liquidity and broaden stimulus efforts in recent months, cutting the benchmark lending rate in November and issuing billions of yuan in short- and medium-term loans to banks. Each year around this time, demand for yuan starts to spike as Chinese give each other red envelopes full of cash for the Lunar New Year holiday.

“There may be some irregular capital inflow and outflow around the world,” PBOC Governor Zhou Xiaochuan said at a World Economic Forum panel in Davos, Switzerland minutes after the central bank announcement. “That may also be a source of volatility.”

The PBOC doesn’t intend to provide too much liquidity, Zhou said in Davos.

China’s money-market rate climbed the most in a month today amid speculation banks will start hoarding funds to meet demands for cash. The central bank hasn’t conducted open-market operations since November. Last month, the PBOC reportedly rolled over part of a separate 500 billion yuan lending facility.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at

To contact the editors responsible for this story: Malcolm Scott at Nicholas Wadhams

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Leveraged-Loan Prices Tumble as Investors Pull Cash

U.S. leveraged-loan prices dropped to a more than two-year low as investors extended a record streak of withdrawals from funds that buy the debt.

Loan prices fell to 95 cents on the dollar, the lowest since August 2012, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index.

Investors are shunning speculative-grade debt as oil prices tumble to the lowest since 2009. They pulled $1.05 billion from U.S. mutual and exchange-traded funds that buy leveraged loans in the week ended Dec. 10, an unprecedented 22nd straight week of withdrawals, according to Lipper.

The market’s biggest ETF, the $5.85 billion PowerShares Senior Loan Portfolio (BKLN), had $132 million of outflows yesterday, the most since its inception in 2011, according to data compiled by Bloomberg. The fund is overseen by Invesco Ltd.

Issuance has slowed as investors have retreated. Borrowers including Toys “R” Us Inc. and fitness-club operator Equinox Holdings Inc. have sold about $46 billion of the speculative-grade debt to institutional investors since the end of September, what would be the weakest end to a year since 2011, Bloomberg data show. That’s down from about $174 billion the final three months of last year.

Leveraged loans have lost 2.1 percent this month, reducing gains for the year to 0.32 percent. The debt’s on track for its worst annual performance since losing 28.2 percent in 2008.

For Related News and Information: Junk-Bond Well Runs Dry as Oil Rout Stems Supply: Credit Markets Investors Withdraw $1.89 Billion From U.S. High-Yield Bond Funds Fed Bubble Bursts in $550 Billion of Energy Debt: Credit Markets

To contact the reporter on this story: Christine Idzelis in New York at

To contact the editors responsible for this story: Shannon D. Harrington at Caroline Salas Gage

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Beware of Loan Overvaluation Is Message From Top ETF

It’s getting more expensive for investors to get their money out of leveraged loans, based on that market’s biggest exchange-traded fund.

As demand for the high-risk, high-yield loans dries up, ETF investors have been accepting prices that are below the market average to cash out of the $6 billion PowerShares Senior Loan Portfolio. (BKLN) The fund, which is overseen by Invesco Ltd. (IVZ), has declined 1.7 percent since the end of June, compared with a 0.9 percent drop on its benchmark index.

The dislocation suggests loans themselves would be priced at a lower value if they were bought and sold more frequently. The ETF shares trade daily like stocks on exchanges and thus often show more immediate prices moves than the debt they own.

“Fixed-income ETFs are oftentimes a better reflection of where the underlying pricing might be headed,” said John Hoffman, Invesco PowerShares’ global head of ETF capital markets. “It’s trading in more real time than the underlying components.”

The pricing also indicates investors are paying up to get out of this illiquid asset class. That charge to exit may soar in a deteriorating market.

“There’s been more sell pressure rather than buy pressure,” Hoffman said. “There’s a conversion price” to turning the loans underpinning the shares into cash.

