From the Securities Lending Trading Desk

In Asia, lending demand for Chinese car rental company CAR Inc. increased after Hertz Global Holdings announced that it would sell a USD$100 million stake in the company.  The European desk is seeing demand across Europe’s metals and mining services sector as a result of China’s economic slowdown.  We also discuss what the Fed’s decision on interest rates last week means for the securities lending market. 

Below please find the September 22 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.


Fed officials left interest rates unchanged during their meeting last week.  From a securities lending standpoint, this means fee and rebate rates were also unchanged.  The Fed based the decision on continued low inflation, financial market volatility and uncertainty regarding global growth. “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Federal Open Market Committee said in a statement on Thursday.

Arch Coal’s stock price has tumbled 48% after rallying from $1.05 to $9.31 in August, driving both securities lending utilization and rebates higher.  The company is seeking to complete a debt exchange in an effort to push back interest payments and conserve cash.   This could devalue higher-ranking debt which prompted a group of lenders to sue Arch Coal last week.  Arch Coal is the second-largest US coal producer by volume.  The firm has roughly $5.1 billion of debt and nearly two weeks before an $18.1 million interest payment is due.  US coal producers, including Arch Coal, have struggled amid competition from inexpensive gas, slowing demand from China, and environmental regulation.  Fee levels are trending higher as directional demand heats up and market supply dwindles.

Asia Pacific

Demand to borrow shares of Takata Corporation remains robust despite recent positive news for the beleaguered Japanese airbag manufacturer.  The US regulator, the National Highway Traffic Safety Administration (NHSTA), confirmed earlier this month that approximately one third fewer airbags than originally estimated will need to be recalled for repair of a flaw in the inflators.  The airbag problem, which first came to light in 2014, has resulted in several fatalities globally and caused the firm’s share price to decline by more than 40% since October 2014.

Lending demand for Chinese car rental company CAR Inc. increased after Hertz Global Holdings announced that it would sell a USD$100 million stake.  Hertz bought a 19% stake in CAR Inc. in 2013 with the aim of driving greater outbound business from China as the Hertz brand becomes more established in the country.  Shares in CAR Inc. fell sharply on news of the sale.


China’s economic slowdown is driving demand across Europe’s metals and mining services sector.  Supply has tightened and fees have increased for several names, notably  FLSmidth & Co and Nyrstar.  The securities lending desk expects demand in this sector to continue while the industry adjusts to slumping demand from China.

Last week the two largest players in the brewing industry announced a potential deal that would be the largest of 2015 thus far.  Belgium based InBev announced plans to purchase SAB Miller for $100 billion, creating a $280 billion firm.  The deal faces a number of hurdles, given the potential market share of the new company.  Securities lending demand has been relatively muted while the market awaits details on the deal.  Under UK law, InBev will have until October 14 to either make a formal offer or walk away.  The securities lending desk remains vigilant of demand.