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Saturday, 13 February 2016

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Wolfgang Schaeuble

​Not fit for purpose

IFR 2120 13 February to 19 February 2016

It wasn’t meant to be this way. When regulators cooked up the next generation of subordinated debt instruments after the financial crisis, they were clear about what this new generation of bonds should do: absorb losses, help a struggling bank get back on its feet, and give it breathing room in times of stress.

Top News

Canary Wharf financial district

AT1 collapse adds to pressure on banks

IFR 2120 13 February to 19 February 2016 By ,

European banks are facing the humiliating prospect of a fresh round of equity issuance and asset cuts after a collapse in the Additional Tier 1 bond market left the industry’s capital plans in tatters.

Deutsche Bank headquarters in Frankfurt

Doubts surround Deutsche’s US$5.4bn buyback

IFR 2120 13 February to 19 February 2016 By Alex Chambers,

Deutsche Bank’s offer to buy back €3bn and US$2bn of senior unsecured debt certainly helped soothe the markets on Friday, but investors were less sure about the move’s long-term impact.

LeasePlan logo

LeasePlan LBO bond pulled

IFR 2120 13 February to 19 February 2016 By Robert Smith

LeasePlan’s shock decision to pull a €1.55bn-equivalent LBO bond has made the prospect of hung bridges very real in Europe, although banks are not yet burdened with a massive backlog of stuck paper akin to that in the US high-yield market.

Scandinavian Tobacco Group logo

Europe trumps US in IPO test

IFR 2120 13 February to 19 February 2016 By , , Graham Fahy

European equity issuers passed their biggest test of the year, overcoming market volatility to price four floats in what was the busiest week of IPOs so far this year and outpacing the US, where both major deals were cancelled.

Solera Holdings logo

Solera debt offer tests appetite for leverage

IFR 2120 13 February to 19 February 2016 By , Robert Smith

Software company Solera may face an uphill battle as it tries to lure investors into a US$4bn debt sale backing its buyout by Vista Equity Partners.

Amec Foster Wheeler coin

Amec pays high price to refinance bridge

IFR 2120 13 February to 19 February 2016 By , Tessa Walsh

UK engineering and construction company Amec Foster Wheeler is trying to close an expensive £1.7bn syndicated loan that refinances existing loans after proving unable to tap the bond market.

Mario Draghi

Systemic risks rise sharply

IFR 2120 13 February to 19 February 2016 By

Concern over a new European systemic crisis has risen sharply in recent days as wider swap spreads and higher short-term funding costs indicate increasing pressure on interbank markets.

Lisbon skyline

Junk threat hits Portugal

IFR 2120 13 February to 19 February 2016 By

Portugal’s government bond yields have risen to their widest levels in almost two years as worries grow that a downgrade could bar the country’s bonds from the European Central Bank’s quantitative easing programme.

Mauricio Macri

Advantage Argentina in holdout battle

IFR 2120 13 February to 19 February 2016 By

Argentina may soon regain access to the international capital markets and get the go-ahead to renew payments on defaulted bonds after gaining the upper hand in debt talks with so-called holdout investors.

Dell logo

Dell’s US$10bn loans for EMC buy stall

IFR 2120 13 February to 19 February 2016 By

The commitment deadline on US$10bn of pro rata loans in a US$45bn financing package backing computer giant Dell’s purchase of data storage products maker EMC Corp has been extended due to a slow order book in turbulent markets.

IFR Magazine Top News in Full (subscription required)

People & Markets

Societe Generale headquarters

Societe Generale adds to bank worries

IFR 2120 13 February to 19 February 2016

Societe Generale has joined a growing list of European banks to worry investors that it faces a difficult year after being hit by a combination of litigation costs, losses from oil loans and a tough trading environment.

keith mullin

Should Credit Suisse go for all-out break-up?

IFR 2120 13 February to 19 February 2016

HAVE THINGS GOT so bad at Deutsche Bank and Credit Suisse that swirling chatter about break-up and solvency can be taken seriously? Is there a risk that Tidjane Thiam and John Cryan could lose, are in fact losing or indeed have already lost the confidence of their boards, executives, employees, shareholders and the broader ecosystem as they struggle to convince anyone (really) that their strategies are rock-solid and credible?