Souring Sentiment

The loan ETF’s shares have traded at an average discount relative to the Standard & Poor’s Leveraged Loan 100 Index for the past year. The fund’s price fell to 0.4 percent below its net asset value as of yesterday, according to data compiled by Bloomberg.

The fund has traded below the market value of its assets for the longest period in its history, and at the second-steepest average discount among U.S. corporate-debt ETFs that are bigger than $1 billion during the last 12 months, Bloomberg data show.

The ETF, which was created in 2011, was a cash magnet last year, receiving about $5 billion of inflows, Bloomberg data show. Investors were drawn to the floating-rate nature of loans, largely on expectations yields would rise as the Federal Reserve curtailed its stimulus. They also were drawn to the speculative-grade debt’s relatively high yields as central bankers suppressed borrowing costs.

Sentiment has soured this year as yields unexpectedly plunged and policy makers warned the loan market looked frothy. Investors pulled $1.1 billion from the ETF during the eight months through November, Bloomberg data show. The fund has returned 0.2 percent in 2014, below the 1.5 percent gain for the S&P Leveraged Loan index.

“The ETFs have actually become more liquid than the underlying thing people are investing in,” said Dave Nadig, chief investment officer of, a research and analytics firm. “That’s where price discovery is happening.”

This fund suggests the loan market has more to fall.

To contact the reporter on this story: Lisa Abramowicz in New York at

To contact the editors responsible for this story: David Papadopoulos at Caroline Salas Gage

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Hedge Fund Monarch Said to End Talks on RadioShack Loan

Monarch Alternative Capital LP abandoned negotiations to take over a $140 million loan to RadioShack Corp. (RSH) as the electronics retailer struggled to reach a deal with lenders on a turnaround plan, according to two people with knowledge of the matter.

Monarch, run by Michael Weinstock, backed out talks it was leading with two other hedge funds to acquire the asset-backed senior loan and renegotiate the terms, said the people, who asked not to be named because the discussions were private. The company continues to talk with the other funds and with other potential lenders, one of the people said.

RadioShack is seeking to refinance the debt to loosen terms that may restrict the amount it can borrow under the loan in March, the people said. That would give the company time to implement a turnaround plan and avoid a cash crunch that management said in a Sept. 11 regulatory filing may lead to bankruptcy.

The loan is part of a $585 million funding package arranged last month by RadioShack’s largest shareholder, Standard General LP, that gave the retailer enough cash to operate through the holiday season. Any deal to refinance the debt will be contingent on whether a key RadioShack lender, Salus Capital LLC, agrees to a company plan to close underperforming stores, one of the people said. Salus owns part of a $250 million, second-lien loan.

Its initial plans to close as many as 1,100 stores were blocked by lenders including Salus earlier in the year, limiting to less than 200 of the sites that could be shuttered. Salus is affiliated with Philip Falcone’s Harbinger Group Inc. Closing unprofitable sites would help the chain preserve cash.

RadioShack had 5,387 outlets on Aug. 2, according to data compiled by Bloomberg.

Turnaround Plan

Merianne Roth, a spokeswoman at RadioShack, David Glazek, a spokesman for Standard General, and Stacey Maman, a spokeswoman at New York-based Monarch, declined to comment.

Salus attempted to buy as much as $465 million of RadioShack’s senior loans last month, two people with knowledge of the discussions told Bloomberg at the time.

Distressed hedge fund investors are interested in buying the struggling retailer’s senior debt to position themselves in restructuring negotiations in case the company files for bankruptcy.

Standard General’s October financing that retired the senior debt held by GE Capital, General Electric’s finance arm, altered the loan terms and provided the company with additional capital.

RadioShack has about $1.06 billion of debt, comprising $325 million of senior unsecured notes due in May 2019 and loans maturing December 2018.

