Saudi IPOs undeterred by poor domestic markets 13 May 2008 The Kingdom s retail driven capital markets have already raised $6bn this year, a 26% increase on 2007. Yet the domestic market is off 13%. With state privatisations making up most of the new offers, Saudi is using discounted issues to redistribute its petrowealth.
Buyout shops’ purchase of portfolio company debt is a crapshoot 13 May 2008 Apollo is buying a bankrupt portfolio company s debt. It may think it can recoup its losses if the bonds get swapped for stock. But bankruptcy is fraught with uncertainty. And the company will have to rocket later for the strategy to pay off. Investors should ask tough questions.
Exchanges aren’t the fix for CDS risk 13 May 2008 Citadel boss Ken Griffin may think they are. Yet credit derivatives are more like bonds than stocks, so they d be difficult to trade on exchanges. But Griffin is right to suggest that a clearing house for trades could defuse some of Wall Street s worrisome counterparty risk.
ILFC separatists should consider GMAC lesson 12 May 2008 Remember GMAC? GM sold 51% of the finance unit when the carmaking operations seemed to be dragging down its credit ratings and pushing up its funding costs. Now GMAC s US mortgage exposures are weighing it down. Any enthusiasts for separating ILFC from AIG should take note.
Clear Channel’s shareholders should consider $36 a victory 12 May 2008 THL and Bain are renegotiating the financing for the radio company s buyout. That will probably result in a lower price. But given the inhospitable markets and bad blood among the parties, it may be the best one can hope for as long as the company forges an ironclad agreement.
MBIA stumbles into … a $3.6bn windfall 12 May 2008 The bond insurer says accountants force it to report misleading marktomarket values on its credit derivatives portfolio. But a new rule from the pocketprotector set just granted the struggling firm a big paper gain. That further muddies the waters for its investors.
As factory prices soar, UK plc heads for pain 12 May 2008 The surge in inflation in UK companies input and output prices looks likely to have a long list of victims. Most companies cannot pass the rises on to beleaguered consumers. Profit margins, employment, the government and the stock market all look set to suffer.
The City needs to become better integrated to UK 12 May 2008 The City should forget about special tax privileges and expect to be treated the same as any other sector if it wants to avoid a wider public backlash, according to a new LibDem City manifesto launched Monday. It s a tough message but the right one.
Banker bonus bust evens the score for investors 9 May 2008 City payout growth has outpaced investor gains by 10toone since 2002. It s clear who got the bull market spoils. But if a forecast 40% drop in the bonus pool proves right, and bank shares hold steady, the gap will narrow considerably if only for a while.
Schwarzman’s PR gaffes are losing their impact 9 May 2008 The Blackstone boss has more than once compared the US mortgage crisis to WW2 Japan. The insensitivity won't help the firm there. But Wall Street and Washington where his earlier actions put the whole private equity industry in the doghouse now have much bigger concerns.
Public hedge fund and buyout firms hit sticky patch 8 May 2008 The downturn is highlighting the disadvantages of publicly traded Fortress and its peers, with performance fees evaporating and new investment slowing. For now, the supposed pluses having a currency to retain talent and grow aren t holding up their end of the bargain, either.
Economic happy talk carries long term dangers 8 May 2008 Paulson, Bernanke and Lazear talk up the economy and play down its difficulties. When they are credible, such official boosters raise Keynesian animal spirits and boost shortterm output. But optimistic predictions that prove unfounded can backfire, causing a credibility gap.
Fannie’s $6bn capital-raising is a fig leaf 6 May 2008 After all, the mortgage giant s regulator is reducing its capital standards, despite its $2.2bn loss. Allowing Fannie to leverage itself up makes the most of the government s tacit guarantee. But Fannie's shareholders should beware it could burn through the new capital fast.
Capital rules cause more pain for US borrowers 5 May 2008 An unprecedented number of banks have tightened loan terms for US borrowers in recent months. A third of them say it s due, in part, to worries about their own deteriorating capital levels. Regulators shortsighted capital rules have increased the burden on borrowers.
Ken Lewis faces Countrywide catch-22 5 May 2008 Deteriorating housing markets are making the Bank of America boss s bid for the ailing mortgage lender look strained. If Lewis backs out, he ll probably lose $2bn immediately and earn the ire of Washington regulators. But sticking with it could cost BofA a bundle, too.
Berkshire-style Sequoia Fund has pros and cons 2 May 2008 The fund started by Bill Ruane, a pal of Buffett's, is taking new investors for the first time in 26 years. It has a track record, a good manager and a nimble scale. Unlike Buffett s Berkshire Hathaway, it also pays cash out. But Berkshire stock might still have the edge.
April bond bonanza looks another false dawn 2 May 2008 Debt issuance last month was the most since June 2007. Companies, led by banks, rushed through a window cracked by tighter credit derivative spreads, which persuaded some investors to get off their hands and lend. But cash spreads hardly budged, meaning risk aversion persists.
India’s Reliance looks after No.1 2 May 2008 When Anil Ambani decided to issue oneoff bonus shares to compensate investors for Reliance Power s abysmal IPO debut, it was seen as an act of generosity. Now Ambani wants to float more Reliance units, it s clear the move was an act of enlightened selfinterest.
Bernanke’s new gambit may ease consumer finance woes 2 May 2008 The Fed chief is still having a hard time getting banks to lend. His decision to accept assetbacked securities in exchange for treasury bonds could help. It will allow banks to squeeze welcome cash out of their big and increasingly wobbly credit card and car loan portfolios.
Dubai doesn’t need two stock exchanges 1 May 2008 A pulled IPO is just another blow for the Dubai International Financial Exchange. In three years it has attracted just three primary listings, and they ve all done badly. The emirate should merge it with the more buoyant local exchange, the Dubai Financial Market.