Posts tagged 'Corporate Debt'

About China’s confusing debt-for-equity swaps

Corporate debt in China is a well-known problem and part of the solution is, apparently, a new round of debt-for-equity swaps.

Of course, there will always be sceptics. Read more

Remember this day Read more

Why American companies are borrowing more in euros

While nominal borrowing costs are now much lower in Europe than in the US, that by itself isn’t a good reason for firms that earn money in dollars to start taking out debt in euros. Modest moves in exchange rates can wipe out any perceived benefits from lower interest rates — just imagine what would happen if the euro returned to its level last summer of around $1.4 — and the cost of hedging this currency risk usually means that borrowers are better off staying in local currency. American corporate treasurers know all this, yet are also responsible for more than a fifth of all the euro-denominated investment grade corporate bonds issued in 2015.

What gives? Read more

The consent of the (bondholder) governed

Sometimes, the courts of England and Wales taketh away when it comes to the law on restructuring bonds and getting debtors out of holes. And other times they giveth.

A landmark decision by the England and Wales Court of Appeal on Monday falls under the latter… Read more

Amazon borrows cheap money because, we guess, money is cheap to borrow (and easy to spend)

From the FT’s Barney Jopson and Vivianne Rodrigues:

Amazon was set to issue a bond for the first time in more than a decade on Monday, taking advantage of rock-bottom borrowing costs as it continues an investment drive that is withering its profits.

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Chinese corporate risk looks pretty significant

Standard & Poor’s has been getting very interested in China’s companies’ risk profiles recently, amid rapid growth for the country’s immature corporate bond market in the past year.

The ratings agency has already published a whole set of reviews into Chinese banks. On Friday, it released a study of 107 large Chinese companies evaluated for business risk and financial risk. Read more

Avoiding a first-ever corporate default, in China

Shandong Helon! We told you to remember the name.

Either this indebted fibre company would default on a RMB400m ($63m) bond coming due on April 15 – thus becoming the first domestic corporate default in Chinese history, and so maybe a sign of a maturing bond market – or it wouldn’t. Shandong Helon could simply get a local government bailout or a bank loan refinancing instead, under the ‘old’ rules of the game in China. Read more

Highly rated US industrial bonds set records

IBM and Procter & Gamble have sold bonds with the lowest interest payments on record for US marketed corporate issues, as investors accept low returns for the safety of owning debt from secure companies, says the FT. IBM sold $1.5bn of three-year notes with a coupon payment of 0.55 per cent, the lowest for unsecured debt of that maturity at least since Dealogic, the data tracker, began compiling this information in 1995 on US marketed corporate issues. That yield compares with the three-year Treasury note’s 0.31 per cent. The US information technology company also sold $1bn of five-year debt that will pay investors 1.25 per cent, the lowest coupon rate for five-year debt. Also on Wednesday, Procter & Gamble, the consumer products group, sold $1bn of 10-year bonds with a coupon payment of 2.30 per cent, a new low for 10-year US corporate debt.

Let there be credit claim collateral

OK — you’re sick to death of hearing about the European Central Bank’s three-year liquidity may, or may not, get banks to buy sovereign debt to pledge as collateral.

So why not hear about all the other extra trash assets the ECB will now accept? Potentially much more economically critical trash. assets. (Update — well, that’s our point about these assets being diverse and difficult to value made for us… we’re sorry for calling them trash. That is indeed unwarranted hyperbole. In truth the assets here vary widely in type, quality, etc. The main thing is their basic economic importance, which is why the ECB’s move is not to be underrated.) Read more

Risk for €250bn of leveraged loans

European credit markets are bracing for more defaults as the bulk of collateralised loan obligations winds down in 2012 and 2013, the FT reports. Such CLOs have a finite life span after which they are not allowed to trade new loans for existing ones, or reinvest money received from repayments or interest on existing loans they hold. By the end of next year, the majority of CLOs will have gone “static”. By 2014, more than 98 per cent of European CLOs will have have a reached the same point, according to a report by Standard & Poor’s. This is expected to hurt the market’s ability to refinance an estimated €250bn of leveraged loans maturing in Europe between now and 2017, and removing a source of credit to the wider economy.

