Category: 3. Business

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Japan’s executives have to change their mindset and exert more pricing power as the country moves on from an era of deflation, one of its biggest independent asset managers has said.

Shuhei Abe, founder of asset manager Sparx, said he was looking to invest in companies and managers willing to emerge from a defensive crouch and raise prices in Japan’s changed economic landscape.

“Investors in this country have waited for years for inflation to return and now the time has come,” he said in an interview in Tokyo. “One of the biggest catalysts for the coming years will be changes of management attitude.”

His comments underline the change of mood among Japanese investors, who for years sought to pick stock market winners in an economy with barely any growth and entrenched deflation following the end of its asset price bubble in 1989.

However, in 2025 Japan’s stock market index has climbed decisively beyond its previous peaks while rising inflation has allowed the central bank to raise interest rates to the highest level in 30 years.

Managers of the previous era “suffered from the trauma of the past bubble” and had it instilled in them to cut debt and hoard capital rather than raise prices, Abe said.

“Most of the top management guys who joined [Japanese companies] during this time were trained . . . to reduce the debt, to not waste capital,” said Abe, a former employee of George Soros. “But finally, now, they have started to understand they cannot continue like they have over the past 30 years.”

Sparx has ¥2tn ($12.7bn) of assets under management. Among its investments Abe cites Morinaga, a confectioner benefiting from Japan’s boom in inbound tourism, and Shoei, a maker of premium motorcycle helmets, as benefiting from pricing power.

Abe is also invested in Pilot, one of the largest pen companies in the world, which has recently moved to satisfy some of Abe’s demands, raising the price of its best-selling pen in Japan by 10 per cent.

Most of Japan’s asset managers are riding the wave of stock price records over the past 18 months. Sparx, which was founded in 1989 just before the end of the bubble, managed in August to exceed its previous peak for assets under management, set 19 years earlier.

Its funds have recorded, over their lifetimes, annualised returns of between 4.7 per cent for its long-short fund and 11.4 per cent for its active long-only strategy. The Topix returned about 4.6 per cent over roughly the same period.

Japan’s average annual growth was less than 1 per cent for more than 30 years, Abe pointed out. “In this environment, it’s not easy to invest in any equity asset. So Sparx did very well in that sense. But, at the same time, no one else could do it, thus there was room for us.”

Before founding Sparx, Abe was funded by Soros in 1985 to invest in Japanese railroad stock, in a bet that the market would start to apply more value to the sector’s vast real estate holdings — a variant on a strategy that some activists and private equity groups are using in Japan today.

It is not just the end of a long period of stagnation that has put Japan back into investors’ sights. Regulators, the government and the stock exchange are pushing companies to pay more attention to shareholders.

The government is also pushing to improve the quality and quantity of asset managers, convinced that they are crucial to improving corporate performance and getting capital flowing.

Abe expects that a wave of retail investors will come into the market, with the side-effect that companies will have a powerful new constituency pushing them to perform.

“Individuals will move the market. Individuals will eventually be . . . a most powerful activist,” he said.

Two Silicon Valley veterans behind Twitter and Pinterest have launched a new app that is designed to be an antidote to the “terrible devastation” they say has been caused by social media.

Biz Stone, a Twitter co-founder, and Evan Sharp, who co-founded online scrapbooking site Pinterest in 2010, have raised $29mn in funding for their new start-up West Co, according to a regulatory filing.

West Co, which the pair founded in 2023, launched its first app, Tangle, in November. It is pitched as a “new kind of social network, designed for intentional living”.

Tangle, which is at present accessible on an invite-only basis, suggests users share personal objectives or “intentions” with their friends, support each other’s goals and “reflect” on how they are achieved.

“It is a tool for meaning that helps people plan with intention, capture the reality of their days, and see the deeper threads that shape their life,” the company said in a recent job advertisement.

West Co, which is headquartered in San Francisco, said on its website that its mission is to “build tools to help people live life more on purpose”. Spark Capital, an early Twitter investor, led West Co’s seed financing round in 2024, according to another job ad.

