For this week’s blog, I have found an article in a Dutch newspaper. I’ve found a really interesting article in ‘De Standaard’ that deals with ‘capital increases’ and I found it really suitable to use in our corporate finance’ blog.
The article is about Option, a Belgian technology company. Because of the bad times this company has had in the past, they want to try to boost the profitability of the company by incorporating some new strategies. To finance and achieve these strategies, they want to introduce a capital increase, along with some organisational changes.
It is not the first time they have introduced a capital increase and in fact, Option is just one of a few companies that are takig this approach.
A part of the strategy will be the approach of new market priorities and as a result, the company will most likely become more like a niche marketer, instead of having the reputation of a ‘high volume, low cost’ - producer that they have now. This reputation was forced on them these last several years in there ‘fight’ against the Chinese competitors. Option on the other hand is a company that excels in innovation and so would be far more successful in a niche market.
According to the founder of the company, one of his main concerns and therefore the goal of this new strategy, is to safeguard the company’s independence.
I actually loved reading this article, because it really showed a different way of financing the corporate strategies, plans, etc. Instead of running to a bank, Option chose to collect money from the public, which is much safer. Well, this of course depends on whether they are going to issue bonds or shares. The safest thing to do is to issue shares, because once the money is paid for these shares, this money will most likely never leave the company again, unless they introduce a capital decrease. This money now belongs to the private equity, which means they have less worries in paying back creditors.
I also think the founder is doing a really good thing by trying to keep the independence of the company.
I was glad to find an article that wasn’t for once talking about how bad a company is doing because of the crisis, but to find a company that has good prospects for next year.
Bye!
Lien Vanneder
Please do read this article on: http://www.standaard.be/Artikel/Detail.aspx?artikelId=T32GH49S&word=option
zaterdag 17 oktober 2009
maandag 12 oktober 2009
Evelien: Direct state aid for Hapag-Lloyd
After many financial institutions, manufacturers and other companies, now a first victim is cased in the container shipping industry.
The sixth-largest container ship operator Hapag-Lloyd, based in Hamburg, has become the first of its kind to receive direct state aid.
Around July, Hapag-Lloyd announced that it was seeking for fresh capital to avoid running out of cash. When Tui, a tourism group that owns 43.3 per cent of Hapag-Lloyd, sold its shares to the Hamburg-based Albert Ballin for 4.4 billion Euros, the company ran almost immediately into problems.
Aware of the consequences of doing nothing, the company decided to search for new financial sources and to restructure the organisation. Despite the urgency, this didn’t go very smoothly. There were some disagreements among the shareholders regarding the strategy. The state of Hamburg, the biggest shareholder, was pro injecting fresh money into the group.
Finally, the German government agreed to help the worldwide known shipping line. Of course this couldn’t take place without long discussions, reunion and under strict conditions.
First of all, the state guarantee only covers 90 per cent of the total of new lending facilities which Hapag-Lloyd organised with different banks. Secondly, the shareholders have to inject a further 750 million Euros. And finally Tui won’t receive any interest on its loans to Hapag-Lloyd until the loans which are covered by the government are repaid.
Since I am quite familiar with the shipping industry and transporting business, I didn’t hesitate to choose this article as source for my second blog on corporate finance.
It hurts to see how the economic crisis even affects such a big company as Hapag-Lloyd.
If Germany is willing to help the automobile manufacturers and the financial institutions, it speaks for itself that it can also help a huge company as Hapag-Lloyd, which stands for high employment, international fame and publicity for Germany.
aricle 'Germany steps in with aid for Hapag-Lloyd'
zondag 11 oktober 2009
Soc Gen set to raise 4.8bn euros
SocGen set to raise 4.8bn euros
Summary
Because of the financial crisis many banks have loaned large sums of money from the state. Of course, the banks have to repay these loans. For many banks it is very difficult to find a good strategy. This is also the case for the french Societe generale.
Societe Generale (SG) has received 3.4bn euro from the French state to bear the financial crisis. SG has planned to raise 4.8 billion euro in a share issue to pay off the emergency loans the bank received from the French state. The bank offers two shares with a discount of 27 percent for each nine shares existing shareholders own.
The bank has said that this financial operation is also needed to pursue potential takeovers, like the 20% stake of Dexia in Credit du Nord.
SG had a decrease of 52% in profits in the second quarter in comparison with last year. However, since then the bank is improved, as the banking sector in general has started to recover.
In April, Mr. Bouthon, the bank’s chairman, left the bank because of personal attacks against him, saying these attacks could harm the bank. The departure of Bouthon was linked with the aftermath of a financial scandal centred on Jerome Kerviel, who is a rogue trader. Kerviel is accused of losing 4.9bn euro. He was charged with forgery, breach of trust and unauthorised computer use. This trial is planned for the beginning of 2010.
