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GC Asia
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Why have bond investors taken a vow of silence?
Pacific Gas & Electric has gone bankrupt with $52bn of debt, blaming forest fires that seared California during 2018. Vale, with $11bn, has been downgraded to the bottom edge of investment grade after its horrific dam burst last Friday.
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Barbarians arrive at the banks’ gates as others flee
While banks fight shy of big-ticket mergers, a select group of private equity firms are leading the restructuring of the industry in Europe, writes David Rothnie.
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Green investors prefer label over substance
Spanish telecoms company Telefonica this week became the latest issuer to sell green bonds. The volume of money dedicated to green bond investments meant that there was huge demand and the deal had participation of nearly 50% from green investors. But if those buyers had that much conviction they wouldn’t have waited for this trade.
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The do’s and don’ts over the holidays
Everyone new to banking has a steep learning curve. But when you live in Asia long enough, you realise the really steep curve comes in trying to understand traditional holiday-related etiquette.
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PDVSA sanctions are a warning shot for EM
The US sanctions slapped on Petroleos de Venezuela (PDVSA) this week look similar to those that have just been removed from Russia’s EN+ and Rusal. The move indicates that the US believes in the effectiveness of sanctions and is happy to keep deploying them. Emerging markets investors should beware.
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UK’s greatest loss from Brexit could be its reputation
Whatever the resolution of the UK’s attempts to leave the European Union, it will likely take a long time for it to repair its reputation among investors.
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Greece can be the new Portugal
Greece has cash. It didn’t need to take €2.5bn of five year bond funding from the capital markets on Tuesday. But the deal was a good tactic to demonstrate that it has access to new capital, which will ultimately push down its borrowing costs and push up its credit ratings. It worked for Portugal, so why not Greece?
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CLOs are the heroes we need right now
As worries about the leveraged loan market have entered the mainstream, there’s an obvious villain: the booming CLO market, which has expanded, gobbling up whatever the stretched lev loan mart can feed it. But not all heroes wear capes. Despite being a three-letter acronym, these vehicles could be the heroes we need.
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Maoyan was right to play it safe with IPO
Chinese new economy company Maoyan Entertainment priced its Hong Kong IPO this week, after a short delay that allowed it to add a high-profile cornerstone investor. Don’t let the deal’s bottom-of-the-range pricing fool you: the company and its banks made the right move.
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Japan’s QE: bad for banks, good for DCM in Europe
Japanese banks are unlikely to enjoy any let-up from razor-thin net interest margins in 2019. This is worrying for their long-term sustainability, but it’s potentially a bonanza for DCM specialists in Europe and the US.
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Spring time for syndicate
The mornings are still dark and gloomy, but the new issue debt markets are full of sunshine. Not only is the market booming but issuers are still paying attention to syndicate advice and treading carefully, for now.
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AT1s: a market of perpetual motion?
The shifting sands of bank regulation make it unlikely that it will ever be worth thinking about additional tier one bonds as perpetual instruments.
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Orcel mess leaves gaps at the top of European banking
The path from M&A rainmaker to CEO is a perilous one, as John Cryan and Andrea Orcel have proved. Will Christian Meissner be the next senior banker to try it, asks David Rothnie.
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A themed tour of the world
Spare a thought for investment bankers working in Hong Kong and Singapore. Although they focus on deals from across the region, there is no escaping the importance of China.
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Turkish debt – get it while you can
Backed by a resilient and toughened banking system, Turkish debt could be one of the most rewarding investments in loan and bond format alike. As the country recovers from the currency crisis of August 2018, it is high time for those still standing on the platform to board the Turkish train.
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Rusal sanctions are still working, even as they go
US sanctions on EN+ and Rusal look set to be lifted soon, but they have not been the failure that some emerging market investors claim.
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Indian debt issuance: two steps forward, one step back
The Reserve Bank of India’s recent reforms to its external commercial borrowings (ECB) policy make for a simpler and looser process for firms raising debt offshore. But the central bank has also put up new roadblocks for issuers that could drastically affect their access to capital markets.
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Redux or reset? Asian bonds show risks
Asia’s offshore bond market has had a strong start to the year, moving past the doom and gloom that ended 2018. But there are already signs that the difficult conditions that defined last year may only be around the corner.
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Who’s afraid of the big bad loans?
Mere mention of the words non-performing and loans together has the power to make markets quake, regardless of whether the details are good, bad or neutral.
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When a bad deal leads to no deal, no one wins
Maintaining confidence in the system relies on trust that leaders — those selected for their competence and character to set the course for the rest of us — are well informed, able to communicate with others at their level and take decisions that serve the interests of those they lead.
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Investment banks gear up for tech coverage revolution
Technology M&A will continue to power corporate finance activity in 2019 but, as deals increasingly cross sectors, banks are having to re-tool their coverage and break up internal silos, writes David Rothnie.
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The slippery slope to workplace humiliation
One of my favourite parts of the winter season used to be the ski trips. Nothing beats swapping the smoggy Hong Kong winters for a cabin on one of Japan’s snow-capped mountains.
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When markets don't match the reality
It will probably be recalled as one of the worst quarters since the financial crisis. But the market's anxieties belie an economy where the indicators still look strong.
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OBG supply can provide political cover for TLTRO III
Never mind the fact that Italian banks are unable to fund themselves economically. If a few can demonstrate access to the Obbligazioni Bancarie Garantite market, the European Central Bank’s impending third targeted long term refinancing operation (TLTRO) might look less like a bailout.
