5 Apr, 2022
Citi pausing SPAC issuances after new SEC rules; GWG preparing for bankruptcy
By John Baguios
TOP NEWS IN BANKING & FINANCIAL SERVICES
* Citigroup Inc. is waiting for its legal advisers' feedback on the potential risks new SEC rules could have on the bank's underwriting of IPOs for U.S. special purpose acquisition companies, Bloomberg News reported, citing people with knowledge of the matter. As such, the bank has paused engaging in new SPAC issuances but has no plans to exit the business, the unnamed sources told the news outlet. The new requirements for blank-check companies include more disclosures about potential conflicts of interest and could make it easier for investors to sue over false projections, according to Bloomberg.
* GWG Holdings Inc. is readying to file for bankruptcy in the coming days following the resignation of its auditor and accounting issues that rendered the company unable to sell its products, The Wall Street Journal reported, citing people familiar with the matter. GWG Holdings previously disclosed to investors that it relied on the sale of L Bonds, which pooled money from bond investors to buy life insurance policies on the secondary market, to meet its financial obligations.
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BANKING
* Citigroup agreed to sell its consumer banking business in Bahrain to Ahli United Bank BSC in a transaction expected to close by the second half of 2022. The acquisition includes retail banking, credit card and unsecured lending businesses but excludes Citi's institutional businesses.
* In other news, Citi will be underwriting a $1.2 billion bond sale for the Dallas Fort Worth International Airport, the biggest transaction the bank will handle in the state of Texas since reentering its municipal bond market, Bloomberg reported. Citi was temporarily sidelined in Texas after the state passed a law that prohibits banks that have taken restrictive gun policies from doing business there.
* Wells Fargo & Co. will be paying $32.5 million to settle a case accusing it of favoring its own funds in workers' 401(k) plan over cheaper and better performing alternatives, Bloomberg Law reported, citing court papers. More than 400,000 are expected to benefit from the resolution of the case, and the settlement amount represents 40% of the plan participants' estimated damages.
* Oxford Commercial Finance Corp., a subsidiary of Michigan-based Oxford Bank that focuses on the commercial finance or alternative asset space, acquired FSW Funding's assets and hired its entire team. Oxford Bank's parent, Oxford Bank Corp., is issuing about 31,000 shares as part of the consideration to the owners.
* JPMorgan Chase & Co. is reassessing its exposure to clients in the commodities sector after March's nickel short squeeze, and any pullback from the bank could impact commodity market liquidity, Bloomberg reported, citing unnamed sources. The review, which includes metal traders and oil refiners, is focused on base metals and businesses related to trading on the London Metal Exchange, according to the report.
* JPMorgan is planning to separate the chair and CEO roles during the next CEO transition, according to a proxy statement from the bank. The plan, which is preferred by many of the bank's shareholders, is "subject to the [b]oard's determination of the leadership structure that best serves the [f]irm and its shareholders at that time," the company said.
FINANCIAL SERVICES
* S&P Global Inc. agreed to sell its Leveraged Commentary and Data business and its related family of leveraged loan indexes to Morningstar Inc. for $650 million in cash, comprised of $600 million paid at closing and a contingent payment of up to $50 million.
* Morgan Stanley investor Disruptive Technology Solutions LLC and affiliated funds filed a demand for arbitration against the investment bank with the Financial Industry Regulatory Authority, claiming that the company and a senior executive leaked information ahead of the fund's sale of Palantir Technologies Inc. shares, The Wall Street Journal reported, citing the demand document. The investor's allegations come as Morgan Stanley's block trading business is being investigated.
POLICY AND REGULATION
* The U.S. Treasury has stopped Russian government accounts' dollar-denominated debt payments at U.S. banks to force the country to drain its own dollar reserves, spend new revenue or go into default, Bloomberg reported, citing an unnamed spokesperson from the department's Office of Foreign Assets Control. The move, which excludes Russia's ability to receive payments for oil and gas, is part of further sanctions the U.S. is implementing to pressure Russia's president, Vladimir Putin, to stop his invasion of Ukraine, according to the report.
* SEC Chair Gary Gensler, during an event hosted by the University of Pennsylvania Carey Law School, said he has asked the agency's staff to work with the Commodity Futures Trading Commission on how the regulators can jointly plan to oversee cryptocurrency platforms that might trade both cryptocurrency-based security tokens and some commodity tokens.
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