Bonds

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.

Bond market balance of power shifts to investors

3 Oct 2006

The week that news broke of Europe s largestever Pik financing may be an odd time to question the strength of the credit markets. But the last few months has seen investors push for the return of a form of bondholder protection last seen after the dotcom crash.

Stakebuilders shouldn’t use CFDs

28 Sep 2006

While it's clearly wrong for investors to use derivatives to build stakes, it s impractical to force all CFD holders to disclose positions. The information would overload the system. A better idea would be to only punish those who convert undisclosed CFDs into stakes.

Bondholders flex muscle over technical defaults

30 Aug 2006

True, bond investors have been slow to put up much of a fight against valuedestructive actions like leveraged buyouts. But as more companies delay regulatory filings, bondholders are crying default. It s an incremental move in the bondholder value revolution.

Increased debt explains corporate wall of cash

21 Aug 2006

Cash on corporate balance sheets has exploded over the past five years nearly tripling at FTSE 100 companies. This probably isn t pessimism. The oil bonanza explains part. But mostly it appears to be a function of rising levels of net debt.

Terrorism threat a red herring for BAA’s £12bn financing

17 Aug 2006

The financing for Ferrovial s takeover of BAA isn t in jeopardy despite losses from flight cancellations. The real hurdle will be convincing existing bondholders to migrate their bonds into the new financing structure.

Debt quality starts to slide

17 Aug 2006

In the last two months, 16 companies have fallen into junk, while only four have risen up to investment grade. The totals aren t huge, but so much deterioration in prosperous times is alarming. If a recession comes, a debt disaster could follow.