Corporate Debt

PetSmart shows lenders need more bite than bark

9 January 2019

Apollo Global helped finance the private-equity-owned company, only to see it transfer part of a key subsidiary to owner BC Partners as a dividend. Now Apollo is suing to get the assets back on leash. Lenders would do better to insist on much tighter covenants from the get-go.

GE aircraft-leasing sale would be $40 bln moonshot

8 January 2019

Buyout firm Apollo may bid for the best bit of GE’s finance arm, testing CEO Larry Culp’s commitment to decluttering the U.S. conglomerate. Unless he can get a knockout price, though, selling a crown jewel could leave Culp looking like he’s out of options.

Warren Buffett finds value in Sears wreckage

7 January 2019

The Berkshire Hathaway boss owns a stake in Seritage, the real-estate firm spun off from the bankrupt retailer. Revamping vacant Sears properties is driving growth and reducing dependence on the ailing chain. But true to form, Buffett has protected his investment with a loan.

Overleveraged AT&T is a magnet for activists

26 December 2018

Boss Randall Stephenson has piled on over $180 bln of debt to add entertainment to the U.S. telco’s core business. It’s a risky strategy, and any missteps could make AT&T look a bit like fallen icon General Electric. Breakingviews imagines a missive from a restive shareholder.

Greek bad-loan rescue relies on government padding

21 November 2018

Greece’s central bank is working on a deal to securitise up to 42 billion euros of lenders’ bad debts. The plan uses tax credits from the over-indebted sovereign to help banks shift loans without too much pain. That will require a loose interpretation of EU state-aid rules.

GE may be canary in credit market’s coal mine

15 November 2018

The firm’s bonds tanked this week even as an asset sale briefly lifted its shares. That’s a warning shot for all credit investors. U.S. companies carry more debt than ever, and quality has deteriorated. Rising interest rates and slowing growth could make this a big problem.

GE boss could face his own goodwill writedown

12 November 2018

The firm’s stock sank anew on Monday despite Larry Culp’s vow to speed asset sales. Repeated failures to draw a line under power woes and other liabilities have shredded GE’s credibility. The new chief risks falling into the same trap, and losing investors’ confidence.

Evergrande’s bond bravado baffles bystanders

1 November 2018

The indebted Chinese developer issued $1.8 bln of dollar bonds at eye-watering coupons, but sold $1 bln to its chairman. With housing looking toppy, the yuan sliding, and a listing in the works, Evergrande has a lot of balls in the air. This gesture confuses more than it amuses.

Bond investors add fuel for Uber’s profit bonfire

18 October 2018

The ride-hailing company has tapped the junk market for $2 bln, even though it generates no EBITDA from which to pay interest. Investors are betting either that Uber will turn a profit – or more likely, that its dash for growth will lure future investors who can pay them back.

Green bonds are fertile spot for climate activists

8 October 2018

Buyers of debt earmarked for environment-friendly uses are tougher on borrowers than, say, those lending to typical private-equity deals. And up to $60 trln of such funding is needed by 2030. That may give green creditors a stronger platform than shareholders to push for change.

M&A bankers better off hunting pheasant than elk

3 October 2018

The value of deals above $10 bln popped by 150 pct in the first nine months of the year. Some, like Comcast’s purchase of Sky, come with chunky financing fees. Still, the glory is spread less thinly on smaller deals, which are also growing quickly, and are easier to close.

UK $2 bln fintech star risks public-market curse

19 September 2018

Funding Circle’s IPO may value it at a lofty 15 times 2017 revenue. That’s justified if it keeps growing at a breakneck rate, and its untested models can weather a downturn. The risk is that a high valuation and investors’ rosy expectations spur the group to take too much risk.

Blackstone’s $5.5 bln bond inverts debt hierarchy

13 September 2018

Steve Schwarzman’s buyout firm is selling debt to fund its takeover of Thomson Reuters’ financial data arm. The terms allow the owners to pay themselves cash even in tough times. Such undemanding rules make these high-yield bonds look more like stock - but without the upside.

AIG’s lost decade is not yet behind it

13 September 2018

The insurer, rescued with a controversial $182 billion bailout in the 2008 crisis, has sold assets like AIA, rejigged operations, repaid the U.S. government, worked through CEOs and even started making acquisitions again. A new direction is emerging, but investors remain wary.

Lehman is long-term champion in Wall Street hubris

12 September 2018

Take a firm with leaders seasoned from previous crises. Add a bubble in an asset they considered their specialty. Let them ignore their own risk rules and throw in supine watchdogs. How Dick Fuld crashed Lehman should scare sense into generations of bankers and overseers.

Spectre of the late 1930s haunts Ray Dalio

12 September 2018

The Bridgewater founder made positive returns in 2008 when few other asset managers did. Today, he tells Breakingviews, he worries about the U.S. deficit and debt pressures that could soon go critical. The risk of populism and conflict sounds eerily like the pre-war years.

UK landlords’ lifeboat has a Debenhams-shaped leak

11 September 2018

As British retailers flounder, the groups that rent them floor space have been pointing to continuing robust demand for prime locations. Debenhams’ potential restructuring not only threatens a key source of rental income. It also undermines landlords’ main counterargument.

Bondholders face risky last bet at Casino owner

6 September 2018

Credit markets are growing increasingly nervous about Rallye, the indebted parent of the French grocer. Luckily, owner Jean-Charles Naouri can draw on bank lines to repay debt. But the more Rallye borrows from lenders, the fewer assets will be left if it eventually collapses.

Foreign exodus to test Italy’s bond market buffers

31 August 2018

Fear of bold public spending is spooking foreign investors, making it harder for the government to fund itself. Italy can lean on banks and local savings to plug the gap. But gorging on debt hurts lenders and growth. And “Quitaly” concerns may lead Italians to move cash abroad.

Cyprus’ bad debt cleanup has lessons for Italy

28 August 2018

Bank of Cyprus will sell 2.7 bln euros in non-performing loans to private equity group Apollo. A price of nearly half book value is higher than comparable deals in Italy or Greece, thanks to government reforms. That should lead to healthier, more profitable banks.