Debt

Calpine $5.6 bln buyout puts chips on gas hegemony

18 August 2017

A consortium is taking the heavily indebted electricity company private at a 51 pct premium. It’s a bet natural gas will dominate the nation’s power grid. Problems with other sources justify that for now. Longer term, stagnant electricity prices and usage makes it a big risk.

Bondholders can play hardball with Portugal’s Novo

18 August 2017

Bailed-out lender Novo Banco wants creditors to take a haircut, to smooth a sale to Lone Star. But creditors have numbers to block the swap, and could recapitalise the bank themselves. Novo has a history of scrapping with bondholders. This time creditors may have the upper hand.

Mortgage interest deduction’s death long overdue

16 August 2017

White House officials are considering limiting a tax break that encourages home purchases. The incentive mostly helps the rich and induces risky behavior. The gimmick has also had little impact, with the home-ownership rate falling to a 51-year low in 2016. Its demise is welcome.

Deutsche’s problems extend well beyond trading

27 July 2017

CEO John Cryan is successfully cutting costs but revenue fell even faster in the second quarter, by 10 pct from a year ago. The lender suffered from the same difficult trading conditions that hit peers but its retail unit also disappointed. The boss is running to stand still.

U.S. colleges may need to start on M&A course

25 July 2017

After tripling in real terms since the early 1970s, tuition costs are now rising only a hair faster than CPI. Cost cuts won't offset flagging enrollment, the result of a stronger job market and demographic shifts. Merging could help, especially for small private schools.

Greek bonds are a bet on euro zone support

18 July 2017

Athens wants to issue bonds just after receiving another bailout tranche. If Greece had to finance itself at market rates it would struggle to stay solvent. But debt relief from European governments and ECB bond-buying will reduce the risk. Investors may find the wager appealing. Full view will be published shortly.

U.S. student debt dims home-ownership outlook

17 July 2017

Economic growth is supposed to lure millennials out of their parents’ basements. But a study from the New York Fed suggests that borrowing for surging college costs accounts for up to a third of the decline in home buying by 28-to-30-year-olds. That purchasing power won’t return.

Bond market breathes life into erstwhile zombies

17 July 2017

European investors are refinancing companies like Dutch retailer Hema that not long ago were trading at distressed levels. Such credits are enticing when central banks have squashed yields, and Europe’s economy is recovering. Markets are unlikely to remain so forgiving for long.

Cool credit markets could be own undoing

10 July 2017

Corporate bonds shrugged off the recent “taper tantrum” that hit government debt and equities. Investors may be betting that central banks will only slowly tighten policy, supporting demand for riskier assets. Yet unruffled markets may only hasten policymakers’ rush for the exit.

Bank of Japan can hold out as Western yields rise

7 July 2017

The central bank underlined its determination to keep 10-year yields close to zero by offering to buy unlimited bonds. The BOJ has the tools, market dominance and motivation to hold firm. Tighter policy in the West should help Japan by weakening the yen and importing inflation.

India’s bond market deserves a good whipping

7 July 2017

The securities regulator is cracking down on the fast-growing corporate bond market. With a large chunk of new issues coming from firms in dubious financial health with too generous ratings, it is a good time to force companies and rating agencies alike to raise their standards.

Italy’s final bank bailout not as bad as it looks

5 July 2017

Taxpayers pumping 5.4 bln euros into Banca Monte dei Paschi di Siena is a backward step for dealing with troubled European lenders. However, junior creditors and employees are probably getting a worse deal than if they had avoided the bailout. And the state could make a profit.

Beijing’s reversal on credit scores is ominous

5 July 2017

China's central bank no longer wants to let private outfits like Alibaba assess consumer creditworthiness, Reuters says. That’s doubly unwelcome. Borrowers need better credit scoring. And this will concentrate even more power in the state’s Orwellian “social credit” system.

China underscores new hard line on outbound M&A

22 June 2017

The banking regulator is probing loans made to serial acquirers Anbang, Fosun, HNA and Wanda, reports say. Following the detention of Anbang's chairman, the message is clear: bold foreign M&A is out of bounds. The puzzle is why the authorities let the splurge last for so long.

Italy tests EU’s bank bail-in regime to the limit

19 June 2017

European regulators will block Rome’s plan to rescue two small lenders, according to a report. A scheme to save Monte dei Paschi has also run into trouble. Spain’s example of winding down failing banks is hard to follow. The government may yet have to help in any solution.

Dana Gas is the tip of Islamic bond iceberg

15 June 2017

The Abu Dhabi-listed company wants to restructure $700 mln of Sharia-compliant bonds, claiming they no longer conform to Islamic law. Creditors have a slim chance of recovering their cash. The arbitrary change exposes the hidden risks in this rapidly growing corner of finance.

Chinese firms are running short on funding options

15 June 2017

A regulatory crackdown on the rapid surge of shadow banking is bearing fruit, central bank data shows. Yet corporate bond issuance has also plummeted, and regulators are slowing IPO approvals. The economy risks overdependence on bank lending once again.

Germany’s euro-bond allergy will be hard to cure

13 June 2017

France’s pro-European president, Emmanuel Macron, has given new hope to advocates of joint euro zone debt. But expect Teutonic resistance. Europe’s biggest economy is loath to give an implicit bailout guarantee to its own regions so will hardly extend one to other countries.

Mining debt junkies in danger of $100 bln relapse

13 June 2017

Glencore’s return to big dealmaking could signal a renewal of mining groups’ appetite for risk. The likes of BHP, Anglo American and Rio Tinto have also cut back their borrowings since the last boom. Now with lots of room to gear up again, they risk falling back into bad habits.

Europe’s next bank rescue may be Italian fudge

8 June 2017

Italy’s big banks may pump 1.2 bln euros into small lenders to help enable a government rescue. The banks see a bailout as the least bad option. Yet after the failure and resolution of Spain’s Banco Popular, it’s a backward step that punishes good banks for the sins of others.