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US restaurant chain Red Lobster joins retail casualties – Industry roundup: 21 May

US seafood chain Red Lobster files for Chapter 11 bankruptcy protection

Rising costs and squeezed consumer incomes are continuing to impact heavily on the retail and restaurant sectors on both sides of the Atlantic.

US seafood restaurant chain Red Lobster has become the latest to file for bankruptcy, blaming onerous leases and high labour costs.

The Orlando, Florida-based group has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the US Bankruptcy Court for the Middle District of Florida, according to a court filing. It listed assets of US$1 billion to US$10 billion and estimated liabilities of US$1 billion to US $10 billion.

The move had been predicted for weeks following the chain’s hiring of restructuring expert Jonathan Tibus, who became CEO in March.

In a press release, the company, which operates nearly 600 Red Lobster casual-dining restaurants across the US, said it would use the protection to “drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.”

The,chain had already closed 90 restaurants last week and the assets of dozens of them were put up for auction.

As part of the filing the company said it had entered into a stalking horse purchase agreement with its lenders.

The company said those restaurants that are still open will continue operations as the bankruptcy proceeds. It added that it has received U$$100 million in debtor-in-possession financing commitment from its existing lenders.

“This restructuring is the best path forward for Red Lobster,” Tibus said in the release. “It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

A Chapter 11 filing would allow the restaurant chain approach its landlords and negotiate better deals. Many would likely be willing to negotiate because the large number of US retail bankruptcies filed this year has made finding new tenants harder.

According to court filings, Red Lobster has 551 US restaurants, 27 restaurants in Canada and 27 franchised locations in Mexico, Japan, Ecuador and Thailand. The company said it has 36,000 employees in the North America.

Meanwhile hundreds of jobs are at risk in Europe as fashion brand Esprit files for bankruptcy. The Hong Kong-listed group says seven of its businesses in Germany cannot pay their bills and it is "unviable financially to continue the business as it is currently structured in Germany".

Esprit has filed for insolvency “under self-administration” for seven of its subsidiaries in Düsseldorf, Germany.

Esprit Holdings is present in more than 40 countries and has one of its two headquarters in Germany, (the other one is in Hong Kong) where the insolvency proceedings concern the Esprit Europe GmbH, and six other German subsidiaries. 

The group said in a statement that it is “unviable financially to continue the business as it is currently structured in Germany”. High rent, high costs of labour and energy prices as well as "”the after-effects of the coronavirus pandemic and the consequences of international conflicts”, had weakened the European subsidiaries’ finances, it added. 

The statement warned that more European businesses could be affected, as two of the currently affected German businesses are also shareholders in other Esprit Holdings companies in France, the UK and Poland, as well as others, which could potentially be subject to a similar insolvency procedure in the future.

Esprit has already filed for bankruptcy in Belgium and Switzerland in March, according to reports.


EU winemakers brace for Chinese retaliatory tariffs

China could be about to target European Union wine exports following EU anti-subsidy investigations into Chinese companies, according to reports citing inside sources.

The prediction, made at the weekend by a Chinese state-affiliated social media account Yuyuan Tantian cited “informed sources” and warned that “China has ample countermeasures ready and will likely retaliate if the EU persists with its actions”.

According to reports, the move could jeopardise the US$800 million wine trade between the EU and China, which official data suggested is equal to almost 70% of China’s total wine imports last year.

Key EU wine exporters to China, including France, Italy, Spain, Germany, and Portugal are set to be affected, with France alone accounting for almost half of the wine exports.

A Chinese lawyer quoted by Yuyuan Tantian pointed out that the EU wine sectors’ dependence on the Chinese market. Meanwhile, non-profit NGO the European Chamber of Commerce in China also echoed the sentiment, amplifying speculation and reiterated that the threat was “significant” and hinted that “European wine and dairy products may find themselves caught in the crossfire.”

In January, China launched an anti-subsidy investigation into EU brandy, which, according to reports, was being positioned as a threat to a US$1.56 billion spirits trade. The activity follows concerns back in 2014 when China threatened to probe EU wines during a dispute over solar panels.

In 2021, China imposed significant tariffs on Australian wines, shaking up the industry in a move which saw tariffs reaching up to 218%, although the tariffs were subsequently lifted.


Microsoft wants green commitment from key suppliers

Microsoft announced a new policy for some of its key suppliers to use 100% carbon-free electricity, as part of a series of actions being put in place by the company to get back on track towards its goal to reduce emissions across the value chain.