Credit Suisse

​Deferring bonuses can backfire

IFR 2120 13 February to 19 February 2016

Deferred bonuses, designed to make investment banks safer, may instead leave them more vulnerable as they look to cut costs. Before regulators pressed banks to reform their pay practices, the bulk of compensation was in simple cash bonuses awarded and paid out each year.

Barclays bank logo

Barclays hires again from JP Morgan as calls rise for radical action

IFR 2120 13 February to 19 February 2016

Barclays has hired a fourth senior banker from JP Morgan as the British bank’s new chief executive Jes Staley turns to former colleagues to push through his turnround plans.

Commerzbank logo

​Corporate finance boost for Commerzbank

IFR 2120 13 February to 19 February 2016

Commerzbank wants to expand its corporate finance business further outside Germany into Britain, Switzerland and other European countries to take advantage of peers who are withdrawing from such markets.

    More from People & Markets

    Bonds

    Logo of the European Banking Authority

    Regulatory fog wreaks AT1 havoc

    IFR 2120 13 February to 19 February 2016

    Regulatory uncertainties are adding to the woes of the Additional Tier 1 market, which has been left reeling by worries about Deutsche Bank’s ability to pay forthcoming coupons.

    Aussie covered revival on hold

    IFR 2120 13 February to 19 February 2016

    Australia’s major banks are unlikely to turn to the domestic covered bond market despite the potential for bigger savings as senior unsecured funding costs march higher.

    Abengoa asks for loan of up to €750m - source

    IFR 2120 13 February to 19 February 2016

    Spain’s Abengoa has asked its creditors for a loan of up to €750m to keep it afloat while its lenders discuss a financial plan to avoid it becoming Spain’s biggest bankruptcy, a source close to the talks said.

    Cracks start to show in AT1 investor base

    IFR 2120 13 February to 19 February 2016

    The sell-off in AT1s has stoked fears that its investor base in Europe may be more fragile than was thought, almost three years on from BBVA’s inaugural trade.

    United Technologies logo

    US companies set to keep on coming

    IFR 2120 13 February to 19 February 2016

    US companies are lining up euro deals that could give the moribund European corporate bond market a much-needed boost after a dire start to the year.

      More from Bonds

      Loans

      A Keurig Green Mountain brewing machine

      ​European investors embrace Keurig

      IFR 2120 13 February to 19 February 2016 By Hannah Brenton

      US coffee maker Keurig Green Mountain more than tripled its euro-denominated Term Loan B to €842m from €250m, allowing it to price the debt lower than if it had been placed in the weaker and more volatile US leveraged loan market. The facility forms part of an overall US$6.4bn buyout loan.

      INEOS flag

      ​European secondary prices start to mirror US weakness

      IFR 2120 13 February to 19 February 2016 By , Hannah Brenton

      European secondary loan prices fell below 98% of face value last week as the market starts to succumb to the weakness that is dragging US secondary prices lower as fears of a global recession mount.

      Endurance International logo

      Lead banks fund Endurance loan after failed sell-down

      IFR 2120 13 February to 19 February 2016 By Jonathan Schwarzberg

      Banks leading the US$1.25bn in loans and bonds backing Endurance International Group’s US$1.1bn acquisition of online marketing company Constant Contact have been forced to fund the transaction themselves after failing to sell the deal, with bankers saying market volatility and regulatory concerns about the companies hampered investor interest.

      Markit logo

      Markit acquires software to speed up syndication

      IFR 2120 13 February to 19 February 2016 By Kristen Haunss

      Markit, the financial data company, has acquired systems integration software from JP Morgan that will help to connect different loan processing programs and reduce the time it takes to close the sale of a syndicated loan.

      Webhelp office

      Investors question looser terms on LBO loans

      IFR 2120 13 February to 19 February 2016 By Hannah Brenton

      Investors are pushing back against looser US-style incurrence documents on European leveraged buyout loans perceived as being weaker credits at a time of turmoil in the broader financial markets and an uncertain global economic outlook.

