America Movil doesn’t rule out Telekom Austria capital hike for expansion

VIENNA (Reuters) – Telekom Austrias majority shareholder does not rule out a further capital increase to fund European acquisitions, according to a newspaper interview published on Thursday.

Mexicos America Movil wants to use the business, in which it bought around 60 percent last year, for further expansion into central and eastern Europe, though Telekom Austria told Reuters last month it had little room to buy new assets.

America Movils Chief Financial Officer Carlos Garcia Moreno told Austrian magazine News on Thursday he expected several years of consolidation in the European telecommunication market.

If there are opportunities for Telekom (Austria) to grow through acquisitions, the situation will be judged accordingly and the topic (of a) capital increase will also be considered, he said.

America Movil fully supported a 1 billion euro (783 million pounds) capital increase conducted by Telekom Austria in November to reduce debt and invest in infrastructure.

Part of America Movils strategy could be to bring together Telekom Austria businesses in different countries under a single brand, Moreno said. Telekom Austria operates in Austria, Macedonia, Belarus, Croatia, Bulgaria, Slovenia, Serbia and Liechtenstein.

(Reporting By Angelika Gruber and Shadia Nasralla; editing by John Stonestreet)

Moody’s downgrades 3 Russian financial institutions’ long- and short-term ratings

Ratings remain on review for downgrade

London, 19 January 2015 — Moodys Investors Service has today taken rating actions on three Russian
financial institutions — namely Sberbank, Agency
for Housing Mortgage Lending OJSC and Vnesheconombank.

These actions follow the weakening of Russias credit profile, as
reflected by Moodys downgrade of Russias government bond rating to Baa3
from Baa2 on the 16th of January, 2015 and placing it on review
for further downgrade. For additional information, please
refer to the related announcement: https://www.moodys.com/research/–PR_316487

Specifically, today Moodys downgraded the supported senior unsecured
debt, local-currency deposit and issuer ratings of the three
government-owned Russian financial institutions that are rated
at the same level as the Russian sovereign due to government support assumptions.
The affected ratings remain on review for downgrade because of (1) the
review for downgrade of the sovereign debt rating; and (2) the considerations
that Moodys stated in a rating action last month on Russian financial
institutions, regarding the significant funding, asset quality
and profitability pressures that they now face as a result of Russias
challenging operating environment for the medium term (see Moodys
reviews for downgrade ratings of 16 Russian financial institutions
23 December 2014).

RATINGS RATIONALE

The weakening of Russias credit profile has prompted the rating actions
on the three financial institutions that are rated at the same level as
the government bond rating. While Moodys considers that the Russian
government will remain willing to assist these entities in the event of
need, its capacity to do so has declined, as expressed by
the downgrade of the government debt rating to Baa3 from Baa2 with a further
review for downgrade.

WHAT COULD MOVE THE RATINGS UP/DOWN

The key drivers of todays actions relate to the weakening of the sovereign
credit profile, as reflected in the downgrade of Russias government
bond rating. Therefore, Moodys considers that upward pressure
on the supported ratings of the three Russian financial institutions is
unlikely in the near term.

As expressed by the review for downgrade on the long-term ratings,
the three Russian financial institutions ratings could be downgraded
further in the event of any further downgrade of the government bond rating.
Downward adjustments could also be triggered by an erosion of the banks
standalone credit profiles.

List of affected ratings

Issuer: Agency for Housing Mortgage Lending OJSC

…. Long-term Issuer Ratings,
Downgraded to Baa3 from Baa2 RUR; Placed Under Review for further
downgrade

…. Short-term Issuer Ratings,
Downgraded to P-3 from P-2; Placed Under Review for
further downgrade

…. Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from Baa2 RUR; Placed Under Review for further
downgrade

…. Backed Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from Baa2 RUR; Placed Under Review for further
downgrade

Issuer: Sberbank

…. Long-term Deposit Rating (Local
Currency) , Downgraded to Baa3 from Baa2 RUR; Placed Under
Review for further downgrade

…. Short-term Deposit Rating (Local
Currency) , Downgraded to P-3 from P-2; Placed
Under Review for further Downgrade

…. Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from Baa2 RUR; Placed Under Review for further
downgrade

…. Backed Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from Baa2 RUR; Placed Under Review for further
downgrade

…. Backed Senior Unsecured Medium-Term
Note Program , Downgraded to (P)Baa3 from (P)Baa2; Placed Under
Review for further Downgrade

…. Backed Short-term Program,
Downgraded to (P)P-3 from (P)P-2; Placed Under Review
for further Downgrade

Issuer: Vnesheconombank

…. Long-term Issuer Ratings,
Downgraded to Baa3 from Baa2 RUR; Placed Under Review for further
downgrade

…. Short-term Issuer Ratings,
Downgraded to P-3 from P-2; Placed Under Review for
further downgrade

The principal methodology used in rating Agency for Housing Mortgage Lending
OJSC and Vnesheconombank was Government-Related Issuers published
in October 2014.

