Nationwide Building Society did what many thought impossible last week and placed high-risk equity-like capital with fixed-income funds – a move that showed just how far traditional investors can be stretched to get a double-digit payout. The UK’s largest building society sold £500m of core capital deferred shares that offered investors a 10.25% distribution.
Europe’s peripheral banks are coming off ECB emergency liquidity, cleaning up their balance sheets, and issuing market funding. Banks, which hardly relied on the central bank to get liquidity before 2008, became hooked on it when the crisis took hold and wholesale funding avenues were shut or became too expensive.
Deutsche Bank has rejigged its European fixed income business in the latest sign of difficulties at what has historically been one of the industry’s foremost trading franchises.
M&G Chemicals, a subsidiary of Italy’s Mossi Ghisolfi, is facing an uphill battle to complete Hong Kong’s biggest overseas IPO in two years. Two of M&G’s arranging banks have walked away from the deal, while investors are more interested in China Cinda Asset Management’s HK$19bn (US$2.5bn) flotation (see Equities section).
The US Treasury is resisting an International Monetary Fund proposal, first set out in an April research report, that sovereigns that receive IMF support should at the same time reschedule outstanding private sector debt.
A combination of weakening aftermarkets, investor fatigue and seasonal caution spurred the cancellation of one sizeable European IPO last week and the restructuring of another, despite earlier covered messages on both transactions.
The prospect of rising rates is expected to lead to a pick-up in liability management in emerging markets next year, as more issuers seek ways to improve their balance sheets.
Cash-rich technology companies rewarding shareholders is a theme that has played out this year across the capital markets. Highlighted by Apple and its five-part, US$17bn debt raising in April, the typical modus operandi has been to fund domestically with straight debt and use low-cost capital to initiate shareholder-friendly policies.
The biggest US banks could still have more than US$105bn in exposure to mortgage litigation, according to Standard & Poor’s.