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Frontrunning: February 6

  • RadioShack files for bankruptcy; Sprint to take over some stores (Reuters)
  • Kansas To Issue Bonds and Invest Proceeds to Boost Pension Returns (WSJ)
  • Merkel to Make Last Push With Putin as Pessimism Prevails (BBG)
  • Islamic State in Syria seen under strain but far from collapse (Reuters)
  • Texas Swagger Fades Fast as Oil Town Squeezed Hard by OPEC (BBG)
  • SEC probes Blackberry options trading ahead of Reuters report about Samsung talks (Reuters)
  • Spanish Bonds Underperform Italy’s as Podemos Gains Popularity (BBG)
  • Steelworkers Union Rejects Offer From Refiners (WSJ)
  • Brazil January Inflation at Fastest Pace in Nearly 12 Years (BBG)
  • Japan automakers hit production snags as U.S. port dispute drags on (Reuters)
  • Anthem Sued Over Large Data Breach by California Consumer (BBG)
  • Iran’s Zanganeh blames oversupply (Reuters)
  • Anatomy of Nigeria’s $20 billion 'leak' (Reuters)
  • Amy Pascal Steps Down as Head of Sony’s Film Business (WSJ)
  • Harvard Hits Social Media to Attract Record 37,000 Applicants (BBG)
  • Taiwan pilots 'faced problem with one engine, restarted the other' (Reuters)

 

Overnight Media Digest

WSJ

* RadioShack Corp's retailing woes were aggravated by strategic confusion that handed power to bare-knuckled lenders. The electronics chain filed for bankruptcy reorganization on Thursday. (http://on.wsj.com/16xkdV6)

* Anthem Inc stored the Social Security numbers of 80 million customers without encrypting them, the result of what a person familiar with the matter described as a difficult balancing act between protecting the information and making it useful. Scrambling the data, which included addresses and phone numbers, could have made it less valuable to hackers or harder to access in bulk. (http://on.wsj.com/1zmrZN5)

* The deadly crash in Valhalla, New York, shows the limits of devices designed to keep cars from crossing tracks as trains approach, though such U.S. intersections have become safer recently. (http://on.wsj.com/1EKIgP9)

* As sanctions hawks in the U.S. Congress butt heads with President Barack Obama over negotiations with Iran, a similar battle on the Iranian side has been playing out. (http://on.wsj.com/1BZfdBe)

* Amy Pascal, who has run Sony Corp's movie business for more than a decade and worked at the studio for nearly 20 years, will step down in May as Sony Pictures co-chairman. She will become a producer based at the company. (http://on.wsj.com/1EJvoZr)

* Hedge-fund managers who employ complicated, automatic-trading strategies made millions off the wild swings in currency and commodity markets in recent weeks. (http://on.wsj.com/1ze8EZz)

* Apollo Global Management's results were hit by a drop in the share price of EP Energy Corp, the private-equity firm's biggest oil and gas bet. But thanks to about $750 million in fees and dividends, Apollo and other investors in the energy company are close to breaking even. (http://on.wsj.com/1FcQHjD)

* The chief executives of the three largest U.S. airlines said they are pressing the U.S. government to modify or kill air treaties with two Persian Gulf nations. The CEOs cited what they claim are subsidies and government industrial policies that favor three of the Gulf region's fast-growing carriers, distorting global air transportation. (http://on.wsj.com/1KjlQF0)

* Walt Disney Co on Thursday tapped parks and resorts chief Thomas Staggs as its operations chief, making the company veteran the leading candidate to be Disney's next CEO. (http://on.wsj.com/1EKC7lU)

* Twitter Inc reported new user growth that slowed more than expected, underscoring ongoing concerns, but the social media company said it sees a return to prior growth levels this year. (http://on.wsj.com/1KwOcK9)

* Securities regulators in the United States and Canada are probing whether a recent news report about a possible purchase of BlackBerry Ltd by Samsung Electronics Co Ltd was sparked by investors intent on manipulating the Canadian smartphone maker's stock. (http://on.wsj.com/1Ie5j7u)