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PG&E’s descent is a climate alarm bell for corporates
Californian utility firm PG&E’s impending bankruptcy filing, on the back of unprecedented liabilities for wildfire damage in the state, is a warning sign that investors may find it impossible to predict how the climate crisis will threaten companies, both quickly and slowly.
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Amendageddon just beginning of loan market's Libor woes
Libor is likely on the way out for sterling loans in 2021, and it is almost impossible to overestimate the deluge of facility amendments headed towards loans desks. But there is worse to come.
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Ivanka Trump and the World Bank — a blessing in disguise?
Ivanka Trump, a US businesswoman better known as the daughter of US president Donald Trump, is set to help out in the search for a new World Bank president. While she is probably the least qualified person ever to have assisted in the process of appointing such an important position, the tempering influence she may have on her father’s disdain for multilateralism could be a blessing — at least the best we can hope for in these politically insane times.
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Caught in stalemate: China-US IPOs
The US government shutdown hit 24 days on Monday, a record kerfuffle for the country. As primary equity markets teams, most importantly at the Securities and Exchange Commission, run on skeleton crews, the IPO pipeline could come under some threat.
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Sub-one year bonds: right tool at the right time
Sub-one year dollar bonds from Chinese issuers are back, but this time they are being used strategically to get reasonable pricing during tough times. Rather than condemn this tenor, it is time to view these notes for what they are — practical and providing flexibility.
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The Hong Kong paradox
IPOs worldwide have been derailed by geopolitical developments — except, it seems, in Hong Kong. Clawback columnist Philippe Espinasse investigates.
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UniCredit trade shows how Italy needs the ECB
Italian banks are paying up for funding, both a cause and effect of financial stress in the country. It shows why the European Central Bank is likely to continue with TLTRO (targeted longer-term refinancing operations), and why the Italian government has less leverage over Europe than meets the eye.
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Bashing World Bank damages US interests
That US president Donald Trump’s administration should pick a fight with the World Bank — and the bevy of other multilateral development banks the US owns shares in — is no surprise.
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Credit Suisse investment banking business defies the critics
Credit Suisse surprised its critics in 2018 by showing that, despite its pivot to wealth management, the European corporate finance business is robust and surprisingly well-diversified, writes David Rothnie.
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With friends like these, who needs enemies?
Catching up with friends on the latest gossip is always good fun — but only if you are meeting at a respectable place.
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Italy is chipping away at the EU's bank failure rules
Europe’s already enfeebled rules around bank failures would be dealt a crushing blow if the Italian state were allowed to use public money to prolong the life of Banca Carige.
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Cracks appear in crypto foundation
The cryptocurrency market, fresh from a hellish year in which 83% of its $800bn market cap went up in smoke, is facing a new, and altogether more serious threat: the 51% attack.
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Eur in no hurry: smaller SSAs should wait for more price markers
The primary euro public sector market kicked off for the year but it's a very different environment from the start of 2017 and 2018. Borrowers will not be supported by net purchases from the European Central Bank, spreads will be pushed up and new issue premiums will go higher — but how much? Borrowers with smaller programmes would do well to wait for more liquid names to gauge the market tone.
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Trump’s Fed criticism has ugly precedents
Donald Trump’s attacks on rising US interest rates have prompted outrage that the maverick president is trampling on the independence of the US Federal Reserve. However, while Trump’s style is unique, his intent to influence the Fed has plenty of precedents.
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Tightwad issuers should take note of Uzbekistan fees
An old argument has rattled on for years between some CEEMEA issuers and banks about the wisdom of paying nothing to banks to arrange sovereign bonds. Uzbekistan has settled it.
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Do credit default swaps need a rethink?
Credit default swaps (CDS) are a complicated product. But the past year has presented a few examples of market participants resorting to ‘creative’ tactics to optimise payouts. If the market fails to respond to concerns around the viability of CDS, the product may have to be rethought.
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Pick-up in China M&A loans is just a pipe dream
A handful of outbound M&A deals announced in the second half of 2018 have given leveraged and acquisition finance bankers hopes for a rebound in action this year. But with many roadblocks ahead, being "cautiously optimistic" will be critical.
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No certainty in sight for the UK or sterling
Borrowers flocked to the sterling bond markets this week, at possibly greater pace than the usual January rush. Some of that seemed to be an attempt to get ahead of a crucial Brexit vote in the UK parliament later this month. But if anyone expects clarity on the UK’s future relationship with Europe after that date, they’re delusional.
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Will Europe regret stringing out the Carige debacle?
The European Central Bank is giving Banca Carige yet more time to boost its capital. If the lender cannot turn itself around, authorities will regret dithering while the private sector walked away.
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Money gun ups the ante for gift giving
One of my favourite parts of meeting up with old friends after Christmas is hearing about the gifts they received. This makes for far more entertaining conversations than bonus season talk.
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Hong Kong’s IPO market: hot no more
Hong Kong may have reclaimed its spot in 2018 as the world’s biggest stock exchange in terms of funds raised, but if early indications for the 2019 first quarter are anything to go by, the bourse is in for a tough time.
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Barclays takes fight to US banks in corporate finance, but doubts linger
Barclays has asserted its credentials as Europe’s top investment bank with market share gains in 2018, but can it shake off lingering doubts about the franchise, asks David Rothnie.
