Credit

China takes clumsy swipe at sloppy credit ratings

6 January 2021

Dagong Global has been ordered to help repay bondholders in a construction company that defaulted on over $200 mln. Courts are understandably getting tough with so much unpaid debt by top-rated issuers. This sort of punishment, however, will lead to fewer not better assessments.

Moody’s seal of approval comes unstuck in China

30 December 2020

Beijing suspended CCXI’s credit rating business after a top-marked miner defaulted soon after selling new debt. A 30% stake held by Moody’s suggests foreign influence didn’t upgrade the industry. Rising state issuance has made pricing risk even more political than financial.

Buy-now-pay-later exposes regulation blind spot

8 December 2020

Sweden’s Klarna and Australia’s Afterpay both allow punters to buy goods and defer payment. Opinion is divided over how regulators should treat any loss on the enabling financing. Balancing innovation and stability is hard, but the rules right now aren’t clear enough.

The Exchange: Brave new credit world

21 July 2020

The crisis unearthed land mines in the fixed-income market – many of which Arena Investors Chief Executive Dan Zwirn had previously identified. He now explains how to navigate this opaque universe with deep dives on leveraged finance, liquidity crunches and an activist Fed.

Investors emerge faster than emerging economies

21 July 2020

Fitch Ratings may soon label more countries in the world as junk than investment grade. And Covid-19 has added to the problems that many poorer countries already faced. Even so, falling U.S. bond yields are forcing money managers to raise their exposure to riskier markets.

Rolls-Royce flies closer to credit-card max-out

9 July 2020

The British jet engine maker led by Warren East incinerated 3 bln pounds in the last six months due to aviation lockdowns. At least another 1 bln may disappear in the next. Extra credit lines look increasingly like bandages over a balance sheet in need of serious surgery.

Car finance giants are skidding into the ditch

8 July 2020

The Financial Conduct Authority is forcing big auto-finance players to freeze customer payments. The losses mean they may have to buy back more of the loans in securitisations that helped fuel the market’s breakneck rise. That in turn will make it harder to fuel future growth.

Corona Capital: U.S.-China fight, Canada downgrade

25 June 2020

Concise views on the pandemic’s corporate and financial fallout: Washington deploys sanctions over Hong Kong, adding to trade and Covid-19 tensions; and a double whammy of the coronavirus and low oil prices costs Canada one of its AAA ratings.

BP’s funky debt charts end of credit’s lockdown

18 June 2020

The oil major issued $12 bln of bonds that count as equity, its first such deal. Investors’ hunger for esoteric securities from a tricky sector illustrates their enduring need for yield, thanks to central bank largesse. A weak economy and risk-hungry markets are a dangerous mix.

Cirque du Soleil deal needs contortionist skills

10 June 2020

Creditors want to take control of the acrobatics company. The company required a reboot even before Covid-19 forced shows into hiatus in March. The pandemic has made it even harder to value. But with other high-wire deals getting done, Cirque’s show is likely to go on.

Argentina gets too cheeky with its creditors

8 June 2020

The serial defaulter wants to put its restructuring to a creditor vote, but leave room to decide later which votes count and which don’t. That would require a tweak to a common clause designed to make bond negotiations simpler. Emerging-market borrowers would be worse off for it.

Fed’s credit market duct tape will come unstuck

20 May 2020

Junk bond yields have fallen from March peaks despite dire economic forecasts thanks to Federal Reserve boss Jay Powell’s new asset buying plans. He can’t make bad business models sustainable and may even encourage bad decisions. Investors will be out on a limb if things blow up.

Banks’ credit-line sweeteners are due a rethink

15 May 2020

Corporate lenders often woo clients with backup cash facilities. That came back to bite the likes of Bank of America and Deutsche Bank, as March drawdowns depleted their capital ratios. It changes the equation for lenders, and for firms which now face higher financing costs.

Bad-debt puzzle has simple answer: consumer credit

14 May 2020

Banks like JPMorgan, Deutsche and UBS have set aside vastly different amounts to cover dud loans. Distinct accounting rules, geographies and economic forecasts matter. But the biggest determinant of lenders’ loan-loss allowances is exposure to credit cards and similar products.

Fed jump-start leaves CLO buyout motor sputtering

11 May 2020

The vehicles that buy most leveraged loans are suffering as downgrades saddle them with too much ropey debt. The Federal Reserve’s lending facilities will help – but not enough to gin up much appetite for new loans. Private equity dealmaking could be stuck in the slow lane.

Car industry’s growth engine is running on fumes

21 April 2020

The churn of new car lease sales has come to a grinding halt in March. It’s a double whammy for the likes of Ford and VW that are facing steep devaluations on cars that will be handed back by cash-strapped customers. A painful financial reckoning lies around the corner.

Banks’ love of plastic gets a bit less fantastic

15 April 2020

U.S. credit cards have delivered years of high returns and low delinquencies. JPMorgan is the biggest issuer; at Citi cards make up one-quarter of revenue. Now lenders are preparing for losses, and consumers aren’t spending. Covid-19 is taking the shine off a nice earner.

OPEC shock pours fuel on credit-market cinders

9 March 2020

The collapse in oil prices and worsening epidemic are causing turmoil in corporate debt markets. Yet the price moves are hard to justify, even matching the damage from Lehman Brothers’ failure in 2008. That adds weight to fears that bank trading limits can exacerbate a crisis.

Private credit pioneers will face a stress test

30 December 2019

A weak economy, high debt and falling profits should mean more corporate defaults in 2020. The pain will fall particularly on lenders specialising in private loans, who have $278 billion of assets under management. Rising losses will sort the sheep from the goats.

Buy now, pay later faces Juul-style backlash

24 December 2019

Companies offering the credit innovation say it can drive online sales and help retailers deal with refunds. One player, Klarna, is valued at $5.5 bln. But making it a lot easier to shop for free could prompt a reaction like that which befell the vaping heavyweight.