* The chairman of Hyundai Motor Co and his heir-apparent have raised 1.16 trillion won ($1.07 billion) through the sale of their stakes in the car group's logistics arm. (http://on.wsj.com/16KmxsH)

* The United Steelworkers union rejected the latest offer from U.S. refiners Thursday evening, continuing the strike at nine plants around the country. (http://on.wsj.com/1Ie68gM)

 

FT

Google's decision to limit censorship under Europe's new "right to be forgotten" rules to its websites based there, and not extend it the world over, has found some backing from a group of independent experts. However, the group also suggested that it should tinker with its processes to decide which links to delete.

Amy Pascal, whose embarrassing emails leaked out in the wake of an online security breach at Sony Pictures last year, has stepped down from her position. However, she has cracked a deal with the company that will keep her based at its California headquarters.

After Pfizer announced its acquisition of U.S. pharma company Hospira for $17 bln on Thursday, analysts said the long expected split of Pfizer is imminent. "We think this deal signals a firm intent to separate in 2017," said Jeffrey Holford, an analyst at Jefferies.

Cyber attacks pose such a big threat to global companies that governments should step in to cover the risks, said Stephen Catlin, head of Lloyd's of London insurer. Catlin was speaking a day after it was reported that cybercriminals had hacked into Anthem, a U.S. health insurer.

 

NYT

* An attempt by Greece to shift the country's debt narrative away from austerity ran into a wall of inflexibility during a two-day trip to Germany. (http://nyti.ms/1AyyBcV)

* For all the opposition to debt forgiveness, the notion has resurfaced as the new government in Athens, facing a cash squeeze, looks for ways to reduce what it owes. (http://nyti.ms/1D3UnES)

* Takata Corp, the Japanese car parts supplier embroiled in a crisis over dangerously defective airbags, added $50 million on Thursday to its loss forecast for its fiscal year, saying that it was facing growing costs to replace faulty components in millions of affected vehicles. (http://nyti.ms/1Kx2xX0)

* RadioShack Corp, a long-ailing 94-year-old electronics chain, filed for bankruptcy protection on Thursday after striking a deal to sell up to 2,400 of its stores to the wireless service provider Sprint and a hedge fund that is its biggest shareholder. (http://nyti.ms/1uhuEHj)

* Ally Financial Inc has separated painfully from its former parent, General Motors Co, and paid off the Treasury in December. Now with a new chief executive in place, it is aiming to ramp up performance. (http://nyti.ms/1DFdhQo)

* The Securities and Exchange Commission accused Christian B. Keller, an in-house financial specialist and three others, including an analyst at Barclay's, of illegally trading ahead of four news announcements made by Keller's employers, Applied Materials Inc and then Rovi Corp. (http://nyti.ms/1AyAF4L)

* The boutique investment bank Moelis & Co on Thursday reported a higher fourth-quarter profit, though its results fell short of Wall Street's expectations. (http://nyti.ms/1Kx3vSZ)

 

Canada

THE GLOBE AND MAIL

** Police believe two Liberal operatives, including one of Premier Kathleen Wynne's top aides, broke the law by offering a former candidate a government job in exchange for dropping out of the Sudbury by-election race. (http://bit.ly/1yPUAX9)

** Canadian universities have used the temporary foreign worker program to recruit for about a quarter of their new permanent jobs over the last five years. Schools are urging the government to relax new rules that they say are hurting their ability to recruit internationally. (http://bit.ly/1Kxr3Hs)

** Ontario's First Nations leaders are demanding the National Energy Board halt its review of TransCanada Corp's Energy East project until they can be properly consulted. In a letter to Natural Resources Minister Greg Rickford, Ontario regional chief Stan Beardy said First Nations have "grave concern" about the NEB process, saying the board has been inaccessible and unwilling to share information with them. (http://bit.ly/1znsUfY)

NATIONAL POST

** The Harper government struck a provocative pose Thursday, telling Russia to "back off" in Ukraine, promising to campaign for NATO membership on behalf of another former Soviet republic and urging all allies to do more. (http://bit.ly/18TKy1b)