To contact the reporters on this story: Jodi Xu Klein in New York at; Jeffrey McCracken in New York at

To contact the editors responsible for this story: Shannon D. Harrington at; Mohammed Hadi at Mitchell Martin

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Sears Needs 10 Times Loan From Lampert: Corporate Finance

Eddie Lampert’s $400 million loan to Sears (SHLD) Holdings Corp. is enough to keep the 128-year-old retailer going for three months. It’ll need 10 times that capital if it hopes to see its 130th birthday.

After racking up more than $6 billion in losses over four years, the retailer will run out of cash in 2016 without at least $4 billion of new capital, according to Fitch Ratings. Credit-default swaps show traders are betting against the operator of its namesake chain and Kmart, pushing down its perceived creditworthiness at the fastest pace among major U.S. department stores, data compiled by Bloomberg show.

The company has been buffeted by declining consumer spending in department stores that are battling online retailers even as it cedes ground to rivals. Sears, which had negative free cash flow of $1.5 billion in the last year, had about seven months of cash left before Lampert offered his loan, Bloomberg data show.

“If you are burning more cash than you are bringing in, the situation is pretty dire,” Monica Aggarwal, an analyst at Fitch who authored the Sears report, said in a telephone interview. “They have to inject more liquidity.”

‘Many Assets’

Lampert’s ESL Investments provided $200 million to Sears on Sept. 15 and will fund the remainder on Sept. 30, the Hoffman Estates, Illinois-based retailer said in a Sept. 15 regulatory filing. The secured loan has an interest rate of 5 percent and matures at the end of the year.

St. Joe Co. (JOE) may contribute as much as $100 million to the loan, according to a filing yesterday. St. Joe, a real estate and timber company, is 24 percent-owned by Bruce Berkowitz’s Fairholme Capital Management, which also has a 24 percent stake in Sears.

“We have many assets at our disposal to continue to fund our transformation,” Chris Brathwaite, a spokesman for Sears said in an e-mail. The company has “multiple financial resources available” to generate additional liquidity, he said.

The retailer may need to sell additional debt, continue asset divestitures or both to achieve Lampert’s goal of cutting costs while investing in rebuilding its brands, Bloomberg Intelligence analyst Noel Hebert wrote in a research note today.

Asset Divestitures

Sears has been selling and spinning off assets to raise cash. It handed the Lands’ End clothing business to shareholders earlier this year after divesting Sears Hometown & Outlet Stores Inc. in 2012.

Real estate sales in the U.S. and Canada, expense reductions, and “asset reconfiguration” have enabled the company to raise $4 billion in the last three years, Brathwaite said. Additional measures may take advantage of its “unencumbered” real estate portfolio, the 51 percent stake in Sears Canada and its auto center unit, he said.

Those are options the company may have to take soon with its results likely to deteriorate, according to James Goldstein, an analyst at CreditSights Inc., who has an “underperform” rating on Sears debt.

“I don’t see a turning point for them to make this a profitable business anytime soon,” he said in a telephone interview. “The only way to keep it going is to continue to carve out pieces of the business and monetize it. At some point the music stops, and that’s when they get stuck.”

The retailer, which has been unprofitable in its last three fiscal years, lost more than $1 billion in the first half of its 2015 period, Bloomberg data show.

‘Additional Liquidity’

Factoring in capital expenditure of about $300 million and interest expense around $275 million, the company may burn $3 billion of cash in the two years through January 2016., according to Goldstein.

Sears had $829 million in cash and $240 million available under its asset-backed revolving credit line on Aug. 2, the end of its second quarter.

“The company has significant assets to raise additional liquidity,” Chris Kocinski, an analyst at asset manager Neuberger Berman Group LLC in Chicago, said in a telephone interview. “But ultimately the trend for the business will need to improve relative to recent performance.”

It must raise $4 billion to $6 billion to get through 2016, factoring in the cash burn, Fitch’s Aggarwal said in the Sept. 16 report.

