Corporate Debt

Anta Sports puts ultimate buy rating on itself

17 January 2020

After outrunning short-sellers, the Chinese apparel giant is issuing 1 bln euros of convertible debt that pays nothing and can’t be swapped for equity until shares rise 40%. Strong take-up will signal confidence Anta can repeat its success reviving Fila with Finland’s Amer.

Investors fuel unicorns’ belief in their own magic

7 January 2020

Private tech startups can control their valuations by only raising money when their worth is rising. Valuing businesses based on a fraction of their capital and the latest preferred-share terms also creates problems. Even WeWork may not be enough of a reality check.

Chinese buyout shop grabs for last UK pizza crust

14 November 2019

Hony Capital paid 900 mln pounds for PizzaExpress in 2014. Now it’s facing a wipeout as the restaurant chain falters. Snapping up unsecured bonds might boost its bargaining power in debt talks, but its hand looks weak. The firm’s best hope is that nobody wants a messy default.

SoftBank debt burden may stoke an asset fire sale

5 November 2019

The group’s $45 bln of borrowing seems low compared with $260 bln of equity holdings. Yet that ignores layers of leverage, and overstates SoftBank’s asset value. If CEO Masayoshi Son’s giant tech-investment machine runs into trouble, he may have to offload stakes like Alibaba.

GE-style pension tweaks blend finance and fear

14 October 2019

Asking future retirees to cash out early from defined-benefit pensions can help close funding holes like the $27 bln one at the U.S. conglomerate. Two things could help GE get the better end of the deal: falling interest rates, and uncertainty over the success of its turnaround.

Corporate debt doomsayers are overstating the risk

7 October 2019

Over half of U.S. investment-grade corporate debt is rated BBB, one level above junk. This has alarmed observers from the Fed to Pimco who fear U.S. companies could struggle in a downturn. But BBBs are not all created equal. Many such borrowers boast improving credit metrics.

Ebola bonds are wonky way to tackle pandemics

13 August 2019

The World Bank-backed instruments are meant to use private capital to fight disease in poor countries. But their rather random structures create weird incentives for both issuer and buyer. As a way to tackle outbreaks, it’s not obvious they’re better than more direct charity.

Deutsche credit upgraded from hopeless to hapless

15 May 2019

The bank’s credit default swap spread, a measure of riskiness, has nearly halved. The fall was due to a legal technicality, not a change in fortune, but should help clients trade with it. Still, high funding costs mean CEO Christian Sewing will struggle to boost profitability.

AB InBev’s debt belly needs more than fizzy growth

7 May 2019

Pricier beer helped the brewer’s first-quarter sales rise faster than expected. Yet AB InBev still has an unsightly debt pile and is battling falling volumes in key regions. An IPO of its Asian operations sooner rather than later would help investors breathe more easily.

Etihad is strapped in too tightly at Jet Airways

19 March 2019

The ailing $400 mln Indian carrier has stopped flights to Abu Dhabi, the hub of its 24 pct shareholder. Even with some planes grounded, Jet may be trying to strong-arm support for a restructuring. It’s a harsh reminder that Etihad has more to lose than just its equity investment.

Deutsche Bank’s opaque asset punt trolls regulator

1 March 2019

The lender’s pile of hard-to-value assets grew by 3 bln euros last year, despite the European Central Bank’s plan to scrutinise them more closely. The increase jars with boss Christian Sewing’s vision of a simpler bank – and does little to ease Deutsche’s elevated funding costs.

Santander gives bondholders a painful lesson

12 February 2019

The Spanish lender flouted market convention by not redeeming a subordinated bond at the first opportunity. The move wrong-footed some investors and shows that banks will put shareholders’ interests above creditors. But not all peers can afford to take such a hard-nosed approach.

U.S. corporate borrowing slump is a bearish signal

25 January 2019

American companies are issuing much less debt in 2019, even after a 20 pct slump in 2018. One reason is higher earnings after lower taxes, but another is cuts in planned investments. That’s how a trade war and political dysfunction could put the economy on a slower growth track.

BlueMountain is tardy with PG&E activism

24 January 2019

The hedge fund firm wants to oust the California utility’s directors, who are heading toward bankruptcy. It has a point: The hit from wildfires is not yet defined, and PG&E has stumbled in other ways. But BlueMountain is running out of time to rouse bigger, longer-term owners.

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.