The principal methodology used in rating Sberbank was Global Banks published
in July 2014. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moodys
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support providers credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moodys disclosures on the lead
analyst and the Moodys legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.

Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moodys legal entity that has issued
the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.

Irakli Pipia
Vice President – Senior Analyst
Financial Institutions Group
Moodys Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Yves J Lemay
MD – Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moodys Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Charlotte charter school faces state action amid financial shortfall

The state could move to shut down a Charlotte charter school as it struggles with low enrollment and significant financial shortfalls.

If Entrepreneur High School closes, it would be the third Charlotte charter school to close within the past year amid financial problems, raising questions about state oversight of charter schools.

Entrepreneur High has only $14 in its bank account, the school#x2019;s chairman, Robert Hillman, told the state#x2019;s charter school advisory board Monday.

The school also only has about 30 students attending classes, well below the minimum of 65 set by state law. By the end of the year, the state Department of Public Instruction projects a deficit of at least $400,000. Entrepreneur High had projected having 180 students this year.

The board removed its founder and principal, Hans Plotseneder, on Christmas Eve, according to documents from the Department of Public Instruction.

Hillman told the board that Entrepreneur High is in early discussions with a management company to take over the school. The board also is trying to drum up a corporate sponsor or receive a lifeline from the Raza Development Fund, a community investment organization that helps charter schools serving Latinos. Entrepreneur High is located on Central Avenue and has targeted the Hispanic community.

#x201C;The ship is clearly not right at this point,#x201D; Hillman said. #x201C;Something needs to be done.#x201D;

The advisory board voted Monday to recommend that the state Board of Education either terminate the school#x2019;s charter or find another board to take the school over. The Board of Education is slated to discuss the issue in February and decide in March.

#x201C;It#x2019;s just been a hot mess. It#x2019;s been very bad. It#x2019;s embarrassing to see a situation get here this quickly,#x201D; state board member Becky Taylor said. #x201C;I just don#x2019;t see how we can continue on with this school.#x201D;

Should the school fail, Entrepreneur High would be the second new Charlotte charter to close its doors this school year. Concrete Roses STEM Academy shut down in September, just a few weeks into the school year. Another Charlotte charter, StudentFirst Academy, closed in April after financial troubles in its first year.

Entrepreneur High#x2019;s experience again calls into question how the state approves new charter schools. The state legislature lifted its long-standing cap of 100 charters in 2011. Since then, the state has approved dozens of new charter schools each year.

Charter school advisory board members said at Monday#x2019;s meeting that they had serious questions about Entrepreneur High#x2019;s viability when they recommended it move forward in December 2013. Just two months before, the school#x2019;s board had dissolved itself and Plotseneder was forced to recruit new members.

In July, Entrepreneur High was one of the least prepared to open charter schools in the state. A #x201C;ready to open#x201D; report compiled by the NC Office of Charter Schools said it had made only #x201C;slight progress#x201D; and a meeting with state officials was needed.

Hillman did not immediately respond to an interview request from the Observer on Monday. Plotseneder said he felt the charter school advisory board did the right thing.

#x201C;We need to end these ridiculous management problems,#x201D; he said, referring to Entrepreneur High.

Quick troubles

Entrepreneur High opened in August as a vocational school focused on advanced manufacturing and business creation. It quickly ran into trouble.

Charlotte-Mecklenburg Schools acknowledged taking some of Entrepreneur High#x2019;s ideas when the district created an advanced manufacturing and entrepreneurship school at Olympic High, creating a #x201C;rivalry#x201D; between the charter school and CMS, Plotseneder said at the time.

Entrepreneur High#x2019;s building was not complete by the start of the school year, leading parents to withdraw their children.

The school projected enrollment of 180 students and was funded based on that count. Last week, the state was told 49 students enrolled but a headcount showed only 31 students in classrooms. Charter schools are required to have at least 65 students.

Because of low enrollment, the state froze Entrepreneur High#x2019;s access to cash in September. The school has been on probation with the state charter school office since then.

Charter schools are funded by tax dollars, and receive money based on how many students attend. The state gives its first allotment before classes start and adjusts the money flow based on how many students show up to class.