The new policy was reported with the release of Microsoft’s 2024 Environmental Sustainability Report, assessing the company’s progress on its key sustainability goals. Microsoft launched a series of goals in 2020, including commitments to become carbon negative, water positive and zero waste by 2030, as well as to protect more land than it uses by that date.

According to the report, while Microsoft is on track towards its goals in several areas, including reductions in operational emissions, accelerating carbon removal, minimising waste, improving biodiversity and protecting more land than it uses, it is not yet on track on reducing Scope 3, or indirect, emissions or on its goal to reduce water use and to replenish more water than it consumes in datacentre operations.

Among the most challenging areas highlighted in the report are the company’s efforts to reduce value chain emissions. While Microsoft has set a goal to reduce Scope 3 emissions by more than half by 2030 compared to 2020, the company reported that Scope 3 emissions in 2023 were actually more than 30% higher than in 2020. In the foreword to the report, Microsoft President Brad Smith and Chief Sustainability Officer Melanie Nakagawa said that the increase has been driven by the construction of datacentres, including embodied carbon in building materials as well as hardware components.

Scope 3 emissions represent than 96% of Microsoft’s total emissions footprint, with the growth in Scope 3 driving a 29% increase in total emissions since 2020, despite a decline in the company’s direct Scope 1 and 2 emissions.

Smith and Nakagawa said: “Our challenges are in part unique to our position as a leading cloud supplier that is expanding its datacentres. But, even more, we reflect the challenges the world must overcome to develop and use greener concrete, steel, fuels, and chips. These are the biggest drivers of our Scope 3 challenges.”

Microsoft has launched a company-wide initiative to identify and develop measures to address its Scope 3 emissions challenges, and the company reported that it has developed “more than 80 discrete and significant measures that will help us reduce these emissions,” including the new 100% carbon-free electricity requirement for select high-volume suppliers, as well as initiatives to improve measurement, increase efficiency at datacentres, forge partnerships to accelerate technology breakthroughs in areas including greener steel, concrete, and fuels, using the company’s purchasing power to accelerate market demand for breakthrough technologies, and advocating for climate-focused public policy changes.

Microsoft also detailed strategies that it is pursuing to accelerate its water sustainability efforts, including designing and innovating to reduce the intensity of water use, optimising datacentres to support AI workloads and to consume zero water for cooling, partnering on water advocacy, and plans to finalize a strategy for water policy this year, and developing replenishment projects in high water stress locations where the company operates datacentres.

Smith and Nakagawa wrote: “Even amid the challenges, we remain optimistic. We’re encouraged by ongoing progress across our campuses and datacentres, and throughout our value chain. Even more, we’re inspired by the scores of executives and employees across Microsoft who are rolling up their sleeves and identifying new and innovative steps that are helping us to close critical gaps. We all recognize the same thing: There is no issue today that connects everyone on the planet more than the i issues around climate change. We all need to succeed.”


Japan’s benchmark bond yield at highest in 11 years

Japan’s benchmark government bond yield has risen to its highest since 2013 on bets the central bank will further raise interest rates to bolster the yen.

The yield on 10-year government debt rose 2.5 basis points to 0.975% on Monday, a level last seen when the then newly appointed Bank of Japan Governor Haruhiko Kuroda was starting his radical monetary easing.

Now under his successor Kazuo Ueda, the yield is edging toward the closely watched 1% mark, as Bank of Japan (BOJ) officials signal their readiness to push up borrowing costs if workers get higher wages that lessen the burden of inflation. This marks a major shift from the deeply negative yields seen as recently as 2020, when falling prices weighed on corporate earnings and prompted consumers to delay purchases in hopes that things would get cheaper.

Yields on debt due in 20 years to 30 years have also climbed to decade highs, raising expectations that Japanese long-term investors will put more of their funds into domestic debt rather than markets in the US and Europe.

“The 10-year yield has risen gradually on the back of view that the BOJ will lift interest rates sooner and cut bond-purchase amounts at its operations,” said Naoya Hasegawa, chief bond strategist at Okasan Securities Co. in Tokyo. There may be a little more buying interest for this maturity around the 1% level but selling pressure at the long end of the yield curve is set to continue, he added.

Investors are scouring data and policymaker statements to try to predict the BOJ’s next move. Pacific Investment Management sees the prospect of three more moves this year. Vanguard Group Inc.’s head of international rates Ales Koutny expects hikes to around 0.75% by the end of the year.


