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Monday, 20 October 2014

Combination of file photos of logos on the headquarters of Germany's biggest landesbanks

Sturm und Drang

IFR 2055 18 October to 24 October 2014

While the latter part of last week descended into frenzied volatility, some parts of the bond markets had already been enduring hardships of their own, even before events unfolded in their full and awful majesty on Wednesday.

Top News

BoC

BOC's US$6.5bn AT1 leads the way

IFR 2055 18 October to 24 October 2014 By Lianting Tu

Bank of China braved a torrid market last week to sell a landmark US$6.5bn offering of Basel III-compliant Additional Tier 1 preference shares and, with it, open the door to a new asset class for China.

LSE

Volatility puts the brakes on IPOs

IFR 2055 18 October to 24 October 2014 By

The year might already be over for ECM bankers – in mid-October. Last week’s broad-based and dramatic corrections in asset prices saw IPOs postponed or cut in size across the world and if markets don’t quickly find stability, the considerable pipeline of deals scheduled for the rest of the year may prove impossible to bring to market.

Yen

Non-dollar sectors open doors to LatAm

IFR 2055 18 October to 24 October 2014 By , Paul Kilby

Latin American borrowers are eyeing a broad set of alternative funding options in non-dollar markets that are becoming increasingly receptive to the region’s credits.

PDVSA

Oil price drop fuels Venezuela fears

IFR 2055 18 October to 24 October 2014 By

Tumbling oil prices caused Venezuela’s international bonds to slide to five-year lows last week, re-igniting fears of a potential default for the dollar-strapped sovereign.

Germany

Test fears hit German sub bonds

IFR 2055 18 October to 24 October 2014 By

Deeply subordinated debt issued by German Landesbanken lost as much as 10 price points last week as investors factored in the possibility that debt issued by banks that fail Europe’s coming stress tests will suffer painful haircuts.

Chinatown

UK debuts landmark Dim Sum

IFR 2055 18 October to 24 October 2014 By , Lianting Tu,

The United Kingdom last week became the first foreign country to issue offshore renminbi bonds, with a smoothly executed offering that reflected the Chinese currency’s growing global appeal and London’s efforts to become a trading hub for the currency.

EBA

Allowance clampdown presents dilemma

IFR 2055 18 October to 24 October 2014 By

Investment banks face the difficult choice of cutting the overall pay packages of their most senior bankers or swallowing a big increase in their fixed costs after the European Banking Authority ruled that discretionary allowance payments breached bonus rules in the region.

European Union flags

EC 'drops' CDS probe

IFR 2055 18 October to 24 October 2014 By

Goldman Sachs believes part of the antitrust investigation by the European Commission into the credit default swaps market has been “suspended indefinitely”, according to its latest quarterly SEC filing.

Taiwan

Ting Hsin borrowing in hot oil

IFR 2055 18 October to 24 October 2014 By Carol Zhong

A syndicated loan backing Ting Hsin International Group’s purchase of cable TV operator China Network Systems is on hold after Taiwan’s financial regulator urged local banks last Wednesday not to lend to the company.

USA

Retail investor exodus could last into 2015

IFR 2055 18 October to 24 October 2014 By Lynn Adler

Outflows from loan mutual funds have reached US$17bn since April when the threat of US interest rate rises receded. The outflows will extend through year-end and possibly until mid-2015. This exodus of retail investors is expected to continue until they see evidence that the Federal Reserve is set to raise interest rates and Treasury yields finally climb.

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People & Markets

The Fitch Ratings building is seen in New York

New Fitch tool to help assess AT1 risks

20 October 2014

Fitch Ratings has launched an interactive tool to help investors better value Additional Tier 1 and Tier 2 contingent capital bonds under various hypothetical scenarios, following regulatory criticism that the instruments are too complex.

A Goldman Sachs sign is seen above the floor of the New York Stock Exchange

Trading rebound boosts US banks

IFR 2055 18 October to 24 October 2014

A spike in volatility in late July and August pulled clients from the sidelines and brought trading floors to life, giving US investment banks a welcome boost in the third quarter and confounding expectations for a dull summer in fixed income and equities.

A sign outside the headquarters of JP Morgan Chase & Co in New York

Banks not shaken by DCM slump

IFR 2055 18 October to 24 October 2014

Fees from debt underwriting took a hit in the third quarter as both high-grade and high-yield issuance slumped, signalling that the debt capital market fee boom that has boosted many banks may finally be coming to an end.

