Top Stories from IFR Magazine
Greece’s first bond issue since it inflicted painful losses on bondholders two years ago has been hailed as the kick-start the country needs to drag itself out of the financial crisis and the latest sign that Europe has turned a corner on its crisis.
JP Morgan’s chief executive Jamie Dimon’s warning, in his annual letter to shareholders, that the cost of providing committed undrawn revolving credits, trade finance and standby letters of credit could rocket has once again highlighted the heavy losses that banks are taking to give clients cut-price loans under the new capital regime.
Investors desperate for higher-yielding securities are snapping up bonds on offer from speculative-rated countries, potentially ignoring associated political risks in the process.
WH Group launched its jumbo Hong Kong IPO at a more conservative price than expected as investors took a cautious stance on the Chinese pork producer’s ability to meld with US-based Smithfield Foods, which it bought last year.
Bankers are taking no chances on the jumbo €6.55bn loan package backing Numericable’s acquisition of French telecoms firm SFR, with pricing set at a level to minimise market risk on a landmark deal expected to soak up liquidity and reduce the heat in the leveraged loan market.
Ally Financial’s transition from government to private hands is off to an ignominious start. An all-secondary sale by the US Treasury in the US$2.38bn IPO of the former General Motors financing arm was followed by profit-taking by investors that participated in a series of private sales of stock in recent months.
Regulators should review the business model of clearing houses that handle over-the-counter derivatives to ensure they can withstand future crises, a senior investment banker said last week, pointing out that the capitalisation of Europe’s leading central counterparties was around one-thousandth that of the European banking system.
Regulatory efforts to tackle the “too big to fail” issue could be nearing a conclusion as legal impediments surrounding swap termination rights that have been hampering a cross-border resolution regime for financial institutions look set be resolved in the coming months, eradicating the threat of future taxpayer bailouts.
US private equity firm Cerberus Capital Management shocked Japan’s financial markets when it ditched plans to sell part of its stake in conglomerate Seibu Holdings at the eleventh hour. The move came in response to a significant cut in the company’s valuation for the IPO and reduced expected proceeds by ¥136bn (US$1.3bn).
Indian issuers are rushing to the offshore bond market to cash in on the pre-election euphoria as investors bet that the next government will move forward with key reforms. Last week, two Indian companies printed offshore bonds amounting to US$2.25bn, marking the busiest week for issuance from the country in the dollar market since May 2011.
Private equity firm Blackstone is set to launch a US$4.2bn financing to back its US$5.4bn acquisition of auto parts maker Gates Global. The deal is the second-largest US leveraged buyout financing of the year, according to Thomson Reuters data, and is also the largest private equity buyout of an industrial company in more than four years.
Syndicated lending in EMEA fell to US$140bn in the first three months of 2014. This was the lowest first-quarter volume since 2004, as the market suffered from a fall in refinancing, the continued absence of large-scale M&A financings and increased competition from the buoyant bond and equity markets.
Greece is planning to return to the international bond market this month, four years after it became the first eurozone country to be bailed out and only two years since defaulting on its debts. With the country showing signs of pulling out of a crippling recession, the government aims to raise €2bn in a sale of five-year bonds, bankers told IFR last Thursday.
Pakistan is marketing its first US dollar bond in seven years. A successful deal would make it one of the lowest-rated countries to sell international debt. Investors will be concerned by political risks and economic uncertainties, but sentiment is improving.
The UK’s National Audit Office’s report into the £1.98bn privatisation of Royal Mail Group has concluded that the UK government had been cautious in pricing last year’s IPO in order to provide certainty of success against a backdrop of terrible industrial relations – but that the deal could have provided better value for the taxpayer.
Brazilian telco Oi has finally launched a share offering of up to US$10.6bn, with all of the 14 banks originally mandated for the deal remaining on board despite a row over whether the deal would be backstopped and a temporary suspension of the trade.
Market-maker/high-frequency trading firm Virtu Financial remains intent on launching its IPO as early as April 21, despite opting last week to delay the deal due to controversy stemming from renowned author Michael Lewis’ newly published book, “Flash Boys: A Wall Street Revolt”.
*Updates Ukraine’s downgrade by Moody’s
Japanese real estate investment trusts have been on a roll since the introduction of Abenomics. But Japan’s consumption tax hike is set to test the durability of the country’s REIT market amid concern that weaker spending could undermine a recent recovery in property prices that was spurred by Prime Minister Shinzo Abe’s loose monetary policies.
Credit risk stemming from bank derivative activities has dipped to its lowest level since the crisis, suggesting that industry and regulatory efforts to reduce risk are having the desired effect. However, the real driver has been low rates volatility that has created stable swap book valuations – something that could quickly change as the Fed cranks up its tapering efforts.