Debt

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.

Tesla’s $2 bln capital raise repeats sins of past

2 May 2019

The electric-car maker’s issue of shares and convertible bonds will barely cover planned capital expenditure, let alone losses like the one it just reported. CEO Elon Musk is betting vehicle sales will rebound quickly. That’s the kind of hubris that put Tesla in its current fix.

Loose credit helps LBO funds slay sacred debt cows

30 April 2019

Lenders to private equity managers are increasingly giving up protections. Loan investors more used to demanding and receiving better terms than bonds are now accepting similar conditions – and, in some cases, even worse ones. That could lead to a nasty shock.

Bond market addition will test China’s resolve

11 April 2019

Index inclusion is pulling global investors into the $13 trln market. Implausible ratings and thin liquidity are among fixable teething issues. The real question is if Beijing will meddle with bonds in bad times as it has in stocks. Initial signs are that it might resist.

Citi’s Northern Rock wager has political spice

2 April 2019

The U.S. bank bought 5 bln pounds of mortgages made by the lender which failed in 2008 from the UK government. The state cuts its debt load, and the buyer gets stable high-yielding assets. The risk is that a left-wing executive takes power, and forces lenders to cut rates.

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.