** Ottawa MPP Lisa MacLeod will drop out of the race for provincial Progressive Conservative leader Friday morning, but she hasn't made up her mind about whether she'll run for federal office. "That may not be the answer anyone wants immediately, but it's the answer I have," she said in an interview over tea in a Barrhaven cafe. "I'll make that decision in the next week." (http://bit.ly/1C08ozr)

** DVD and Blu-ray rental company Redbox is shutting down its Canadian operations and pulling its rental kiosks out of Canada. Chicago-based Redbox announced that it made the decision after failing to generate sufficient business at its 1,400 rental kiosks across the country. (http://bit.ly/1znw3N1)

 

China

CHINA SECURITIES JOURNAL

- Sixteen listed brokerages said in their January earnings reports that their net profit soared 211 percent to 6.46 billion yuan ($73.58 million), exceeding market expectations.

- The State Council has approved a mixed ownership reform plan for the China National Pharmaceutical Group Corporation, its subsidiaries said. China National Medicines Corporation will be among the first to take part, it said.

SHANGHAI SECURITIES NEWS

- The Central Commission for Discipline Inspection said it found corruption, such as misuse of power for money, during its November inspection of state-owned firms such as Dongfeng Motor Corporation and Shenhua Group.

- Twenty-four firms will issue new shares next week which are likely to see investors locking up 2 trillion yuan in anticipation.

CHINA DAILY

- China plans to take new measures to support the overseas expansion of its train makers CSR Corp and China CNR .

SHANGHAI DAILY

- Shanghai police have smashed a gang operation in Shanghai city and the province of Guangdong, seizing 2.4 tonnes of methamphetamine in the city's largest ever drug bust.

 

Britain

The Times

REXAM WANTS 4 BLN STG MERGER

British drinks can maker Rexam Plc could be sold to U.S. rival Ball Corp in a 4.3 billion pound merger to create a tin cans giant that would trigger scrutiny by competition authorities. (http://thetim.es/1Kl0jvA)

STANDARD CHARTERED MAY OPT FOR SHARES PAYOUT

Standard Chartered Plc could hand out shares rather than cash when it comes to pay its full-year dividend. Investors, analysts and banking industry insiders say that the struggling emerging markets lender should consider paying at least a portion of its annual dividend in stock as fears grow over the balance sheet. (http://thetim.es/1zTTeip)

The Guardian

TRAVELODGE BOOKS IN FOR 1.3 BLN STG EXPANSION

Budget hotel chain Travelodge is planning to capitalise on the Britain's growing appetite for cheap stayovers with a 1.3 billion pounds expansion programme this year that will target 205 new hotel sites, mostly in London and the south-east. (http://bit.ly/1v2T4PU)

The Telegraph

GREECE PLEADS WITH BERLIN FOR TIME AND MONEY TO RE-WRITE DEBT DEAL

Greece's finance minister pleaded for his country to be given time and money to negotiate a new debt deal with its creditors, after the European Central Bank sought to pull the carpet from under the feet of the country's stricken banks. (http://bit.ly/1Cz4ZwE)

WONGA AVOIDS CRIMINAL INVESTIGATION OVER FAKE LETTERS

The City of London Police has ruled out opening a criminal investigation into Wonga after concluding that the payday lender's fake letter scandal was not a case of fraud. A spokesman for the police force said the demands for repayment that Wonga sent its customers under fake lawyers' names were not "falsely purporting to be debt recovery agencies", since the letters' small print showed that they were in fact from Wonga. (http://bit.ly/1xrArVJ)

FORMER CITY MINISTER MARK HOBAN TO JOIN THE LONDON STOCK EXCHANGE

Mark Hoban, the former City minister, has lined up a non-executive job at the London Stock Exchange as he prepares to leave Westminster. Hoban, the Conservative MP for Fareham, will join the board of the stock market with immediate effect. He has also been named as the new chairman of Flood Re, the insurance industry scheme to provide cover to households at risk of flooding. (http://bit.ly/1DkdOK5)

