15 10 / 2011
Obama administration pulls part of healthcare law
U.S. health officials said on Friday that after 19 months of analysis, they could not come up with a model for the so-called CLASS Act that keeps it voluntary and budget-neutral.”We do not have a path to move forward,” Kathy Greenlee, assistant secretary of aging from the Health and Human Services department and administrator of the program, said in a call with reporters.”Everything we do to make the program more (financially) sound moves us away from the law, and increases the legal risk of the program.”The Community Living Assistance Services and Supports (CLASS) program was designed to give the disabled and elderly cash to receive care at home instead of usually more expensive institutional care.Under the law, workers would have begun enrolling in the program after October of 2012, after the HHS set the program’s benefits. The program was to have been voluntary, with participants required to pay into it for at least five years before qualifying for benefits.The Congressional Budget Office had estimated the program would reduce the federal deficit by $70 billion in the program’s first decade.However, the CBO also said the program would start to lose money after the first decade or two, once benefit payments exceeded income from premiums.Republicans, many of whom are eager to repeal Obama’s healthcare reform, have criticized the CLASS Act as a way to trump up the cost savings of the Affordable Care Act.”The CLASS Act was a budget gimmick that might enhance the numbers on a Washington bureaucrat’s spreadsheet but was destined to fail in the real world,” said Senate Republican Leader Mitch McConnell.”However, it is worth remembering that the CLASS Act is only one of the unwise, unsustainable components of an unwise, unsustainable law.”Greenlee said the Affordable Care Act will continue to reduce the deficit by $127 billion between 2012 and 2021, even without the CLASS Act. However, the decision to suspend the program would probably reduce the president’s 2013 baseline budget.Dozens of states have sued to challenge the healthcare law, particularly its requirement that all Americans have health insurance. The Supreme Court is expected to rule on the legal challenge sometime before June 2012.NOT ADDING UPIn September, Republicans in Congress posted emails that showed government actuaries were already questioning CLASS, even before the program became part of the Affordable Care Act.The Republican Policy Committee also posted a September email from Bob Yee, an HHS actuary who said he was hired to run the program, saying he was leaving his position and the CLASS office would be closing.HHS Secretary Kathleen Sebelius in February acknowledged the agency was struggling to make the program self-sustainable in the long run.On Friday, Greenlee said the law specifically allowed the program to be suspended if the HHS could not prove it was financially sound for 75 years.”Because of the tremendous uncertainty that surrounded the program from its inception, it had this provision that the (HHS) Secretary had to satisfy solvency, and we could not proceed otherwise,” she said.Some Democrats on Friday urged the HHS to not be so quick in giving up on the program.Congressman Frank Pallone, a Democrat from New Jersey who co-authored the program along with the late Senator Edward Kennedy, said seniors and the disabled who need home care would only have Medicaid to fall back on if the program were repealed.”If the program needs improving, then let’s find the way to do it,” he said in a statement.”While we are fighting so hard against Republican attempts to cut Medicaid … abandoning the CLASS Act is the wrong decision. Soon enough, those in need will have nowhere to go for long term care.”According to the AARP, a nonprofit group that represents those over 50 years of age, 70 percent of people age 65 and over will need long-term care services at some point in their lifetime, and Medicare, the federal insurance program for the elderly and disabled, does not cover such care.
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14 10 / 2011
WL Ross & Co cuts fund-raising target-WSJ
U.S. billionaire Wilbur Ross founded the private-equity
firm which he sold to Invesco in 2006. WL Ross & Co
could not be reached immediately for comment.WSJ said that Wilbur Ross declined to comment on fund
raising efforts.
