From the Securities Lending Trading Desk – Week of March 4th

In the Americas, demand for Mattel, Inc.(MAT) remains stable as the toy maker looks to recover from a difficult 2018. In Asia Pacific, Standard Chartered Plc also announced that it will restructure operations into hubs focused in Hong Kong, Singapore and London. In Europe, Aston Martin is back in the spotlight after falling the most since its controversial initial public offering last year.

Americas

Ahead of earnings, we have seen strong demand for GTT Communications Inc. (GTT). The share price for the telecom carrier has been trending higher since dipping to a 52-week low on 1/3, closing at $21.76. Since that time the value has climbed more than 40%. According to reports there has been a growth in positive corporate insider sentiment which has resulted in increased insider buying. While this is largely positive for GTT, the company nevertheless reported “Q4 EPS of ($0.96), $0.68 worse than the analyst estimate of ($0.28)”. They went on to report that revenue slightly beat estimates coming in at $455 million compared with the estimate of $452.28 million. With the miss on earnings per share some investors remain skeptical as to the future of GTT. As a result we continue to see strong demand and elevated fee levels.

Demand for Mattel, Inc.(MAT) remains stable as the toy maker looks to recover from a difficult 2018. Last year was difficult across the toy industry with competitor, Hasbro, Inc. (HAS), also facing challenges after the closing of Toys R Us. MAT has been the major focus of borrowers after recently projecting “flat gross sales in constant currency in 2019”. Prior to this, the share price had closed at a six-month high of $17.07 but has lost roughly 15% in the past two weeks. While the bulls are focused on new management at MAT making the necessary changes to drive sales, bears are focused on several analyst price target reductions and remain concerned these turnaround efforts will take longer than expected. Utilization remains high as more demand is focus on Mattel.

Asia Pacific

Shares in Australian-listed Reliance Worldwide fell sharply last week after its Chairman decided to cut ties with the company. Rich Lister Jonathan Munz, the Chairman and founding family member of the plumbing supplies group, announced his departure from the firm last week after over 30 years of service. Munz sold his final 10 per cent stake in the company in a block trade which will net him A$367 million ($260 million) and will leave the Board of the company following an orderly transition to a new chairman. The departure marks an end of an era for the Munz family which built up Reliance from a small manufacturing entity to a A$4 billion ($2.8 billion) global firm. We have seen increased securities lending demand for Reliance, which saw its share price slide by as much as 7% following the announcement.

Standard Chartered Plc announced a new strategy to reduce its cost base and boost its faltering performance. The London-based lender, which has a strong focus across the Asia and EMEA regions, reported that pre-tax profits in 2018 rose by 28 per cent to $3.86 billion, missing analyst expectations. The bank announced its intention to divest its roughly 45 per cent stake in Indonesian Bank Permata which could raise up to $1 billion, as well as embark on a three year strategy to reduce costs by $700 million by the year 2021 and pare down businesses in India, South Korea and the United Arab Emirates. The bank also announced that it will restructure operations into hubs focused in Hong Kong, Singapore and London. We have seen limited securities lending demand for Standard Chartered in recent weeks, which has seen its share price increase by nearly 10 per cent in 2019.

Europe

Capital raising has been in the news again with several rights issues being announced. UK challenger bank Metro Plc plans to raise $464 million through selling shares to fix a shortfall on its balance sheet after it applied the incorrect risk weighting to a number of its mortgages. Marks and Spencer’s Group Plc announced a joint venture with Ocado Group Plc, the online grocer, in a $993 million deal for a 50% stake in the partnership. M&S plan to raise $794 million to help fund the deal in a move that looks to help offset its falling retail sales. Looking to mainland Europe, Cellnex the Spanish infrastructure firm specializing in telecoms announced a $1.4 billion capital increase due to start trading next week. Finally, Sunrise Communications Group announced a $6.3 billion deal to buy US cable giant Liberty Global Swiss assets, partly financing the deal with a $4.1 billion rights issue. All four names have seen an increase in demand this week following the news.

Aston Martin is back in the spotlight after falling the most since its controversial initial public offering last year. The luxury carmaker said some U.K. and European buyers are delaying purchases amid uncertainty around Brexit. The firm has been struggling to gain traction with investors since its initial IPO after the stock was valued in line with Italian supercar name Ferrari. The stock dropped as much as 20% and short interest remains hovering around 23% of free float.