Debt

Blackstone’s round trip brightens HNA attractions

12 March 2019

The private equity shop is buying back control of a Hong Kong construction company it sold to the Chinese group in 2016. The $900 mln price tag belies a slug of cash that comes with it. That makes the valuation inviting and may increase interest in HNA’s sprawling portfolio.

The Exchange: Austerity in the age of populism

8 March 2019

Fiscal restraint is going out of fashion. In his new book “Austerity”, Harvard professor Alberto Alesina sets out to explain when it’s needed. He tells Breakingviews of the hidden long-term risks of U.S. President Donald Trump’s policies and why Italy’s debt risks are not over.

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.

China makes banks take a practice perp walk

25 February 2019

Officials want lenders to use perpetual bonds to boost capital buffers. Generating buyer interest is tough, so Beijing put a thumb on the scales to help sell the first $6 bln issue. State-incubated markets can work in China, but the trick is taking the training wheels off.

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.

Guidance is a two-way street with Fed and markets

10 January 2019

Jerome Powell says the U.S. central bank will be patient in weighing new rate moves. Previous hawkish comments unsettled investors, helping tank stocks last month. The two are learning to read each other, but a data-dependent message may get tricky if the economy starts to turn.

Fed hike leaves Powell exposed in multiple ways

19 December 2018

The U.S. central bank raised rates despite criticism from President Trump. Slowing growth and bearish markets will only complicate its task going forward. The chairman will give more public talks in 2019 just as it gets harder to offer guidance. It could be a bumpy ride.

Alexis Tsipras mistimes Greek pre-election gamble

7 December 2018

After nearly a decade of bailout-related austerity, the prime minister is promising giveaways ahead of a 2019 vote. There’s a case for spending more. But Italian jitters and the end of the European Central Bank’s bond-buying make this a bad moment to test investors’ patience.

Watch UK bonds to see when there’s a real crisis

16 November 2018

The pound suffers every time concern flares that Britain may crash out of the European Union. But gilts strengthen since bleaker economic prospects make higher interest rates less likely. The clearest sign investors have had enough would be when both weaken at the same time.

Mozambique removes only part of tuna bond whiff

16 November 2018

The war-scarred African nation wants to restructure its defaulted obligation by linking repayments to future gas sales, giving bondholders extra security. But developing $50 bln of projects in such an exotic locale is unlikely to avoid snags. Delays could mess up creditors’ sums.

UK universities graduate to bailout candidates

1 November 2018

Tertiary education colleges across the UK are issuing more and more debt. The lack of an insolvency framework means any default would be messy, but lenders reckon the government would probably prevent a default. With demand for degrees waning, the bet may soon be tested.

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.

Italy budget gives with one hand, takes with other

1 October 2018

The new government has chosen to fight stuttering growth with tax cuts and a “citizens’ income”. Ditching austerity may boost sentiment and lift consumer spending in the short term. But the plan lacks a credible strategy to fight youth unemployment which is over 30 pct.

Guest view: Real rates matter more than inversion

13 September 2018

An inverted U.S. yield curve, with short-term interest rates higher than long-term ones, is seen as a recession warning. Myron Scholes and Ash Alankar of Janus Henderson Investments argue that monetary policymakers should worry more about the excess of yields over inflation.

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.

Hadas: The paradox of risk-free finance

5 September 2018

A new study claims that national deposit insurance makes financial crises more likely. It may exaggerate, but guarantees are a sign of a basic problem in banking. The mix of public service and private risk is always potentially toxic. Separation would be hard but worthwhile.

Italy’s Trump card shows bond market fragility

24 August 2018

The U.S. President offered to buy Italian debt, according to one newspaper. Donald Trump may want to help a eurosceptic government but has limited scope to mitigate the damage that Rome’s policies are inflicting on domestic asset prices. Help is better sought closer to home.

Italy’s bond fix idea resembles covert bailout

21 August 2018

The economic spokesman of the ruling League Party says the euro will collapse unless the European Central Bank limits the gap between euro zone countries’ bond yields to 150 basis points. That bar is too low and would give big spenders free rein to dodge hard budget decisions.

Cox: When commemorating crises, think 20 not 10

15 August 2018

As the decennial anniversary of Lehman’s systemic collapse approaches, it’s worth recalling the one that preceded it. Russia’s 1998 default led to LTCM’s demise. Shockingly, that fiasco’s lessons went mostly unheeded until 2008. The key takeaway: there are always blind spots.