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Saturday, 25 October 2014

The European Central Bank (ECB) headquarters

Don’t do it

IFR 2056 25 October to 31 October 2014

When the European Central Bank said it would buy covered bonds for the third time – plus ABS for the first time – in order to promote credit easing in the eurozone, bond market participants were perplexed. Covered bonds were already overbought, and banks were already awash with ECB liquidity through the LTROs. As for ABS – well, good luck finding enough bonds to make much of a difference.

Top News

Euros

European banks face €1trn capital hole

IFR 2056 25 October to 31 October 2014 By

European banks could be forced to sell billions of euros of subordinated debt or completely reshape their corporate structures if global regulators go ahead with new rules seeking to stop banks being “too big to fail”.

ECB

Is the ECB ready to buy corporate debt?

IFR 2056 25 October to 31 October 2014 By

“Buy the rumour, sell the fact” goes the old market adage. But for anyone basing their trading strategy on the machinations of the European Central Bank, these are highly confusing times.

Virgin Money logo

Early IPO comebacks may struggle

IFR 2056 25 October to 31 October 2014 By

UK used car group BCA Marketplace postponed its £400m London IPO at the end of pre-marketing last Tuesday, with bankers declaring the chances of securing a satisfactory valuation far greater in the new year.

Medibank

Medibank to set Aussie record

IFR 2056 25 October to 31 October 2014 By

The largest Australian private health insurer, Medibank Private, is pushing ahead with its jumbo IPO of up to A$5.5bn (US$4.83bn), despite the recent volatility in global markets.

Russia

Russia looks haggard but default risk low

IFR 2056 25 October to 31 October 2014 By

Fears are growing that Russia could face a dollar liquidity crunch if Western sanctions remain in force, though in the short term the default risk is limited given the central bank’s firepower.

FDIC

CLO issuance to plunge after ruling

IFR 2056 25 October to 31 October 2014 By Billy Cheung, Lynn Adler

US regulators including the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have approved final risk retention rules that are expected to result in a significant reduction in CLO issuance.

Congress

Risk retention goes easy on mortgages

IFR 2056 25 October to 31 October 2014 By , Andrew Park

In contrast to the howls of anguish from those involved in CLOs, issuers and bankers in the US private-label RMBS and CMBS markets breathed a sigh of relief last Tuesday as regulators appeared to take a soft approach on new risk retention rules on securitisation (see “CLO issuance to plunge after ruling”).

Samsung

Samsung SDS builds momentum

IFR 2056 25 October to 31 October 2014 By Frances Yoon

Samsung SDS’s strong reputation and prominent position in its industry prompted investors to flock to the company’s IPO of up to W1.16trn (US$1.1bn), in the process setting a positive tone for another upcoming Samsung-related deal, the US$1.4bn listing of Cheil Industries.

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

Landesbanken wary of Hypo Alpe-Adria precedent

IFR 2056 25 October to 31 October 2014 By

The controversy aroused by Austria’s recapitalisation of Hypo Alpe-Adria may steer Germany’s Landesbanken away from copying such measures should any require extra capital after the European Central Bank’s comprehensive assessment exercise, according to several informed sources.

IFR Magazine Top News in Full (subscription required)

People & Markets

People walk past an office building of Swiss bank Credit Suisse in Zurich

​Credit Suisse takes knife to FICC again

IFR 2056 25 October to 31 October 2014

Credit Suisse plans additional cuts to its already diminished investment bank over the next year, with its fixed income, commodities and currencies business likely to be worst hit as the Swiss lender struggles to grapple with tough new rules on leverage.

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

Four banks fined for cartel activity

IFR 2056 25 October to 31 October 2014

JP Morgan, RBS, UBS and Credit Suisse have been fined by the European Commission for cartel behaviour in connection wth setting or trading interest ...

