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The preference for a diverse group of lead managers and the convention of reciprocity keep covered bond bookrunning competitive despite concentration so far this year
Chemical sector's growing uncompetitiveness a problem when it comes to attracting investment in the capital markets
When staff complain, they deserve a fair hearing, not a wall of silence
Benin reaped the rewards of its sukuk debut last week, and will do so for years to come
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Europe’s loan market is still capable of funding big deals — but these transactions are not easy, and lending appetite is still constrained. Bankers are angry, therefore, at a new form of ill-discipline they believe has crept in to this normally civilised market. This is the ‘bait and switch’, in which banks offer borrowers a low rate to win the mandate, only to put it up before launch.
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Yet another deal pulled from the leveraged loan market is hardly a positive sign but the decision to withdraw the Eu620m deal for UK chemicals firm, Ineos, last week doesn’t spell gloom for the LBO sector. It merely confirms what was already known: the main factor that determines a deal’s success at the moment is the borrower’s sector.
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John Thain still has a firm hand on the tiller at Merrill Lynch, but the ship is so badly holed that he has had to resort to throwing the cargo overboard. By selling $30.6bn of CDOs to Lone Star, Mother Merrill has abandoned all dignity and allowed herself to be well and truly worked over by the Texans. This is no sale but a thinly disguised giveaway.
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This is not a glorious day for Merrill Lynch, but many in the UK and Europe will envy the way it can just swoop on the market and increase its capital by 35% in 24 hours. That is possible because US shareholders lack the pre-emption rights UK investors enjoy. Those rights are a holy shrine of the UK capitalist system — but many would now like them to be curtailed or even eliminated.
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Yesterday was a big day for the US covered bond market, with the release of a Best Practices Guide by the US Treasury, with a fanfare designed by Hank Paulson to show top banks were backing the product. But a lack of guidelines has not been the market’s main problem — it is that investors are not so far offering issuers pricing that is attractive enough to get the market started. When a new deal establishes that level, the celebrations will really be justified.
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US bank stocks charged higher when Wells Fargo and JP Morgan reported second quarter results last week. Investors saw signs that the worst of the writedowns and losses were over. But this rally was a mere pantomime — conditions are still getting tougher and many of the banks are not admitting how bad things really are.