My opinion
I think it is terrible what has happened in the financial sector the past year. The financial crisis is caused by the banks themselves. They were irresponsible, took too many risks. Moreover, many bankers were involved in illegal activities. Jerome Kerviel is such an example. He is accused of losing 4,9 bn euro and he is charged with forgery and unauthorised computer use. The chairman of Societe Generale seemed also involved in this scandal. Eventually, he had to resign.
Because of this kind of behaviour the banks faced serious difficulties in the past year. Then the state had to intervene and grant high loans to the banks.
I think that financial criminals like Kerviel must be punished very hard and I think that banks must learn from the past crisis. I also believe that in the future the government must control the banks more severely.
Source http://news.bbc.co.uk/2/hi/business/8292200.stm
By Annelies Devos
Summary
Because of the financial crisis many banks have loaned large sums of money from the state. Of course, the banks have to repay these loans. For many banks it is very difficult to find a good strategy. This is also the case for the french Societe generale.
Societe Generale (SG) has received 3.4bn euro from the French state to bear the financial crisis. SG has planned to raise 4.8 billion euro in a share issue to pay off the emergency loans the bank received from the French state. The bank offers two shares with a discount of 27 percent for each nine shares existing shareholders own.
The bank has said that this financial operation is also needed to pursue potential takeovers, like the 20% stake of Dexia in Credit du Nord.
SG had a decrease of 52% in profits in the second quarter in comparison with last year. However, since then the bank is improved, as the banking sector in general has started to recover.
In April, Mr. Bouthon, the bank’s chairman, left the bank because of personal attacks against him, saying these attacks could harm the bank. The departure of Bouthon was linked with the aftermath of a financial scandal centred on Jerome Kerviel, who is a rogue trader. Kerviel is accused of losing 4.9bn euro. He was charged with forgery, breach of trust and unauthorised computer use. This trial is planned for the beginning of 2010.
My opinion
I think it is terrible what has happened in the financial sector the past year. The financial crisis is caused by the banks themselves. They were irresponsible, took too many risks. Moreover, many bankers were involved in illegal activities. Jerome Kerviel is such an example. He is accused of losing 4,9 bn euro and he is charged with forgery and unauthorised computer use. The chairman of Societe Generale seemed also involved in this scandal. Eventually, he had to resign.
Because of this kind of behaviour the banks faced serious difficulties in the past year. Then the state had to intervene and grant high loans to the banks.
I think that financial criminals like Kerviel must be punished very hard and I think that banks must learn from the past crisis. I also believe that in the future the government must control the banks more severely.
Source http://news.bbc.co.uk/2/hi/business/8292200.stm
By Annelies Devos
Livine: The best industries for starting a business right now
Hello everyone!
I’ve chosen for a slideshow named ‘The best industries for starting a business right now’. It gives an overview of the best and most valuable industries at the moment. It’s not only interesting for starters but it’s also useful for companies who’d like to invest in a specific sector or company or who’d like to extend their own company. So, investments have also something to do with corporate finance.
First of all, there is the Candy-sector. Candies are things that almost everybody can afford, even in times of recession. If we look back at the launch of some classic brands like ‘Snickers’, we see that this happened in the Great Depression and ‘Snickers’ is still successful. Other examples of goods where consumers don’t cut back their expenses are beer and wine. Liquor wholesalers have also made profit, their sales have increased over the past year.
Second great opportunities are the iPhone applications. Apple is worth to invest in because it’s known all over the world and they are always searching for novelties and improvements. Apple has also launched an App Store and this store is a goal, the sales increase every month.
Thirdly, there is the Health-Care Technology. You have for example the digitalization of medical records, designing e-prescription programs, online communication with hospitals and so on. There is a lot of demand and it gives companies the chance to develop.
The Home Health Care-industry is also an example of luxury that people need and where they don’t cut back on. With the aging baby boomer generation, it’s a very lucrative sector. There is also a very big need to computer programs so that people can train themselves and do fitness-exercises at home.
In the health-sector, there is also the increase of yoga products and services. There are more doctors and therapists who suggest their patients to do some yoga.
Another possibility to invest in are the technical and trade schools. There is a lot of unemployment because of the crisis so companies can use this opportunity to invest in these schools. Temporary staffing firms are also examples of good businesses for now because of the unemployment.
The industry of the fast-casual dining has also made progress. This year, because of the crisis, there are less people who go to restaurants but they still want some luxury and convenience so they chose for fast-casual food. That’s an industry between fast food and full-serve restaurants. There are also more and more food trucks who deliver food at home.
Green constructions are also more popular these days. This sector has also made profits despite of the crisis. There are a lot companies who want to give themselves the image of an eco-friendly company because consumers like that image and that gives the business benefits.
A great opportunity for companies is the industry of niche business consulting. Niches are more specialized and give clients a more confidential feeling and that is what consumers search and need these days.