The logo of Swiss bank Credit Suisse is seen in front of a branch office in Zurich

​Credit Suisse promotes Amine and O'Hara

IFR 2055 18 October to 24 October 2014

Jim Amine and Tim O’Hara have been promoted to the executive board of Credit Suisse and have been asked to run the Swiss lender’s investment bank together with existing co-head Gael de Boissard.

Peters 475px June 2014

The Hunt for Red Sixteen

IFR 2055 18 October to 24 October 2014

Is the tech sector more utility than Wild West?

Vitor Constancio

European banks' assets €6.7trn smaller after crisis

IFR 2055 18 October to 24 October 2014

European banks have shed a fifth of their assets since the onset of the global financial crisis in 2008, according to new figures from the European Central Bank, which have illustrated the impact of the past six years of financial deleveraging, increased regulation and poor economic growth.

The Bank for International Settlements (BIS) in Basel

Basel eyes operational risk capital changes

IFR 2055 18 October to 24 October 2014

The Basel Committee on Banking Standards looks set to overhaul the rules on how banks calculate operational risk capital. The move is expected to simplify the calculation, but could also result in banks having to build up more capital.

Who's moving where...

IFR 2055 18 October to 24 October 2014

Morgan Stanley has promoted Richard Wong and James Tam to be its new co-heads of mergers and acquisitions for the Asia-Pacific region, succeeding Sam Kim – who has also been promoted. Kim will become vice-chairman of investment banking in Asia-Pacific. Wong was most recently deputy head of M&A for Morgan Stanley, while Tam focused on the bank’s China business including working on the US$7.1bn acquisition of Smithfield Foods by WH Group, formerly known as Shuanghui International Holdings.

    More from People & Markets

    Bonds

    ESM prepares benchmark amid sovereign volatility

    IFR 2055 18 October to 24 October 2014

    The European Stability Mechanism (ESM) is expected to sell its first benchmark issue since May this week, having sent out RFPs to a selection of banks from the EFSF/ESM Market Group. However, the move comes against a volatile market backdrop that saw eurozone peripheral sovereigns sell off dramatically last week.     

    On your marks, get set: ECB to enter market from Monday

    IFR 2055 18 October to 24 October 2014

    The ECB will launch its much anticipated third covered bond purchase programme on Monday, in a bid to open up bank lending in the eurozone.

    KBN, NRW caught in volatility crossfire

    IFR 2055 18 October to 24 October 2014

    Two public-sector transactions became caught in the intense market volatility that gripped the US dollar market on Wednesday, ending a smooth run for borrowers and leading bankers to say that new-issue concessions will have to increase.      

    The Fitch Ratings building is seen in New York

    European banks make progress but long road ahead, warns Fitch

    IFR 2055 18 October to 24 October 2014

    European banks, particularly those in weaker countries, are still vulnerable to potential shocks despite the progress made on capitalisation, Fitch warned in a report last Monday.

    Snam logo

    Snam flies solo

    IFR 2055 18 October to 24 October 2014

    Italian gas distributor Snam defied a very shaky market to price a heavily oversubscribed issue last week, despite weakness in the eurozone periphery that saw Italian 10-year government yields spike up by almost 30bp in the space of one day.

    Dynegy's US$5.1bn high-yield deal impresses

    IFR 2055 18 October to 24 October 2014

    US power company Dynegy appears to have pulled off a smooth deal on October 10, when it braved the volatile market to price the biggest dollar domestic junk bond of the year.  

    US banks face ballooning debt needs

    IFR 2055 18 October to 24 October 2014

    The US’s biggest banks have estimated that they might have to issue at least US$260bn of senior unsecured debt over and above what they need to run their businesses in coming years, to comply with stricter loss-absorbing capital rules and extra equity buffers to be announced by the Federal Reserve after November.

    Japanese duo on the road

    IFR 2055 18 October to 24 October 2014

    Dai-ichi Life Insurance Company kicked off investor meetings last week for an offering of US dollar-denominated perpetual bonds.

      More from Bonds

      Loans

      Shadow banking

      Out from the shadows

      IFR 2055 18 October to 24 October 2014

      Shadow banks are winning market share from US banks in the US leveraged loan and high-yield bond markets as stricter regulation forces borrowers to cast the net wider to finance buyouts.

