Dubai World guarantee might prove worthless 30 Nov 2009 The emirate s holding company guaranteed a $3.5bln bond issued by its now troubled property subsidiary Nakheel. Dubai World has some juicy assets, including control of ports operator DP World. But foreign creditors might find it hard to convince local lenders to sue.
Federal Reserve can’t have it both ways 30 Nov 2009 The US central bank wants to retain its distance from Congress, particularly on monetary policy while keeping or even expanding its already beefed up responsibilities for bank regulation. It s a tricky balance. There are arguments for both, but reconciling them is a challenge.
CDS defenders protest too much 30 Nov 2009 Credit swaps are under fire. Now ISDA, the derivatives trade body, is fighting back. It s right to debunk the idea that CDS traders can make an easy killing from a company s death spiral. But CDS do modify creditors behavior. ISDA should be looking for solutions, not objecting.
Living wills should be open-minded on bank models 30 Nov 2009 Blueprints for dismantling failing banks are in vogue. The dominant idea is that firms should reorganise into separately capitalised subsidiaries. But that might hurt business without necessarily making things safer. Living wills should be flexible towards bank structures.
Depositors at risk in Hugo Chavez-land 30 Nov 2009 Venezuela's closure of four banks probably isn t a sign of wholesale bank nationalization. The group s owner was a proChavez tycoon who is now under arrest. But Chavez's harsh views on banks suggest further seizures to come, and deposit insurance is very limited.
Liberals and Tories point right way on UK taxes 30 Nov 2009 The Liberal Democrats plan to raise the tax threshold substantially would help the poor and the country, but their mansion tax on the rich doesn t seem worth it. Conservative ideas on corporate tax look good. The UK needs to rethink its tax system to encourage work and output.
Dubai pain looks manageable for Abu Dhabi lenders 30 Nov 2009 Banks in Abu Dhabi have reportedly lent over $2.2 billion to finance Dubai s property follies. Recapitalisations may be needed. Abu Dhabi can afford to shore up its banks, but the Dubai debacle could still have a lasting impact on their funding costs and topline growth.
Abu Dhabi pick ‘n mix bailout sounds sensible 29 Nov 2009 The rich emirate seems about to support its struggling neighbour Dubai but only on a casebycase basis. Abu Dhabi s priority should be to stop a bank run. And although it may also make sense to cherrypick some Dubai assets, that doesn t mean bailing out Dubai World.
Borders UK’s demise was written on the wall 27 Nov 2009 Don t blame overleveraged private equity investors or the recession. UK bookseller Borders went into administration for a good old fashioned reason its business model didn t work any more. Online retailers and supermarkets have made life tough for highstreet booksellers.
UK commercial property needs more Dubais 27 Nov 2009 Prime real estate yields are tightening fast. Historically low rates are inflating a bubble, because global demand for yield is chasing a shrinking stock of prime assets, bidding prices up. Indebted foreigners who need to sell rather than keep buying could relieve the pressure.
Dubai shock won’t sink foreign banks 27 Nov 2009 Shares in banks that lent to Dubai World plunged after the stateowned holding company announced a standstill on debt payments. But the possible losses don t look very large, unless the whole oilrich UAE comes undone. Dubai s neighbours are more likely to reduce lenders pain.
Dubai’s careful plan claim a bad joke 27 Nov 2009 The emirate may have needed to restructure Dubai World s $59bln debts. But the way it has communicated its intended default is appalling. Dubai now says the move was carefully planned and a sensible business decision. But its reputation will struggle to recover from the blow.
Further yen rise would provoke intervention 27 Nov 2009 The yen shouldn t be climbing. A soaring yen will make Japan's newly returned deflation worse. And with government debt rising towards twice GDP, deflation is the last thing Japan needs. If the yen keeps rising, the authorities will step in. Intervention would be the lesser evil.
Dubai’s debt writedowns don’t look huge 27 Nov 2009 Facts are scarce, but Dubai World is supposed to hold three quarters of the emirate s debt. The holding company had $59bln of liabilities at the end of 2008, and $40bln of equity. Even after a deep fall in the property market, it s hard to see how losses can exceed $1020bln.
Markets overreact to Dubai damage 27 Nov 2009 Even a total meltdown in the emirate would probably cost foreign lenders far less than enough to justify the huge global selloff in risky assets. Dubai s problems might presage another credit crunch, but for now it looks more like markets are getting carried away.
