Bonds

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.

Wall Street starts to feel the sting of bankruptcies

27 Jan 2009

Until now, most bank writedowns were the result of marking stillfunctioning loans to market rather than borrowers going belly up. Goldman s revelation of $850m of losses on Lyondell loans suggests the next wave of financial difficulty actual corporate defaults is rolling in.

Apollo, Cerberus get sweet deal in Lyondell

26 Jan 2009

The bankrupt chemicals giant's $8bn of DIP financing always looked a lot. But some of it is rebadged prebankruptcy debt, not new money. That's a plus for the two investment firms and other lenders involved. And it has understandably riled those who weren't so lucky.

Blackrock could play Batman to hedge fund Jokers

21 Jan 2009

The asset manager s fourthquarter numbers weren t great, although its base of feeearning assets kept it in the black. But its unusually broad range of asset types and hybridfee model could position it well to pounce on money fleeing hedge funds and funds of funds.

Barclays desperately needs a confidence boost

20 Jan 2009

Investors have lost faith in the UK lender s claims on capital strength. Monday s disclosure, with a promise to tell more, was a step in the right direction. But Barclays should trust shareholders with all the facts. An outside valuation of the balance sheet would also help.

Neiman Marcus is test case for lenient LBO debt

14 Jan 2009

The highend US retailer was one of the first to issue pik toggle and covenantlite debt. It is now paying some interest in kind. But that s not as alarming as other companies similar moves. Neiman gives LBO bosses a chance to prove that lenient debt terms aren t always toxic.

Credit thaw starts, but ice age isn’t over

14 Jan 2009

Libor spreads are narrowing. Coveredbond and highyield issues are back. That suggests credit is coming out of the deep freeze. But asset reallocation and low government bond yields may account for some of the revival. Economic reality points to a continued cold snap.

Fed-issued bonds would make world riskier

10 Dec 2008

The US central bank would be at the market s mercy if it issued debt without Treasury backing. The Fed can t raise taxes, so prices would reflect sentiment about the Fed balance sheet. Snap judgments about policy moves could reduce their effectiveness or worse, influence them.

US mortgage rate scheme may push on a string

4 Dec 2008

The Treasury thinks lower interest rates will spur demand. That may be true, incrementally. But mortgages are already cheap. The factors keeping most buyers on the sidelines are ongoing house price deflation and growing economic uncertainty.

The credit crunch in round numbers

3 Dec 2008

Annual risk premium on iTraxx index of European companies rated subinvestment grade: now a record 10 percentage points. Estimated junkrated corporate default rate next year: more than 10%. Global junk bonds sold last month: a big zero. Talk about putting the o s in gloom .