Richard Sears

The retailer traces its roots to Minnesota railway agent Richard Sears buying a load of watches being returned to their maker in 1886, according to its website. He hired watchmaker Alvah Roebuck and then formed the mail-order company that became Sears Roebuck in 1893. The company issued its first general merchandise catalog in 1896, targeting farmers, and opened its first store almost 30 years later.

Kmart acquired Sears Roebuck in 2005 in a $12.3 billion takeover that Lampert said would create a company with the geographic reach and scale to compete with Wal-Mart Stores Inc. Sales peaked at $53 billion in fiscal 2007, Bloomberg data show.

Lampert’s firm owns about 48 percent of the outstanding stock, according to an Aug. 21 regulatory filing. Lampert also owns about $205 million of the company’s $1.2 billion 6.625 percent notes coming due in October 2018. That’s more than double the holdings in the notes at the same time a year ago.

The bonds traded at 90.5 cents on the dollar to yield 9.5 percent yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That compares with an average 8.5 percent for bonds sold by U.S. department stores, Bloomberg data show.

‘Another Band-Aid’

The company has $3.9 billion in outstanding borrowings, with the next maturity of more than $10 million coming due in 2016.

The market share for department stores as a percentage of general merchandise, apparel and accessories, furniture and others has dropped to 13 percent this year from 27 percent in 2000, Bloomberg data show. Sears’s share has declined relative to competitors, standing at 19 percent of department-store sales from 27 percent in 2006, the data show.

That decline is reflected in the derivatives market where price of contracts protecting against a default for five years on Sears’s debt has increased 767 basis points to the equivalent of 1,864 basis points, according to CMA, which is owned by McGraw Hill Financial Inc. That means investors would have to pay about $1.86 million to protect $10 million of Sears debt.

The short-term loan is “another Band-Aid for a company that has been performing a surgery on itself for the last couple of years,” Steven Azarbad, co-founder of the New York-based hedge fund Maglan Capital, said in a telephone interview. “They have enough liquidity to go through the next year but beyond that it depends.”

To contact the reporter on this story: Sridhar Natarajan in New York at

To contact the editors responsible for this story: Shannon D. Harrington at Mitchell Martin, Richard Bravo

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Interested in Emaar IPO But Short of Cash? Take a Loan


“Interested in Emaar IPO but short of cash?” asks a text message from a United Arab Emirates lender to customers. If so, there’s good news: local banks are making it easier to borrow money and invest in shares.

Mashreqbank PSC (MASQ), Dubai’s third-largest lender, is offering account holders loans of about $2,700 to take part in the initial public offering by the retail division of Emaar Properties PJSC (EMAAR), the country’s largest IPO since 2007. Emirates NBD, the second-biggest bank, greets customers with a message encouraging them to buy shares in the IPO through its automated teller machines or when they log in to their accounts online.

Emaar Malls Group PJSC is seeking to raise as much as $1.58 billion, with orders received for all the stock allocated to institutional investors within two days of the sale starting. Individuals can buy as much as 30 percent of the shares, giving them the chance to bet on the world’s second-best performing stock market this year, according to data compiled by Bloomberg.

“Retail banks have always been involved in lending to invest in the stock market, but that willingness has definitely been improving this year,” said Taher Safieddine, an analyst at Shuaa Capital Psc in Dubai. “The risky part is margin lending and putting additional debt burdens on retail clients.”

Photographer: Charles Crowell/Bloomberg

Shoppers walk through the Dubai Mall, owned by Emaar Properties PJSC, in Dubai, United Arab Emirates. The mall features an aquarium and underwater zoo, the world’s most expensive gold-sheeted cupcakes and attracted 75 million visitors last year. Close

Shoppers walk through the Dubai Mall, owned by Emaar Properties PJSC, in Dubai, United… Read More


OpenPhotographer: Charles Crowell/Bloomberg

Shoppers walk through the Dubai Mall, owned by Emaar Properties PJSC, in Dubai, United Arab Emirates. The mall features an aquarium and underwater zoo, the world’s most expensive gold-sheeted cupcakes and attracted 75 million visitors last year.