      Ball Corp logo

      ​Ball rolls out US$3.9bn refi

      IFR 2120 13 February to 19 February 2016

      Metal and plastic food packaging supplier Ball has launched syndication of around US$3.9bn in senior secured loans.

      Gazprom logo

      Gazprom seeks US$2bn loan

      IFR 2120 13 February to 19 February 2016 By Sandrine Bradley

      State-owned gas giant Gazprom is looking to raise a US$2bn syndicated loan from international banks.

      Amec Foster Wheeler coin

      Amec pays high price to refinance bridge

      IFR 2120 13 February to 19 February 2016 By , Tessa Walsh

      UK engineering and construction company Amec Foster Wheeler is trying to close an expensive £1.7bn syndicated loan that refinances existing loans after proving unable to tap the bond market.

      More from Loans

      Equities

      cigar smokes

      Bankers break out the Cohibas

      IFR 2120 13 February to 19 February 2016

      Scandinavian Tobacco Group made its trading debut last Wednesday, having survived the market turmoil to become the largest tobacco IPO since Caroline Group came to the market in 2002.

      Saipem logo

      Underwriters stuck with Saipem

      IFR 2120 13 February to 19 February 2016

      Underwriters are blaming arbitrage traders for a surge of selling in Saipem that pushed the share price below the subscription level on its €3.5bn rights issue, sticking them with almost €427m of unwanted shares.

      AveXis logo

      Biotech IPOs test market tolerance

      IFR 2120 13 February to 19 February 2016

      Biotechs, the sole bright spot of the US IPO market in 2016, are not impervious to the brutal markets conditions. Arguably, they are more susceptible given thin, concentrated bookbuilds that can see stocks whipsawed if just one or two investors break (or join) the ranks.

      Franco-Nevada logo

      Canada: Franco-Nevada glitters on gold recovery

      IFR 2120 13 February to 19 February 2016

      As the financial rout takes hold, investors are piling into gold as a safe haven to recessionary/deflationary fears and as central banks move to low or negative interest rate policies. Spot prices are up 18% for the year and precious metals funds year-to-date have taken in US$2.8bn, including US$631.1m this past week, Lipper Analytics reported.

      India: State pushes US$1bn buybacks

      IFR 2120 13 February to 19 February 2016

      The Indian government is asking state-owned companies to buy back shares totalling Rs70bn (US$1bn) that it controls to raise funds, though weak prices have nearly shut the window to sell stock in the market.

      India: BSE hires Edelweiss as IPO lead

      IFR 2120 13 February to 19 February 2016

      Bombay Stock Exchange has hired Edelweiss Financial Services as lead for its proposed IPO of Rs10bn (US$150m), with responsibility to prepare the related documents.

      Netherlands: Sif fails despite last-ditch effort

      IFR 2120 13 February to 19 February 2016

      There was disappointment as bookbuilding ended for Sif’s IPO on Thursday, as a last-minute restructuring of the offering for the maker of foundations for wind turbines failed.

      US ECM stuck in deep freeze

      IFR 2120 13 February to 19 February 2016

      US ECM bankers experienced the slowest week of the year for deal flow last week, but may have to get used to an equity issuance freeze for at least a few weeks, possibly longer.

      More from Equities

      Derivatives

      BNP logo

      EQD models set to be tested

      IFR 2120 13 February to 19 February 2016 By

      Equity derivatives business models are being put to the test as an elevated volatility regime drives dispersion in trading revenues across the main dealers.

      CFTC building in Washington, DC

      US, EU reach equivalence agreement

      IFR 2120 13 February to 19 February 2016 By Mike Kentz

      Regulators in the US and Europe have ended a stalemate over the cross-border recognition of each other’s frameworks for the clearing of over-the-counter derivatives.

      Financials CDS performance

      Deutsche CDS hits wides

      IFR 2120 13 February to 19 February 2016 By

      Credit default swaps referencing Deutsche Bank hit four-year wides on Thursday after plans to write down the value of its Postbank retail unit by a third added to concerns surrounding the bank’s capital levels and its ability to meet coupon payments on Additional Tier 1 bonds.

