Corporate Debt

Dell has no time for fantasy finance

29 Jan 2018

The U.S. tech giant needs cash to pay taxes, reduce debt and let investors exit. Reversing into its $53 bln subsidiary VMware is too complex, while an IPO would be financially unattractive because of pricey past acquisitions. There are simpler, more logical ways to raise cash.

Breakdown: Why Steinhoff’s complexity may save it

24 Jan 2018

An accounting scandal has exposed the retailer’s warren-like structure. Creditors who are owed close to 11 billion euros face a fight for repayment. But the prospect of a messy restructuring may help keep Steinhoff afloat for now. Breakingviews offers a guide through the maze.

Wall Street owes Steinhoff a billion thanks

17 Jan 2018

The South African retailer’s woes forced Citi and three peers to take hits totaling more than $1 bln. The pain is manageable. Like the collapse of UK builder Carillion, though, the episode offers a chance to review risks before a broader downturn brings more red ink - and faces.

Corporate loans can propel Europe’s bank recovery

15 Jan 2018

Lending to companies has seen minimal growth in recent years, official data shows. A raft of positive economic data should provide the catalyst for increased demand. It would be a welcome way for slimmed-down lenders to give revenue a leg-up.

HNA’s hard job: put the M&A machine into reverse

12 Jan 2018

The acquisitive Chinese group has been buffeted by regulatory setbacks and signs of financial stress. Now trade in two key listed units in China is halted, suggesting a corporate reshuffle could be looming. HNA will find shrinking back to health tougher than breakneck growth.

Blackstone exploits lack of virtue in CDS market

11 Jan 2018

The investment firm’s GSO unit is trying to engineer a default at Hovnanian to make more money as part of a $363 mln restructuring. Sellers of credit insurance may cry foul, but the homebuilder’s investors are cheering. The nature of default swaps can create perverse incentives.

U.S. junk bonds are time bomb with a long fuse

29 Dec 2017

Low default rates, a lack of alternatives and foreign demand will support high-yield bonds in 2018. Yet with spreads near record lows, covenants weak and leverage rising, the seeds of a bear market are plentiful. Investors should keep a wary eye for the first shoots of trouble.

Ambani’s debt cure is no elixir for shareholders

28 Dec 2017

Anil Ambani says he has rescued his Reliance Communications with a $6 bln firesale. That’s a relief for lenders, assuming buyers turn up as promised. But it’s not the moral victory the tycoon claims. Even if creditors play ball, investors are left with a much diminished company.

UniCredit ups the ante on bad-debt cleanup

12 Dec 2017

Italy’s biggest bank by assets is vowing to run down a 33 billion euro portfolio of non-core loans by 2025. It also reckons it can withstand regulators’ drive to purge lenders’ bad credit, and still increase dividends. The move will put more pressure on rivals.

Alibaba and the 40-year bond is one tall tale

29 Nov 2017

The e-commerce giant is selling the longest fixed-maturity paper ever by a Chinese company. Jack Ma’s outfit is smart to lock in cheap funding while it can. But with Beijing looking to influence the tech sector, investors should think hard about four decades of political risk.

Carillion meltdown shows risk in return-free world

17 Nov 2017

Creditors of the UK construction group face losses in a looming restructuring. The company expanded too fast and took on risky contracts. Meanwhile, BBB-rated Veolia is borrowing at sub-zero yields. Investors should remember that even central banks can’t make default impossible.

RCom sets up trial run for Indian bankruptcy rules

14 Nov 2017

Anil Ambani’s struggling telecom operator has missed a payment on a $300 mln U.S. dollar bond. Offshore creditors could claim a default, testing the regime India established last year. A credible, reasonably speedy process would further boost the country’s booming bond market.

Broadcom lenders shed prudence just as it’s needed

6 Nov 2017

The chipmaker’s advisers are “highly confident” of arranging finance for its $105 bln Qualcomm bid. Ample liquidity, low defaults and easing regulations have banks itching to lend. But rising corporate leverage and looser covenants pose big risks for anyone coming to the dance.

UniCredit NPL glitch muddies Italian bank cleanup

31 Oct 2017

The ECB is reportedly examining whether the bank inflated the price of a $21 bln bad-loan sale, a move that could hurt its capital. It’s surprising as UniCredit’s valuations were less rosy than peers. Regulatory confusion gives lenders more reason to cling on to dud loans.

RBS’ next tempest beckons as past storms subside

27 Oct 2017

The state-owned lender is resolving litigation and other hangovers from the 2008 crisis. It is still barely profitable, but third-quarter results suggest it might one day cover its cost of capital. A rich valuation, however, pays little heed to the risk of a Brexit-induced slump.

Syngenta puts Beijing’s unspoken promises to test

10 Oct 2017

The Swiss seed company’s Chinese parent and its state backers disagree over whether they stand behind its legal bills. It’s a dynamic found across China’s financial system: implicit guarantees are common, and rarely tested. The government has good reason to keep things ambiguous.

Bad debt cleanup challenges buoyant Spanish banks

8 Sep 2017

Shares in the country’s lenders have been on a tear this year, outperforming the Madrid bourse by 5 pct. Now Liberbank is raising 500 mln euros – over half its market value – to scrub its balance sheet. The rights issue will test optimism about lower bad debts and rising rates.

Etihad’s airlines fail, but odd CDO remains aloft

17 Aug 2017

Air Berlin and Alitalia are insolvent. Their debt is probably worthless, except for an unusual collateralised debt obligation that part-owner Etihad used to fund them. It is trading at a price that suggests Etihad might bail it out. Fuzzy guarantees often end badly.

Like much else, Amazon can sell debt in a flash

16 Aug 2017

The e-commerce giant’s blowout $16 bln bond deal suggests further potential for it to pursue M&A. Yet in nearly tripling debt to buy brick-and-mortar Whole Foods, Jeff Bezos’ outfit is starting to look like a traditional retailer. The risk is that its stock will do the same.

Musk fine-tunes Tesla with junk-fueled turbo boost

7 Aug 2017

The electric-car maker’s CEO is using $1.5 bln of debt to fund ramping up production of the Model 3. Diluting its overvalued shares by just 3 pct would have done the trick at less risk. But the money is cheap. And bondholders don’t need stockholders’ faith in Musk to be paid back.