      AVG Technologies logo

      Issuers make concessions to lenders amid volatility

      IFR 2055 18 October to 24 October 2014

      Increasingly selective investors are calling for concessions on US leveraged loans that managed to launch before a spike in volatility all but closed the market last week. Buyers are still receptive to deals with good credit stories and results, but are snubbing riskier credits, which is forcing issuers to sweeten terms to syndicate deals.

      TATA steel plant

      India: Tata Steel refinancing launches

      IFR 2055 18 October to 24 October 2014

      Tata Steel has hit the market with its long-awaited US$5.64bn-equivalent loan component of a US$7bn refinancing, in the largest and potentially also Asia’s most widely syndicated borrowing of the year.

      Shire's manufacturing facility in Massachusetts

      AbbVie ditches US$55bn Shire deal

      IFR 2055 18 October to 24 October 2014

      AbbVie has pulled the plug on its US$55bn takeover of Shire weeks after the US government moved to curb deals designed to reduce tax. AbbVie’s board recommended that shareholders vote against the proposed takeover following new US proposals which aim to make it harder for American firms to shift their tax bases out of the US and into lower cost jurisdictions in Europe.

      Secondary plunge led by energy, retail sectors

      IFR 2055 18 October to 24 October 2014

      The US secondary loan market was swept along with the volatility that roiled equity and high-yield bond assets last week, with energy and retail names leading the decline in loan prices.

      Boeing completes deal

      IFR 2055 18 October to 24 October 2014

      Boeing has allocated US$4.95bn in loans, comprising an increased US$2.4725bn 364-day revolver and a US$2.4725bn five-year loan.

      Van Gansewinkel lenders face losses

      IFR 2055 18 October to 24 October 2014

      Lenders to troubled Dutch waste management firm Van Gansewinkel Groep may have to write off some of the company’s €800m debt, even if its private equity owners sell the company.

      Eaton allocates

      IFR 2055 18 October to 24 October 2014

      Power and technology company Eaton Corp has allocated a US$1.25bn refinancing that comprises two revolvers.

      More from Loans

      Equities

      China International Capital Corp

      Top CICC pair exit ahead of IPO

      IFR 2055 18 October to 24 October 2014

      China International Capital Corp, one of the PRC’s top investment banks, is pressing ahead with plans for a Hong Kong listing, despite the resignation of one top executive and the pending departure of another.

      Virgin Money logo

      Duo avoid the C word

      IFR 2055 18 October to 24 October 2014

      Richard Branson’s UK challenger bank Virgin Money and German triple-play operator Tele Columbus both put their IPOs on hold last week following the end of pre-marketing. Tele Columbus said on Monday that it was still considering its IPO options, while Virgin Money said completion would now not take place in October.

      Great Western Bank

      Great Western rides on through tougher IPO market

      IFR 2055 18 October to 24 October 2014

      Great Western Bancorp, the agribusiness-focused bank controlled by National Australia Bank (NAB), traded in line with its IPO price on its NYSE debut on Wednesday, the latest in a series of steady but unspectacular aftermarket performances by US bank IPOs in 2014.

      Aena Aeropuertos logo

      Uncertainty on cornerstones

      IFR 2055 18 October to 24 October 2014

      Europe is still getting to grips with the concept of cornerstone investors, as the up to €2.9bn IPO of Spanish airports operators Aena Aeropuertos illustrates. Corporacion Financiera Alba, Ferrovial and The Children’s Investment Fund Management are lined up to take 21% of the 49% to be offered by the Spanish government, but final allocations depend on pricing and demand from institutions.

      Seven Generations weathers inhospitable market

      IFR 2055 18 October to 24 October 2014

      Canadian E&P Seven Generations is proceeding with its C$800m (US$715m) initial public offering despite the precipitous declines in commodity prices and internal discussions among underwriting banks on the ultimate valuation targeted. The decision to proceed with an all-primary offering reflects world-class assets and a desire by the company to move ahead with an aggressive capex ramp.

      Blue Bird slashes IPO size

      IFR 2055 18 October to 24 October 2014

      Indonesian taxi operator Blue Bird, which postponed an attempt to float last year, has slashed its fundraising size by as much as 35% in its latest bid to go public.