      ICE Clearing relents after bank CDS pressure

      IFR 2120 13 February to 19 February 2016 By

      ICE Clear Credit has responded to dealer protests over its requirement that they provide the clearinghouse with credit default swap prices daily, saying it is considering a change to the protocol.

      Swap dealer thresholds diverge

      IFR 2120 13 February to 19 February 2016 By Mike Kentz

      A final rule defining the amount of swap activity that would force an entity to register as a swap dealer passed unanimously at the Securities Exchange Commission this week – while the CFTC came under fire from the House Appropriations Committee for its finalised version of the same rule.

      More from IFR Derivatives

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      Capital CityCapital City logo    

      The Citigroup building in New York

      Some US$75bn of IG debt could become junk in 12 months – Citigroup

      12 February 2016 By Hillary Flynn

      Some US$75bn of investment-grade debt issued by over 130 companies could fall into junk territory in the next 12 months, said Citigroup’s credit strategists in a note on Friday.

      Pemex logo

      Pemex taps alternative funding source in KKR loan

      12 February 2016 By

      A US$1.35bn loan to finance KKR’s purchase of Pemex assets could be the first of several such transactions as the Mexican state-owned oil company seeks to tap alternative funding sources.

      Daniel Pollack

      Argentine debt talks to continue – mediator

      12 February 2016

      (Reuters) - Argentina’s ongoing sovereign debt settlement talks will continue despite no resolution between the government and four remaining major holdout creditors, court-appointed mediator Daniel Pollack said in a statement on Friday.

      Endurance International logo

      Devil in the details as IG/HY spreads widen

      12 February 2016 By

      The spread between US high-yield and high-grade bonds spreads hit 666bp this week – the widest gap in five years as turmoil in the junk bond market escalated.

      A tram in downtown Lisbon

      Junk threat looms over Portugal

      12 February 2016 By

      Portugal’s government bond yields have risen to their highest levels in almost two years as worries grow that a downgrade could bar the country’s bonds from the European Central Bank’s quantitative easing programme.

      Deutsche Bank headquarters in Frankfurt

      DB confirms buyback, AT1s shrug off downgrade

      12 February 2016 By Alex Chambers

      Deutsche Bank announced a tender to buy back €3bn of euro and US$2bn of dollar-denominated senior unsecured debt, some of it sold just weeks ago.

      Sime Darby logo

      Sime Darby readies perpetual sukuk for debt refinancing

      12 February 2016 By Kit Yin Boey

      Malaysian conglomerate Sime Darby is preparing to market subordinated perpetual Islamic notes to refinance debt and meet working capital needs.

      P&M: DBRS hires former Fitch CEO Joynt as chairman

      12 February 2016 By

      DBRS Group, the parent company of rating agency DBRS, has appointed the former CEO of Fitch Ratings as its executive chairman.

      Deutsche Bank CDS hits four-year wides

      11 February 2016 By

      Credit default swaps referencing Deutsche Bank hit four-year wides this morning after plans to write down the value of its Postbank retail unit added to concerns surrounding the bank’s capital ratios and its ability to meet coupon payments on AT1 bonds.

      LeasePlan logo

      UPDATE – LeasePlan postpones €1.55bn LBO bond – sources

      11 February 2016 By , Robert Smith

      LeasePlan has postponed a €1.55bn-equivalent holding company bond backing its leveraged buyout after a savage sell-off in financial debt forced underwriters to yank the deal from market.

      Schlumberger headquarters

      US companies tipped to sell euro debt in record numbers in 2016

      11 February 2016 By , Hillary Flynn

      US companies are lining up euro deals that could give the moribund European corporate bond market a much needed boost after a dire start to the year.

      BNP Paribas logo

      Negative convexity: AT1's very own doom spiral

      11 February 2016 By

      The sell-off in Additional Tier 1 bonds has been exacerbated by a phenomenon known as negative convexity, which is putting pressure on the already shaky asset class and threatening to keep bond prices at low levels and funding costs high.

