Bonds

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.

Investors could get angry over geared CDOs

10 Mar 2006

Using highly geared structures to jack up returns seems like a good idea when spreads are tight and credit conditions are benign. But as the potential downgrade of a Barclays CDO shows, these types of deals could really come back to haunt investors.

Linde shows why hybrid capital is so handy

6 Mar 2006

One reason the German gases group's E12bn offer for BOC succeeded is the availability of cheap financing through hybrid capital. That has allowed Linde to retain a more favourable investmentgrade rating while issuing only a small amount of equity.

Weather uses clever bond to gear up further

24 Feb 2006

The highlyleveraged vehicle which owns Italian mobile group Wind has found a way to raise money relatively cheaply with a convertible. The clever bit? The bond swaps into shares of a hot listed subsidiary. But Weather hopes to redeem it with its own shares if it can float.

E.on deal could set debt financing record

21 Feb 2006

Raising the cash shouldn t be hard. Capital is plentiful and banks are even more eager to lend for M&A than last time. The financing package for its allcash offer for Endesa could surpass the E30bn high water mark set in Europe s last takeover boom.

BAA shouldn’t change its E2.9bn bond deal

10 Feb 2006

Bond investors are up in arms because Ferrovial s highly leveraged approach to BAA has caused bonds to fall in value. They now want a change of control clause inserted into the deal, but doing so would be a poison pill that isn t in shareholders interest.

Public companies mimic LBO structures

10 Feb 2006

Look at US IT services firm, ACS. It is borrowing $3.3bn to buy back 45% of its shares after talks to sell to private equity fell through. While leveraged recaps of public firms can create value, there s a risk companies will overpay for their stock.