Alexis Schauss, director of school business for the NC Department of Public Instruction, told the advisory board Monday that Entrepreneur High is unlikely to make it through the year without a significant infusion of cash from an outside source.

The school owes more than $275,000. Based on the enrollment, the state will give it monthly allotments of $41,000 beginning in February. That is not enough to meet the school#x2019;s payroll.

Where now?

Elaine Worthey, who has stepped into the principal#x2019;s role, said school leaders will hold interest meetings every Saturday to try to recruit students.

The school also is working to get its financial systems back in order after its bookkeeper left in March. Hillman said his review of the finances shows no impropriety.

#x201C;There were no trips to Vegas, there were no hot tubs anywhere,#x201D; he said. #x201C;It is our desire to complete this school year and start next year.#x201D;

By the end of 2015, Entrepreneur High wants to add board members with financial and legal expertise, Hillman said.

But charter school advisory board members were more concerned about the school#x2019;s financial viability in the next six months. Members said if they want the state Board of Education not to shut the school down, leaders should secure a hard commitment of money from a company or investment group by the February meeting.

#x201C;It breaks my heart to see y#x2019;all standing here today, and it#x2019;s actually worse than we thought it was,#x201D; Taylor said.

China and the final frontier of financial reform

id=posts> China and the final frontier of financial reform datetime=2015-01-19T22:00:21+11:00>19 January 2015
class=content>

Authors: Yiping Huang, Peking University; Ran Li, Peking University; and Bijun Wang, CASS

In late 2013 the Chinese authorities put together a reform agenda for the financial sector, focusing on reducing entry barriers, liberalising market mechanisms and improving financial regulation. This could be the final frontier of China’s financial reform, which — according to the plan — should make critical progress by 2020.

So why did the leaders decide to accelerate reform efforts in this area?

China’s financial reform started in 1978. Reforms in the past, however, have exhibited a unique pattern of being strong in building a comprehensive framework and growing transaction volume but weak on liberalising market mechanisms and improving corporate governance. The Chinese financial system already resembles a modern financial sector in advanced economies. Quantitative indices show the size of Chinese financial assets is very large. However, China still lags significantly in freeing up key financial market prices, especially interest and exchange rates. Most commercial banks still behave more like SOEs than listed companies.

This unique pattern of financial reform is closely related to the overall asymmetric liberalisation approach adopted by the Chinese government. While most products have been fully liberalised, factor markets remain heavily distorted. These distortions are like subsidising the corporate sector while taxing households. This asymmetric approach is behind China’s peculiar economic model with both strong growth performance and serious structural imbalances.

Repressive financial policies — such as controls over interest rate, exchange rate, credit allocation and capital mobility — are important forms of factor market distortions. The degree of financial repression in China today is not only higher than the world average but is also higher than average for low-income countries.

Surprisingly, such policy distortions in the financial market did not prevent rapid economic growth. In fact, earlier empirical works confirm that financial repression actually played a positive role in supporting economic growth, at least during the early reform years.

So why is the status quo no longer an option? First, the growth impact of repressive financial policies has changed from positive to negative. Second, repressive financial policies already contribute increasingly to macro-economic and financial risks. Important examples include growing banking risks and property bubbles. And, third, many of the policy restrictions are no longer sustainable, giving rise to the major concerns of ‘hot money’ and the rapidly growing ‘shadow banking’ system.

All this suggests that the authorities have no alternative other than completing the transition to a market system in the financial sector. The official plan covers 11 specific areas, including reducing entry barriers, liberalising interest and exchange rates, developing multi-layer capital markets, achieving capital account convertibility, and strengthening financial regulation, among others. All of these pursuits are centred around two key tasks: interest rate liberalisation domestically and currency internationalisation externally.

Both of the above tasks have a large number of prerequisites. For instance, before fully liberalising interest rates, an effective reform of commercial banks is necessary in order to avoid reckless competition after reform, and a new monetary policy instrument is needed if the People’s Bank of China’s (PBC) base interest rate regulation is to go ahead. For renminbi internationalisation it is necessary, but not sufficient, to have: sustainable growth of the Chinese economy; an open, large, efficient and liquid financial market; and the credibility of China’s economic, legal and political systems.

While financial liberalisation is critical, it can also raise financial volatility. One big issue is whether China will be able to avoid a financial crisis. This is possible but is dependent on how it implements reforms. In the near term, the Chinese government still has a sound fiscal system to contain financial risks in individual areas, but the system could become risky if the central government’s credibility is overdrawn. If this is not addressed quickly, it could amount to a big problem.