Stone said the current version of the app — which sends users notifications every morning asking “What’s your intention for today?” — was still an early test and could change before a full public launch.

“It turns out that creating something to help people navigate their lifetime is difficult work,” he told the Financial Times, “but I think it’s worth it.”

In a recent podcast interview, Sharp — who is West Co’s chief executive — described his “eight-year-long obsession” with “really trying to understand what we fundamentally disrupted with the phone and social media so that I could . . . help make that a little bit better”.

“What could I build that might help address just some of the terrible devastation of the human mind and heart that we’ve wrought the last 15 years?” he said.

Stone and Sharp are among several Silicon Valley executives grappling with the side effects of the products and services that they built, even as their companies’ success made them wealthy.

Sir Jonathan Ive, the former Apple designer who helped birth the iPhone, has described his project to develop an AI-based consumer device with OpenAI as a response to the “unintended consequences” of the smartphone. Sharp spent two years working at LoveFrom, Ive’s design firm, before launching West Co.

Tangle is Stone’s latest attempt to capitalise on his earlier success. He is also a co-founder of Medium, an online publishing platform, and Jelly, a question-and-answer app that was later acquired by Pinterest. He launched investment firm Future Positive in 2019 and at present serves on the board of Mastodon, another social networking group.

After leaving Twitter in 2021, Stone clashed with Elon Musk after the Tesla and SpaceX chief acquired the company, which the billionaire has now renamed X. Musk is “not a serious person”, Stone said in a post in December 2022, describing the changes Musk made to the service as “heartbreaking”.

Several of West Co’s founding team previously worked at Twitter and Pinterest. Another early employee, Reverend Sue Phillips, a former Unitarian Universalist church minister turned tech company adviser, now serves as the start-up’s “head of wise AI and ancient technologist”, according to her LinkedIn profile.

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The concept of “eat what you kill” common to many financial groups has been mostly unknown among lawyers, and especially those on the lower rungs of the ladder. In a change of tone, major US law firms are now forking over year-end holiday bonuses as high as $315,000 to associate lawyers, figures not seen before.

Grunts typically get paid mostly in fixed salaries that vary little across the industry: typically from $225,000 to $420,000 annually based on year of service. But that system had already started to creak. For the top litigators and dealmakers, big firms have been paying as much as $25mn in the belief that future winners will be those with an all-star line-up of lawyers.

Now the talent war has reached the junior ranks, even if the numbers on offer have fewer zeroes. Not only are large bonuses being doled out, but the so-called lockstep model, where pay varies little between peers and firms, is under threat. Pallas Partners, a litigation boutique, told the FT it was paying larger bonuses for associates — meaning those who aren’t yet partners — but was also giving special rewards to the highest performers.

Law firms for decades had turned their noses up at the money-grubbing culture that defined their Wall Street clients, believing that theirs was a profession and not a career. To be sure, the firms that are today paying the biggest associate bonuses seem to be upstarts such as Pallas, which have less name recognition than old-school New York firms like Cravath, Swaine & Moore, which set the associate pay scale. As such, the newcomers must work harder to attract top talent.

There is plenty to keep bonuses aloft, following the second-best year for global mergers and acquisitions on record. A survey conducted by Hildebrandt Consulting/Citigroup showed average revenue up more than a tenth in 2025 among nearly 200 law firm respondents. Future disruption from AI notwithstanding, junior staff are valuable since they do much of the heavy lifting on deals and pre-trial preparation.

By venturing into the kind of pay associated with hedge funds or investment banks, law firms risk taking on the same problems. Bonuses are, by definition, elastic, so elation can turn into disappointment in a bad year.

But it will be hard to go back to cozy former ways. Already, some law firms are turning to mergers to better compete. The venerable Cadwalader recently merged with Hogan Lovells after losing dozens of partners last year. A year earlier, New York’s Shearman & Sterling joined forces with London’s Allen & Overy. Creative destruction has come for big law; it’s no surprise if a wave of creative remuneration is coming too.

sujeet.indap@ft.com

Investors sank money in big European office deals again last year, with values and the number of transactions rebounding as the prospect of a supply crunch breathed new life into a once moribund sector.

