Bonds

US should pull the plug on ResCap

4 Jan 2010

Despite nabbing the bulk of the latest $3.8 bln infusion into GMAC, the car lender's mortgage unit is a mess. ResCap still may not pull through, and there's no reason for taxpayers to prop it up. Like its former subprime lending peers, it should be disposed of or allowed to die.

ManU scrambles to avoid financial penalty area

4 Jan 2010

The Glazer family needed an expensive paymentinkind note as well as bank debt to purchase thefootball club in 2005. That PIK not due until 2017 threatens to become a ballooning liability. Tapping the resurgent bond market would put the club on a sounder financial footing.

Advice to CDS regulators for 2010

4 Jan 2010

Lawmakers and bankbashers have pinned blame for the financial crisis and in particular the collapse of AIG on credit default swaps. Changes to and tighter oversight of the $31 trillion market are needed. But action should address real, not imaginary, problems.

Walking away will gain cachet

23 Dec 2009

Why bother? That's the question more underwater Americans are asking themselves about their mortgages. Trapped in the abyss of negative equity, more will decide to quit paying. As they should.

Steep yield curve could throw investors for a loop

23 Dec 2009

The difference between yields on short and longterm U.S. government bonds is at a record high as investors bet on an inflationgenerating economic snapback. But what happens if that doesn t materialize? There are painful precedents.

AAA investors running out of options

21 Dec 2009

Yet another toprated class of debt is on the hit list now that S&P may downgrade covered bonds. Soon there will be little AAA debt left outside the world of government and quasigovernment debt. That means less diversification and lower returns for investors fixated on safety.

US loan market looks ready for leveraged buyouts

15 Dec 2009

The market has gobbled up three recent loans to fund private equitybacked deals. Lenders didn t need much enticement and one debt package was upsized. The renewed appetite will be welcome to dealstarved buyout barons. But investors should beware another bout of indigestion.

Junior creditors get help in bankruptcy fights

9 Dec 2009

It isn't easy for lesser creditors to organize opposition to a bankrupt US company s restructuring plan. But in recent decisions on Six Flags and Freedom Communications, judges have handed them small wins. They should take heart that a debtor s plan isn t always a fait accompli.

CIT jumps through bankruptcy; next trick harder

9 Dec 2009

The US business lender is set to emerge from Chapter 11 with nearly $11 billion less debt. Yet the company still has to figure out a way to raise funds to make new loans on attractive terms. It may have slashed its debt burden, but its longterm viability still looks uncertain.

Dubai Holding needs to clarify its position

8 Dec 2009

The personal vehicle of the emirate's ruler is heavily exposed to property and its estimated $7 billion of debt doesn't have a sovereign guarantee. If Dubai Holding wants to reassure investors that it isn't the next Dubai World, it could start by answering these questions.

CLO stirrings could set new benchmark

4 Dec 2009

A new $250 million collateralized loan obligation looks puny in size and conservative in structure compared with credit boom offerings. But at least it could serve as a reference for future deals, which are certain to get riskier as a financial market recovery takes hold.

Are Fannie and Freddie America’s Dubai Worlds?

2 Dec 2009

Not yet. But creditors of the two housing giants shouldn't forget that, like Dubai World, they have only implicit backing from their government. It may seem farfetched that the US would cut Fannie and Freddie loose. Even so, longterm investors shouldn't ignore the possibility.

Dividend recap resurgence looks rash

2 Dec 2009

Carlyleowned consultancy Booz Allen is taking out a loan to pay the buyout firm a $550 mln dividend. It is the sixth company this year to recapitalize this way. Even with the new debt, Booz won't be overleveraged. Still, given recent blowups, investors should be cautious.

CDS defenders protest too much

30 Nov 2009

Credit swaps are under fire. Now ISDA, the derivatives trade body, is fighting back. It s right to debunk the idea that CDS traders can make an easy killing from a company s death spiral. But CDS do modify creditors behavior. ISDA should be looking for solutions, not objecting.

Abu Dhabi pick ‘n mix bailout sounds sensible

29 Nov 2009

The rich emirate seems about to support its struggling neighbour Dubai but only on a casebycase basis. Abu Dhabi s priority should be to stop a bank run. And although it may also make sense to cherrypick some Dubai assets, that doesn t mean bailing out Dubai World.

Dubai bites the bullet on debt

25 Nov 2009

One of the emirate's big holding companies, Dubai World, is asking creditors for a standstill. That would amount to a technical default. Dubai proved it can still tap neighbour Abu Dhabi for loans, but it's right to try first to restructure the $60 bln debt.

Mezz debt craze may last a while

11 Nov 2009

Blackstone, TPG and KKR have all tapped mezzanine funds for recent LBOs. The hybrid debtequity financing plugs a gap that burnt banks aren't yet willing to fill. Some buyout firms have mezz funds inhouse, too. And while it's pricier than straight debt, mezz is more flexible.

CIT should be put out of its misery

29 Oct 2009

Creditors have until midnight on Thursday to vote on the US smallbusiness lender's proposals for a debt restructuring or a prepackaged bankruptcy. But CIT has little value as an ongoing business. Creditors would probably do better if it just sells off or winds down its assets.

Debt swap window may be closing

28 Oct 2009

That s especially true for opportunists like Hilton and TXU. When debt trades at a significant discount to par, borrowers can offer creditors a better than market price while still cutting their debt loads. But rebounding debt markets mean it is harder to make the numbers work.

Bonds step in where bank loans fear to tread

8 Oct 2009

Nonfinancial companies have raised more money in bond markets than through syndicated loans so far in 2009. That s a first, and a dramatic change from two years ago when loans dominated. With banks capital now tightly constrained, this shift makes sense.