The share sale began on Sept. 14 and ends on Sept. 24 for individual investors and Sept. 26 for institutional investors.

Underwater Zoo

Bank customers who respond to the marketing by borrowing money are in line for shares in the company behind the world’s largest shopping mall. Dubai Mall features an aquarium and underwater zoo, the world’s most expensive gold-sheeted cupcakes and attracted 75 million visitors last year.

The share sale for a listing on the Dubai Financial Market is the largest in the U.A.E. since investors bought $4.96 billion of port operator DP World Ltd.’s stock seven years ago.

Dubai’s benchmark stock index has advanced 48 percent this year, lagging behind only Argentina’s Merval Index. Shares trade at an average of 21 times past earnings in Dubai, compared with 13 times for members of the MSCI Emerging Markets Index.

“We don’t think it’s a bubble in the U.A.E., in fact we think valuations are some of the most attractive in the region,” Jaap Meijer, Arqaam Capital Ltd.’s director of equity research in Dubai, said by phone.

Property Gains

The U.A.E.’s exchanges began trading as emerging markets in June after index provider MSCI Inc. reclassified them in June 2013. Dubai’s gauge more than doubled almost a year after the upgrade on bets the change will lure investors. The benchmark tumbled 23 percent from June 5 to June 30 amid concerns the market’s property-led gains were overdone.

Photographer: Charles Crowell/Bloomberg

The Burj Dubai, the world’s tallest skyscraper, developed by Emaar Properties PJSC, towers over the skyline in Dubai, United Arab Emirates. Close

The Burj Dubai, the world’s tallest skyscraper, developed by Emaar Properties PJSC,… Read More


OpenPhotographer: Charles Crowell/Bloomberg

The Burj Dubai, the world’s tallest skyscraper, developed by Emaar Properties PJSC, towers over the skyline in Dubai, United Arab Emirates.

In March, Emirates Reit, the first U.A.E-based real estate investment trust, raised 500 million dirhams ($136 million) in the first IPO in Dubai in at least five years. Last year the DFM was the best-performing stock market in the world after losing 17 percent in 2011.

For the banks, lending to customers to buy stock is a way to put their ample supplies of cash to work. The combined loans-to-deposit ratio of the U.A.E.’s 51 banks, a measure of liquidity, was 95 percent at the end of July compared with 101 percent at the end of 2012, data compiled by Bloomberg shows.

Banks’ surplus cash helped push the three-month Emirates interbank offered rate, a benchmark used by banks to price some loans, to 0.71 percent, near the lowest since at least 2006 when Bloomberg began collecting the data.

Plans by other U.A.E. companies to raise funds by selling stock to investors make it important that Emaar Malls IPO goes well.

“Having another bubble now will send the wrong message,” said Safieddine at Shuaa. “Especially as the market is getting ready for a new wave of IPOs.”

To contact the reporter on this story: Matthew Martin in Dubai at

To contact the editors responsible for this story: Dale Crofts at John Viljoen

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RadioShack Shareholder Lifeline in Sight as Cash Dwindles


Don’t pull the plug on RadioShack Corp. (RSH) just yet.

Standard General LP, the hedge fund that’s orchestrating a rescue for American Apparel Inc., is in talks with RadioShack about ways to raise cash that would allow the electronics retailer to stave off a bankruptcy filing, according to two people with knowledge of the matter. The company’s shares and bonds rose yesterday.

Fresh cash from a more diverse group of investors may make it easier for Fort Worth, Texas-based RadioShack to implement its turnaround plan, which includes closing stores, to mitigate nine straight quarters of losses. Without a capital infusion, the seller of phones and batteries will probably face a cash crunch next year, according to Moody’s Investors Service.

“As tough a battle as it’s going be to turn the business around, I won’t completely write them off yet,” Will Frohnhoefer, a special-situations equity analyst for BTIG LLC in New York, said in a telephone interview. “The new capital could get them through the rough patch.”