Sky News

ECB PULLS PLUG ON GREEK GOVERNMENT BONDS

Greece's access to vital loans has been squeezed after the European Central Bank stopped accepting the government's bonds as collateral. The ECB had been accepting the junk-rated bonds, but in a statement said it was changing its mind because of uncertainty over Greece's bailout commitments. The country's new leaders are currently jetting around Europe trying to renegotiate their 240 billion euros bailout package and ease austerity obligations. (http://bit.ly/1KwqBJr)

VIRGIN ACTIVE GETS FIT FOR JOHANNESBURG IPO

Virgin Active has picked a quintet of banks to work on a flotation that will value one of Britain's biggest health and fitness chains at around 1.5 billion pounds. Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley, Standard Bank and UBS have been hired by Virgin Active's board to work on the public listing. (http://bit.ly/1uftps6)

SINGAPORE STATE FUND EYES MISYS SOFTWARE DEAL

Singaporean state fund Temasek Holdings is plotting a takeover bid for Misys, one of the UK's biggest software companies. Temasek is among a number of potential acquirers examining offers for Misys, which was a member of the FTSE-250 index before it was taken private in 2012. (http://bit.ly/1DCQCV3)

The Independent

TESCO TO BE INVESTIGATED BY GROCERY INDUSTRY WATCHDOG OVER SUPPLIER PRACTICES

An official investigation is to be made into Tesco Plc to find out whether the supermarket giant broke the grocery industry watchdog's rules, including through delayed payments to its suppliers. The Groceries Code Adjudicator (GCA), Christine Tacon, announced the move today, saying she had formed a "reasonable suspicion" that the retailer had breached the Groceries Supply Code of Practice. (http://ind.pn/1zCriOl)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Nonfarm payrolls for January at 8:30--consensus up 230K
Unemployment rate for January at 8:30--consensus 5.6%
Consumer credit for December at 15:00--consensus $15.2B

ANALYST RESEARCH

Upgrades

ABB (ABB) upgraded to Overweight from Equal Weight at Barclays
AXIS Capital (AXS) upgraded to Hold from Sell at Deutsche Bank
Best Buy (BBY) upgraded to Outperform from Perform at Oppenheimer
CyberArk (CYBR) upgraded to In-Line from Underperform at Imperial Capital
Everest Re (RE) upgraded to Buy from Hold at Deutsche Bank
First BanCorp (FBP) upgraded to Outperform from Market Perform at Keefe Bruyette
GrubHub (GRUB) upgraded to Buy from Hold at Brean Capital
Hospira (HSP) upgraded to Neutral from Sell at Goldman
Ironwood (IRWD) upgraded to Hold from Sell at Cantor
MEDNAX (MD) upgraded to Buy from Hold at Stifel
Nationstar (NSM) upgraded to Outperform from Market Perform at Wells Fargo
PartnerRe (PRE) upgraded to Hold from Sell at Deutsche Bank
PennantPark (PNNT) upgraded to Outperform from Neutral at RW Baird
PennantPark (PNNT) upgraded to Overweight from Neutral at JPMorgan
Prudential plc (PUK) upgraded to Neutral from Underweight at JPMorgan
RenaissanceRe (RNR) upgraded to Hold from Sell at Deutsche Bank
Santander Chile (BSAC) upgraded to Neutral from Sell at Goldman
Staples (SPLS) upgraded to Neutral from Sell at Goldman
Synchronoss (SNCR) upgraded to Neutral from Underperform at RW Baird

