Friday 13 June 2008

"Is Lehman the next Bear Stearns?", all the media ask. Hmm... I wonder whether they are trading as much as they used to. For, from what I understand, reduction in trading volumes because of counterparty risk concerns was the last "red flag" at Bear, before the Fed and JP Morgan came to the rescue. Now, Lehman is replacing some of its top executives: I am not convinced such measures bring much when the slide is already slippery.
In the freight sector, I am intrigued by the launch of new derivatives based on the Baltic Dry Index. Somehow it reminds me of the CBOT evolution: from farmers or orange-growers and their customers to purely-financial punters. Remember "Trading Places"? In freight, are these instruments new toys with which to burn one's fingers?Kemira Oyj, a Finnish chemicals group that counts paper companies among its main customers, has just announced that it would raise its prices by as much as 25% to try and offset higher raw material and energy costs. A week ago, it received a €100 million loan from the EIB to support its R&D activities. Sounds positive doesn't it? Perhaps, but not enough in Moody's eyes: they lower the group's short-term rating, which had been on review for downgrade since 17 March 2008, to Not-Prime, from P-3. Unfortunate timing, but presumably correct decision, as financial difficulties among customers are likely to hinder price-raising efforts (37% of 2007 revenues from Pulp & Paper produts and 22% from Coatings, plus 25% from Water treatment products, which, in turn, are frequently used in the paper industry).
This follows Moody's downgrades two days ago of Sappi, the South African paper company (to Ba2/stable corporate family and debt ratings), and of the French coated fine paper company Lecta SA (to B1/stable corporate family and B3/stable debt ratings).
M-Real will not sell its Reflex mill to Arjowiggins. The companies had envisaged the deal in October 2007, but the European Commission, in its capacity of M&A spoilsport, decided last week that the transaction could only take place if Arjowiggins sold off Reflex's carbonless and digital imaging activities. Anyone else interested in Reflex?