Debt

Corona Capital: UK debt, Oaktree, KKR, Chanel

19 Jun 2020

Concise views on the pandemic’s corporate and financial fallout: UK government borrowing surges past GDP; Howard Marks is sceptical about the stock market revival; KKR bets on cheap and local European holidays; Chanel takes a gloomier view than rivals on the luxury rebound.

Hadas: Virus debt will leave toxic residue

17 Jun 2020

Corporate borrowing breaks down when revenue dries up. Yet companies are taking on more leverage to survive the Covid-19 slowdown, inhibiting future growth. Ultra-low interest rates reduce the pain but bring other risks. There’s no safe way to recover from the debt overload.

China’s Zambia debt problem is Africa-sized

15 Jun 2020

Beijing-backed lenders are owed nearly a third of the African state’s $10 bln external debt pile. They will be under pressure to share in any restructuring pain. Caving in will set a precedent across a continent that has borrowed $146 bln from China in the last two decades.

Italy gives sovereign debt revolution a nudge

12 Jun 2020

The country will sell bonds whose payout is linked to how GDP evolves. It’s a first step that only targets domestic savers. But cultivating an international market for such securities could help countries, particularly ones locked into the euro, to better weather economic shocks.

Argentina gets too cheeky with its creditors

8 Jun 2020

The serial defaulter wants to put its restructuring to a creditor vote, but leave room to decide later which votes count and which don’t. That would require a tweak to a common clause designed to make bond negotiations simpler. Emerging-market borrowers would be worse off for it.

Kotak cash call shows India Inc’s fear and greed

28 May 2020

A well-subscribed $1 bln share placement is sufficient to defend the richly valued lender against credit-quality doomsday. Barring that, it’s a massive war chest for acquisitions. Boss Uday Kotak, Asia’s richest banker, is prepared for both deep disruption and deep discounts.

Europe has way out of Covid corporate debt trap

27 May 2020

Germany, Britain and France have approved $140 bln in state-backed loans to firms. As that number rises, so does the risk of a damaging debt overhang. Linking repayments to profit, so that some companies pay nothing, would help forestall that growth-sapping scenario.

Guest view: Debt crisis will delay global recovery

25 May 2020

The world is facing an emerging market blowup of unprecedented breadth that will damage confidence in the international financial system, former Citibank Chairman William Rhodes and Stuart Mackintosh argue. Easing the blow requires the United States and China to work together.

Debt hero role awaits China at rich price

21 May 2020

Beijing has deferred loan payments from poor countries, but with over $900 bln in IOUs from emerging markets, officials are hesitant to do more. China’s banking opacity deters cooperation. If it wants to seize leadership, it will have to come clean.

African debt holiday choices open new divisions

20 May 2020

Kenya won’t take up a G20-backed offer to poorer nations to suspend debt repayments. That’s because private creditors may take a dim view of such a move, irrespective of what ratings agencies say. Africa’s laggards have to accept the offer and will look worse in comparison.

India’s economic pick-me-up earns half marks

18 May 2020

The five-part, $277 bln plan includes jobs for fleeing migrants and relaxed rules on debt defaults. A privatisation push is one of many longer-term vows. Upfront spending is sparing, however, and bailouts absent. Growth will take a bigger hit before it has a chance to roar back.

Debt forgiveness is, unfortunately, a bad idea

14 May 2020

Over 300 officials from around the world have urged the IMF and World Bank to cancel poor countries’ debt. But that would favor heavier borrowers, it doesn’t ask for any accountability, it could limit future lending, and it hands advantages to China. A debt standstill is safer.

Emerging markets will see less index, more Rolodex

13 May 2020

Epic Federal Reserve action has stemmed an unprecedented flood of capital from developing countries. But ongoing virus concerns make it risky to invest by lazily following an index. Sensible fund managers will now need to appreciate the local nuances of the places they buy into.

Argentina’s whiz kid may flunk restructuring test

7 May 2020

Martin Guzman, the 37-year-old economy minister, is trying to get a deal with holders of over $65 bln of debt using academic theories about what's sustainable. He makes valid points but the clock is ticking before default. Pragmatism is needed – otherwise it may tick for him too.

Virus offers Pakistan grim bargaining opportunity

5 May 2020

Debt payments suck up the largest chunk of its budget. Islamabad’s $8 bln crisis support package is measly, yet will push the fiscal deficit to 10% of GDP. Pakistan needs more than repayment deferral from creditors, especially China. And it’s better positioned to ask than most.

America could actually shirk its debts to China

3 May 2020

It would cause market chaos and give a clear reason to avoid the dollar. But Donald Trump would find it surprisingly easy to effectively renege on China’s $1.1 trln of U.S. Treasuries, using broad powers he already has. It’s only a matter of time before the idea gains traction.

Debt freeze for poor nations is in interest of all

30 Apr 2020

Private creditors can choose to join rich countries in giving lower-income economies a payments holiday. The G20, IMF and World Bank have sticks and carrots to encourage participation. And a temporary pause is better than a series of defaults that would disrupt emerging markets.

GE boss’s options are to shine or shrivel

27 Apr 2020

Larry Culp’s recent goal of reducing the company’s $59 bln of debt to a manageable level this year is toast: It relied on cash flow from the airlines unit. He could hunker down, but that risks making GE weaker. Selling, say, a stake in the healthcare business would be wiser.

European banks’ bad-debt pain threshold

27 Apr 2020

The continent’s major lenders have bigger capital buffers and are getting help from regulators. However, their balance sheets are expanding and income is dropping, while many borrowers are at risk of default. This calculator shows what level of bad loans banks can safely absorb.

Europe’s big banks can weather 2009 times three

27 Apr 2020

Shares in the region’s top lenders have plunged as investors fret about a surge in bad debts. Yet a Breakingviews calculator shows most capital buffers can absorb a spike three times as bad as the 2009 average. Taxpayer bailouts or widespread equity hikes are unnecessary for now.