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’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’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.
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.
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.
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.
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.
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.
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.
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.