Corporate Debt

BP’s leverage is punt on oil price resilience

1 Aug 2017

The British energy giant’s net income fell to $684 mln in the second quarter but was better than expected as production soared. However, debt has crept up to 29 percent of equity. A weaker oil price would call the strategy into question.

Carillion needs high-speed balance sheet repair

17 Jul 2017

Despite winning a share of the UK’s 55 bln pound high-speed rail line, the distressed construction company’s situation is precarious. Its pressing task is to find investors to put in perhaps 500 mln pounds, before customers start cutting loose.

Santander’s Popular remedy compounds original sin

14 Jul 2017

The Spanish bank is giving retail investors who lost money in the failure of Banco Popular 980 mln euros of new bonds as compensation. The practice of selling bonds to depositors has made it much harder to wind down banks in Spain and Italy. Santander is perpetuating the problem.

Cool credit markets could be own undoing

10 Jul 2017

Corporate bonds shrugged off the recent “taper tantrum” that hit government debt and equities. Investors may be betting that central banks will only slowly tighten policy, supporting demand for riskier assets. Yet unruffled markets may only hasten policymakers’ rush for the exit.

India’s bond market deserves a good whipping

7 Jul 2017

The securities regulator is cracking down on the fast-growing corporate bond market. With a large chunk of new issues coming from firms in dubious financial health with too generous ratings, it is a good time to force companies and rating agencies alike to raise their standards.

Dana Gas is the tip of Islamic bond iceberg

15 Jun 2017

The Abu Dhabi-listed company wants to restructure $700 mln of Sharia-compliant bonds, claiming they no longer conform to Islamic law. Creditors have a slim chance of recovering their cash. The arbitrary change exposes the hidden risks in this rapidly growing corner of finance.

Spain’s model bank bail-in leaves lasting scars

15 Jun 2017

The resolution and sale of Banco Popular used European rules to ensure creditors, not taxpayers, picked up the bill. Investors have responded by dumping debt issued by healthier peers. The risk of bigger losses means smaller lenders will now have to pay more to borrow.

J.Crew bond revamp is roadmap for asset transfers

14 Jun 2017

The retailer is trying to restructure $567 mln of debt giving some bondholders access to valuable assets that will irk other lenders. To bridge the gap, they’re offering those lenders buyouts at par. It’s a clever way to mend several problems. Other wobbly retailers take notice.

Mining debt junkies in danger of $100 bln relapse

13 Jun 2017

Glencore’s return to big dealmaking could signal a renewal of mining groups’ appetite for risk. The likes of BHP, Anglo American and Rio Tinto have also cut back their borrowings since the last boom. Now with lots of room to gear up again, they risk falling back into bad habits.

MSCI’s China index inclusion risks liquid headache

12 Jun 2017

The index provider will decide this month whether to add yuan-denominated shares to key benchmarks. Scandals and trading halts at Hong Kong-listed mainland firms have made passive fund managers' jobs difficult already. Bringing in onshore tickers could complicate things further.

Europe’s next bank rescue may be Italian fudge

8 Jun 2017

Italy’s big banks may pump 1.2 bln euros into small lenders to help enable a government rescue. The banks see a bailout as the least bad option. Yet after the failure and resolution of Spain’s Banco Popular, it’s a backward step that punishes good banks for the sins of others.

Spanish bank rescue poses several big questions

8 Jun 2017

Seizing Banco Popular and selling it to Santander averted a panic without a bailout. But it’s not clear how regulators calculated the hole on the lender’s balance sheet, or why they previously deemed it solvent. Investors need answers to have faith in Europe’s resolution regime.

Popular wipeout leaves CoCo bonds on drawing board

7 Jun 2017

The Spanish bank’s failure did not provide the expected test for bonds which convert into equity under stress. The securities were wiped out before they could be triggered. The good news is that losses did not trigger contagion. But it’s still unclear whether CoCo bonds work.

Santander picks up Europe’s regulatory roadkill

7 Jun 2017

Europe’s resolution board wound Banco Popular down and sold it to the Spanish lender for one euro. It’s a neat solution that avoids taxpayer support or financial chaos. While Banco Popular may be a unique case, this will leave creditors and other weak banks feeling anxious.

Spanish bank mess could make or break CoCos

1 Jun 2017

Banco Popular’s contingent capital bonds have collapsed in price, for fear they will be converted into equity. If they do so without causing chaos, it would show that CoCos are a viable instrument in a real-world bank rescue. A failure to trigger would confirm the opposite.

China’s growth obsession fosters collateral fraud

1 Jun 2017

A Reuters report lays bare how loans are often backed by fake holdings of land or metals. It’s not surprising: the system deliberately enables corner-cutting to boost economic activity. But a lack of trust in asset values could prove traumatic if prices start to fall.

Ambani dials up the pain in sibling rivalry

30 May 2017

An upstart telecom operator led by India's richest man, Mukesh Ambani, has hammered the industry. Younger brother Anil's RCom has been hit especially hard. Even after two planned deals, the group’s finances may still look rickety. New Delhi might offer a little relief.

“Too big to fail” trade backfires in Baku

24 May 2017

International Bank of Azerbaijan is restructuring $3.3 bln of foreign debt after loan and currency losses. Bondholders had counted on the Caucasus state to prop up the lender, despite weaker finances. The hunt for yield in emerging markets is bound to throw up other nasty shocks.

Europe dangles 2008-style bank moral hazard trade

7 Apr 2017

The EU’s willingness to let Italy bail out sickly banks looks a retreat from post-crisis reforms on bank failure. Investors might conclude that senior creditors will always be saved. A key change since the financial crisis – abolishing implicit subsidies – is being muddied.

China’s growing corporate-bank nexus is toxic mix

28 Mar 2017

Shares in a Chinese rural bank tanked amid troubles at its dairy-making shareholder. The woes highlight the dangers of banks receiving capital injections from corporate borrowers. The interdependence can marry shaky banks to weak firms, leading to more bad debt.