Downgrades

Apollo Global (APO) downgraded to Market Perform from Outperform at Keefe Bruyette
Apollo Investment (AINV) downgraded to Neutral from Overweight at JPMorgan
BioMed Realty (BMR) downgraded to Neutral from Buy at Mizuho
Broadridge (BR) downgraded to Market Perform from Outperform at Keefe Bruyette
Digital Realty (DLR) downgraded to Sell from Neutral at UBS
DuPont Fabros (DFT) downgraded to Sell from Neutral at UBS
Empresas ICA (ICA) downgraded to Equal Weight from Overweight at Barclays
Expedia (EXPE) downgraded to Perform from Outperform at Oppenheimer
Gilead (GILD) downgraded to Neutral from Outperform at Credit Suisse
Goodrich Petroleum (GDP) downgraded to Market Perform from Outperform at Cowen
National Bank of Greece (NBG) downgraded to Neutral from Buy at Goldman
OFG Bancorp (OFG)  downgraded to Market Perform from Outperform at Keefe Bruyette
Pandora (P) downgraded to Market Perform from Outperform at Raymond James
Pandora (P) downgraded to Market Perform from Outperform at Wells Fargo
Pandora (P) downgraded to Neutral from Buy at B. Riley
Post Properties (PPS) downgraded to Hold from Buy at Stifel
Prestige Brands (PBH) downgraded to Market Perform from Outperform at Raymond James
Sprint (S) downgraded to Hold from Buy at Evercore ISI
Telenor (TELNY) downgraded to Sell from Neutral at Citigroup
Teradata (TDC) downgraded to Underperform from Neutral at Credit Suisse
USG (USG) downgraded to Equal Weight from Overweight at Barclays
Viacom (VIAB) downgraded to Underweight from Neutral at Atlantic Equities
Wesco Aircraft (WAIR) downgraded to Sector Perform from Outperform at RBC Capital
Yelp (YELP) downgraded to Sector Perform from Outperform at Pacific Crest
Yelp (YELP) downgraded to Sell from Neutral at B. Riley

Initiations

ACADIA (ACAD) coverage resumed with a Buy at Roth Capital
AmSurg (AMSG) initiated with a Buy at Jefferies
BB&T (BBT) initiated with an Outperform at Credit Suisse
Citizens Financial (CFG) initiated with a Neutral at Credit Suisse
Comerica (CMA) initiated with a Neutral at Credit Suisse
Fifth Third Bancorp (FITB) initiated with an Underperform at Credit Suisse
Huntington Bancshares (HBAN) initiated with a Neutral at Credit Suisse
Inphi (IPHI) initiated with an Outperform at Imperial Capital
KeyCorp (KEY) initiated with an Outperform at Credit Suisse
M&T Bank (MTB) initiated with a Neutral at Credit Suisse
Regions Financial (RF) initiated with a Neutral at Credit Suisse
Sunoco Logistics (SXL) initiated with an Overweight at JPMorgan
Sunoco (SUN) initiated with an Overweight at JPMorgan
Zions Bancorp (ZION) initiated with a Neutral at Credit Suisse

COMPANY NEWS

Frontier Communications (FTR) announced a definitive agreement with Verizon (VZ) under which Frontier will acquire Verizon’s wireline operations that provide services to residential, commercial and wholesale customers in California, Florida and Texas, for $10.54B in cash
Verizon (VZ) lease rights to over 11,300 towers to American Tower (AMT) for $5B
Verizon (VZ) to return $5B to holders through share repurchase
Harris (HRS) to acquire Exelis (XLS) for $23.75 per share, or approximately $4.75B
Twitter (TWTR) reported Q4 Average Monthly Active Users up 20% to 288M, sees Q1 net user adds similar to rate of first three quarters of 2014
Trian said DuPont (DD) "appears to be acknowledging” the need to upgrade its board with individuals that have “fresh, independent, highly relevant perspectives"
GoPro (GPRO) COO Nina Richardson resigning to pursue other opportunities, board roles
Activision Blizzard (ATVI) announced a new $750M share repurchase program

