Bonds

Is subprime the first shoe to drop?

9 Feb 2007

HSBC and New Century have been punished for lower lending standards loans to less creditworthy US homeowners. The danger is that credit conditions will tighten as banks become more cautious and regulators breathe down their necks.

HSBC’s bet on Household turns bad

8 Feb 2007

The bank will lose $1.8bn more than expected on highrisk US mortgage loans. And the bleeding may not have stopped yet. HSBC's cutprice Household purchase isn t looking so clever. Investors may wonder how healthy HSBC s promotion arrangements really are.

Alcoa bondholders ignore gearing risks

23 Jan 2007

The US aluminium giant s $2bn bond offering was a blowout, luring investors eager for a corporate issue that protects against LBOs. But bond investors may still need protection from the issuer itself, which is catering to shareholders with a huge stock buyback.

Are property derivatives the next big thing?

22 Jan 2007

The market is growing fast, but is still not very liquid. But that may change with the launch of the first property derivatives hedge fund. After a long boom, the property market may become more volatile. And the creation of sector and regional indices will allow relative trades.

Deloitte’s Parmalat settlement shows hidden value

16 Jan 2007

The E115m payment may seem small. But Citi s and Bank of America s deep pockets have still to be picked. Parmalat s shares are pricing in only a 7% recovery from its E21bn of claims. That s too pessimistic.

AAA ratings are an endangered species

7 Dec 2006

There are now only six US companies with a tripleA ratings left. And Pfizer s is under review for a possible downgrade. The number has fallen nearly 90% over 25 years. While smart financing explains some of the trend, there are other less brilliant reasons.

Weather forced to raise costly E1.7bn loan

7 Dec 2006

It seems odd that the telecom investor is issuing pricey Pik debt to buy back a 26% stake held by Enel while prepaying cheaper senior debt. But the original LBO financing of Wind was so risky, that lenders tied the company up in knots. So Weather has to hoop jump to raise cash.

Steel becomes less cyclical

6 Dec 2006

Look at how Arcelor Mittal has been talking up prices and has now snapped up a E17bn credit facility on good terms. Mittal would be positive, but it does look less volatile. Owners are more profithungry, and demand growth has been unexpectedly strong.

Fixed income markets contradict themselves

6 Dec 2006

Falling US bond yields and an inverted yield curve suggest recession, but narrow credit spreads suggest healthy expansion. Inflation could resolve the conflict. There are signs of rising price pressures. If so, the only soft landing may be 30 feet underwater.

Softbank’s $12.4bn refinancing is a feat

1 Dec 2006

It wasn't easy for the Japanese group to fund the purchase of Vodafone's Japan business using a wholebusiness securitisation technique. Mobile operators especially troubled ones aren't obvious securitisation candidates. That it got done at all is a sign of huge liquidity.

Infrastructure bubble may not be wholly irrational

30 Nov 2006

At least as far as the fund managers who are sucking in money, pushing up valuations and piling on leverage are concerned. S&P warns of a dotcomstyle bubble. But heads I win, tails you lose incentives mean the behaviour could, in a narrow sense, be rational. At least so far as the fund managers who are sucking in money, pushing up valuations and piling on leverage are concerned.

Will Citadel doom the prime broker boom?

29 Nov 2006

The Chicago hedge fund may borrow some $2bn through a landmark bond issue, reducing its dependence on Wall Street brokers for leverage. This is a costeffective way to hoard rainyday funds and a smart move given the convergence of hedge funds and investment banks.

Eurotunnel will test new French bankruptcy law

28 Nov 2006

Two investors think they have been crammed down by Eurotunnel and the courts. They may have a point. It seems unfair that creditors with different economic interests should be forced to vote together. The law could use a tweak.

Ford hocks silver to keep it

27 Nov 2006

The carmaker s $18bn secured financing deal suggests it has decided against selling assets like Volvo and its credit arm. Given the market for these assets, this may be wise. But if it fails to execute a turnaround with the proceeds, it s game over.

French law rides to rescue of Eurotunnel plan

21 Nov 2006

The vote of the senior creditors next week is what really matters. And while there are angry dissidents among them, they are in a minority. The French safeguard bankruptcy process marginalises potential opponents. Bondholders can kick up a fuss, but they ve done relatively well.

Experian’s standoff with bondholders to end

14 Nov 2006

A disagreement with one group of bondholders over the demerger from GUS appears to be ending with a compromise. The bondholders, which are mostly hedge funds, had hoped to make a tidy profit, but a buyout threat has made an agreement essential.

Demand overwhelms supply in the junk bond market

13 Nov 2006

HCA s record issue has been trading well above par. Demand is strong because the high yield carry trade has been very profitable this year. But with credit quality declining this market could blow up when favourable conditions change.

Eurotunnel’s chief plays chicken with creditors

25 Oct 2006

The gap between Eurotunnel and its creditors doesn t seem to be closing. Yet liquidation may be just a week or so away. As in chicken, both sides are aiming to make the other blink first. Both can't be right. Many games of chicken end in a car wreck.

Leveraged loan market should open up

13 Oct 2006

Under the current private system loan investors get more information than bond investors. That s a problem now because hedge funds both buy bonds and make loans. They could have an informational advantage.

Europe’s record E4.5bn junk deal is a breeze

6 Oct 2006

Philips chipmaker division NXP managed to get this giant bond deal away despite worries about the size and health of the highyield market. But don't read too much into it. NXP benefited from a sensible structure and the market's lack of a future deal pipeline.