From the Securities Lending Trading Desk

In the US, CBS launched an exchange offer to separate its radio business as part of its plan to combine CBS Radio with Entercom Communications, leading to increased demand for CBS and ETM. Line Corp, Japan’s top mobile app company, saw its share price rally last week; however some investors remain sceptical over its prospects. The world’s oldest bank, Banca Monte Dei Paschi, returns to action, 10 months after being suspended.

Below please find this week’s edition of From the Trading Desk, which provides timely commentary about top security earners, revenue drivers and other factors influencing the securities lending market from the BBH Securities Lending Trading Team. 


Demand for ETM and CBS increases following reports that the merger is expected to be completed by mid-November. CBS launched the exchange offer to separate its radio business as part of its plan to combine CBS Radio with Entercom Communications. According to the terms released, CBS Class B shareholders can swap some or all of their shares for CBS Radio stock at a 7% discount per-share value, subject to an upper limit. The discount means tendering shareholders are expected to receive about $1.08 of CBS Radio stock for every $1.00 of CBS Class B stock tendered and accepted. Brokers are looking to borrow ETM on open through the close on 11/16 and looking for CBS take no action stock. With the completion date still three weeks out many long-holders have not yet submitted elections on CBS.

Recall pressure is pushing fee levels for Sears Holdings Corporation (SHLD) higher. SHLD has been a long term focus of demand as they have focused on “transformation”, yet their struggles and obstacles remain the same and seem to be getting worse. Over the years, SHLD has neglected their core strengths and sold some its most attractive assets, including its Craftsman brand to Stanley Black & Decker Inc., Lands’ End Inc., and a portfolio of its most attractive real estate assets. Most recently the company’s annual report for the fiscal year ended January 2016 contained this statement: “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.” Bears continued to focus on Sears, and with added recall pressure, we are seeing fee levels spike. 

Asia Pacific 

One of Asia’s largest commodities trading houses announced the sale of a core business last week, reigniting concerns on whether the firm will survive in the long-run. Hong Kong based Noble Group Ltd said it would sell its global oil-liquids business to US-based Vitol Group to raise much needed funds and reduce its debt burden. The company also issued its third quarterly profit warning this year, flagging a potential loss of over $1 billion. Investors remain concerned about the firm’s precarious financial situation with over $3 billion in debt due likely to be restructured in the next few months. We have witnessed long term securities lending demand for Noble Group, which slumped by nearly 20% in trading last week.

Japan’s top mobile app company saw its share price rally last week but some investors remain sceptical over its prospects. Line Corp, which develops and operates the ‘Line’ application for smart phones, saw its stock price climb as much as 16% in one trading day last week. The company reported quarterly operating profit of 5.85 billion yen ($51 million), beating analysts’ projections, on increased revenue from advertising. Shares in Line Corp had been heavily shorted ahead of the earnings release, as some investors expressed concerns over the firm’s growth prospects outside of Japan and its ability to compete with its existing product range. We have seen strong securities lending demand for Line Corp in recent weeks.


The French drug maker DBV Technologies falls after failing a major drug test. The French biopharmaceutical firm fell as much as 53% percent last week as its Peanut Allergy Patch failed a major drug test. DBV commented that although the Viaskin patch didn’t meet the trial’s main statistical goal, it was safe to use and did increase children’s ability to tolerate peanuts. The fall wiped out as much as EUR 1.3 billion of the firm’s market value as investors still believe the patch will get approved, but brought into question future sales and commercial potential. The desk saw demand for the stock at the beginning of last week but with such a substantial fall already, funds may have missed the boat on this stock. Interestingly, investors seemed to flock to a similar US stock that is developing its own peanut allergy treatment in Aimmune Therapeutics Inc., which rose 46% on the same day.

Banca Monte Dei Paschi returns to action, 10 months after being suspended. The well reported world’s oldest bank stated that the Italian watchdog had approved a prospectus for its re-listing. Analysts have said the stock could fall below EUR 4.28, a price derived from last month’s auction held for investors who held insurance against the bank’s default. Whilst the stock trades at these levels, it highlights more of Italian tax payer’s money that has been lost since the state paid EUR 6.49 when it injected EUR 3.85 billion back in August. The stock has demanded high fees with limited supply and strong demand present.