Top UK Stocks to Watch: BHP warns creditors ‘threaten Samarco operations’

BHP’s Samarco venture takes action to protect itself from creditors, AstraZeneca says its Farxiga drug doesn’t help coronavirus patients, Hammerson is in talks about selling retail parks to Brookfield, and cybersecurity firm Darktrace outlines plans for its London IPO.


Top News: BHP takes action to protect Samarco operations

BHP Group said its Samarco joint venture with Brazilian outfit Vale has filed paperwork for a judicial reorganisation with courts in Brazil in the hopes of resolving multiple legal cases brought against the company by some of its lenders.

BHP and Vale both own 50% of Samarco, which mines for iron ore in Brazil, and said the judicial reorganisation was ‘a last-resort response to multiple legal actions’ filed by creditors in the US and Brazil.

BHP said Samarco recently tried to restructure its debt with the lenders in question but was unsuccessful. Notably, the legal actions have resulted in freezing orders being placed on Samarco’s accounts, which ‘threaten Samarco’s operations’.

The judicial reorganisation essentially acts as an application for bankruptcy protection to prevent creditors from disturbing its operations.

The judicial reorganisation is intended to gain court approval to allow Samarco to reorganise its debt so the company can continue operating since being restarted after the Fundao dam failure in 2015 – one of the country’s worst environmental disasters that killed several people. BHP highlighted that Samarco needs to restructure its credit if the Renova Foundation, established to help rebuild the area hit by the dam failure, is to be able to continue carrying out remedial work and compensating locals that were affected.

The foundation has spent around $3 billion on rebuilding the area and compensating individuals affected. Around $870 million has been paid out to 320,000 people.

‘Samarco, BHP Brasil and Vale expect to continue negotiations in the coming months with the Brazilian authorities on the programs undertaken by Renova to progress settlement of the R$155 billion public civil claim commenced by the Federal Prosecutors Office against BHP Brasil, Vale and Samarco,’ said BHP.

Where next for the BHP share price?

The BHP share price trended higher from the start of November hitting a high of 2408, a level last seen in 2008.  

The price then trended lower hitting a monthly low of 1988 on March 25 and before re-attempting to break above 2200 forming a double top formation. This is often considered a reversal pattern. 

The RSI is pointing lower and pushing further into bearish territory.  

The continue the double top the price must break through the 50 EMA on the daily chart at 2115 and the 100 EMA at 2040. A break-through 1990 could see the bears gain momentum and head towards support at 1910. 

On the upside, any recovery would look at another attempt on 2200 to head back towards 2408. 

AstraZeneca’s Farxiga fails Covid-19 study

AstraZeneca has revealed that its Farxiga drug does not help treat patients suffering from coronavirus.

The company had been testing whether Farxiga could help those hospitalised by the virus or experiencing serious complications, but said the drug did not meet its primary endpoints in the Phase 3 trial – which were to prevent organ disfunction and death.

It was the first Phase 3 trial that looked into the effectiveness of a sodium-glucose co-transport-2 inhibitor in hospitalised patients that also suffered from illnesses like diabetes or chronic kidney disease, which have traditionally not responded well to coronavirus treatments.

AstraZeneca shares were trading broadly flat in early trade at 7276.0.

Hammerson considers selling retail parks to Brookfield

Hammerson confirmed it is in talks about possibly selling its retail parks to Brookfield Asset Management after media reports broke over the weekend about a £350 million deal.

The Sunday Times reported that Hammerson had agreed to sell seven retail parks to Brookfield. Hammerson noted the speculation and said it is in discussions with Brookfield about a possible sale.

‘There can be no certainty that a transaction will take place or the terms on which any transaction may occur. The company will provide a further update in due course, if appropriate,’ Hammerson said.

Hammerson is keen to raise cash and lower its debt after being hit hard by the pandemic, prompting it write down the value of its commercial properties. Hammerson said it still intends to raise cash by selling-off assets and that it had made £73 million in proceeds since the start of 2021.

Hammerson shares were down 1.1% in early trade at 36.9.

Cybersecurity outfit Darktrace prepares for London IPO

Darktrace has filed paperwork outlining its plans to list in London to raise cash to fuel its product development, promote the business and bolster its balance sheet.

The company, which uses automation and Artificial Intelligence (AI) to provide cyber security services, has been touted to list in London for some time but has now confirmed its intention to float. The exact price and size of the listing is yet to be determined, but it is intending to list on the Main Market and said at least 20% of its shares would be floated under the offer. Existing shareholders will also be given the chance to cash-in on some of their investment with a secondary offering.

‘Our intention to list on the London Stock Exchange marks a major milestone in Darktrace's history of rapid growth, and a historic day for the UK's thriving technology sector,’ said chief executive Poppy Gustafsson.

Darktrace saw revenue grow to $199 million in 2020 from just $79 million in 2018 and it swung from a $26.7 million adjusted loss before interest, tax, depreciation and amortisation to a $9 million profit in the same period.

Sirius Real Estate reports another year of strong rental growth

Sirius Real Estate reported its seventh consecutive year of rental growth of over 5% despite unexpectedly losing some large tenants in newly-acquired properties during the pandemic.

The firm, which owns and manages industrial parks in Germany, said like-for-like rent roll grew by 5.2% to EUR94.3 million in the year to the end of March. Total annualised rent rose 7.6% to EUR97.2 million, thanks to higher rental rates, higher occupancy levels and a strong cash collection rate of 98.2%. Sirius Real Estate said the strong performance came despite losing some major tenants in some of its newer properties.

The company said over 17,500 enquiries were made about its properties during the period, up 18.5% from the year before. This helped keep its conversion rate broadly stable at 13% during a tough year. Total occupancy at the end of March stood at 87%.

‘Over the past 12 months we have continued to grow Sirius, both from an operational perspective and through the acquisition of further assets where we see a clear opportunity to add value and increase income in the future,’ said chief executive Andrew Coombs.

‘The fact that we achieved our seventh year of like for like rent roll growth of above 5% alongside increases in many of our key performance indicators is all the more pleasing given the unprecedented headwinds created by the COVID-19 pandemic; it is a real reflection of the strength of our operating platform and the ability of our team to adapt, the quality of our assets, as well as the diversity and resilience of our tenant base.  With the worst of the pandemic seemingly behind us and vaccinations being rolled out across the globe, we look forward with cautious optimism,’ he added.

Sirius Real Estate will release annual results on June 7.

Sirius Real Estate shares were up 1.1% in early trade at 93.9.

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