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Robinhood to the rescue again

Alamy 2021-05-21 robin hood 575x375

Having come to the aid of Main Street stalwarts such as car rental company Hertz, video game store GameStop Corp, cinema group AMC Entertainment Holdings and diner chain Denny’s, it seems that US equity investors are now stepping in to help out that other pillar of American society — CLO managers.

Flush with stimulus money, bored by the pandemic, and spurred on by Robinhood’s gamification of investing, retail investors have been credited with pushing up the value of these companies, helping them to avoid or survive bankruptcy.

Ever on the lookout for a fresh punt, they have also contributed to the boom in special purpose acquisition companies (Spacs), which have been floated in New York at an increasingly alarming rate over the past year. The “democratisation of investing” has therefore, predictably, resulted in a boost in fees for investment bankers and corporate lawyers, too.

And as the hungry hordes of newly minted Spacs gobble up acquisition targets left, right and centre, GlobalCapital has noticed that it is having a beneficial knock-on effect for the credit quality of CLOs as the private companies that go public this way find themselves paying back loans at par under change-of-control provisions, or getting better credit terms. In some cases, those loans have been trading well below 100, prompting one market source to describe Spacs as a “blessing” for CLOs.

 

Moving on

While the Spac boom shored up investment banks’ earnings in the first quarter of the year, the ramifications of the Archegos Capital Management disaster are still unfolding, particularly at Credit Suisse, which is said to have cut its bonus pool after a big loss arising from its prime brokerage business with the defunct family office.

Most of the reported departures of personnel so far have been in M&A and sector coverage roles, with beneficiaries including Barclays, which snapped up at least two senior Credit Suisse bankers in the US recently as it seeks to rebuild its global investment banking footprint.

But there have also been exits from the syndicate desk, with head of equity capital markets syndicate Stephane Gruffat leaving after more than two decades for rival Deutsche Bank, and London-based ECM banker Jack Barrass heading to the buy-side.

Elsewhere, major moves from the past week include Christina Cho’s switch from BNP Paribas to CIBC in New York, where she will lead dollar coverage of sovereigns, supranationals and agencies in North America; former SMBC Nikko banker David Bourne’s arrival on the corporate and financial institutions syndicate desk at TD Securities in London; and Deutsche Bank’s hiring of Daniel Ross from Barclays to oversee investment banking in the UK and Ireland.

 

Consigned to history

Finally, it was a sad day for scripophiles when the German Bundestag passed legislation to bring the country’s securities law at least partly into the 21st century by eliminating the need for paper bond certificates.

Physical sheets of paper documenting the terms and conditions of every outstanding bond issued under German law are at present held in secure vaults operated by Clearstream Banking.

GlobalCapital wanted to know more about how the certificates were printed, signed and delivered to Clearstream’s safe, but even very experienced capital markets practitioners in Germany were not sure exactly how the process worked. We did not track down anyone who had so much as seen one of the certificates in person.

Some people thought they might be delivered to the central depository by courier, introducing an element of traffic risk to execution, while others were fairly sure that Clearstream had its own printing facilities on site.

Which raises the question — do they actually exist?

Issuers could have stopped printing the things years ago and it is unlikely anyone would have noticed. The person in charge of the certificate printer at Clearstream, if there is such a person, could have taken 15 years of unauthorised paid leave, like one of those Spanish bureaucrats we hear so much about, and no one would be any the wiser. Or they could have been printing out a child’s drawing of a cat over and over again, instead of the terms of KfW’s commercial paper.

It is possible that BaFin conducts site visits to check that the paperwork in the vault is really there, but really, the German regulator has bigger fish to fry.

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