SocGen commits up to US$1 billion to for energy transition projects

France’s Société Générale has agreed to lend up to $1 billion for Nasdaq-listed ReNew Global’s energy transition projects over the next three years, at a time when the Indian company aims to expand its footprint across green power and decarbonisation. The financing would help develop ReNew's projects in India and abroad.

The two entities have signed a memorandum of understanding (MoU) to collaborate on solar, wind, complex renewables, green hydrogen, energy storage and solar modules manufacturing, a ReNew statement said. The amount will include debt financing and advisory solutions.

Sumant Sinha, founder, CEO and chairperson of ReNew said: “This MoU represents a key milestone towards our ambitions in India and worldwide. Société Générale is a trusted partner for accelerated deployment of renewable energy projects, and this collaboration will contribute towards India’s net zero goals."

ReNew recently tied up JERA Co (Japan’s Energy for a new Era), Japan's largest power-generation company, to study the development of a green ammonia plant in Odisha's Paradip. The company also has a joint venture with Indian Oil Corp and Larsen & Toubro for developing green hydrogen. In solar module manufacturing, it has 6.4 gigawatt (GW) module capacity, and a 2.5 GW of cell manufacturing capacity is under construction. ReNew is also a beneficiary of the production-linked incentives scheme to develop modules, cells and wafers.

Katan Hirachand, chief executive and chief country officer of Société Générale India said that ReNew’s commitment to the energy transition in India and beyond aligns with the lender's focus on supporting clients’ sustainability journey. "This MoU marks an important step in our collaboration with ReNew – we look forward to supporting their significant growth ambitions and driving the deployment of green energy in the market," it said.

Founded in 2011, ReNew debuted on Nasdaq three years ago by merging with a special purpose acquisition vehicle (SPAC). SPACs are publicly traded shell companies that merge with unlisted companies to take them public, skipping the time-consuming conventional route of initial public offering (IPO). At the time, the company said it would have an enterprise value of US$8 billion.


Djibouti offers “rare hub of stability” amid ongoing Red Sea disruption

The small country of Djibouti, strategically situated on the Horn of Africa where the Red Sea meets the Gulf of Aden, “has never felt more conveniently placed than now” suggests a Bloomberg report.

As a direct consequence of the Houthis’ violent campaign against commercial ships in the region, the former French colony of a million people is playing an outsized role in a highly turbulent region. Some call it the “eye of the cyclone” with violence rife in neighbouring Somalia and Ethiopia, and Eritrea still deemed to be a pariah state to the north.

Djibouti’s container port is busy as ships from Asia take the opportunity to dock and unload their goods onto smaller vessel; part of a growing transshipment business to take them through the perilous Red Sea toward the Suez Canal, the report notes.

And although the government has defended the rights of Palestinians and has criticised Israel's war in Gaza, Djibouti has allowed naval vessels from the European Union’s Aspides mission — with orders to protect cargo ships in the Red Sea — to refuel and use its port facilities. Several vessels damaged by Houthi missiles have also been repaired by local workers in Djibouti.

However, the country is attempting to maintain a fine balance. The US has already asked if it could launch offensive actions toward the Houthis from Djibouti and was turned down by the country’s prime minister,.

The Bloomberg report concludes that this sense of neutrality and steadfast positioning promise to continue giving Djibouti its place in the world and allow it to leverage the biggest geo-economic card it holds of location.


SMEs to benefit from Zimbabwe trade finance credit line

The African Development Bank (AfDB) has approved a US$15 millon funding deal for Zimbabwe’s First Capital Bank, which will use the proceeds to provide trade finance to the country’s small- to medium-sized enterprises (SMEs) and women-owned businesses.

The package comprises a US$7.5 million direct line of credit and another US$7.5 million facility for guarantees to overseas confirming banks, covering non-payment risk taken on First Capital’s trade finance transactions with SMEs.

The AfDB says the financing “will provide the much-needed hard currency financing to support First Capital Bank to close its trade finance gap and expand its trade finance support for SMEs and local corporates in Zimbabwe”.

Foreign currency shortages have been a perennial problem in cash-strapped Zimbabwe, where the population mostly use US dollars following a series of failed sovereign currencies over the past two decades.

The global trade finance gap, estimated to be US$2.5 trillion, is also severe in Sub-Saharan Africa, where SMEs struggle to access trade finance from banks. Experts have called on development finance institutions, such as the AfDB, to play a bigger role in helping commercial lenders provide finance to smaller companies.