Daniel Tarullo

Criminal banker charges return to spotlight

IFR 2056 25 October to 31 October 2014

Tough talk from US Federal Reserve Governor Daniel Tarullo about changing the culture of bankers rang hollow for some critics. While the Fed vice chairman spoke of taming Wall Street, he stopped well short of embracing criminal prosecutions for egregious behaviour.

Logo of financial advisory and asset management firm Lazard

Tax inversion cancellations share up tables

IFR 2056 25 October to 31 October 2014

The cancellation of a number of tax inversion-inspired mergers and acquisitions following the US government’s decision to clamp down on the practice has begun to feed through to bank league tables, with a number of firms hit hard by the pulled AbbVie-Shire deal in recent days.

A sign for Bank Street is pictured in the Canary Wharf financial district

Big banks hit hard by rescue fund costs

IFR 2056 25 October to 31 October 2014

Larger European banks will have to make a disproportionately larger contribution to the region’s planned €55bn bank rescue fund to reflect the greater risks they pose to the system, according to the latest proposals from the European Commission.

Shanghai-Hong Kong scheme to test regulators

IFR 2056 25 October to 31 October 2014

The Hong Kong-Shanghai cross-border stock initiative is likely to present a huge test for regulators in the SAR and China to work together to prevent, identify and punish financial wrongdoing, market participants say.

Barclays bank logo

Barclays overhauls FIG coverage team

IFR 2056 25 October to 31 October 2014

Barclays is revamping its financial institutions group business for the second time in under two years, appointing Ben Davey as the sole head of financial institutions Europe, Middle East and Africa following the departure of Allen Appen earlier this month.

The Bank of England

UK unveils tough regime for failed banks

IFR 2056 25 October to 31 October 2014

Top managers of a failed bank would be replaced immediately and creditors told within two days the losses they would bear, the Bank of England has said in its blueprint for avoiding taxpayer bailouts in future financial crises.

    More from People & Markets

    Bonds

    Italy raises €7.5bn through lukewarm retail sale

    IFR 2056 25 October to 31 October 2014

    Italy last week sold €7.5bn of a new inflation-linked bond aimed at small investors, far less than such issues have raised in the past, as a low coupon and feeble inflation deterred buyers.  

    ECB

    ECB prepped for primary action

    IFR 2056 25 October to 31 October 2014

    The European Central Bank is preparing to buy covered bonds in the primary market this week, extending its purchase programme beyond the secondary market action it has pursued since last Monday. 

    The headquarters of the French nuclear reactor maker Areva

    Areva to pay big or go home

    IFR 2056 25 October to 31 October 2014

    With its long-term investment-grade status hanging in the balance and market conditions in a fragile state, investors eyeing pricing on the upcoming hybrid from Areva think they have the company over a barrel.

    ESM prints zero coupon first

    IFR 2056 25 October to 31 October 2014

    The European Stability Mechanism (Aa1/NR/AAA) on Tuesday brushed off the previous week’s volatility to price the first zero coupon supranational deal, taking a route only walked by sovereigns before.

    Suncorp revives local covered market

    IFR 2056 25 October to 31 October 2014

    Suncorp-Metway breathed new life into an out-of-favour asset class on Thursday, when it sold only the second Australian dollar covered bond offering of the year from a local issuer.

    CBA makes timely return

    IFR 2056 25 October to 31 October 2014

    Commonwealth Bank of Australia last Tuesday priced the tightest euro-denominated Australian covered bond on record, as it made the most of Europe’s growing bid for the asset class.

    An ATM machine at a Bank of America office is pictured in Burbank, California

    Tier 1 market roars back to life

    IFR 2056 25 October to 31 October 2014

    The depth of investor interest for capital securities in the US was underscored last week, with Bank of America, Citigroup and Dai-ichi Life all tapping the institutional market with US$3.9bn of perpetual non-call five and 10-year structures.

    Schaeffler PIK toggle bonds tackle holdco loan refinancing

    IFR 2056 25 October to 31 October 2014

    Schaeffler priced a €1.2bn-equivalent PIK toggle on Tuesday, offering a generous concession to win over investors still sore from a contentious consent solicitation the previous week and some concerns about the German company’s ability to handle the debt.

      More from Bonds

      Loans

      A Fat Face store

      Stepping back

      IFR 2056 25 October to 31 October 2014

      Lenders of European leveraged loans are still wary of taking on risk despite the market taking steps towards a recovery, having recently been rocked by wider macroeconomic and geo-political volatility.

      Acron Group logo

      Testing the water

      IFR 2056 25 October to 31 October 2014

      Russian fertiliser maker Acron is in talks with banks to raise a US$400m pre-export financing and private bank Nomos, now named Otkritie Financial Corporation Bank, is looking for a one-year extension for a US$240m one-year loan, despite Western banks having pulled away from lending to Russian borrowers in the wake of US and EU sanctions.

      Office of the Comptroller of the Currency

      OCC signals flexibility with leveraged loan ratio

      IFR 2056 25 October to 31 October 2014

      Limits on loans that regulated banks handle for companies with high amounts of junk-rated debt are not set in stone, an official from the Office of the Comptroller of the Currency said.

      Flags of Cathay United Bank

      FSC examines local banks' China exposure

      IFR 2056 25 October to 31 October 2014

      Taiwan’s Financial Supervisory Commission has launched an enquiry into 10 Taiwanese banks with the largest exposure to Chinese companies, following a similar investigation by the country’s Ministry of Finance.

      The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan

      GM nets US$12.5bn

      IFR 2056 25 October to 31 October 2014

      General Motors allocated a US$12.5bn refinancing that was led by JP Morgan and Citigroup.

      AbbVie cancels loan, cuts revolver

      IFR 2056 25 October to 31 October 2014

      Drugmaker AbbVie cancelled the £13.5bn of acquisition loans backing its aborted £32bn acquisition of Dublin-based Shire.

      A Pertamina fuel container

      Riding high on optimism

      IFR 2056 25 October to 31 October 2014

      Indonesia is shaping up to be one of the highlights of the Asian loan market in 2014 as lenders wager that the country’s new government will push through necessary economic reform.

      Cargill allocates

      IFR 2056 25 October to 31 October 2014

      Agricultural company Cargill allocated a US$5bn refinancing via JP Morgan, Barclays, BNP Paribas, Citigroup and Bank of America Merrill Lynch.

      More from Loans

      Equities

      Deals withdrawn

      Fifth Street marks rare US flop

      IFR 2056 25 October to 31 October 2014

      Fifth Street Asset Management, the manager of US$5.6bn in assets including two publicly traded business development companies, said it would withdraw its IPO plans after failing to price an offering of up to US$208m late on Tuesday.

      FHIPO logo

      Mexican mortgage REIT built to yield

      IFR 2056 25 October to 31 October 2014

      While leveraged vehicles such as mortgage REITs and BDCs are commonplace in the US, they are virtually non-existent in Mexico. But residential mortgage REIT Concentradora Hipotecaria SAPI, known as FHipo, is set to change this and is drawing strong investor attention to its US$600m IPO. Through what appears modest leverage – 0.5–2x equity – the vehicle is targeting a low to mid-double-digit annual yield.

      Susser Petroleum Partners logo

      MLP acquisition accretion benefits the parent

      IFR 2056 25 October to 31 October 2014

      Master limited partnerships almost universally comprise a complex web of corporate structures. At the bottom is the MLP itself, controlled by a traditionally structured tax-paying corporate as general partner of the MLP – sometimes the general partnership interest is itself floated as a separate public company.

      China: Grand Auto puts IPO on hold

      IFR 2056 25 October to 31 October 2014

      The pipeline of major Hong Kong IPOs before the end of the year is now thinner as China Grand Automotive Services has postponed its US$500m–$800m listing.

      Justdial logo

      India: Justdial aims for equity fundraising

      IFR 2056 25 October to 31 October 2014

      Internet search engine Justdial has received board approval to raise up to Rs10bn (US$163m) through equity and related instruments.

      The Kuwait Stock Exchange

      Kuwait springs back to life

      IFR 2056 25 October to 31 October 2014

      After several years of deafening silence, the Kuwaiti IPO market is showing a few signs of life, though this statement should come with the disclaimer that no deals have yet been completed. Earlier this year, Viva Kuwait said it had obtained regulatory approval to list on the Kuwait Stock Exchange seven years after completing its IPO.

      Peak takes second run at IPO

      IFR 2056 25 October to 31 October 2014

      Ski-resort operator Peak Resorts is once again looking to go public after failing to do so three years ago.

      Biotechs cross over to public markets

      IFR 2056 25 October to 31 October 2014

      In response to a lack of investor conviction in promising biotech companies heading into the year-end, investment banks are reverting to club book-building strategies on recent IPOs. While the strategy has been commonplace on IPOs for early-stage drug developers with limited institutional sponsorship, it is now being used in instances where companies secured institutional funding through late-stage, cross-over rounds.

      More from Equities

      Derivatives

      The Commodity Futures Trading Commission building in Washington, DC

      Swap market fears CFTC deadline

      IFR 2056 25 October to 31 October 2014

      An upcoming US regulatory deadline is distressing swaps users as execution platforms say they will not be able to offer transactions pairing interest rate swaps with certain other derivatives following the cut-off.

      Euro stoxx 50 vs iTraxx Europe

      Credit roars ahead of equities on sell-off

      IFR 2056 25 October to 31 October 2014

      The violent market sell-off in mid-October along with the prospect of the European Central Bank buying corporate bonds has created attractive trading opportunities for relative value investors, with European credit surging ahead of the region’s stock markets.

      The US Securities and Exchange Commission (SEC) headquarters in Washington

      SEC deals blow to non-transparent ETFs

      IFR 2056 25 October to 31 October 2014

      The Securities and Exchange Commission last week rejected multiple proposals for non-transparent, actively managed exchange-traded funds – the approval of which would have been a game-changer for the investment market.

      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.

      Capital CityCapital City logo    

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

      Shafted

      IFR 2056 25 October to 31 October 2014

      AS THE NIGHTS draw in, anyone who likes the physical side of life and is stuck for something to do outside the office could consider joining “PECS”, a winningly homoerotic acronym for the Private Equity Combat Sports group. This is not Fight Club for financial sponsors – not least because everyone’s talking about it.

      ECB

      Mario Draghi's German problem

      Reuters correspondents piece together a stark picture of the tense relationship between the ECB and top officials in Berlin.

      Shah

      ECB Watch

      The frayed relationship between the ECB and Germany poses a significant risk to the eurozone outlook.

      Stress tests

      UPDATE: Europe's banks face moment of truth from ECB review

      (Reuters) - At around noon on Thursday, the eurozone’s 130 biggest banks received the European Central Bank’s final verdict on their finances after a review aimed at drawing a line under persistent doubts about the health of the region’s banking sector.

      GW8

      IFR Fantasy Football League: GameWeek 9 preview

      Surprise package of the season, Southampton’s Graziano Pelle, helps Roderick Smits and Goden Zonen keep the IFRFFL leaders, Born Strikers, in sight.

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      Why Jim Rogers owns dollars printed by "crazy" fed bankersVideo

      A shaky couple of weeks in the global markets has rattled nerves, but while Jim Rogers continues to hold US dollars, he warns investors not to confuse the greenback for a long-term safe haven.

      All Spotlight

      IFR German Corporate Funding Roundtable 2014 Cover image

      IFR German Corporate Funding Roundtable 2014

      Is Germany in a credit bubble, participants were asked at IFR’s 2014 German Corporate Funding Roundtable in September. It was the final question at the end of a thoughtful and insightful discussion. The cascade of answers was enlightening: “no”, “not yet”, “no, but it’s approaching”, “we’re close” and “it’s coming and it won’t be the banks that get hurt this time”.

      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.

      All Special Reports