Halister News

(Bloomberg) -- The repo market has become more concentrated by jurisdiction, with French, Japanese and U.K. banks accounting for 63% of balances as of end-August vs 44% in November 2012 as banks make “more efficient use of their balance sheets,” JPMorgan strategists led by Alex Roever said in Sept. 22 note.

• Even though repo transactions with money funds don’t “necessarily qualify to be netted off balance sheet,” increased efficiencies with other counterparties can create more room
• Dealer repo transactions in money funds have increased by 139% to $818b in August 2017 from $343b in June 2015, JPM said, citing Office of Financial Research data
• Repo activity from French banks has grown by $139b during same time period; U.K. banks +$61b, Japanese banks +$59b
• Fixed Income Clearing Corp.’s balances have grown to $6.6b as of August from $5b in June; balances are likely to grow, though they may remain small in the near-term given the need for a sponsoring bank
• Until money market funds can directly access a centrally cleared repo platform, “which does not seem like it’s going to happen any time soon,” money funds will continue to have a need for dealer repo

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Vivien Lou Chen

(Bloomberg) -- Alsea’s gross margins will probably expand by 0.8% this year while Ebitda margins could increase by 0.2% as the company benefits from a more stable consumer environment in Latin America, cheaper raw materials and a stronger Mexican peso, Barclays analysts led by Benjamin Theurer write in note. 

• Cost of raw materials that are most important to Alsea (cheese, coffee and meat) expected to stay "fairly stable" as they’re priced in USD-terms and the peso has strengthened
  • NOTE: Alsea operates Starbucks, Burger King and Domino’s Pizza franchises in Mexico
• Stronger peso has removed FX pressure for Alsea and will probably help Ebitda grow faster than sales in 2017
• Not expecting M&A in next year as company has the option to spend ~3.6b pesos (~$202m) acquiring a remaining 28% stake in Grupo Zena before a put/call option expires next year
• Earlier, Alsea Upgraded to Overweight at Barclays; Price Target MXN72

To contact the reporter on this story: Michelle F. Davis in Mexico City at mdavis194@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Scott Schnipper

--AARON KIRCHFELD

(Bloomberg) -- Spain’s constitutional crisis over separatism in its Catalonia region is viewed with some complacency by investors when instead they should consider taking bearish positions, JPMorgan analysts say in note.

• Recommends tactical hedges in Spanish credit
  • Weak sentiment may increase spread of Spanish corporate debt 10bps-15bps in near term, in universe of issuers that included Gas Natural, Repsol, Iberdrola
• With Catalonia comprising about one-fifth of Spain’s economy, disruption from general strike or civil disobedience may affect companies
• While crisis may get worse before it improves, doesn’t generate “systemic risk” to European credit
• JPMorgan rates team recommends shorting 10-year Spanish govt bonds versus Portugal’s and Germany’s
• NOTE: Catalan Police Endure Spanish Pressure Before Disputed Vote (1)
• Should Catalan parliament attempt to declare unilateral succession from Spain, central government “would have no other option” but to suspend the region’s administration
• Measures taken so far by central government to quash independence referendum planned for Oct. 1 “threaten to inflame the situation”
  • Therefore either of two “unpalatable outcomes” now more likely: vote is canceled; or referendum goes ahead with low voter turnout rate due to disruption, resulting in a “yes to independence” result

To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Cecile Gutscher

(Bloomberg) -- Here’s a roundup of Indian co. debt-rating changes.

• To get this story sent to your inbox real-time, run NI INRATINGS, click on Display & Edit, then Set Alert Delivery

DOWNGRADES

• Lava Cast
  • Term loan cut to BBB-(SO) from BBB(SO) at Care
  • Cites revision in ratings of corporate guarantor Setco Automotive
• Lotus Construction
  • Long-term bank facilities cut to BB+ from BBB- at Crisil
  • Cites significant decline in scale of operations
• Rajvir Industries
  • LT bank facilities cut to D from B- at Care
  • Cites delays in debt servicing
• Setco Automotive
  • LT fund-based facilities cut to BBB- from BBB at Care
  • Cites flat revenue, decline in operating profit margins and net losses
• Sushee Infra
  • Fund-based working capital facilities cut to BBB+ from A- at India Ratings
  • Cites significant refinancing risk

UPGRADES

• Avanti Feeds
  • Fund-based working capital facilities raised to AA- from A+ at India Ratings
  • Cites increase in scale of operations
• GHCL
  • LT bank facilities raised to A from A- at Care
  • Cites healthy operating performance of its soda ash division
• Kurlon Enterprise
  • Fund-based facilities raised to A+ from A at ICRA
  • Cites sustained revenue growth
• La-Gajjar Machineries
  • LT bank facilities raised to A from BBB+ at Crisil
  • Cites operational, managerial and financial support expected from parent
• Malladi Drugs
  • LT bank facilities raised to A- from BBB+ at Crisil
  • Cites steady offtake of core products, introduction of new products
• Mercator
  • LT bank facilities raised to BBB+ from BBB at Care
  • Cites positive impact on capital structure led by reduction of high-cost debt

Economic Release Details: {GRIFPBUS Index ECOD} --PAUL GORDON

--CHRISTIAN WIENBERG