A total of 21 transactions worth £100mn or more had completed in central London as of mid-December, compared with 12 for all of 2024. Nine office buildings were sold for £200mn or more, compared with just one in 2024.

Big deals accounted for a greater share of the market. Office building sales in central London worth £100mn or more were 53 per cent of total sales volumes as of mid December, up from 27 per cent for the whole of 2024, according to data from real estate broker Savills.

“Investors are feeling more confident” about putting money back into this space, particularly domestic funds and institutions, said Oliver Bamber, director for central London investment at Savills. Bamber is advising on the sale of St Christopher’s Place, a mixed-use office, residential and leisure estate, and Stirling Square, an office building. Both are in the West End and expected to sell for more than £200mn.

As of mid-December, there were 12 office deals worth £100mn or more under way in continental Europe and the UK, with a total value of €2.7bn. That compares with nine deals worth €1.87bn at the same point in 2024, according to data from MSCI, and eight worth €1.65bn in 2023.

“Despite the noise around work from home, actually the cranes have stopped for a number of years in key markets, presenting in critical markets like London a supply crunch,” said Nick Deacon, head of offices for Europe at Nuveen Real Estate.

“Demand has stayed up, supply is looking really difficult, we’re all anticipating rental growth and that’s fundamentally what people are buying into,” he added.

Nuveen in December sold its “Can of Ham” skyscraper in London to Hayfin and Capreon for about £340mn. The average office deal size in Europe is about €35mn, according to MSCI.

US asset manager Invesco has appointed broker CBRE to sell its Capital 8 complex in Paris’s 8th arrondissement, which could fetch about €900mn, according to people familiar with the matter.

Invesco acquired the nearly 500,000 sq ft building in 2018 and spent two years and €100mn redeveloping it. It now has a rooftop bar and a “hotel-inspired lobby”, according to the firm. Invesco and CBRE declined to comment.

A price tag of €900mn would represent the largest European office building sale in three years and the largest in France in five years. It joins other high-end assets that are being sold, a sign the market is creeping back after valuations crashed in the wake of the pandemic and high interest rates.

JPMorgan Asset Management and Singapore sovereign-wealth fund GIC, for example, are selling OpernTurm, an office tower in Frankfurt known for its good location and steady tenant base. It could fetch €800mn, according to people familiar with the transaction. JPMorgan and GIC declined to comment.

Both real estate investment manager Hines and developer Art-Invest Real Estate have looked at OpernTurm, according to people familiar with the matter. They declined to comment.

Meanwhile, Blackstone in September snapped up the Centre d’Affaires Paris Trocadéro, a mixed-use property including office and retail in the 16th arrondissement, for about €700mn.

“There’s real evidence of rental growth: we are seeing some prime rents in the City of London can be well north of £100 a foot, north of €1,200 a metre in Paris,” said Samir Amichi, Blackstone’s head of real estate acquisitions for Europe. “These are rents we hadn’t seen before.”

The Trocadéro sale is a “bellwether” for supersize deals, said Tom Leahy, head of real estate research for Emea at MSCI. “It’s emblematic of a broader recovery.”

Still, investors remain selective, with bidders focused on well-located buildings with attractive amenities in the top global cities.

Lars Huber, head of Europe at Hines, said capital completely dried up over the previous two or three years and has only started coming back recently.

“Investors are drawn to Europe right now because the interest rate environment has improved, construction costs are moderating, there’s less supply of top-quality office space and Europe provides geopolitical stability compared to other places.”

Traditional lenders are also more keen to lend, which is adding liquidity, he said.

In the first half of 2025, new commercial real estate lending in the UK totalled £22.3bn, up 33 per cent from the year before, according to research from Bayes Business School.

For the Trocadéro transaction, Blackstone’s loan-to-value ratio was 60 per cent, said a person familiar with the matter. A year and a half ago, it would have been hard to get leverage above 50 per cent LTV, the person said.

