Corporate Debt

Ivory tower barbarian now pounds at the gate

16 Aug 2013

A Harvard Law professor is ratcheting up his battle against corporate defenders such as Martin Lipton. Hedge fund bosses like Dan Loeb and Bill Ackman expose real management weaknesses. Even without their resources, academic activists like Lucian Bebchuk can still be on target.

J.C. Penney inspires long-term investing rethink

15 Aug 2013

In a world increasingly disrupted by technology, it’s harder to know which companies will navigate the next 10 years let alone 100. Buyers of J.C. Penney’s century bonds 16 years ago may now have reason for pause, but so will those sitting on 30-year debt from the likes of Apple.

Kleinwort Benson owner should shake up board

6 Jun 2013

Hedge funds urging change at RHJ have lengthened the charge sheet. Poor market judgment has been added to limp performance and excess costs. RHJ hasn’t delivered a convincing response. Moves to refresh the board deserve support.

Qatar aims to expand power with corporate giants

11 Sep 2012

The Gulf state has expanded its economic and political reach with direct investments through its sovereign fund. Now bankers are licking their lips anticipating an M&A wave as Qatar is set to consolidate its influence by supporting the international expansion of homegrown firms.

Eike Batista’s EBX feijoada gets harder to stomach

1 Jun 2012

The Brazilian billionaire’s latest IPO, of a coal subsidiary, went down badly, with shares tumbling 29 pct. Most of his other listings have done poorly, too, including 50 pct falls for the shipbuilding and logistics arms. Even optimistic investors can’t keep digesting such slop.

Hurdle rates need post-crisis rethink

29 May 2012

Most companies and investors say they still expect double-digit returns on equity - bizarrely high in a world of modest growth, negative real interest rates and low inflation. Even though the unrealistic targets are often fudged, they distort investments and damage the economy.

Mega-cap discount creates demerger incentive

5 Jul 2011

Shares in the largest companies are trading at chunky discounts to smaller peers on both sides of the Atlantic. The valuation gap has been around for almost a decade. The longer it persists, the more big companies will face a powerful incentive to break themselves up.

Slo-mo activism may be Japan’s best bet

24 Jun 2011

A protest vote at electronics firm Keyence over reappointing the chairman lacks the fireworks of hedge fund TCI's assault on giant Japan Tobacco. But it is no less significant. Activism is slowly chipping away at Japan Inc to use capital more smartly. It bodes well for reform.

China’s next accounting worry could be the VIE

22 Jun 2011

Companies from Baidu to Renren rely on a legally untested ruse to get around restrictions on foreign investment. But these variable interest entities (VIEs) can go wrong. They may be behind Yahoo's spat with partner Alibaba. As so often in China, investors seem too trusting.

Russian blogger persecution should worry investors

11 May 2011

A criminal case against anticorruption blogger Alexei Navalny is just the latest blow to freedom in Russia, and flatly contradicts President Medvedev's investorfriendly rhetoric. His reform pledges will lack credibility until he tackles abuses of power by the security services.

Italy toys with new protectionist ploy

9 May 2011

The idea of giving companies more powers to defend themselves against hostile bids has some merit. But the context in which the Italian stock market watchdog raises the topic suggests it's mainly concerned to stop foreigners, especially the French, buying more Italian companies.

Hong Kong’s hot IPOs more style than substance

4 May 2011

Glencore, Prada and Jimmy Choo show the city can attract big resource companies and luxury brands. But less cyclical companies and Chinese growth stocks still prefer other bourses. Hong Kong must look beyond big names and investment fads if it wants to be a global financial hub.

Buffett inadvertently nails it evoking Salomon

30 Apr 2011

The Oracle of Omaha compared David Sokol's Lubrizol dealing to the scandal that rocked the Wall Street firm he partly owned 20 years ago. He described both as inexcusable and inexplicable. The link Buffett missed is that rogue trading at Salomon Bros exposed poor controls.

Buffett bungle restores a bit of M&A banker cred

28 Apr 2011

Bankers routinely seek credit for transactions on which they do squat. But Berkshire's David Sokol understated Citi's role in arranging the Lubrizol takeover. Given his exboss's views on bankers, it's the last place where Wall Street could have expected inadvertent image help.

Berkshire board tries cleaning up Buffett’s mess

27 Apr 2011

The audit committee has taken a much tougher stance than the Oracle of Omaha on the Lubrizol shares scandal involving onetime heir apparent David Sokol. The latest assessment is sager and should help restore confidence in Berkshire. But Buffett is left looking incredibly naïve.

Lubrizol provides smoking gun on the Sokol scandal

12 Apr 2011

The group added 30 words to a proxy filing to say its bankers at Citi informed the former Berkshire executive that its board would meet to discuss a possible deal. He then bought $10 mln of stock. Warren Buffett's contention that David Sokol did nothing wrong doesn't look right.

GE’s $3.2 bln buy comes with motivated managers

29 Mar 2011

The purchase of Converteam brings GE's energy M&A spree to $11 bln since October. The firm boasts impressive growth and promises handsome synergies. And with Converteam's top dogs slated to pocket an extra $125 mln, they've got a strong incentive to make the deal work.

Big M&A may not survive quake, unrest

21 Mar 2011

A $12 bln bid for part of telecom firm Zain has fallen through. Bain's buyout of Japanese restaurant chain Skylark may be next. Japan's quake and Middle Eastern conflict have made some offers seem too generous, others inadequate. Financing, valuations and confidence are at risk.

Buybacks don’t signal corporate malaise just yet

16 Feb 2011

Share repurchases are back in vogue, with Intel, GSK, Rio and BHP unveiling plans to buy back stock. That may suggest companies lack uses for their money. But the size of recent schemes is still modest. And it's easy to redeploy cash if new opportunities come up.

Deal machine beats PE barons to $5.8 bln deal

7 Feb 2011

Danaher has snatched medical group Beckman Coulter, outbidding buyout firms in the process. It shows that despite relatively easy credit, private equity isn't the only acquirer that can pay up. But the acquisitive Danaher isn't your typical strategic buyer, either.