Bonds

Wellcome Trust taps exuberant credit markets

3 Jul 2006

The £12bn UK charity is borrowing £500m at ultralow rates for 30 years and using the proceeds for investment. Loose credit markets make this a smart bit of arbitrage. Unfortunately, few other European charities are likely to follow.

Goldman’s Eurotunnel plan isn’t greedy

28 Jun 2006

The investment bank and its partners are paying a reasonable price for the tunnel owner. It won t be easy to get a good return. Some investors are unhappy. But they would have more credibility if they explained their plan and said if they would put up more cash.

Eurotunnel uses questionable tactic

28 Jun 2006

The company has asked regulators to examine the actions of junior creditors who have come up with a rival restructuring plan. Eurotunnel may hope this will pressurise bondholders into negotiations. But it doesn t seem like the creditors have done anything wrong.

European hybrids could be past their sell-by date

26 Jun 2006

Riskaverse investors have been dumping the once popular hybrid bonds, causing prices to fall off a cliff. That doesn't bode well for companies planning to use them for financing. It is also a sign that leverage levels in M&A may have peaked.

Bond investors claw back some power

22 Jun 2006

Judging by recent bond issues by Saint Gobain and Bayer, bond investors are becoming more risk averse and more demanding. That said, issuers still have the whip hand. There s still a lot of liquidity sloshing around and pricing remains tight for now.

BAA bondholders may skewer Ferrovial

22 Jun 2006

The Spanish group may have to buy back some of BAA's bonds at a fat premium because of the leverage it plans to load on the UK group. It is sometimes possible to negotiate around such clauses. But Ferrovial s highly geared bid makes bondholders likely to press for an exit.

Are zombie equities a new asset class?

20 Jun 2006

Traders disappointed by the measly returns on distressed debt have started snatching up bankrupt companies shares instead. The returns can be phenomenal. But the risks are much higher. Shareholders in bankrupt firms usually walk away with nothing.

GM bankruptcy could boost bondholders

16 Jun 2006

CEO Rick Wagoner says filing for Chapter 11 would be a bad strategy . But it might give bondholders a chance to get some money back. Distressed debt traders starved of new opportunities would pounce on GM s $30bn debt pile. That could push up prices.

Bond conundrum is back

14 Jun 2006

A few months ago, it looked like Greenspan s 2005 puzzle low yields in a strong economy was on the way to a solution. Not any more. US yields are down in the midst of an inflation scare. Why? Perhaps a lurking recession, or maybe just uneconomic bond buyers.

Eurotunnel’s most junior creditors win battle

14 Jun 2006

The channel tunnel operator's lowestranking creditors have rightly been given extra time to come up with a rival restructuring plan. This is a welcome shift from the our way or the highway rhetoric of last month and should give a better result for all stakeholders.

GUS right to defy testy bondholders over demerger

1 Jun 2006

The retailtobusinessinformation company plans to cram all its debt onto one side of the company even though bondholders want a buyback. But this isn't a case of highhanded management railroading bondholders. GUS is actually behaving perfectly reasonably.

Citigroup promises fight over Eurotunnel

31 May 2006

The Channel Tunnel operator thought its deal with Goldman Sachs and Macquarie Bank was sewn up. Now it may have to think again. The US bank claims to have formed a restructuring plan that may leave more for shareholders and junior creditors than Eurotunnel's proposal.

Herding hedge funds may cause more wobbles

22 May 2006

Last week's steep stock market falls had less to do with fundamentals and more with hedge funds placing the same bet on low volatility. Central bankers are warning that many market bets may be predicated on benign markets. There may be more shakeouts if volatility rises.

Job moves may signal top of LBO market

19 May 2006

You don't have to analyse leverage multiples to see if the market has peaked. Just look at the many leveraged loan bankers changing jobs. When bankers move to lock in guarantees, it's a sign they see future pay falling. The more that move, the more likely the top has gone.

Hybrid could placate angry Eurotunnel investors

16 May 2006

The convertible bond would put off for three years the dilution shareholders would face in a debt restructuring. It might pass muster with lenders too if only because it's possibly their least worst option.

Bullish credit spreads don’t tell the whole story

12 May 2006

Fears of a downturn in the bonds markets are not being reflected in credit spreads, which remain remarkably buoyant. Why? The answer lies in the growing demand for credit derivatives, used in structured debt products. These are keeping spreads artificially low.

Biggest high-yield hybrid to test appetite

9 May 2006

Lottomatica is selling a E750m hybrid bond the largest junk hybrid in Europe despite some uncertainty in the US market. AArated Swiss Re s recent $2bn hybrid deal was well received, and early indications are that demand for a junk deal will also be strong.

Viacom bondholders give in too easily

11 Apr 2006

They settled for a sweetened price on last week s $4.8bn bond deal. True, Viacom s growth and cash flows look healthy. But it s also buying back stock and hunting for deals. Given chairman Sumner Redstone s record, bondholders should have pushed for more.

Trump’s move into mortgages looks ill-timed

7 Apr 2006

Sure, there has been a pickup in US mortgage applications. But that looks like a false dawn. The homelending business suffers from excess capacity and loan volumes are liable to collapse.

Cable company cuts out bank lenders

30 Mar 2006

German cable company Unity Media has replaced all its bank debt with bonds, giving the company more flexibility for not much extra cost. This is yet another example of investors stepping on banks toes. Before they were buying pieces of loans, now they are replacing them.