The AfDB says the package, which was approved three weeks ago, will help spur Zimbabwe’s inter-African trade and will “catalyse” some US$146 million in trade over the next three years.

“The facility is expected to support the importation of strategic commodities and promote the integration of Zimbabwe’s economy into regional and global trade markets, which are essential for the country’s growth,” says Moono Mupotola, the AfDB’s Zimbabwe country manager.


HSBC partners with Ember to launch tax tools

HSBC Holdings has partnered with accounting-software fintech Ember to roll out accounting and tax tools for small UK business customers.

HSBC is aiming to support SMEs in preparing for the UK’s Making Tax Digital (MTD) rules, set to come into force in 2026. These rules will require quarterly financial reporting instead of the current yearly data submissions.

HSBC will offer its UK business customers on its online banking platform real-time profit and loss, self-assessment tax, and available dividends reports. This move positions HSBC to compete with established accounting software providers such as Xero and Sage Group.

Ember co-founder Dan Hogan described the tax rule changes as an “insanely big” opportunity for banks, noting that most of the UK’s 1.75 million affected business owners lack the necessary tools to maintain digital tax records. In a separate announcement, Ember revealed it had secured £4 million (US$5 million)  in additional funding from investors including Valar Ventures and Shapers.

Tom Wood, head of global payments solutions at HSBC UK, highlighted the time-consuming nature of accounting tasks for small business owners, who would prefer to focus on growth and expansion. Wood said, “Small business owners spend huge amounts of time on laborious accounting tasks when they would much rather be seeking new opportunities, delivering on orders and expanding.”


BCX to host first Malaysian carbon credits auction in July

The Bursa Carbon Exchange (BCX), a subsidiary of Bursa Malaysia Berhad, is set to auction its first Malaysian carbon credits on 25 July 25, 2024. This auction will feature credits from the Kuamut Rainforest Conservation Project, marking the debut of Malaysia Nature-based Carbon Credits Plus (MNC+) derived from a domestic forestry initiative. BCX’s portfolio will now include both local and global carbon credits.

The Kuamut Project, located in Sabah’s Tongod and Kinabatangan districts, safeguards 83,381 hectares of tropical forest. This project is a collaboration between the Sabah Forestry Department, Rakyat Berjaya Sdn Bhd, Yayasan Sabah, and Permian Malaysia, with support from PACOS Trust and the Southeast Asia Rainforest Research Partnership. In March 2024, the project issued its first Verified Carbon Units (VCUs) under Verra’s Verified Carbon Standard, achieving an annual reduction of 800,000 tonnes of carbon dioxide equivalent. The project also received a Gold Level for Climate status under the Climate, Community, and Biodiversity Standards.

Datuk Muhamad Umar Swift, CEO of Bursa Malaysia, described the event as a historic moment as the company introduces the first Malaysian nature-based carbon project on BCX. The auction underscores Malaysia’s commitment to climate action and its leadership in environmental initiatives. He also expressed hope that the auction would attract both domestic and international investors to further carbon projects in Malaysia.

Stephen Rumsey, founder and chairman of Permian Global, praised BCX’s role, saying the Exchange is crucial in driving investment in high-impact climate actions like the Kuamut Project.


Report finds that most SaaS product managers plan to implement embedded finance

A majority of Software-as-a-Service (SaaS) product managers within business to business (B2B) plan to adopt and utilise embedded finance as part of their near-term roadmap, reports embedded finance company Weavr in a white paper entitled The next step for B2B SaaS.

Among key findings from the report:

  • 55% of B2B SaaS product managers believe that embedding finance will provide them with a clear competitive advantage.
  • 74% of B2B SaaS product managers have a built-in payment wallet on their roadmap.
  • 62% of B2B SaaS product managers say they plan to implement both built-in payment wallets and debit cards, while only 4% have done so already.
  • 33% of CPOs see reducing churn as their most important feature driver

Examples of use cases for embedded finance in B2B SaaS products include spendable employee benefits, modernisation of expense management, integrated bill payment for IT and cloud subscription management, and automation of batch payments in accounting tools. Embedded finance involves non-fintech apps and products integrating payments and other regulated financial features seamlessly within their application branding and user experience.

The research highlights rapidly growing awareness of embedded finance within the sector. The white paper underlines the key drivers for embedding finance across B2B SaaS. In addition, it reveals the timeframes SaaS product managers have established for their projects. And it confirms the business case for embedding financial capabilities through payment wallets and debit cards within B2B SaaS services.

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