      Starbucks logo

      US primary bond market shut for fifth straight day

      11 February 2016 By , Hillary Flynn

      Bankers again scrapped plans to sell new US corporate bonds on Thursday, the fifth consecutive day without issuance as the primary market was rocked by broader volatility.

      Moody's sign

      UPDATE – Rating agencies see 2016 uptick in junk-bond defaults

      11 February 2016 By

      Rating agencies said Thursday they expect high-yield bond default rates to increase by the end of 2016, as depressed commodity prices keep borrowers under pressure.

      Alstria Office logo

      Triple B REITs struggle with premiums

      11 February 2016 By

      Real estate firms Carmila and Alstria could be putting their bond deals on ice as they struggle to accept the high premiums required to print Triple B deals in turbulent market conditions.

      Deutsche Bank headquarters in Frankfurt

      Rally in Deutsche Bank debt short-lived

      11 February 2016 By

      Deutsche Bank bonds restarted their downward march on Thursday after a rally following rumours of a debt buyback proved short-lived.

      All Latest news

      Bank of the Year: UBS

      Bank of the Year: UBS

      IFR Review of the Year 2015 By

      How often has any bank been able to lay genuine claim to creating a benchmark for how the business is conducted? Faced with some tough decisions about its own future amid the chaos of the new order, UBS fashioned an innovative and sustainable operating model that is now a blueprint for others to follow. It is IFR’s Bank of the Year.

      IFR Awards 2015

      IFR Awards 2016

      IFR Awards dinner raises £1.22m for Save the Children

      01 February 2016

      The IFR Awards dinner on January 27 raised £1.22m for Save the Children with the banking community once again pledging large sums in support of the charity. Bank of the Year UBS and UBS Optimus Foundation together donated a record £800,000 to be named bookrunner.

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

      Bellwether

      IFR 2120 13 February to 19 February 2016

      HOLLYWOOD A-LISTER and pint-sized Scientologist Tom Cruise is uppermost in Bellwether’s mind this week thanks to the work of Michael Every, head of financial markets research for Asia Pacific at Rabobank.

      Opinion

      keith mullin

      Should Credit Suisse go for all-out break-up?

      HAVE THINGS GOT so bad at Deutsche Bank and Credit Suisse that swirling chatter about break-up and solvency can be taken seriously? Is there a risk that Tidjane Thiam and John Cryan could lose, are in fact losing or indeed have already lost the confidence of their boards, executives, employees, shareholders and the broader ecosystem as they struggle to convince anyone (really) that their strategies are rock-solid and credible?

      Peters 475px June 2014

      A correction turns to a rout

      WHAT STARTED OUT at the beginning of the year looking like a bit of a correction in the way risk was being priced really does look as though it is turning into a rout. Bottom fishers have a few decent days and then, whoosh, they find themselves right back in the jaws of the bearish sentiment that continues to stalk markets.

      James Saft - June 2014

      Desperately seeking alternatives to negative rates

      The basic problem with negative interest rate policy is that it gelds the banking system, says James Saft.

      John Plender

      Case for optimism rests on policy

      With Europe, Japan split, US and China can act.

      keith mullin

      Jes Men: Building a poor man’s JP Morgan

      Well that didn’t last long, did it?

      James Saft - June 2014

      Falling knives really do cut

      Buying shares that have been hit hardest is not a winning strategy, says James Saft.

      James Saft - June 2014

      The Geithner Asset Relief Program and the revolving door

      James Saft on JP Morgan’s loan to Tim Geithner.

      David Cameron

      After immigration, it’s London vs the euro area

      Europe starts preparing for future without the UK.

      OMFIF

      Europe’s three psycho-battles

      Spectre of ‘winner takes all’ in north-south split.

      keith mullin

      Goldman tools up for trouble

      DO GOLDMAN SACHS’s most recent executive shifts give away valuable clues as to how investment banks’ corporate and institutional clients will need to be serviced as this treacherous market gives rise to all sorts of doom and gloom scenarios and outlooks, and market-structure shifts in FICC call for new ideas?