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Twitter (TWTR), LinkedIn (LNKD),  GoPro (GPRO), Sirona Dental (SIRO), Aon plc (AON), Sensient (SXT), Silicon Image (SIMG), ACETO (ACET), Simpson Manufacturing (SSD), AptarGroup (ATR), Audience (ADNC), Evans Bancorp (EVBN), Rentrak (RENT), Endurance Specialty (ENH), SPS Commerce (SPSC), Sierra Wireless (SWIR), SMART Technologies (SMT), Iteris (ITI), Universal Technical (UTI), Paylocity (PCTY), LeapFrog (LF), Marin Software (MRIN), Brightcove (BCOV), ON Semiconductor (ONNN), ChannelAdvisor (ECOM), Control4 (CTRL), McKesson (MCK), Standard Pacific (SPF), Tempur Sealy (TPX), Activision Blizzard (ATVI), Axcelis (ACLS), Maxwell (MXWL), Ubiquiti Networks (UBNT), News Corp. (NWSA), athenahealth (ATHN), Mettler-Toledo (MTD), FleetCor (FLT), Outerwall (OUTR), Yelp (YELP), Pixelworks (PXLW), Symantec (SYMC), Kemper (KMPR), Haynes (HAYN), Fluidigm (FLDM), FBL Financial (FFG), Nuance (NUAN), ePlus (PLUS), bebe stores (BEBE), Netgear (NTGR), Echo Global (ECHO), Lionsgate (LGF)

Companies that missed consensus earnings expectations include:
Intrawest Resorts (SNOW), Olin Corp. (OLN), Bristow Group (BRS), Post Holdings (POST), Badger Meter (BMI), ARC Group (ARCW), Craft Brew (BREW), Aspen Insurance (AHL), eGain (EGAN), Amtech Systems (ASYS), Cardica (CRDC), Moelis (MC), Wesco Aircraft (WAIR), DeVry (DV), VeriSign (VRSN), Cutera (CUTR), Elizabeth Arden (RDEN), Fairway Group (FWM), PDF Solutions (PDFS), Brooks Automation (BRKS), pSivida (PSDV), Expedia (EXPE), Pandora (P), Buffalo Wild Wings (BWLD), NIC Inc. (EGOV)

Companies that matched consensus earnings expectations include:
Empire District Electric (EDE), Capstone Turbine (CPST), Q2 Holdings (QTWO), SciQuest (SQI), TeleCommunication Systems (TSYS), Imperva (IMPV), Callidus Software (CALD), Solera (SLH), Stericycle (SRCL)

GoPro (GPRO) sees Q1 EPS 15c-17c, consensus 17c
Yelp (YELP) sees FY15 revenue $538M-$543M, consensus $537.98M
Twitter (TWTR)  sees Q1 revenue $440M-$450M, consensus $449.68M, sees FY15 revenue $2.3B-$2.35B, consensus $2.3B
LinkedIn (LNKD) sees FY15 adjusted EPS approximately $2.95, consensus $2.73

NEWSPAPERS/WEBSITES
RadioShack (RSH) files for bankruptcy protection, Bloomberg reports
SEC investigating insider trading of BlackBerry (BBRY) options, Reuters reports
Expedia (EXPE) may see $847M tax fine from State governments, Bloomberg reports
Anthem (ANTM) did not encrypt information prior to hack, WSJ reports
United Steelworkers reject offer from oil refiners, WSJ reports (MPC, TSO, LYB, RDS.A, RDS.B)

SYNDICATE
Activision Blizzard (ATVI) files to sell 41.5M shares of common stock for Vivendi (VIVHY)
Columbia Pipeline (CPPL) 46.81M share IPO priced at $23.00
Dave & Busters (PLAY) 6.6M share Secondary priced at $29.50
Easterly Government Properties (DEA) 12M share IPO priced at $15.00
Emerald Oil (EOX) files to sell $25M of common stock
M/A-COM (MTSI) 7.8M share Secondary priced at $30.00
Navios Maritime Partners (NMM) files to sell 4M common units for limited partners
Ohr Pharmaceutical (OHRP) files automatic common stock shelf
Oncothyreon (ONTY) files to sell common stock and series B convertible preferred stock
Oncothyreon (ONTY) files to sell common stock, Series B Convertible Preferred Stock
One Horizon Group (OHGI) files to sell 3.28M shares of common stock for holders
Prologis (PLD) files to sell $750M of common stock 'at-the-market'
Sterling Bancorp (STL) 6M share Secondary priced at $13.00
Trovagene (TROV) files automatic common stock shelf
WashingtonFirst Bankshares (WFBI) files to sell 1.37M shares of common stock for holder