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14 10 / 2011
SEC to limit charges against Allianz in bribery case
* difficulties in getting documents from Germany at issueBy Aruna ViswanathaWASHINGTON, Oct 14 (Reuters) - The U.S. Securities and
Exchange Commission does not plan to charge Allianz SE
(ALVG.DE) for activity at its private equity investments,
according to two people familiar with the matter, in a case
that could have tested the agency’s reach.Europe’s largest insurer has been under investigation in
the United States for alleged corruption at a joint venture in
Indonesia and at a German printing equipment maker it owns
through a private equity arm.While the SEC is expected to settle the Indonesia piece of
the investigation in the coming weeks, it will not bring
charges related to the private equity holdings, in part due to
German ownership laws that make it difficult to obtain
information, one of the people said.”We confirm discussions with SEC on a settlement. It is our
policy to fully cooperate with authorities. In the meantime we
took the proper consequences in order to avoid such
misbeaviours to happen again,” a spokesman for the company,
Michael Matern, said.An SEC spokesman declined comment.The case involves allegations that an Allianz joint venture
paid bribes to win contracts to insure big infrastructure projects in Indonesia, and whether the printing equipment maker paid bribes in Europe and elsewhere.The SEC’s decision marks a tough start to the agency’s
efforts to hold private equity funds and other investors
responsible for corruption at companies they have stakes in.The SEC and Justice Department have turned to financial
services as a new area of interest as they have ramped up their
enforcement of the Foreign Corrupt Practices Act. The law bars
U.S.-linked firms from paying bribes to foreign government
officials.But complicated foreign investment structures and data
privacy laws may make those cases difficult to bring.Allianz Capital Partners owns just over 60 percent of the
voting rights of the company at issue, manroland AG, but the
stake is a passive one.Allianz does not exercise day-to-day control over the
company, and under German law, it cannot force manroland to
turn information over to it or the SEC.The entity that allegedly paid the bribes is a Swiss
subsidiary of manroland, making the link to the corporate
parent at least three levels removed.The case gets even more complicated for the SEC because the
parent firm, Allianz SE, used to be listed on the New York
Stock Exchange, but removed its shares in 2009 citing a desire
to focus on the German capital markets.The case began when a whistleblower at the company’s
operations in Asia contacted the company’s outside auditors at
KPMG with allegations of corruption. The auditors informed the
board, which hired Claudius Sokenu, a partner at Arnold &
Porter, to conduct an internal investigation.The allegations centered around Allianz’ business in
Indonesia.The firm originally entered the market through a joint
venture with a state-owned entity, and the projects let the
firm get a foothold into the Indonesian insurance market.The investigation turned up evidence of bribe payments
there, and in India and China.The manroland conduct turned up later, when German tax authorities began to investigate.Allianz is expected to pay between $7 and $10 million in
penalties to settle the SEC’s case. German prosecutors continue
to examine the manroland conduct.A lawyer for Allianz, Joel Cohen at Gibson, Dunn &
Crutcher, declined to comment. Sokenu and a spokesman for KPMG
did not respond to a request for comment.Whether the problems with getting documents will hinder
future foreign bribery cases against investment funds remains
to be seen. It may be easier for the agency to bring cases
related to problems that should have surfaced during an
acquisition.”They are always fact-based inquiries, but where a company
has an ownership interest or a stake in a subsidiary, the SEC
is going to be looking very carefully at what steps the firm
has taken to ensure policies are compliant and what due
diligence it did prior to that acquisition,” said Luke Cadigan,
a former SEC lawyer who is now a partner at K&L Gates.
Permalink 136 notes
14 10 / 2011
SEC to limit charges against Allianz in bribery case
* difficulties in getting documents from Germany at issueBy Aruna ViswanathaWASHINGTON, Oct 14 (Reuters) - The U.S. Securities and
Exchange Commission does not plan to charge Allianz SE
(ALVG.DE) for activity at its private equity investments,
according to two people familiar with the matter, in a case
that could have tested the agency’s reach.Europe’s largest insurer has been under investigation in
the United States for alleged corruption at a joint venture in
Indonesia and at a German printing equipment maker it owns
through a private equity arm.While the SEC is expected to settle the Indonesia piece of
the investigation in the coming weeks, it will not bring
charges related to the private equity holdings, in part due to
German ownership laws that make it difficult to obtain
information, one of the people said.”We confirm discussions with SEC on a settlement. It is our
policy to fully cooperate with authorities. In the meantime we
took the proper consequences in order to avoid such
misbeaviours to happen again,” a spokesman for the company,
Michael Matern, said.An SEC spokesman declined comment.The case involves allegations that an Allianz joint venture
paid bribes to win contracts to insure big infrastructure projects in Indonesia, and whether the printing equipment maker paid bribes in Europe and elsewhere.The SEC’s decision marks a tough start to the agency’s
efforts to hold private equity funds and other investors
responsible for corruption at companies they have stakes in.The SEC and Justice Department have turned to financial
services as a new area of interest as they have ramped up their
enforcement of the Foreign Corrupt Practices Act. The law bars
U.S.-linked firms from paying bribes to foreign government
officials.But complicated foreign investment structures and data
privacy laws may make those cases difficult to bring.Allianz Capital Partners owns just over 60 percent of the
voting rights of the company at issue, manroland AG, but the
stake is a passive one.Allianz does not exercise day-to-day control over the
company, and under German law, it cannot force manroland to
turn information over to it or the SEC.The entity that allegedly paid the bribes is a Swiss
subsidiary of manroland, making the link to the corporate
parent at least three levels removed.The case gets even more complicated for the SEC because the
parent firm, Allianz SE, used to be listed on the New York
Stock Exchange, but removed its shares in 2009 citing a desire
to focus on the German capital markets.The case began when a whistleblower at the company’s
operations in Asia contacted the company’s outside auditors at
KPMG with allegations of corruption. The auditors informed the
board, which hired Claudius Sokenu, a partner at Arnold &
Porter, to conduct an internal investigation.The allegations centered around Allianz’ business in
Indonesia.The firm originally entered the market through a joint
venture with a state-owned entity, and the projects let the
firm get a foothold into the Indonesian insurance market.The investigation turned up evidence of bribe payments
there, and in India and China.The manroland conduct turned up later, when German tax authorities began to investigate.Allianz is expected to pay between $7 and $10 million in
penalties to settle the SEC’s case. German prosecutors continue
to examine the manroland conduct.A lawyer for Allianz, Joel Cohen at Gibson, Dunn &
Crutcher, declined to comment. Sokenu and a spokesman for KPMG
did not respond to a request for comment.Whether the problems with getting documents will hinder
future foreign bribery cases against investment funds remains
to be seen. It may be easier for the agency to bring cases
related to problems that should have surfaced during an
acquisition.”They are always fact-based inquiries, but where a company
has an ownership interest or a stake in a subsidiary, the SEC
is going to be looking very carefully at what steps the firm
has taken to ensure policies are compliant and what due
diligence it did prior to that acquisition,” said Luke Cadigan,
a former SEC lawyer who is now a partner at K&L Gates.