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The boss of one of Europe’s largest grid operators has warned that too many speculative and unprepared projects are holding up grid connections for critical energy projects and causing years-long queues.

Bernard Gustin, chief executive of Elia Group, which operates the Belgian and parts of the German grid, said that operators of network infrastructure should be able to allocate connections to projects that are ready, rather than those that applied first.

‘‘I think in Belgium we have 10 times more projects [than] needed until 2030,” he said, referring to battery storage projects. “If you change from first come, first served to first ready, first served, then you will focus on the ones who are really serious because they have everything [ready].”

Grid connections have become a huge issue for European countries. Many are trying to manage a rapid increase in demand for grid access as more industrial plants and households install wind and solar power that can go into the grid, as well as an increasing number of applications from data centres to use energy from it.

In some countries, such as the Netherlands, queues to be connected to the grid stretch more than seven years. In Slovakia, about 50 per cent of capacity reserved for connection remains unused, according to commission figures. In Germany, there are twice as many requests to add battery storage to the grid as is planned in the country’s grid development plan, an Elia Group report found.

The rollout of renewables in the EU has outpaced the infrastructure needed to support it, as countries race to meet renewable energy targets set by Brussels and move away from imported fossil fuels. The European Commission has estimated that €1.2tn needs to be spent on the EU’s grids by 2040 in order to support the transition.

Gustin said that grid operators are competing for funding to rapidly build out networks and upgrade infrastructure to balance the volatility of wind and solar energy.

After years of stagnant investment levels, “we all have huge capex plans, so big that you need to be able to finance them, which is a challenge”, he said.

Costs from grid congestion — where cheap electricity cannot flow to where demand is so people have to pay for higher cost sources — are rising. Acer, the EU energy regulator, has said that they reached €5.2bn in 2022 and could rise to €26bn by 2030.

In a document published in December, Brussels set out recommendations to prioritise connections to the grid. The commission also said that it would take a more top-down approach to energy infrastructure planning in order to accelerate the build-out and ensure costs were shared between EU countries.

“In Europe it’s a huge problem and we lose billions every year in lost value because of curtailment and bottlenecks,” EU energy commissioner Dan Jørgensen told the Financial Times.

In a report on energy storage, Elia Group found that the first 100GW of installed batteries in Europe would reduce the curtailment of renewable power by 13 per cent, meaning that 13 per cent more power would be available.

Elia plans to spend €31.6bn on grid upgrades until 2028, split roughly one-third to Belgium and two-thirds to its German arm. To deal with connection demands from batteries, data centres and renewable energy installations could cost an additional €10bn, Gustin estimated.

“These are not small amounts . . . you have a lot of people saying we don’t want tariffs to go up on energy, electricity is not competitive. And so we have a first challenge [which] is how do we make sure, given the amounts we need to raise, that we have a competitive return on equity?”

Gustin, who was formerly chief executive of Brussels Airlines, oversaw a €2.2bn capital raise earlier this year, bringing in investors such as BlackRock and the Canadian pension fund CPP.

Often the length of time it takes to grant permits for infrastructure projects is seen as a risk factor by investors, he said, with permitting times in Belgium running up to eight years.

“By [that] time inflation and the price have increased and some investors are telling you these were not the conditions we had at the start, we cannot continue,” he said.

The EU’s recent legislation aims to speed up permitting times by setting time limits for permit deliberations and proposing that energy projects should be seen as having an overriding interest.

More than three-quarters of economists expect the US to maintain or widen its productivity lead over the rest of the world, because of artificial intelligence, deep capital markets and relatively low energy costs, a Financial Times survey has found.

In the global poll, 31 per cent of 183 respondents thought the US would retain its advantage in productivity, while another 48 per cent expected the country to increase its dominance.  

The economists were based in China, the Eurozone, the UK and the US.

Productivity growth — which measures progress in converting inputs such as hours worked into goods and services — ultimately allows companies to increase wages and profits, improving living standards.