At the moment, policymakers are still building consensus on pace, extent and sequence of various reform measures. In particular, whether China should move rapidly toward full capital account convertibility is still a subject of major debate. Yet, in the meantime, financial reform is already picking up the pace. PBC Governor Zhou Xiaochuan indicated that it would take one to two years to liberalise interest rates. Some officials also suggested that the central bank may withdraw from daily intervention in the foreign exchange market, allowing market forces to determine the exchange rate.

But there are still important hurdles for the authorities to overcome in the near term. Introducing the deposit insurance mechanism has been talked about for years. But it still hasnt happened yet. Establishing market-based interest rates is also dependent on successful resolution of the moral hazard problem. How to allow default of some debt and trust products without causing systemic risk remains a tough challenge for policymakers in the coming year.

Yiping Huang is Professor of Economics at Peking University and the China Economy Program at the ANU.

Ran Li is a PhD Candidate at the National School of Development, Peking University, and currently visiting the Australian National University

Bijun Wang is a senior research fellow at the Institute of World Economics and Politics, Chinese Academy of Social Sciences

It’s Time to End Financial Advisers’ 1% Fees

But there’s a risk they could also lose larger clients–depending on what these larger clients need and what these traditional advisers offer. Thanks to online advisers, helping investors build globally diversified portfolios has become a low-cost, commodity service. But many clients need more than just a portfolio design: They might require handholding when the market declines and they could need help with other financial issues.

“If someone is in their 20s, what’s the advice? ‘Save as much as you can and put it in stocks,’ ” notes

Mitch Tuchman,

managing director at Rebalance-IRA.com. “Once you get to middle age, things become much more complicated.”

Rebalance-IRA.com aims to distinguish itself from other online advisers by giving clients their own dedicated financial adviser. For 0.5% a year, that adviser helps clients design a portfolio, juggle goals, coordinate different accounts, and figure out how to make their money grow and then draw it down in retirement.

For traditional advisers to continue charging 1%, they’ll likely need to offer even more, including detailed advice on estate planning and tax issues, as well as full-blown financial plans.

What if traditional advisers continue to offer portfolio building, the occasional in-person meeting and a client dinner once a year? They shouldn’t be surprised if clients head elsewhere.

Consolidator to acquire network Financial Ltd in £2.7m deal

Tavistock will initially hand over £1.5 million to Standard Financial Group. It will pay £500,000 in cash and put up a further £500,000 in working capital for the new business.  

Tavistock has also paid £500,000 in relation to Standards support services arm IFA Compliance Limited. The consolidator will not keep this business and has instead sold it back to former Financial Ltd chief Charlie Palmer. Of the £500,000, £488,000 will be used by IFA Compliance to pay off loans which it owes to other companies within the Standard group. Palmer will retain control of IFA Compliance but will not join the new business.

Lake Shore Gold: Big Gold Sales In 2014, Weak Oil To Shore Up Margins (LSG)

Lake Shore Gold (NYSEMKT:LSG) is a Canadian-based gold producer with mining and exploration activities at the Timmins Gold Camp in Ontario, Canada. The company recently announced record full-year gold production results for 2014 from its low-cost Timmins West and Bell Creek mines. We expect the companys strong operational and financial performance to continue into 2015.

(Note: All financial figures are in Canadian dollars unless otherwise specified).

2014 production results

Lake Shore Gold reported record annual gold production in 2014 of 185,600 oz at a high gold grade of 4.8 grams per tonne, up 38% from a year ago. That beats the guidance range of 160,000 to 180,000 oz for the year. Gold sales totaled 183,300 oz at an average realized gold price of $1,398/oz (US$1,269/oz), or an estimated $256.25 million ($216.11 million US) in total gold revenues.

The big jump in gold production for the year is largely attributable to the milling capacity expansion in the third quarter of 2013. Production rates significantly improved, thus raking in bigger revenues, and cash flows from the Timmins West and Bell Creek mines, which have offset the fall in gold prices.

Gold production for Q4 totaled 43,200 oz at an average gold grade of 4.2 grams per tonne, 16% lower than the prior year quarter. The drop in gold production derived from lower mill grade recoveries compared to 5.2 grams per tonne in Q413. Gold sales were 41,200 oz at an average realized gold price of $1,360/oz, or an est. $56.03 million in Q4 revenue.

Lake Shore Gold plans to release preliminary cost estimates for 2014 and Q414 next week. We expect the company to beat its 2014 all-in sustaining cost (AISC) guidance range of $950/oz and $1,050/oz, considering the 9-month trailing AISC (as of Sept. 31) was $861/oz.

