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Tuesday, 22 January 2019

Upfront

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  • Going Stateside

    It’s one of the oddities of the sovereign market that eurozone governments rarely visit the US dollar market. Sure, the euro provides plenty of home comforts. But given that many of these sovereigns have billions of euros of annual gross funding needs, it’s bizarre how they continue to eschew the biggest bond market in the world.

  • Desert storm

    What do Boeing, GE, Bechtel and Rolls-Royce (to take a random sample) have in common with BNP Paribas, Citigroup, HSBC and JP Morgan?

  • IPO interference

    Asia’s equity underwriters are caught between a rock and a hard place. After a dismal end to 2018, the pressure is on to reopen markets. The right approach, however, seems to be open to debate.

  • Taking a ride

    A couple of ride-sharing unicorns butting heads could make a fascinating spectacle in the US IPO market next year.

  • Smashing a window

    Well done, Indonesia. The stand-out deal of the last week in Asia’s capital markets came from – of all places – the Indonesian government.

  • Statement trade

    Sometimes it’s best to keep your head down, let the bad noise fade and show the market a bit of respect. But that’s not the way Russia likes to do things in the international bond markets.

  • New London landmark

    The introduction of the Shanghai-London stock trading link has enormous political significance for the governments at each end of the connection. In capital markets terms, however, its success will boil down to two things: price, and liquidity.

  • Times they are a-changin’

    The year opened with a bang for the German covered bond market when a €1bn January 2025 Pfandbrief issue for market darling LBBW was priced at an eye-watering 20bp through mid-swaps, the sector’s tightest in memory.

  • Time to move on

    The one undeniably good outcome for Mozambique after it reached an agreement in principle with bondholders last week is that an end is finally in sight to a sorry saga that began with the issuance of “tuna bonds” in 2013.

  • Not so grand

    In normal circumstances, raising close to US$2bn in the high-yield bond market would be cause for celebration. China Evergrande, however, might want to hold off on the baijiu after its latest offshore financing.

  • This time it’s different

    International regulators including the US Federal Reserve and the Bank of England are lining up to take a pop at leveraged loans as the next instrument of financial destruction. Last week, it was former Fed Chair Janet Yellen’s turn to highlight the risks.

  • 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?

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