Bonds

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.

CIT will struggle to sell its soul twice

30 Sep 2009

The troubled business lender pledged nearly all its assets to secure lastditch funding in July. Now it faces a deadline to restructure its $30bn debt load. The odds are against it: junior lenders are unlikely to accept anything but bankruptcy or the functional equivalent.

Chavez reaps big benefit from global stimulus

25 Sep 2009

Venezuela's strongman accuses the US and others of exploitation. But the return of liquidity has encouraged him to borrow $5.7bn locally and $4bn abroad and brought $46bn of energy commitments from Russia and China. The opportunistic Chavez is grabbing money while it s there.

Over-regulation of ratings could have happy ending

24 Sep 2009

There must be a point at which credit raters would give up officially sanctioned status to avoid unworkable red tape or financial liability for errors. If that led to governmentfree ratings and ratingsfree laws, Richard Beales says the financial world could be a better place.

Junk borrowers trade death row for long jail time

22 Sep 2009

Resurgent debt markets have helped several highyield borrowers refinance loans, averting death by bankruptcy in the short term. But with interest costs most likely at least doubling, their cash flows will be squeezed condemning some to protracted pennypinching, if not worse.

Pilgrim’s Pride investors should do the funky chicken

21 Sep 2009

Brazil's JBS is plucking the poultry company out of bankruptcy for $2.8bn meaning creditors are paid in full and equity holders even get a few nuggets. With stock prices buoyant, there's a chance other bust companies will also pay back more than was thought possible.

Senior creditors finally get a consolation prize

16 Sep 2009

Bankrupt chemical company LyondellBasell is offering senior creditors the chance to buy extra stock as it exits Chapter 11. It doesn't make up for being squashed by earlier bankruptcy lenders. But it's worth watching as a way to give frustrated creditors a few additional options.

Harrah’s plays catch up – but isn’t home and dry

9 Sep 2009

The US casino operator has just completed the latest stage of a restructuring designed to cut its debt. But the business may still be worth less than what it owes creditors. It s a reminder of how frothy debt markets became and why new creditors to old LBOs should be cautious.

Industry’s derivatives reform: too little, too late

8 Sep 2009

Despite dealers attempts to reduce counterparty risk and improve transparency since Lehman s collapse, it looks as if US watchdogs aren't convinced. As politicians return to Washington from their summer breaks, Congress appears poised to crack down.

Hole poked in rating agencies’ lawsuit shield

3 Sep 2009

Rating firms use US free speech protections to deflect litigation. Now a judge has cast doubt on this defence by allowing a lawsuit over a structured finance deal to go ahead. If the case succeeds, the rating agencies may face a flood of suits they actually have to fight.

Schwarzman finesses debt market – again

13 Aug 2009

The Blackstone boss took advantage of the leveraged loan market s boom to fund his LBOs at minuscule cost. Now his buyout shop has sold $600m of bonds to tap the investmentgrade market rally. But his new investors should do better than their unfortunate loan market counterparts.