Corporate News

(Moscow)

Despite personal presidential requests and all of the headlines surrounding Western sanctions in Russia, Western oil companies are pushing ahead with deals in Russia. Exxon Mobil, in particular, is expanding its exploration and drilling in the Russian arctic in partnership with Rosneft’s Igor Sechin, who is personally under sanction by the US government. Shell, BP, Total, and Norway’s Statoil are also in deals with Russia to expand their production there. Late last year Russia officially ended Gazprom’s stranglehold on the domestic oil market and allowed international firms to be brought in to help extract the country’s vast resources, which has spurred the international interest. Analysts say the oil companies will keep strengthening ties until the US government overtly tells them to stop, as they cannot miss out on the benefits of production in the world’s largest energy-exporting country, Russia.


 

FINSUM: This may end up going badly wrong for the oil companies as just last week the US laid out its plans to impose much broader sanctions within the next month.

(New York)

Big Wall Street banks are locked in an elaborate cat and mouse game with US regulators as they seek to find loopholes in the government’s new laws on leveraged loans. New legislation has made loans that would create debt burdens of 6 times a company’s cash flow illegal, but banks are seeking alternative structures which would allow them to continue to issue such debt. Leveraged loans, or loans to highly indebted companies, are a very profitable and growing area, with issuance up 10% versus last year. J.P. Morgan, Bank of America, and Credit Suisse all have particularly large leveraged loan business, and the credit is important to private equity firms like KKR & Co., who use the financing to boost returns in buyouts. Recent deals have been fueled by the market’s desire for yields, which has meant banks have catered to hunger for new bonds and provided new structures like Payment in Kind notes (PIK), which fulfill interest payments with added principal rather than continuous cash flow. 


 

FINSUM: Leveraged loans have proved way too profitable a segment for banks to let them to go down without a fight. With interest rates so low, there is no end in sight to the demand.

(Detroit)

In order to meet the US government’s ambitious new goal of achieving an average of 45 mpg fuel economy by 2025, auto makers are being forced to switch into manufacturing with lighter materials. The practice, called “lightweighting”, is at the heart of the industry’s push towards a greener future, and is actually a much larger component of development that electric-powered or renewable energy cars. In order to make cars lighter, companies are swapping glass and steel for carbon fiber, plastic and aluminum, and parts like brakes, windshields, hoods, and seats are all shedding pounds. Somewhat surprisingly, crash tests are proving that lighter does not mean less safe, as the new lighter vehicles are performing very well in safety tests. So far, companies like Ford have been successful in shaving 700-800 pounds off stock models through modifications, but the new prototypes are still far from production as costs are prohibitively high. Analysts estimate that by cutting 110 lbs from every car on earth, $40 billion would be saved in annual fuel bills.


 

FINSUM:  This is a major development in the auto industry and seems likely to give a boost to domestic suppliers as development of high tech materials with requires close collaboration between multiple companies.

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