Limits to stimulus start to appear 26 Nov 2009 Huge fiscal deficits and ultralow interest rates have boosted many markets and helped end the global recession. But Dubai s troubles show the official blitz can t erase all the excesses of the credit boom. And the dollar s fall looks like a dangerous side effect of easy money.
Walker does what he can for UK bank governance 26 Nov 2009 The former civil servant and current Morgan Stanley advisor has done what the government asked him to: provide solid ideas for improving bank boards. There are no radical plans for waking up dozy UK shareholders. But then again, that once mighty group hardly matters any more.
Political murders add to Filipino woes 25 Nov 2009 The Philippines hasn t had a bad crisis, thanks to money sent home by exported workers. But crony capitalism and poor governments have held back growth for decades. Monday s politically motivated murder of 50 people adds another reason for much needed foreigners to stay away.
Do US retail stocks still have room to run? 25 Nov 2009 Consumer confidence has nearly doubled from its lows and the savings rate is trending down. After buying houses and cars aided by government subsidies, Americans have gotten back to spending. But for investors, the best deals may have already occurred.
France Telecom’s Swiss merger betters UK model 25 Nov 2009 The French operator is bigger in the UK than Deutsche Telekom, but still had to settle for a 5050 joint venture. In Switzerland, it s smaller than Denmark s TDC, but if the regulator approves, FT will get 75 percent. FT gains from TDC s private equity owners desire for an exit.
Next Mexican crisis could come soon 25 Nov 2009 Fitch s ratings downgrade was a warning. Mexico s oil production is declining rapidly, its exports even faster. Nonoil state revenue is far below global norms. With tax evasion, huge inequality, political stasis, economic stagnation and an antimarket outlook, crisis looms.
WestLB shows how brinkmanship works now 25 Nov 2009 Lehman was allowed to fail. Lesson learned. The UK secretly passed cash to RBS and HBOS at the last minute in 2008. And when WestLB s savingsbank owners threatened to leave the German lender for dead, the government said no. The threat of big bank collapse concentrates minds.
Spain can’t afford to duck reform 25 Nov 2009 Spain may already be growing, sooner than many economists expected. But while the turn may be quicker, the recovery is still set to be weak. Spain s big structural problems have not been addressed. The need to reform the labour market is as great as ever.
Vietnam is like China – with an East European flavor 25 Nov 2009 Like China, Vietnam continued growing through the slump, giving output an extra fiscal stimulus boost. But Vietnam also had inflation, foreign hot money and a payments deficit. It s unsurprising it ran into problems afflicting economies elsewhere, and had to devalue.
Dubai bites the bullet on debt 25 Nov 2009 One of the emirate's big holding companies, Dubai World, is asking creditors for a standstill. That would amount to a technical default. Dubai proved it can still tap neighbour Abu Dhabi for loans, but it's right to try first to restructure the $60 bln debt.
Lloyds may be ready to try out capital markets 24 Nov 2009 A heavily discounted £13.5bln rights issue will let the UK bank avoid the state s costly insurance scheme. As the crisis fades, Lloyds can move forward, even into capital markets. That sounds risky, but a joint venture with a UK broker could be a postrecession winner for Lloyds.
UK plc suffers from small corporate bond market 24 Nov 2009 London is supposed to be European centre of financial markets. But when it comes to corporate bonds, France and Italy are twice the size. Firms of all shapes and sizes have been selling shares, but only the strongest can tap the fixedincome market. That should change.
Hershey investors should beware Cadbury bid math 24 Nov 2009 To buy the UK confectioner, the U.S. candy company would need to raise $6 blnplus of equity while still allowing the Hershey Trust to retain firm control. The financing math could work, but investors should demand serious sweeteners before handing Hershey any cash.
Informa deal machine goes into overdrive 24 Nov 2009 The UK publisher has another big deal in its sights: the German Springer. The mooted E2.5bln price sounds cheap in some ways. But even with synergies, Informa would need a massive rights issue to pay for Springer. Its acquisitive history will help it get away with such moxie.
Cameron’s forked tongue damages deficit crackdown 24 Nov 2009 The UK s probable next PM had been doing an admirable job softening up the electorate for fiscal retrenchment. But now he has spoilt the effect by promising an emergency growth budget. Even if the plan has little substance, the rhetorical uturn is unfortunate.