From the Securities Lending Trading Desk – Week of April 15th

In the Americas, hydrogen fuel cell manufacturer, Ballard Power Systems, announces agreement with Norled A/S. In Asia-Pacific, the passing of the Chairman of Korea’s largest airline has threatened to disrupt his family’s control over the group company. In Europe, convertible bond activity has been a focus for securities lending demand this week.


Chinese E-commerce platform Baozun Inc. (BZUN) announces the closing of a $225million offering of convertible senior notes. The leading e-commerce strategy partner in China has been on a wild ride over the last two years growing its business from $14/share up to $66/share between 2017 and mid-2018 before crashing back down to $28/share by year’s end. Highly sensitive to earnings results and the US-Chinese trade war, Baozun has been a volatile stock over the last 24 months. The recent convertible offering, which will be used for working capital and debt repayment, has helped boost the Chinese stock back up about 20% over the last month and the continued volatility has given way to increased lending demand.

Hydrogen fuel cell manufacturer Ballard Power Systems announces agreement with Norway’s largest ferry and express-boat operator Norled A/S. The announcement comes directly before the company set an earnings call date (5/2) for its Q1 2019 performance. With demand for alternative fuel cell technology increasing worldwide, BLDP has seen an uptick in lending interest as of late. Norway’s government has played a part in driving the demand for clean energy sources by directing a zero-emission mandate on all ferries by 2026. The sector has seen similar boosts in lending interest on competitors such as FuelCell Energy, Plug Power, and Bloom Energy.

Asia Pacific

The passing of the Chairman of Korea’s largest airline has threatened to disrupt his family’s control over the group company. Cho Yang-ho’s 17.8 per cent stake in Hanjn Kal Corp, the holding company of Korean Air Lines, is expected to be passed onto his eldest son Walter which in turn will require the latter to pay a significant amount to government authorities as per the country’s tough inheritance tax laws. This may require Walter Cho to divest a part of the stake in order to pay the levy, which would dilute the family’s control of the group. Investors believe a reduction in his stake will improve the corporate governance of a company that has been plagued by various scandals in recent years as a result of improper behavior by the Cho family. We have seen strong securities lending demand for Hanjin Kal Corp, which saw its shares rally by over 30 per cent last week.

Crown Resorts, the Australian casino operator, saw its fortunes fluctuate last week after negotiations over a proposed takeover by Wynn Resorts collapsed. Wynn terminated talks with Crown only 24 hours after the Australian operator had received a A$10 billion ($7.1 billion) from the Las Vegas-based gaming firm. Wynn cited the early leak of discussions in the Australian press, especially on sensitive matters, prompted them to withdraw their bid. However, some analysts believe that Wynn may return back to the negotiating table later in the year as they seek to broaden their business in Asia and expand beyond its current hub in Macau, China. We saw limited securities lending demand for Crown whose shares had risen by as much as 20 per cent after the announcement of a potential deal last Tuesday before erasing half those gains the next day.


Indivior Plc tumbles following the failure to reach a settlement agreement with the US Department of Justice. British drug maker Indivior Plc lost nearly three-quarters of its share value this week following U.S. criminal charges accusing Indivior of illegally increasing prescriptions for its opioid addiction treatment Suboxone. The news on Wednesday wiped out over 550 million pounds ($720 million) with close to 100 million shares changing hands, roughly 40 times the 30 day daily average volume. The UK based drug maker’s price has already been under pressure from is 2018 high due to increased concern over generic competition for Suboxone. Jefferies analyst, James Vane-Tempest noted that a potential $3 billion fine would require either a major rights issue or could lead the company into bankruptcy.

Convertible bond activity has been a focus for securities lending demand this week. The online pharmacy company, Shop Apotheke Europe, announced results of a capital increase and EUR 60M convertible bond. 1.39M new shares were issued at EUR36. In Spain, the construction company Sacyr announced a EUR150M convertible bond at an initial conversion price at EUR2.8898. Both stocks are trading at a premium as borrowers secure stock to hedge the deal.