Debt

Inflation’s real benefits beat theoretical costs

5 May 2023

A barrage of shocks have battered the world’s developed economies, leaving central bankers struggling to adapt. Allowing prices to rise not only eases the economic adjustment but shrinks big debt piles, argues Felix Martin. That’s helpful to everyone – except bond investors.

Buyout barons make bloody return in Europe

3 May 2023

Silver Lake and Bain are facing off to buy German company Software AG amid a revival in takeovers. Cheap stock prices mean deals can work despite debt constraints. But a limited pool of targets will make it hard to deploy $2 trln of dry powder, and stay disciplined.

Private equity is the new fuel for India’s tycoons

3 May 2023

Big conglomerates Reliance, Tata and Bharti are putting more skin in the game by looking to outside shareholders including tech giants and sovereign funds to finance new ventures. It heralds a shift from debt to equity, and towards better governance at the expense of lenders.

Capital Calls: BP, Japanese M&A

2 May 2023

Concise views on global finance: The oil giant will buy back $1.8 bln of shares over the next three months, which is less than investors hoped for; Astellas Pharma is making the most of cheap debt for its $5.9 bln pounce on U.S. eye-treatment specialist Iveric Bio.

A flawed but useful economic model for a bleak age

14 Apr 2023

Ideas become fashionable when they meet the needs of the era. John Cochrane’s fiscal theory, which states that governments ultimately determine the level of inflation, fits the bill. Despite its shortcomings, the model may be helpful, says Edward Chancellor.

Swedish real estate is canary in the coal mine

13 Apr 2023

The Nordic nation is at the sharp end of Europe’s real estate slowdown. Residential prices fell 15% last year, with offices and shops set to follow as debt costs surge. Its property firms with borrowings equivalent to 40% of GDP have little cushion if foreign bondholders panic.

Trouble lurks in Reliance’s happy crowd of lenders

6 Apr 2023

Some 55 banks are extending a $3 bln loan to the Indian retail-to-energy conglomerate. Mukesh Ambani’s highly-rated behemoth is a catch. Yet the pile-on points to a dearth of big corporate credit mandates. As much of India Inc deleverages apace, lenders can brace for more slack.

New EU debt rules have way to avoid past mistakes

4 Apr 2023

The European Union’s old stability pact was a poorly fitting straitjacket, yet recrafting it is politically fraught. The bloc now aims to replace strict diktats with medium-term goals. A successful framework can revive growth. But it will only work if countries follow it.

Bank health barometer could use own health warning

28 Mar 2023

Stock market investors interpreted last week’s jump in Deutsche Bank’s credit default swaps as a sign of distress. Yet thin trading in parts of the $12 trln market for speculating on creditworthiness can exaggerate moves. Add social media and it can feed self-fulfilling spirals.

Capital Calls: Microsoft/Activision, Subscriptions

24 Mar 2023

Concise views on global finance: The software giant convinced UK regulators to drop one of two major concerns about its $69 bln deal. Meanwhile, the U.S. Federal Trade Commission has picked an easier — and less controversial — fight than its antitrust crackdown.

Swiss CoCo litigation may have a broader payoff

23 Mar 2023

Holders of Credit Suisse’s $17 bln contingent convertible bonds think authorities were wrong to wipe them out. A legal challenge will take years. Still, Bern might decide to placate angry investors. And a fight will discourage countries considering following the Swiss example.

Credit Suisse rescue sends shockwaves far and wide

23 Mar 2023

The ailing Swiss lender was saved by UBS with a $3 bln takeover. In this Viewsroom podcast, Breakingviews columnists debate why the deal pushes up bank funding costs, how the new mega-lender affects Switzerland’s financial system, and why bank deposits are becoming less reliable.

Africa debt stalemate will reverberate across West

27 Feb 2023

More than half the countries in sub-Saharan Africa may default on loans worth over $300 bln. Those which sought IMF relief are awaiting the resolution of a standoff between Western lenders and China. The crisis will leave debtors and creditors worse off and fuel migration.

IAG takeoff weighed down by debt dilemma

24 Feb 2023

With net debt above its market value, the $9 bln British Airways owner could use a rights issue. But it’s also back in the black after a painful pandemic, and deals may yield cost savings. Boss Luis Gallego has to work out which path is likely to annoy long-term investors least.

Rolling EU debt would boost investment and markets

21 Feb 2023

European Union bonds to fund 900 bln euros in pandemic aid have cheered investors. The bloc needs ongoing debt sales to buoy traders’ confidence, invest cross-border and challenge the U.S. dollar. Separating borrowing plans from spending rows could make the politics possible.

China’s local debt bomb fuse starts offshore

21 Feb 2023

Regional financing vehicles owing $9 trln have tapped offshore bond markets after officials curbed domestic financing. Now that channel is narrowing too, which could topple some into default. Many are rated investment grade, making it a major headache for Beijing.

Search for new World Bank boss flows from Barbados

20 Feb 2023

The multilateral lender needs a new president now that David Malpass is quitting early. Barbadian Prime Minister Mia Mottley’s green finance strategy offers a way to channel more lending to developing countries. Though the U.S. will have the final say, a shift is overdue.

Vedanta will test limits of Adani contagion risk

16 Feb 2023

Investors are wary of possible funding shortfalls at Anil Agarwal’s convoluted commodities empire. He’s trying to reassure on refinancing plans for $8 bln of net debt as his peer’s problems infect Vedanta bonds. The mess will push weak edges of India Inc towards private lenders.

Telecom Italia breakup can please all its masters

15 Feb 2023

The sickly telco needs to cut its 25.4 bln euro debt pile. Selling its fixed-line grid to KKR offers a fix, provided the government gets a stake in the strategic asset. For major investor Vivendi, the upside would be a chance to sell Telecom Italia’s revamped service business.

Debt is poor fix for Italian soccer’s malaise

8 Feb 2023

Having rejected private equity suitors, Italy’s top football league may turn to Wall Street banks to borrow up to 1 bln euros. The cash may give Serie A’s ailing TV rights business extra time. But without a governance shake-up, gorging on debt would extend its losing streak.