From the Securities Lending Trading Desk

In the Americas, investors are wary not to overlook the fact that there is still plenty of regulatory red tape that TELL must cut through before 2023 operations are expected to start. In Asia, Japanese telecommunication giant Softbank Group Corp unveiled plans for the biggest share buyback in the company’s history. In Europe, Spanish food store provider Distribuidora Internacional (DIA SM) rallied 70% this week following news that the board is to work with Mikhail Fridman and his investment firm, LetterOne.

Americas

A recent spike in share price and an upcoming record date has resulted in increased demand and fee levels for Papa John’s International, Inc. (PZZA). The company struggled throughout 2018 after the founder and CEO, John Schnatter, was removed from his position after making racist comments. The company reported disappointing results including declines in both comparable store sales for the full year and into the new year. However, Starboard Value LP sees turnaround potential for PZZA as they did previously with the Olive Garden’s parent company, Darden Restaurants. Starboard Value LP will also be taking over a board seat and adding two others as they look to implement their turnaround strategy. PZZA’s stock price is up roughly 13% after falling to a 52- week low on 2/1. Limited market liquidity is due to PZZA’s dividend record date next week which has pushed fee levels higher as bearish investors look to build positions.

As the share price has nearly doubled since the end of 2018, we are seeing increased directional demand for gas storage company Tellurian Inc. (TELL). While there is some speculation the rally was largely a correction due to the declines at the end of 2018, others believe this is due to a long awaited regulation announcement. The Federal Energy Regulatory Commission’s (FERC) Environmental Impact Statement (EIS) has prompted TELL’s share price to rally as investors price in the long term effects, which includes construction and operations of the Diftwood LNG export terminal. However, investors are wary not to overlook the fact that there is still plenty of regulatory red tape that TELL must cut through before 2023 operations are expected to start. Fee levels remain elevated as directional demand remains strong.

Asia Pacific

Itochu Corp is seeking to raise its stake in Descente Ltd to 40%, giving it significant control of the Japanese athletic clothing manufacturer. Itochu Corp is offering Descente Ltd shareholders a 50% premium for their shares, however Descente Ltd is opposed to the tender offer from its biggest investor. Descente Ltd shares rose more than 40% following the announcement of the Itochu Corp tender offer. We have seen strong lending demand for untendered shares of Descente Ltd.

Japanese telecommunication giant Softbank Group Corp unveiled plans for the biggest share buyback in the company’s history. Softbank founder Masayoshi Son’s announcement of plans to buy back as much as 5.5 billion dollars through the end of January next year sent the group’s share price soaring in Tokyo trading. The buyback will be funded by the proceeds from the IPO of Softbank’s telecom unit last December. As the group shares rallied, the telecom unit dived 13% below its IPO price. We have seen moderate securities lending demand for Softbank Corp following the announcement of the buyback.

Europe

Ceva Logistics’ board proposed a rejection of the takeover offer by CMA CGM this week which prompted an increase in borrower demand. The board of transportation company, Ceva Logisitics (CEVA SW) this week released a statement which recommended to shareholders that they do not tender their shares in response to a takeover bid by CMA CGM. CEVA cited that the company is valued closer to CHF40 per share rather than the CHF30 offered. CMA CGM currently holds 33% of CEVAs outstanding shares according to Bloomberg and is looking to increase its stake. Global lending utilization has increased from 10% at the beginning of January to 35% at present according to Datalend. The tender offer will run from the 12th February to the 12th March unless revised or extended.

Lending demand increased for Distribuidora Internacional this week as news of a potential rescue plan caused a stock rally. Spanish food store provider Distribuidora Internacional (DIA SM) rallied 70% this week following news that the board is to work with Mikhail Fridman and his investment firm, LetterOne, on a rescue deal which would assist with the retailer’s plan for capital increase and financial restructuring. DIAs share price had previously dropped from €2 in October 2018 to €0.42 prior to this week’s news following profit warnings and the suspension of a finance director. Short interest is high at 27% of freefloat and industry lending utilization is at 95% according to Datalend. According to reports, DIA management plan to present a capital increase plan at the AGM, which should take place later this quarter.