US labour productivity rose 10 per cent between 2019 and 2024, thanks to rapid technological advances and the reallocation of workers during the Covid-19 pandemic. By contrast, it remained largely stagnant in the UK and Eurozone, according to OECD data.

Jumana Saleheen, head of Vanguard’s investment strategy group in Europe, said US productivity was set to “pull away from other developed market economies” thanks to the country’s dynamic capital markets, flexible labour force and lead in emerging technologies.

She added that Europe risked “falling further behind”, with research and development still heavily focused on traditional sectors such as automotive and pharmaceuticals.

Saleheen also noted structural challenges for the EU, including fragmented infrastructure, more rigid labour markets and less supportive capital markets.

The US economy is set for the strongest growth in the G7 this year, according to the OECD — buoyed by a tech-led investment boom and stock market gains that are bolstering wealth and spending among better-off households.

The gains have helped counter some of the economic damage done by US President Donald Trump’s trade wars but have also raised fears of an unsustainable AI-related bubble.

The FT survey, which was carried out in December, suggests economists do not expect the trends powering US outperformance to be reversed soon.

AI and related digital technologies were the new productivity frontier, said Nina Skero, chief executive of the Centre for Economics and Business Research, and the US’s “position as a leader in investment and development of these technologies will extend the US’s productivity lead”.

The trend is supported by a divergence in business investment. In the US, investment jumped 24 per cent in the second quarter of 2025 compared with the same period in 2019, before the pandemic. It contracted 7 per cent over that time in the Eurozone, according to Oxford Economics.

Some economists surveyed by the FT warned that the surge in AI investment could reflect a “bubble” — a term mentioned 25 times in responses — and cautioned that a sharp correction might weigh on US output and productivity.

A reversal in the stock market gains made by US tech could also have international repercussions via tighter financial conditions, softer external demand and rising risk aversion, some economists said.

But the majority of respondents to the poll, which represented the UK and Eurozone more heavily than China and the US, still expected America to maintain its productivity edge globally. Overall, the poll surveyed 207 economists, although not all responded to every question.

The US was starting from a “position of strength” in the productivity race, said Thomas Simons, chief US economist at Jefferies.

Respondents also pointed to the US’s structurally lower and more predictable energy costs, flexible labour market and large domestic economy.

The US benefits from “structurally lower and more predictable energy costs than Europe and many Asian economies, underpinned by an administration that treats energy policy as a driver of economic prosperity rather than a vehicle for moral posturing at the expense of growth and living standards,” said Martin Beck, chief economist at the consultancy WPI Strategy.

Europe is widely seen by economists as constrained by over-regulation, weaker investment, rigid labour markets and a business environment less favourable to cutting-edge technologies. The UK had the additional weight of the Brexit legacy to deal with, some economists contended.

“While the US and others have made major strides in AI, the UK has spent much of the last decade chasing the Brexit tail, diverting attention and resources from innovation,” said Evarist Stoja, professor of finance at the University of Bristol Business School.

Experts acknowledge that the US faces rising AI competition from Asia. “Other countries — particularly in Asia — will move to the frontier, meaning that the relative advantage of the US will erode somewhat but will not be eliminated,” said Jagjit S Chadha, professor of economics at the University of Cambridge. 

China has the second-largest cumulative venture capital investment in AI since 2012 after the US and over three times more than the EU, according to the OECD.

The US may be at the forefront of the AI wave, but “much of this may prove a misallocation of resources,” said David Owen, chief economist at Saltmarsh Economics. “Ultimately, much of the benefits will go to the users of the technology (elsewhere), not the early-stage innovators.”

Many economists also highlighted risks from US trade protectionism, restrictive immigration policies, fiscal imbalances and political instability that could eventually undermine productivity growth. 

US productivity gains from trade “have been traded away for chump change tariff revenues”, warned Robert Barbera, director of the Johns Hopkins University Center for Financial Economics.

Jonathan Portes, professor of economics and public policy at King’s College in London, warned that a “toxic combination” of tariffs, an erosion of the quality of US government administration and anti-immigration policy would “over time do significant damage to the US economy”.