Permalink 93 notes
12 10 / 2011
HeidelbergCement opens new Swiss HY market
The Ba2/BB rated transaction, which is guaranteed by
HeidelbergCement AG, Hanson Limited priced at the tight end of a
7.25%-7.5% coupon range and was the first non-Swiss high-yield
issue to surface in the Helvetian market in years, maybe ever.
It represented the highest coupon for a public bond in well over
a decade.”It will mainly be placed in the local market,” said one
European syndicate banker close to the transaction. “There’s a
micro market in Switzerland with demand from Swiss institutions
and private banks who are looking for exposure to European
corporates. Since Heidelberg is a big brand name, it can access
the liquidity there, but it’s a relatively small size.”Thomas Gessner, at Deutsche Bank’s Swiss franc new issue
syndicate in Frankfurt, said: “It was a hell of a deal, opening
a new sector in an interesting market. It worked well, hitting
the window perfectly with a good name, and providing an
excellent outcome for both issuer and investors.”The deal follows investment-grade names such as GDF Suez,
France Telecom, Daimler and BMW that have tapped the Swiss
market in recent weeks as funding in euro-denominated primary
markets has remained volatile. The market could be receptive to
other high-yield issuers, but limited to well-known brand names,
rated double B, the pan-European high-yield specialist said.ATTRACTIVE FUNDINGCompanies can also raise funds more cheaply. “What’s
attractive about the Swiss market is the lower cost of
financing,” the banker said. “Swap rates are lower than in euros
by more than 100bp.”The bulk of Heidelberg’s outstanding EUR6.3bn
euro-denominated bonds carry coupons of 6%-8%, according to
Tradeweb. The German company was last in the market in late
September with a EUR300m seven-year which yielded 9.625% with a
9.5% coupon, or roughly 730bp over swaps, for a one year longer
deal. The nearest liquid comparable would be the EUR1bn 8%
January 2018 which is quoted on Tradeweb at a Z-Spread of plus
658/633.At the tight end of the guidance, 7.25%, the deal came at
roughly 625bp over mid-swaps, which puts it broadly in line with
secondaries. At that level, it provided some arbitrage
opportunity to the issuer, which would probably have had to pay
a larger new issue premium in the euromarket, while still
looking like decent value to Swiss investors.Coming hot on the heels of the aborted Air France deal from
the previous week, which was scuppered by negative headlines
surrounding the industry after AA flirted with bankruptcy as
well as a decidedly negative tone to the wider market, some
investors saw the HeidelbergCement issue as a bit of a gutsy
move.However, the company is in a totally different and
significantly more stable industry and is a well known name in
Switzerland with an obvious local comparable in Holcim, which
priced a SFr425m 10-year in May this year at swaps plus 115bp
with a 3.375% coupon, commensurate with its Triple B rating.Heidelberg waited a bit after their euro deal to monitor its
progress, and seeing that it had gone well, commenced
discussions with Deutsche Bank about a Swiss bond, presounding a
few select accounts late in the week before launch. The market
showed a window of opportunity on Monday, and books were opened
for a CHF150m no-grow amount with guidance in the 7.25%-7.5%
area.The size was set by the company as a solid print in the
market and an almost certain guarantee of good demand. Things
went well, and the deal was priced before lunchtime, books
having closed as soon after they became oversubscribed, with a
very granular 65 accounts represented, having placed orders
ranging from CHF10k to CHF25m.As expected for the tenor and coupon, private banks and
retail took a hefty chunk, with 46%. Asset managers followed
with 27%, hedge funds 15%, banks 9%, insurers 3% and pension
funds 1%. Geographically, 91% went to Swiss accounts, split 68%
to Zurich, 13% Geneva, 8% Lugano and 1% Basle, while outside of
the mountainous borders, German accounts took some 6%, the UK
1%, Liechtenstein 1% and others 1%, mostly from private banks.The deal performed well in the aftermarket, trading up to
101.50 offered late in the day of launch, and settling at
100.50-100.80 by late Tuesday.Other bankers echoed the lead’s sentiments, saying that it
was a “good trade, people want yield, and HC is one of the best
known high yield names with retail”. Others said that “with good
name recognition and a fair price, follow up trades could be
seen [in the high yield market]”, and “Absolutely. Lower-rated
credits will become more common in the months to come.”
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