Corporate Debt

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.

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.