Additional reporting from Olaf Storbeck, Claire Jones and Thomas Hale

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Chinese authorities are raking in more tax from online vendors as part of a crackdown triggered by Beijing’s desire to bolster revenues to compensate for slowing economic growth.

Since a new law came into effect in October, platforms such as Alibaba, Shein and Amazon have been submitting data that indicates merchants’ profits, including names, orders, sales and virtual gifts or digital tokens, according to documents released by local tax bureaus.

More than 7,000 ecommerce platforms had reported tax-related information by the end of the third quarter, said Lian Qifeng, a director of tax for the State Taxation Administration, at a briefing in December.

This had contributed to a 12.7 per cent rise in tax revenues from ecommerce platforms in the third quarter from a year earlier, he said. He did not provide an overall figure.

With China’s economy expanding at its slowest pace in a year in the third quarter, authorities are keen to counter the effects of the US trade war and a lingering property downturn. The collapse of land sales and slowing economic growth have also increased pressure on Beijing to find new sources of fiscal revenue, including from merchants and live streamers on online platforms.

The State Taxation Administration has launched several campaigns to boost collection, including pressing mainland investors to pay taxes of 20 per cent on their global capital gains. It has also curtailed incentives in regions blamed for fuelling industrial overcapacity and launched a nationwide crackdown on evaders who inflated invoices to claim fraudulent rebates.

Online sales of physical goods were Rmb12.8tn ($1.8tn) in 2024, almost 27 per cent of China’s total retail sales, according to data from the national statistics bureau, but analysts say their share of the tax take is often lower. While the submission of sales data has been mandatory since 2019, implementation was lax and the new law sets clear deadlines for submission.

Lian said tax authorities had issued repeated reminders to vendors whose self-declared income was substantially lower than the amounts reported by platforms. That had “significantly narrowed the gap of tax burden between online and offline merchants”, he said.

“Data-driven taxation has become the ultimate weapon in the authorities’ toolbox,” said Quan Kaiming, Shanghai-based partner at Allbright Law Offices, adding that the rise of the platform economy had shaken up traditional tax governance.

The new tax reporting rules helped close the gap, promoting fair competition but also raising compliance costs and data security risks, Quan said. “The tax risks are particularly high for influencers and livestreaming platforms,” he added.

For merchants whose current margins are thin, a higher value added tax — 13 per cent for companies whose sales exceed Rmb5mn — could be devastating.

“This will kill us, everyone. We were not paying any tax before and that’s the biggest benefit of selling online,” said a Quanzhou-based Amazon exporter surnamed Huang, whose online sales of household goods and toys to overseas clients can be as much as Rmb200mn a year.

“Profit margins on Amazon for sellers average around 8 per cent and rarely does anyone exceed 20 per cent,” Huang told the Financial Times. “It is not reasonable at all for cross-border merchants like us to pay a tax as high as 13 per cent.” 

Zeng Jianwei, a Guangzhou-based merchant who sells pet merchandise on Amazon, also voiced concern. “The business is already bad . . . . My sales declined by 20 to 30 per cent [in 2025], and now it’s likely to get even worse.”

Zeng said his strategy was to wait and see. “Maybe after the tax bureau hits its collection quota from larger sellers, they will go easier on us.”

Amy Lin, sales manager at a footwear supplier to Shein, expects most sellers to increase prices. “The ecommerce industry has not been doing too well.” 

Alibaba, Shein and Amazon did not reply to requests for comment.

Additional contribution by Cheng Leng and Tina Hu in Beijing, William Langley in Guangzhou and Rafe Rosner-Uddin in San Francisco

Staff Writer

Jan 3, 2026 10:15pm

Delta began cancelling flights early Saturday morning in compliance with FAA airspace closures in the Caribbean.

As cancellations are processed, customers will receive notifications via the Fly Delta app and contact information listed in their reservation.