      Japan: Hulic REIT to raise US$212m

      IFR 2055 18 October to 24 October 2014

      Hulic REIT is raising around ¥22.7bn (US$212m) in new shares to purchase new properties and pay off bridge loans.

      IPO window set to close

      IFR 2055 18 October to 24 October 2014

      The US IPO market looked set to go into hibernation last week after a swoon in markets and a surge in volatility prompted investors to curb their demand for new issues, though a recovery in equities late in the week offered a glimmer of hope for banks still seeking a busy year-end.

      More from Equities

      Derivatives

      The Commodity Futures Trading Commission building in Washington, DC

      SEF review could shuffle market

      IFR 2055 18 October to 24 October 2014

      Swap execution facilities awaiting final confirmation from the CFTC regarding their status as registered derivatives trading platforms say that eventual decisions made by the agency are likely to rattle a so-far benign market.

      The European Commission headquarters

      EC to hand down derivatives relief, says US regulator

      IFR 2055 18 October to 24 October 2014

      The European Commission will delay the imposition of higher capital requirements on European banks operating on US derivatives exchanges that had been scheduled to hit in mid-December, according to the chairman of the Commodity Futures Trading Commission.

      Euro 5YR5YR inflation forward (%)

      Oil, technicals drive inflation expectations lower

      IFR 2055 18 October to 24 October 2014

      Forward inflation expectations dropped to new record lows last week, as concerns about economic growth and disinflationary pressures in Europe and China sparked a sell-off across global markets.

      Bitcoin sign

      Bitcoin derivatives interest grows

      IFR 2055 18 October to 24 October 2014

      The first Bitcoin derivatives transaction on a regulated exchange was completed this month between digitalBTC – a digital currency solutions firm and liquidity provider for the new swaps contracts – and an undisclosed hedging counterparty.

      Investors burnt by index overshoot

      ​Investors burnt by index overshoot on CDS rebirth

      IFR 2054 11 October to 17 October 2014

      A number of hedge funds were left licking their wounds last Monday following the launch of new legal documentation for credit default swap indices – the US$21trn credit derivatives market’s most significant overhaul in more than five years.

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      Capital CityCapital City logo    

      From the practice of placing a bell around the neck of a castrated ram to lead the flock

      Suited and booted (out)

      IFR 2054 11 October to 17 October 2014

      VTB CAPITAL SHOULD be applauded for its colourful response to escalating sanctions and general macro-political grimness.

      Sterne

      EM kablooie risk

      Gabriel Sterne of Oxford Economics on the likelihood and impact of an emerging markets meltdown.

      Lloyds

      Lloyd's of London to stage bond market return

      The Society of Lloyd’s, better known as Lloyd’s of London, is preparing to return to the bond market for the first time since the financial crisis began as it seeks to shore up capital ahead of two bond redemptions.

      James Saft - June 2014

      Fed magic fades, risk assets slide

      What matters isn’t so much the proximate cause of the recent downdraft in stocks, but the underlying logic.

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      Morgan Stanley profit jumps 87%Video

      A big spike in trading helps Morgan Stanley nearly double its profit, which crushed analysts’ estimates. Fred Katayama reports.

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      Bankia scandal touches raw nerveVideo

      Spain’s High Court orders former senior executives at bailed-out lender Bankia to hand over several million euros as it investigates the alleged misuse of company credit cards. As David Pollard reports, the high-profile corruption scandal is touching a nerve amongst Spaniards emerging from the country’s downturn.

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      Goldman profit surges 50%Video

      A spike in bond trading revenue and lower compensation costs push profit higher at Goldman Sachs. Fred Katayama reports.

      All Spotlight

      IFR DCM Cover 2014

      IFR DCM Special Report 2014

      Fashion can be a cruel mistress, especially if you’re the only person to turn up at the party with platform sneakers, a tracksuit with “Juicy” scrawled across the derriere, and a green feather boa. Banks are experiencing their own fashion faux pas right now and working hard to maintain their appeal.

      IFR IMF World Bank Report Cover 2014

      IFR IMF/World Bank Report 2014

      Playground rules - The collaborative effort of European governments and regulators is akin to children rushing around the school playground with a football. Enthusiasm and no lack of skill are undermined by issues of translation and the fierce desire of all to score the winning goal.

      All Special Reports