Debt

Guest view: Mutual debt is spectre haunting the EU

22 Apr 2020

European leaders meet on Thursday to discuss how to tackle the economic costs of the pandemic. Collective borrowing is the most contentious item on the agenda. Carlo Altomonte of Bocconi University and Fabrizio Pagani of Muzinich explain how a joint “recovery fund” might work.

Car industry’s growth engine is running on fumes

21 Apr 2020

The churn of new car lease sales has come to a grinding halt in March. It’s a double whammy for the likes of Ford and VW that are facing steep devaluations on cars that will be handed back by cash-strapped customers. A painful financial reckoning lies around the corner.

Glencore mine grab would have a tiny silver lining

20 Apr 2020

Zambia may seize assets, including the commodity giant’s Mopani copper mine, to help with Chinese debt relief, the WSJ says. That would make the African state a pariah and confirm fears of debt-trap diplomacy by Beijing. At least Glencore might win some useful U.S. sympathy.

Dixon: How will pandemic debts be paid for?

20 Apr 2020

The UK introduced income tax to fund the Napoleonic Wars. America imposed it to pay for the civil war. The coronavirus pandemic is not literally a war. But it will lead to massive borrowing. Higher taxes are a better way to repay it than austerity, default or inflation.

EU virus aid is no panacea for Italy’s debt woes

17 Apr 2020

The country ravaged by Covid-19 could draw on an EU euro bailout fund to help manage the pandemic. But interest savings look small, unless the ECB also helps. Political resistance to use such funds means Rome probably won’t use the aid until it faces a bond market crisis.

Hadas: The world needs to declare bankruptcy

31 Mar 2020

Debts have been out of alignment with the real economy for years. The coronavirus shutdown will magnify the imbalance. Finance has become an economic burden. A Chapter 11-style restructuring of the global balance sheet is the cure, but that’s too much for today’s politicians.

Shadow lenders may get their day in the sun

31 Mar 2020

Private debt providers have more than doubled their assets since 2010 to over $800 bln. They also have over $270 bln in dry powder. Newer lenders may struggle as defaults mount. But this will create even more bargains for the winners. The Covid-19 crisis is their moment to shine.

Corona Capital: Banking bonuses, Local TV M&A

30 Mar 2020

Concise views on the pandemic’s corporate and financial fallout: BBVA’s ditched bonuses pressure peers; local TV deal has more than one struggle.

Why 150% is the new 100% for public debt/GDP

26 Mar 2020

Governments are splurging to fight the economic havoc wrought by the coronavirus. For example, France’s debt will exceed its annual output by the end of 2020. Investors may not mind as much as before: Every country is affected, and central banks are the backstops.

Korean Air drama risks ending in corporate tragedy

25 Mar 2020

Feuding siblings, white knight Delta Air Lines, and a pushy activist are all battling over the country’s top carrier. Change is overdue, but debt worth 862% of equity has left Korean Air more vulnerable than peers to a pandemic. Any victory from the proxy battle will be pyrrhic.

New Zealand airline rescue puts taxpayers in first

24 Mar 2020

The national carrier has received a $514 mln state lifeline that ensures its survival. A high interest rate should ensure any loan is repaid quickly, while shareholders share the pain through suspended dividends. It’s a model for other countries considering bailouts to follow.

More regulation, less return for U.S. utilities

19 Mar 2020

A defensive sector looks less so amid the coronavirus pandemic. A sharp rise in unemployment will make regulators less willing to green-light rate increases. Yet the grid still needs heavy investment, virus or not. PG&E’s return from bankruptcy illustrates the dilemma.

Cox: Are taxpayers ready to rescue the jerks too?

19 Mar 2020

Workers will be human shields for reckless CEOs in the crisis clamor to save jobs. Consider Penn National: The U.S. casino group gorged on debt and bought brash Barstool Sports a month ago. If capitalism had any purity, or morality, Penn would go bust. Watch it get bailed out.

OPEC shock pours fuel on credit-market cinders

9 Mar 2020

The collapse in oil prices and worsening epidemic are causing turmoil in corporate debt markets. Yet the price moves are hard to justify, even matching the damage from Lehman Brothers’ failure in 2008. That adds weight to fears that bank trading limits can exacerbate a crisis.

Lebanon faces long road to default exit

9 Mar 2020

The debt-burdened country is set to miss a debt payment due on Monday, a first-time default. The debt’s outdated fine print could give creditors leeway to reject stiff haircuts. But Lebanon could also dust off an old tool in its defense. It’s likely to be a long grind.

Banks could use some wiggle room in virus battle

4 Mar 2020

The growing health crisis risks turning into an economic slump and reversing a decade-long crusade to clean up dud loans. Banks can help by jointly relaxing credit terms for otherwise healthy firms. The relief will be more effective if regulators also ease up on bad-debt rules.

Lebanon gives Lazard bankers a brainteaser

28 Feb 2020

The debt-strapped nation has selected the firm to advise on a restructuring. But principal haircuts could imperil local banks, austerity would upset ordinary Lebanese, and Hezbollah’s growing power complicates everything. Lazard will be worth its fees if it can solve the puzzle.

Anta Sports puts ultimate buy rating on itself

17 Jan 2020

After outrunning short-sellers, the Chinese apparel giant is issuing 1 bln euros of convertible debt that pays nothing and can’t be swapped for equity until shares rise 40%. Strong take-up will signal confidence Anta can repeat its success reviving Fila with Finland’s Amer.

Private credit pioneers will face a stress test

30 Dec 2019

A weak economy, high debt and falling profits should mean more corporate defaults in 2020. The pain will fall particularly on lenders specialising in private loans, who have $278 billion of assets under management. Rising losses will sort the sheep from the goats.

Buyout barons’ debt machine will blow a gasket

19 Dec 2019

The $1 trln market for bonds backed by leveraged loans has fuelled the boom in private-equity dealmaking. A weaker economy will make investors wary of buying these so-called CLOs, and force vehicles to curb lending. That means higher borrowing costs, and probably fewer takeovers.