Standard General, based in New York, owned almost 10 percent of RadioShack’s shares as of yesterday, one of the people said. That’s up from 7 percent as of June 30, according to data compiled by Bloomberg.

Photographer: David Paul Morris/Bloomberg

RadioShack Corp. lost $98.3 million in the quarter ended May 3, wider than the $43.3 million deficit in the year-ago period, Bloomberg data show. Close

RadioShack Corp. lost $98.3 million in the quarter ended May 3, wider than the $43.3… Read More


OpenPhotographer: David Paul Morris/Bloomberg

RadioShack Corp. lost $98.3 million in the quarter ended May 3, wider than the $43.3 million deficit in the year-ago period, Bloomberg data show.

Shares Surge

RadioShack’s $324.8 million of 6.75 percent notes due May 2019 rose 4 cents yesterday to 44 cents on the dollar, according to Trace, the bond-pricing system of the Financial Industry Regulatory Authority. Those bonds traded as low as 35 cents on June 20.

Shares climbed 19.4 percent to 86 cents yesterday on the New York Stock Exchange. That’s the highest close since July 9, Bloomberg data show.

Standard General is also seeking a way to refinance RadioShack’s $250 million second-lien term loan, which is held by Salus Capital Partners LLC and Cerberus Capital Management LP, the people said. That may allow the retailer to close a large number of underperforming stores, helping stem cash losses.

A refinancing of the loan “will buy the retailer more operating flexibility,” Noel Hebert, an analyst at Bloomberg Intelligence, wrote in a report yesterday. “Both Standard General and fellow shareholder BlueCrest Capital say RadioShack should close as many as 1,100 stores, a plan that was rejected by lenders given that closures would reduce its available collateral.”

Merianne Roth, a spokeswoman for RadioShack, declined to comment, as did Salus’s Emily Serafin and Standard General’s David Glazek.

Cash Infusion

RadioShack lost $98.3 million in the quarter ended May 3, wider than the $43.3 million deficit in the year-ago period, Bloomberg data show. The retailer is in danger of running out of cash in 2015, according to a July 29 Moody’s report. Moody’s rates the company Caa2 and Standard & Poor’s gives it a CCC grade.

Even a fresh infusion of cash and the ability to close more locations don’t automatically point to a turnaround, according to Scott Tilghman, an analyst at B. Riley & Co. in Boston.

Store closings “are not the silver bullet,” said Tilghman, who recommends selling the shares. “There is cost associated with closing stores; the challenge for them is being able to do that while at the same time righting the current business.”

Standard General, which was founded in 2007, committed as much as $25 million in capital to American Apparel, the unprofitable chain that recently ousted founder and Chief Executive Officer Dov Charney. That included spending $10 million to purchase Lion Capital LLP’s high-interest loan.

American Apparel

As part of that deal, RadioShack CEO Joe Magnacca was appointed to American Apparel’s board, establishing a tie between the two struggling retailers.

RadioShack’s revenue fell to $3.43 billion in fiscal 2013 from $3.83 billion the year earlier, Bloomberg data show. The retailer would need to increase its revenue by a third to get back to break-even, according to Tilghman.

Standard General is “trying to salvage their investment,” Anthony Chukumba, senior research analyst at BB&T Capital Markets in New York, said in a telephone call. “Whether it’s going to be successful or not is another question.”

To contact the reporters on this story: Jodi Xu in New York at; Lauren Coleman-Lochner in New York at

To contact the editors responsible for this story: Shannon D. Harrington at Richard Bravo, Mitchell Martin

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Megabanks’ $800 Billion Cash Pile Shows Abe's Challenging Task

Prime Minister Shinzo Abe has succeeded in wrestling down the yen and snapping a 15-year deflationary spiral. The challenge of spurring lending by the country’s cash-hoarding megabanks remains.