The crisis gives also a good chance for starters in accounting services. Companies always need someone to manage their accounts but in times of recession, they need them more than ever to avoid costs.
Repair services and the energy-sector made also profits because of this recession. When something is broken or a bit worn out for example a shoe, people want to repair it instead of buying a new pair to save money. It’s the same thing with energy, people search for ways to save money and to cut back their energy bill. Alternatives like solar panels have made progress last year.
I think it’s a very good slideshow because it gives a simple and quick view of good and valuable businesses and that’s interesting for companies and people who want to start a business. You know in which industry you’ll be safe at the moment and where you can make profits.
You can see the slideshow on: http://www.inc.com/ss/best-industries-for-starting-a-business?nav=mostpopular
Greet,
Livine
Lien: "Gala Coral gamble on debt-equity deal"
As I already said last week, ‘corporate finance’ covers many loads and one of the aspects of corporate finance I am going to talk about today is ‘acquisition’. This week’s article is called ‘Gala Coral gamble on debt-equity deal’.
Gala Coral, one of Britain’s largest bingo chains and owner of, amongst other things, betting shops and casino’s is doing what many companies are doing now to survive. In total, Gala Coral has to pay off a debt of £ 2.6 billion. In order to do this, the private equity owners of the company will give up up to half of their interest in Gala Coral to some of their lenders, namely investment firms, in order for them to drop a large part of the loans. If the lenders agree, £ 540 million will be dropped.
The fact that Gala Coral is in this bad position has a lot to do with the recession and the fact that people aren’t allowed to smoke in public places anymore, but one of the main reasons is the fact that the state charges high taxes on gaming. There aren’t any agreements with the lenders yet, but nevertheless, the company wants to free some money to invest in the business. Gala Coral has already had to close six bingo halls this year. As they say in the article, for a lot of companies, it has been the choice between this and closing their business.
I chose this article, because it deals with some of the aspects of corporate finance, for instance the finance of their business in general. Like last week, this article illustrates how a company can get in trouble after borrowing a lot of money, but now, we can see that not only the economic crisis is at the base of it, but that also other factors can get a company in a financial crisis. For instance the fact that people aren’t allowed to smoke in public places, like casinos, anymore can lead to a loss of clientele.
Another reason that I wanted to point out this article to you, is because they illustrate a special way to get out of debts. Handing over a part of your stake in the company to the lenders seems to me a drastic way to get out of your debts, but if it means that the company can keep its doors open, then I do understand the fact that many companies take on this option. This is also why in my introduction, I said I was going to talk about ‘acquisitions’, an important part of corporate finance. By receiving shares of a company in exchange for dropping some of the debt, the investment firms are actually buying their way into the company. It’s not a full acquisition, because there are still other equity owners, but they now own part of the company.
This article can be reread on: http://www.guardian.co.uk/business/2009/oct/04/gala-coral-gamble-debt-equity
By Lien Vanneder
Gala Coral, one of Britain’s largest bingo chains and owner of, amongst other things, betting shops and casino’s is doing what many companies are doing now to survive. In total, Gala Coral has to pay off a debt of £ 2.6 billion. In order to do this, the private equity owners of the company will give up up to half of their interest in Gala Coral to some of their lenders, namely investment firms, in order for them to drop a large part of the loans. If the lenders agree, £ 540 million will be dropped.
The fact that Gala Coral is in this bad position has a lot to do with the recession and the fact that people aren’t allowed to smoke in public places anymore, but one of the main reasons is the fact that the state charges high taxes on gaming. There aren’t any agreements with the lenders yet, but nevertheless, the company wants to free some money to invest in the business. Gala Coral has already had to close six bingo halls this year. As they say in the article, for a lot of companies, it has been the choice between this and closing their business.
I chose this article, because it deals with some of the aspects of corporate finance, for instance the finance of their business in general. Like last week, this article illustrates how a company can get in trouble after borrowing a lot of money, but now, we can see that not only the economic crisis is at the base of it, but that also other factors can get a company in a financial crisis. For instance the fact that people aren’t allowed to smoke in public places, like casinos, anymore can lead to a loss of clientele.
Another reason that I wanted to point out this article to you, is because they illustrate a special way to get out of debts. Handing over a part of your stake in the company to the lenders seems to me a drastic way to get out of your debts, but if it means that the company can keep its doors open, then I do understand the fact that many companies take on this option. This is also why in my introduction, I said I was going to talk about ‘acquisitions’, an important part of corporate finance. By receiving shares of a company in exchange for dropping some of the debt, the investment firms are actually buying their way into the company. It’s not a full acquisition, because there are still other equity owners, but they now own part of the company.
This article can be reread on: http://www.guardian.co.uk/business/2009/oct/04/gala-coral-gamble-debt-equity
By Lien Vanneder
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