Euro *non*-redenomination risk

Amazing what you find in analyst reports on German telecom credit these days (via Societe Generale’s Juliano H Torii):

…we think investors might be waking up to the possibility of the mirror image of redenomination risk – what we will call “no-redenomination” risk (NORED) – a risk that may be severely underestimated for the German companies in our space.

 Read more

Turmoil darkens the mood for corporate debt

Falling borrowing costs, subdued default rates and healthy issuance created a robust start to the year for corporate credit markets but mounting fears over the eurozone debt crisis and tepid global economic growth have darkened the mood, writes the FT. Benchmark interest rates have continued to drop but this month’s markets turmoil has sent spreads higher on both investment grade and high-yield corporate debt, the riskiest part of the market.

Debt-financed buybacks on the increase

Blue-chip companies from Philip Morris to AT&T are taking advantage of cheap debt to finance share buy-backs and mergers and acquisitions activity at an accelerated pace, the FT reports. According to Dealogic data, companies with investment-grade ratings have borrowed more than $200bn in the dollar-bond market, up from $134bn by this time last year. The trend could mark a turning point for the credit cycle and the hoard of cash built up by companies since the crisis. While it’s often unspecified how companies plan to use bond sale proceeds, perhaps 20 per cent of borrowings will be used for M&A financing, a proportion last seen in 2006 and 2007.

Corporate balance sheets: when will the real spending begin?

A quick rewind is necessary to put this post in context.

We wrote repeatedly last year about the problem of non-financial companies hoarding their cash rather than spending it, and attributed the trend to a few different factors: Read more

Petrobras to raise $40bn to develop fields

Petrobras, Brazil’s national oil company, plans to raise up to $40bn in debt by 2014 as it prepares for the development of its “pre-salt” oilfields, according to its chief executive Jose Sergio Gabrielli, the FT reports. The target, which follows a $6bn bond issue two weeks ago that was the biggest in Brazilian corporate history, would significantly raise Petrobras’ debt ratios, but not to levels that would jeopardise its investment grade status. Raising debt on this scale means that Petrobras will dominate corporate debt markets in the country for the next three to four years.

Corporates stampede to bond sales

It’s been a record week for corporate debt issuance in US markets, says Bloomberg — $48.2bn has been sold, eclipsing a previous week high of $46.9bn in May 2009. While General Electric Capital got the largest single offering away, 57 per cent of the week’s issues came from foreign sellers. Looking at investment-grade debt alone, the WSJ estimates that at least $35bn has been sold, making 2011’s market the busiest in this sector since 2010’s first week. There is one caveat to the current optimism, the FT warns: yields on Treasuries are rising at a faster pace than corporate bonds, which may make investors far more selective over the credits on offer.

Caterpillar rolls out renminbi bond

Caterpillar, the US-based manufacturer of earthmoving equipment, has launched a two-year Rmb1bn bond with a coupon of 2 per cent in Hong Kong, becoming the first foreign industrial multinational to issue debt in the Chinese currency, the FT reports. McDonald’s was the first foreign multinational to dip its toes into the market, but its Rmb200m is dwarfed by the Caterpillar placement, which was seven times oversubscribed. The deal will give momentum to the nascent offshore market in renminbi-denominated debt which financiers hope will become an important fundraising route for companies with operations in China.

Corporate bond bonanza on low rates

Around $51bn in corporate bonds and leveraged loans have entered the debt market in the past two days, with this week looking to be the busiest of the year so far for high-grade corporate issuance, the WSJ reports. The culprit is Planet Zirp, of course — corporates are benefiting from interest rates keeping close to zero, while investors are keen for higher-yielding assets. Allergan issued $650m of bonds at a 3.375 per cent yield this week, for example — the lowest yield for a US corporate since at least 1995. But companies are already pumped with cash, the NYT notes — they’re just borrowing anyway because it’s so cheap.