The nation’s three largest lenders increased their cash and deposits with other financial institutions 5.7 percent in the quarter to June to 82 trillion yen ($800 billion) from the previous three-month period, earnings data show. New loans by Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. fell 329 billion yen to 239.1 trillion yen.

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Abe needs to spur lending after the world’s third-largest economy shrank at an annualized 6.8 percent in the second quarter due to an April sales-tax increase aimed at curbing the world’s biggest debt burden. While the banks can no longer park excess cash in sovereign debt amid expectations for higher yields, falling loan rates have narrowed the spread over deposit payments to levels that discourage extending credit, according to Moody’s Investors Service.

“The big three are at a turning point,” said Graeme Knowd, an associate managing director who oversees corporate and financial institutions at Moody’s in Tokyo, in an interview. “They haven’t really taken credit risk for a long time. If Abenomics works, they need to reorient the business model.”

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Excess Cash

Deposits at Japanese financial institutions exceeded loans by 192.5 trillion yen last month, according to Bank of Japan data. The surplus reached a record high 194.2 trillion yen a month earlier.

Cash and funds held at lenders soared 47.4 trillion yen since March 2013, a month before the central bank introduced its stimulus program. Reserves at the BOJ in excess of the minimum requirement, which pay a 0.1 percent interest, rose 82.3 trillion yen in the period to 134.9 trillion yen as of Aug. 12.

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Abe’s policies and the BOJ’s about 7 trillion yen in monthly sovereign bond buying succeeded in depreciating the yen more than 18 percent last year. The infusion also reduced borrowing costs in the country, forcing banks to charge lower interest.

New loan rates dropped to 0.779 percent in May, the least in BOJ data going back to 1993, before rising to 0.905 percent in June. The spread on what Mitsubishi UFJ charges for domestic loans over deposit interest rates fell to 0.96 percent in the first quarter, a record low.

Risk Averse

“Japan’s banking sector is a little bit unusual,” said David Marshall, a credit analyst at CreditSights Inc. in Singapore. “They’re more risk averse, only willing to take on what they see as the good quality clients and they have been reluctant to lend to weaker companies.”

While some companies in Japan are spending more on capital investments, their cash levels remain high and so it will take time before demand for bank loans increases, Tomoyuki Narita, a spokesman for Sumitomo Mitsui said in an e-mail. Mitsubishi UFJ’s spokesman Takafumi Miyamoto said the bank is actively seeking to engage borrowers.

“Although we continue to make efforts to increase lending, a real rebound in funding demand will take a little bit more time,” Mizuho spokeswoman Masako Shiono said in an e-mailed response to questions. “We are hopeful for a recovery in the fiscal second half starting in October.”

Lending in Japan increased to 414.7 trillion yen in July, the highest level since March 2003, according to data compiled by Bloomberg. The additional income from new loans still fell short of what the banks made on bonds and equities.

Bonds and Stocks

Sumitomo Mitsui increased interest income from loans by 7 billion yen in the most recent quarter from a year earlier, according to calculations by CreditSights. That compares with a 32.7 billion yen gain on equities and a 12 billion yen net gain on bonds.

Japan’s benchmark 10-year bonds yielded 0.5 percent as of 9:29 a.m. in Tokyo today, down 23.5 basis points this year. The Topix stock index has fallen 2.7 percent since Dec. 31, after a 52 percent gain in 2013.

Banks have also turned to more lucrative overseas markets to escape low rates at home. Mitsubishi UFJ boosted loans abroad by 8.4 trillion yen since March 2013, compared with a 1.3 trillion yen increase in corporate lending at home.

“The banks are basically on the sidelines until it becomes clearer what the outcome is going to be” of Abe’s policies, CreditSights’ Marshall said.

To contact the reporters on this story: Finbarr Flynn in Tokyo at; Takako Taniguchi in Tokyo at

To contact the editors responsible for this story: Katrina Nicholas at; Sandy Hendry at Pavel Alpeyev

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