CTRYY - Wall Street Breakfast Podcast: Country Garden Default Warning

2023-10-10 06:49:54 ET

Summary

• Country Garden warns of potential debt restructuring and tight liquidity position, causing stock to drop 9.5%.
• WW International's stock rises 13% after aligning itself with weight loss drug Ozempic.
• PGT Innovations gains 11% after rejecting $33-per-share takeover offer from Miter Brands, backed by Koch Industries.

Listen below or on the go on Apple Podcasts and Spotify

Country Garden ( CTRYF ) drops on debt default warning amid cash crunch, weak sales. (00:26) WW International ( WW ) rides the Ozempic ( NVO ) wave , closes up 13%. (01:26) Door maker PGT Innovations ( PGTI ) gains amid report of rejected $1.9B bid. (02:55)

This is an abridged transcript of the podcast.

Country Garden ( OTCPK:CTRYF ) on Tuesday warned it may not meet all of its offshore debt obligations and could be in for debt restructuring.

The property developer said its liquidity position will remain "very tight in the short- to medium-term."

Country Garden’s Hong Kong-listed shares dropped 9.5% on the news.

Country Garden' ( OTCPK:CTRYF ), China's largest private property developer, sales have been under "remarkable pressure," with its September sales down 80.7% Y/Y at ~RMB 6.17B ($860.5M).

In addition, it faces significant uncertainty regarding asset disposals "as there has not been any industry-wide improvement in property sales."

Country Garden ( OTCPK:CTRYF ) said in an exchange filing that it has not yet defaulted, although the debt non-payment "may lead to creditors demanding acceleration of payment or pursuing enforcement action."

As of Tuesday, the cash-strapped company failed to make a HK$470M (~$60.1M) loan payment.

It'd also missed coupon payments on some dollar bonds since last month.

Shares of WW International (NASDAQ: WW ) closed up ~13% Monday.

The uptick comes after an article in The Wall Street Journal highlighted the company's strategy to align itself with popular drugs used for weight loss, notably Novo Nordisk's ( NVO ) Ozempic (semaglutide).

Facing the mounting pressure of popular weight loss medications, the weight loss products and services business is shifting away from its signature points-tracking system. CEO Sima Sistani told the newspaper that the system was inadvertently introducing shame into the weight loss journey.

WW ( WW ) invested a hefty $106M to bring the telehealth company, Sequence, under its umbrella. The acquisition, which closed in April , paves the way for the company to prescribe weight loss medications, a departure from its traditional weight loss strategies.

A key member of the company's board also revisited her earlier stance on weight loss drugs, Oprah Winfrey. Contrary to her previous characterization of these drugs as "an easy way out," which had negatively impacted the stock in September, Winfrey told the Journal , "Prescription medications are an essential tool for those grappling with weight and associated health challenges."

The ripple effect of Ozempic's rise is clear. WW reported an uptick in its Q2 membership to 4.1M, defying the typical slump after New Year's resolutions have been abandoned.

PGT Innovations (NYSE: PGTI ) jumped 11% in after-hours trading amid a report that the door maker rejected a $1.9 billion takeover offer from Miter Brands, a competitor that's backed by Koch Industries.

According to a Reuters report, which cited people familiar with the matter, PGT's ( PGTI ) board rejected Miter's fully-financed $33-per-share offer, saying it was inadequate.

One source said, Miter is considering increasing its offer to $36 a share but there's no certainty that Miter will continue its pursuit of PGT.

The $33 offer for PGT, which manufactures and sells windows and doors, represents a 26% premium to its closing price on Friday. PGT has a market cap of $1.5 billion.

Other headlines to look out for on Seeking Alpha:

Truist said to be in talks to sell rest of its insurance brokerage unit

Fannie Mae survey shows pessimism in housing market hit new high in September

PG&E to pay $45M penalty for California's Dixie Fire, regulator says

Sonos dips amid loss in Google patent case

On our catalyst watch for the day,

• Amazon’s second prime day event of the year starts today. It runs for two days.

• Adobe ( ADBE ) will hold an investor meeting.

• The quiet period ends on Neumora Therapeutics ( NMRA ) and RayzeBio ( RYZB ) to free up analysts to post ratings.

• The Nasdaq short interest report will be released.

U.S. stocks on Monday closed in the green, bringing the curtains down on a volatile session that saw markets complete a solid turnaround.

Of course, investors will continue to weigh the potential ramifications of conflict in the Middle East between Israel and Palestinian military group Hamas. For an update on the attacks in Israel, be sure to check out today’s edition of the Wall Street Breakfast newsletter .

The Nasdaq ( COMP.IND ) reversed course in late afternoon and eventually settled 0.39% higher. The S&P 500 ( SP500 ) added 0.63% while the Dow ( DJI ) advanced 0.59%.

All 11 S&P sectors closed in positive territory. Market participants snapped up safe assets like Gold and the dollar. Oil prices popped , while energy and defense stocks surged and travel stocks fell.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the green. The Dow is up 0.2%, the S&P 500 is up 0.2% and the Nasdaq is up 0.2%. Crude oil is down 0.5% at nearly $86 a barrel. Bitcoin is up 0.2%.

In the world markets, the FTSE 100 is up 1.5% and the DAX is up 1.6%.

The biggest stock movers for the day premarket: Ventyx Biosciences (NASDAQ: VTYX ) is down 21% after the biotech company announced results from a Phase 2 clinical trial for a drug to treat moderate-to-severe active ulcerative colitis.

On today’s economic calendar, at 9am the Fed’s Raphael Bostic will speak on the outlook for the U.S. economy, interest rates, opportunities to enhance financial inclusion and other topics at the American bankers association convention. At 1:30 pm the Fed’s Christopher Waller will speak on the Evolution of Monetary Policy at George Mason University.

For further details see: