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Saturday, 20 October 2018

Upfront

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  • Hail to the chief

    Another cash-burning company – this time Uber – has pulled off a junk bond sale. But it’s not necessarily a sign that the high-yield market is bonkers.

  • Seismic shifts

    An earthquake in the small hours of Thursday morning gave delegates at the IMF’s annual meetings in Bali an uncomfortable reminder that Asia’s emerging economies remain vulnerable to unforeseen shocks. The financial markets have been delivering their share of shocks as well, and another terrible week for risk assets provided a tricky backdrop for the gathering. Rising oil prices, slumping emerging market currencies and the worsening US-China trade war were all high on the agenda.

  • Haters gonna hate

    Funding Circle’s 17% collapse on its third day as a listed company was a shock for all concerned following a muted first couple of sessions. The next day, Aston Martin Lagonda hit the skids on its debut – just hours after securing a £4.33bn valuation.

  • Take me, I’m yours

    Investors like big, liquid bond deals. Especially when they know there aren’t many more in the pipeline any time soon.

  • Show us the money

    Hats off to all those involved in the remarkably successful leveraged financing backing Blackstone’s carve-out of a 55% stake in Thomson Reuters’ Financial & Risk unit (of which, full disclosure, IFR is a part).

  • Overnight sensation

    Just a few years ago, the idea of a US$4.3bn-equivalent overnight equity offering would have been unthinkable in Japan’s capital markets. Last week’s mega block trade in Yahoo Japan is therefore a big step forward.

  • Too big to fail

    The transatlantic leveraged finance market is facing a unique challenge as two massive buyout loans compete for investors’ time and money.

  • Test-driving a new model

    The Financial Conduct Authority couldn’t have hoped for a better road test for its changes to the UK IPO process than Aston Martin Lagonda. There won’t be a more high-profile float in the UK this year than the £1.25bn deal and as such it is certain to attract research from unconnected analysts.

  • Blocked pipeline

    Saudi Arabia certainly grabbed the headlines when it announced plans, in early 2016, to IPO its state oil company and cash cow Aramco. The deal, at a projected US$100bn, would be four times bigger than anything seen before. A valuation of US$2trn would be double that of Apple.

  • Contagion contained

    As the markets opened in London on Monday it seemed as though all hell was about to break loose across the emerging markets.

  • ​Reality check

    Turkey’s economy is broken. Everyone knows this apart from one person. Unfortunately, that person happens to be President Recep Tayyip Erdogan.

  • Posturing in Pakistan

    The IMF’s warning earlier this year that China’s emergence as the world’s biggest bilateral creditor could cause problems in future debt reckonings is finally catching the attention of its largest shareholder, the US.

  • Libor pains

    Of all the regulatory challenges facing the syndicated loan market, the replacement of Libor as the base rate for deal pricing could prove to be the most difficult.

  • Deal or no deal

    There’s no doubt about it: Europe has too many banks. At the last count, there were more than 3,000 European banking institutions.

  • Xiaomi’s reboot

    What a relief. Xiaomi’s first week as a listed company has drawn a line under the recent run of shaky IPOs from China’s technology sector – but it could have been very different.

  • Running out of money

    Loan bankers love to think that they are made of sterner stuff than the fickle folk of the bond market.

  • Sticking plaster

    The emerging markets are not in crisis and the fundamentals – measured by growth rates or external balances – are in much better shape in many countries than in, say, the US or the UK.

  • Xiaomi the way to go home

    When it comes to Chinese equities, two wrongs sometimes do make a right.

  • Crest of a wave

    AT&T is set to go down in the record books after a court judge finally approved – some 20 months after the deal was first announced – the telecoms giant’s acquisition of Time Warner’s media empire.

  • Syndicate, or cartel?

    “To permit antitrust actions such as this threatens serious securities-related harm … there is a serious risk that antitrust courts, with different nonexpert judges and different nonexpert juries, will produce inconsistent results.”

  • Gloom and doom

    The European sovereign debt crisis, which claimed the scalp of at least one bank and brought countless others close to the edge seven years ago, was supposed to have been a wake-up call. Policymakers, seeing the carnage wrought by the crisis, pledged to make the system safer.

  • Led astray

    At a time when regulators are clamping down on questionable behaviour, it’s amazing what goes on under everyone’s noses in certain markets. And nowhere more so than in the Gulf.

  • High stakes

    Asian high-yield bonds can offer investors some welcome protection from rising US Treasury yields, but buyers will have to be prepared to ride out the storm first.

  • Blast from the past

    There was a distinct retro feel to last week, with apparently looming financial crises in Argentina and Turkey; and the Buenos Aires government calling in the IMF. Even Mahathir Mohamad is back in power in Malaysia.

  • Xiaomi the money

    Xiaomi’s giant IPO is widely seen as a turning point for Hong Kong, and for China’s technology sector. So far, it’s looking more like a leap of faith.

  • Coming apart at the seams

    Christian Sewing has a problem. The chief executive of Deutsche Bank, who took over from the deposed John Cryan earlier this month, came out all guns blazing at his first real public appearance as the new boss at the first-quarter results announcement on Thursday.

  • Mizzed opportunity

    As mishaps go, this was as high-profile as it gets.

  • More joy in heaven…

    Outside observers would be forgiven for wondering how much really changed at Deutsche Bank last week. Yes, the bank fired chief exec John Cryan and replaced him with Christian Sewing.

  • Good in parts

    For Spotify, listing on a stock exchange was useful, but not a burning ambition.

  • Dead man walking?

    It was another terrible week for Deutsche Bank. But this time it wasn’t John Cryan’s fault.

  • Bankerless deal

    Uber last week brought its contemptuous attitude to established norms to the loan market, successfully pricing a US$1.5bn deal with only limited involvement from bank syndication teams.

  • Getting away with it

    The British government’s decision to chuck 23 Russian diplomats out of the UK may have rattled some cages in the Kremlin, but as far as the financial markets are concerned the move barely registered.

  • The right prescription

    Investors are claiming a historic victory in the high-grade corporate bond market after extracting a discount from drugstore chain CVS on some of its M&A bonds.

  • Changing of the seasons

    The QE era is over. The ECB may still be buying €30bn of bonds a month, but the cycle of ever-tighter credit spreads and ultra-low yields is at an end.

  • Hong Kong Stuey

    “All political lives end in failure” is a familiar quote. But what Enoch Powell actually wrote was more nuanced: “All political lives, unless they are cut off in midstream at a happy juncture, end in failure.”

  • Big, bigger, biggest

    It’s an intimidating number. But the liquid US loan market is more than equal to the task of syndicating the US$100bn of committed debt facilities backing chipmaker Broadcom’s US$121bn bid for Qualcomm.

  • Taxpayers’ delight

    The roller-coaster ride experienced by financial markets last week was matched by the roller-coaster ride in bankers’ emotions.

  • Logo of China Evergrande Group

    Bullying tactics

    Evergrande’s latest capital markets outing is a stark example of the kind of bullying tactics investors often have to put up with in Asia.

  • Compression session

    Remember those convergence trades in anticipation of the euro, when the likes of Italy saw their bond yields rally to levels close to those of Germany?

  • Swap this

    The finance industry has a well-developed ability to punch itself in the face. But no part of the market is better at doing that than the credit default swap market.

  • Don’t look back in anger

    Remember when, 15 years ago, HBOS issued the first UK covered bond? Suddenly, UK high street lenders were able to tap this long-standing sector for wholesale secured funding, in addition to selling billions of dollars of RMBS.

  • On the spot

    ECM bankers are understandably nervous about Spotify’s decision to shun an IPO and list without a placing.

  • Ding dong merrily on high

    Christmas has come early for investment banks this year. Last week, the annual haul of fees that banks earn from underwriting and advisory work crossed the US$100bn threshold for only the second time in the industry’s history – the only other time was 2007.

  • Made to be broken

    Last week the three main US bank regulators, including the Federal Reserve, told Congress they would consider revising the post-crisis guidelines on leveraged lending. It was a victory for Republicans trying to roll back financial regulation – or at least it looked like one.

  • Answers required

    It’s a frightening prospect that, a month before one of the biggest regulatory changes in European financial markets history comes into force, bond bankers are still in the dark about how their businesses will be affected.

  • On yer bike

    “HSBC likes nice people,” said one banker when asked last week why co-head of global banking Matthew Westerman is suddenly leaving the bank.

  • Talking junk

    For all the panicky headlines last week about the end of the world in junk bonds, the sector isn’t really in bad shape at all.

  • Toughing it out

    Is it time to batten down the hatches in EM?

  • Get on with it

    What is Venezuela’s President Maduro up to? On the face of it, his decision to make nearly US$2bn in principal payments on sovereign and state-owned oil company bonds – and then declare that he is looking to restructure the country’s debt – makes no sense.

  • Mind-blowing yoghurt

    Just when you think pricing on bond deals couldn’t get more irrational, along comes a trade that appears to defy all logic.

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