Lake Shore Gold has slashed operating costs (OPEX) aggressively in 2014, boosting operating margins, and most importantly free cash flows (FCF) from Timmins West and Bell Creek. Free cash flows (as of Sept. 31) were $49 million, and we expect the company to extend positive FCF generation in Q414 and 2015 given the gold mines sustain their low-cost structure.

Investors should anticipate the release of full-year and Q4 financial results in March 2015.

2015 outlook

Lake Shore Gold improved its financial positioning in 2014 by repaying Sprott $45 million in debt, and raising its cash and bullion balance to $60 million, up 76% from the beginning of the year. We expect Lake Shore Gold to repay the remaining $7 million in debt to Sprott by the end of May 2015 using internal cash flows.

Debt repayment is very telling of the companys strength to generate sufficient FCF at its gold mines, particularly in a tough gold environment. It gives investors great comfort that management is keen on reducing financial risk. Lake Shore Gold is on track to reduce debt to zero, and we believe this raises the possibility of FCF deployment in the form of cash dividends to shareholders.

We expect the recent drop-off in oil prices to lower OPEX for the first half of 2015 for Lake Shore Gold as oil makes up a big portion of OPEX. HSBC Securities estimates every 20% drop in oil prices cuts approximately 2% to 6% in overall costs for gold miners.

Oil fell approximately 40% in Q414, followed by a 10% drop in the current (Q115) quarter. We could see OPEX savings reflected in the upcoming Q4 and 1H 2015 financial results. Lower OPEX will in turn reduce AISC and raise operating margins, including FCF generation moving forward.

Lake Shore Gold estimates gold production to range between 170,000 to 180,000 oz in 2015, including OPEX of $650/oz to $700/oz, and AISC of $950/oz to $1,000/oz.

We have no position in Lake Shore Gold, but remain bullish on its financial and operational turnaround. Shares have jumped 26% after tax loss selling ended on Dec. 24 in Canada, and we forecast shares to continue to run up on the back of strong financial and operational performances.

Exclusive: DIC launches sale of German aluminum group Almatis – sources

FRANKFURT/DUBAI (Reuters) – Dubai International Capital (DIC) is launching the sale of German alumina products maker Almatis as the fund seeks to reduce its liabilities in the wake of a debt restructuring, three people familiar with the deal said.

DIC has mandated Barclays (BARC.L) to explore the options of the possible divestment, the people said on Thursday. Almatis is around 80 percent owned by DIC with a stake also held by Blackstone (BX.N) unit GSO Capital Partners.

The company had earnings before interest, tax, depreciation and amortization (EBITDA) of around $100 million in 2014, DIC Chief Executive David Smoot said last year, without giving an expected valuation for the firm.

Listed aluminum companies trade at an average of 6.8 times their expected EBITDA. Groups which like Almatis specialize in premium alumina products – such as Vesuvius (VSVS.L), Albermarle (ALB.N) and Imerys (IMTP.PA) – trade at a slightly higher average multiple of 7.5.

If valued at a similar multiple, Almatis could bring in more than $750 million in a potential sale.

A person familiar with the deal said, however, that DIC was hoping for a substantially higher price tag.

DIC bought Almatis at the height of the buyout boom in 2007 for $1.2 billion from Rhone Capital and Teachers Private Capital, the private investment arm of the Ontario Teachers Pension Plan. But its investment crumbled as demand for the companys products collapsed in the economic crisis and Almatis went into restructuring in 2010.

In a bid to reduce debt, DIC, part of Dubai Holding, the personal investment vehicle of the emirates ruler, Sheikh Mohammed bin Rashid al-Maktoum, sold German packaging group Mauser for 1.2 billion euros to private equity firm Clayton Dubilier Rice in 2014.

The process of grooming both Almatis, a unit carved out of Alcoa (AA.N) in 2004, and British engineering aerospace group Doncasters for a sale began last summer and deals with respective buyers are expected to be clinched within 18 months, Smoot had said at the time.

DIC, Almatis, Barclays and Blackstone declined to comment.

Almatis, an acronym for Alumina Materials, Innovative Solutions, makes alumina for the refractory, ceramic and polishing industries and has 1,150 employees. It posted sales of $550 million in 2013.

Almatis sought protection from creditors with more than $1 billion in debt, which stemmed from the leveraged buyout by DIC. The group was able to restructure the liabilities later the same year in a deal that saw DIC invest $100 million in Almatis.

(Reporting by Arno Schuetze and David French; Editing by Jonathan Gould and David Evans)