Corporate Debt

Co-op bail-in would set bank creditors on edge

23 Mar 2017

The Co-operative Bank needs capital again, and markets are fretting over the risk of a resolution. Given Co-op’s ongoing losses, the Bank of England could justify one. The risk is investors think that even banks with respectable capital ratios aren’t safe from regulators.

Anglo raid is a complex way to do simple thing

16 Mar 2017

Indian magnate Anil Agarwal appears to be building roughly a 12 percent stake in the mining group. In fact he is renting it, using an exchangeable bond to get access to the votes. The structure is clever, but suggests he is more interested in influence than direct financial gain.

Markets’ latest distortion: riskless company debt

7 Mar 2017

Some 200 billion euros of corporate bonds are trading below interbank swap rates – usually seen as a floor for credit risk. That renders one measure of companies’ creditworthiness redundant. This distortion comes courtesy of central bank meddling and German parsimony.

Deutsche $8.5 bln equity hike would be partial fix

4 Mar 2017

The German bank may raise funds while markets look kind. The infusion would boost creditworthiness and thus Deutsche Bank's key trading and corporate lending arms. That's fine unless investment banking falters, or Deutsche turns out to have underestimated its capital needs again.

Breakdown: China swaps bad debt for faint hope

24 Feb 2017

The People's Republic is trying to ease its huge corporate debt burden by letting some state-owned groups switch bank loans for equity. Over 300 billion yuan has already been exchanged. Breakingviews explains how, if the companies cannot be saved, taxpayers will still be on the hook.

French corporate debt immunity to Le Pen will fade

15 Feb 2017

Even the slim possibility that far-right leader Marine Le Pen might lead France out of the euro zone has pushed up government bond yields. By contrast, corporate debt has suffered relatively little damage. Savvy investors will make this anomaly disappear soon.

UK watchdog trolls EU with City Brexit manifesto

14 Feb 2017

European bankers often fear a post-EU Britain will become an offshore casino. The FCA’s consultation on the UK’s listing regime mostly focuses on worthy goals like tech financing. But some proposals – like laxer listing standards for foreign companies – could feed the paranoia.

Market sceptics are alive and well in Hong Kong

19 Dec 2016

GMT Research claims Evergrande needs $22 bln of writedowns. That is bold, given the hard time local authorities and companies give sceptical analysts - including the developer's previous critics. This and recent short attacks are signs of resilience from the contrarian camp.

Italy: stop dawdling, bail in Monte dei Paschi

9 Dec 2016

Rome is trying to keep a 5-bln-euro rescue of the stricken lender on the road. The best way to do so is to let retail investors take some of the losses. Protecting them from their just deserts will mess up future European bank rescues, and not just in Italy.

China bond market could use some foreign insight

9 Dec 2016

Regulators may allow foreign ratings agencies into the onshore market. That might comfort overseas investors enough to persuade index compilers to include Chinese bonds. The trick will be stimulating competition in a market twisted by government guarantees.

China’s debt swap is a deal nobody wants

12 Oct 2016

China latest debt swap is a clever piece of balance sheet engineering. The government wants to swap corporate debt for equity without bailing out banks or borrowers. But unless the state forces deals through, there won't be much appetite from either side.

Deutsche debt market canaries not yet in coal mine

30 Sep 2016

Fears over the German lender have hit its stock and made some clients pull funds. Yet Deutsche Bank’s deeply discounted "CoCo" bonds are still only pricing in the risk that the bank cuts off coupons, not wipes them out. Worse scenarios, like resolution, aren’t yet on the cards.

Bold issuers test limits of yield-hungry market

29 Sep 2016

Bond investors, who only recently snapped up negative-yielding Sanofi and Henkel debt, shunned an aggressively-priced Lufthansa offering. IPOs too are showing signs that buyer power is returning and that desperation for yield hasn’t dulled asset managers' ability to scent risk.

Carney guessing game feeds bond market distortion

13 Sep 2016

The Bank of England has revealed corporate bonds eligible for its 10 billion pound buying spree. Its requirement that companies make a material contribution to the country still throws up some anomalies. Second-guessing the central bank makes capital markets less efficient.

Freak euro bonds show ECB’s power – and its limits

8 Sep 2016

The central bank’s negative rates and bond-buying have forced down borrowing costs: German bearing maker Schaeffler is paying around 3 pct on risky notes that roll up interest payments. Yet smooth credit markets have not boosted investment. Europe’s governments need to step up.

ECB picks bad time to give Monte Paschi good slap

4 Jul 2016

The EU bank regulator wants the Tuscan bank to sell bad loans quicker. It's right, but MPS could need capital. That may require a politically contentious bail-in of Italian creditors, or Brussels to cave in to Prime Minister Matteo Renzi by watering down state aid rules.

India prizes fiscal prudence over corporate debt

23 Jun 2016

A share buyback by a state-owned miner and an auction of telecom spectrum suggests companies may have to borrow to help the government meet its deficit targets. New Delhi seems intent to meet its pledge to raise $23 billion for the state coffers - even if it upsets India Inc.

ECB corporate bond buying is risky experiment

1 Jun 2016

The central bank's pledge to buy company bonds has caused a surge in issuance. As a result, market spreads - the premium investors demand over sovereign debt - are not falling. The unwanted side effects of the programme show why corporate credit markets are best left alone.

Verizon herds investing sheep in grand fashion

11 Sep 2013

Bond buyers are piling into the telco’s record $49 bln debt sale. A 10-year yield above 5 pct and an investment-grade rating make it appealing. A big part of the lure, though, is the creation of a supersized, super-liquid benchmark. It’s an offer that just can’t be refused.

Moody’s U-turn raises bar for choosing hybrids

19 Aug 2013

The rating agency’s decision that junk-rated hybrid bonds are entirely debt and not quasi equity highlights the changeability of this funny money. The fallout is limited for now. But it’s another reason for companies to think twice before issuing hybrids, and investors before buying.