Editor’s note: This article originally appeared on Morningstar’s US site and has been amended for an Australian audience. The insights in this piece are globally focused, but we have determined that the findings are still relevant for Australian audiences.

Key takeaways

• Private credit quality looks likely to deteriorate in 2026.
• Despite stronger sales growth, EBITDA margins remain stressed for many borrowers.
• Increasing debt balances signal a pickup in acquisition activity.

The Morningstar DBRS outlook for private borrower credit quality trends remains negative as we head into 2026. Fundamental operating results show an increase in borrowers experiencing margin compression from a year ago. Leverage has also increased materially for many borrowers, spurred by lower base rates and an uptick in acquisition activity among higher-rated borrowers. Meanwhile, the weakest borrowers in our portfolio will remain pressured by weak top-line performance, shrinking margins, and the erosion of already-constrained liquid resources.

We view more restrictive and rapidly changing global trade policy as a key threat in 2026. As the full impact of tariffs and other policy changes during 2025 flow through results, we may see an acceleration in the margin compression trends we are already observing.

Other key highlights:

• The trend in credit metrics is weaker at both ends of the ratings spectrum.
• Increasing debt balances signal a pickup in acquisition activity.
• Private borrowers remain proactive in managing loan maturities.

The weakest borrowers continue to face weak top-line performance, shrinking margins, and erosion of already-constrained liquid resources. In our September 2025 commentary highlighting private borrower reliance on capital support, we reported that borrowers operating under covenant relief expanded from 9% to 10% of active borrowers over the past year. We also noted that roughly 40% of these borrowers face significantly weakened liquidity positions relative to capital needs over the next year. We expect this group to continue to lead downgrades and defaults next year.

The distribution of EBITDA margin remains skewed toward a net contraction, with 61% of borrowers indicating weaker margins over the past year. The largest proportion of borrowers (35%) experienced margin contraction between zero and negative 250 basis points.

A deeper look into financial results for borrowers active for more than one year reveals more broad-based weakness. Approximately 12% now have cash flow below zero, while 13% have IC ratios less than 1 time (x). For comparison, 7%-8% of comparable borrowers a year ago had cash flow below zero or an IC ratio below 1x.

Much of the expansion in these proportions appears to be in the B rating range. In the CCC and lower range, we note only modest expansion in the higher risk proportions: 55.6% of borrowers with cash flow below zero compared to 54% a year ago and 57% with IC ratios below 1x compared with 55.6% a year ago.

Despite an acceleration in debt growth among European borrowers, we still view credit quality among borrowers in the region as better positioned relative to U.S. borrowers. Compared with Europe, the U.S. group continues to face a greater degree of margin compression, mitigating the positive effect from recent base interest rate reductions.

Meanwhile, European borrower results reflect relatively stable cash flow metrics and improved interest coverage ratios, indicating a greater degree of cash flow flexibility relative to the United States.

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WASHINGTON:

President Donald Trump on Friday blocked US photonics firm HieFo Corp’s $3 million acquisition of assets in New Jersey-based aerospace and defence specialist Emcore, citing national security and China-related concerns.

In an order released by the White House, Trump said HieFo was “controlled by a citizen of the People’s Republic of China” and that its 2024 acquisition of Emcore’s businesses led the president to believe that it may “take action that threatens to impair the national security of the United States.”

The order did not name the individual or detail Trump’s concerns. “The Transaction is hereby prohibited,” Trump said, ordering HieFo to “divest all interests and rights in the Emcore Assets, wherever located,” within 180 days.

The Committee on Foreign Investment in the United States identified a national security risk in its investigation of the deal, the Treasury Department said after Trump’s order. The statement did not specify the national security risk.

HieFo and Emcore could not immediately be reached for comment.

Emcore, publicly traded at the time of the deal and later taken private, has said HieFo bought its chips business and indium-phosphide wafer-fabrication operations for $2.92 million. HieFo said at the time that it was co-founded by Genzao Zhang, a former Emcore vice president of engineering, and Harry Moore, whose LinkedIn profile describes him as a former senior sales director at Emcore.