Bonds

UK bank rescues heighten restructuring complexity

1 Apr 2009

RBS and Lloyds are putting risky corporate loans into the UK assetprotection scheme, capping future losses. That could drive a wedge between them and other creditors if borrowers have to undergo a restructuring. It may also see fewer distressed loans sold cheaply to hedge funds.

Ireland faces painful adjustment or ugly euro exit

31 Mar 2009

S&P has downgraded Ireland's credit rating, as the country's growth and tax revenues have plummeted. Ireland's fiscal accounts look unsustainable. A big, painful adjustment is required if it is to remain in the eurozone. But exiting would be agony too.

NXP’s $1.9bn debt exchange shows signs of failure

19 Mar 2009

The Dutch chipmaker s attempt to cut debt by offering bondholders a chance to swap their notes for supersenior loans appears to have hit trouble. A mere 10% takeup at the half way stage suggests NXP s private equity owners may have to share the pain sooner rather than later.

Goldman risks biggest black eye in vulture brawl

19 Mar 2009

Buyout firms are plunging into distressed investing. Goldman is the latest to ask investors for their blessing to buy the debt of troubled companies. This could pit one private equity player against another and sometimes against itself. That s especially dangerous for Goldman.

Asia must develop local currency bond markets

18 Mar 2009

With stock markets down and banks not lending, Asian countries need to develop domestic corporate bond markets. That requires macroeconomic and tax policies that encourage bond investment, transparent price discovery and an investment culture oriented toward the long term.

ArcelorMittal shows strength with E1bn convert

17 Mar 2009

Investors lapped up the steel giant s bond. But the fourtimes oversubscription reflects generous terms; a near 8% yield with a modest conversion premium. ArcelorMittal is paying up to get financial flexibility, and support for its claim that it doesn t need a rights issue.

GE downgrade guts rationale for finance unit

12 Mar 2009

It just lost its tripleA rating, a big reason for keeping its industrial and finance arms together. This shouldn t affect its financing cost markets have ignored the rating for some time. And its customers should still be able to get financing from GE Capital after a split.

TPG and Apollo salami slice Harrah’s creditors

5 Mar 2009

The casino company controlled by the LBO firms is asking bondholders to take yet another haircut in a debt exchange. The prices on offer look tempting relative to market. But creditors set precedents and expectations each time they acquiesce. It s time to get tough.

Talf could be a steady earner for investors

4 Mar 2009

The US government s trilliondollar scheme to kickstart the assetbacked securities market poses risks for taxpyayers and will further distort the capital markets. But handing out cheap loans could be a boon for hedge funds, banks and the like.

US stimulus changes bankruptcy calculus

3 Mar 2009

A change allows companies to do exchange deals that reduce debt without taking a tax hit. The rule change will encourage restructurings outside bankruptcy and give private equity and other company owners more ways to avoid pushing a company over the edge.

China bondholders get lesson in crisis capitalism

2 Mar 2009

The government is backing a cash boost to Asia Aluminium but only if the troubled metals group buys back its offshore bonds at a pittance. Such rough treatment could deter foreign investors into Chinese firms. But with the economy slowing, the authorities may not care.

AIG’s toxic spill still isn’t contained

2 Mar 2009

The insurance giant got less onerous terms on its bailout package and is hiving off businesses. But even as it tries to wind down bad assets, its plans for isolating the financial products division the main source of its $99bn loss in 2008 are still clear as mud.

India can’t afford junk rating

27 Feb 2009

India relies less on foreign cash than other Brics, so its credit rating shouldn t make much difference. But imported capital has kept growth up. And populist politicians are likely to build even bigger deficits. A threatened downgrade to junk would make them harder to finance.

Bank insurance premiums shouldn’t be pro-cyclical

26 Feb 2009

The US Federal Deposit Insurance Corporation plans to raise premiums it charges to insure retail bank accounts. Though they re admittedly cheap, that s bad timing. Like procyclical capital ratio requirements, the insurance premiums should be rethought once the crisis has passed.

Uses of credit ratings should guide regulation

24 Feb 2009

Governments are itching to heighten scrutiny of ratings firms. But one problem in the past has been investors overreliance on officially sanctioned credit assessments. To set good rules rather than just more of them, authorities everywhere should consider why they need ratings.

Lenders should draw up naughty borrower lists now

17 Feb 2009

Trump's casino company just filed for bankruptcy for the third time. During the boom, banks overlooked big borrowers track records. They should make a list of who to shun and stick to it next time. It could also include Zell, Macklowe and a lot of US consumers.

Who will buy all the T-bonds?

12 Feb 2009

Chinese doubts about the value of US Treasury bonds highlight that question. With $2.74.2 trillion worth to be issued in the next two years, foreign purchases accounting for only $200bn annually, and domestic investors unable to bridge the gap, the Chinese are right to worry.

Moody’s results reflect intractable rating system

5 Feb 2009

The firm managed to beat estimates despite frozen bond and securitisation markets. That its core business didn t shrivel further shows how deeply its ratings are embedded in the financial system a problem for competitors and reformers alike.

Has Citi found a way to muzzle lending critics?

3 Feb 2009

The ailing firm s disclosures on how it s using $45bn of government capital are a tad simplistic but so are arguments that banks aren t lending enough. Breaking out the numbers is helpful, but won t silence those who assume only an absolute increase in lending is a success.

Obama wants banks to lend, but who’s borrowing?

2 Feb 2009

The US president wants to require any bank that receives government rescue funds to crank up its lending. But the Fed s quarterly bank survey shows US demand for commercial loans just fell off a cliff. Until borrowers business prospects revive, jawboning banks won t help much.