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Issuer's £280m deal was cleverly marketed
With equity returns under strain, managers would do well to slow the pace of CLO issuance
Issuance has kept going by giving investors just what they want
John Healey resigned because the money was not there for defence. It may not be there for anything
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2008 is bringing a new philosophy to the world’s bond markets. Carpe diem — seize the day — is becoming the motto of wise issuers and banks wanting to sell debt. While the overall outlook remains firmly gloomy, market participants are increasingly confident that there are, and will be, gaps in the clouds — ups as well as downs.
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Barclays’ decision this week to buy a small Russian bank for £373m is just the latest in a stream of acquisitions and other moves by leading investment banks to bulk up in Russia. Small wonder: it is the only bit of Europe that resembles Asia in terms of rapid economic development and big deals galore. But there are no easy pickings — some firms have found it much easier to make headway in Russia than others and with stockmarkets uneasy, this year may be a tough one.
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The European securitisation market showed some welcome signs of life last week with two new issues, and the pricing achieved was encouraging, considering secondary spreads are still widening. But it is too early to call the end of the market’s period of devastation.
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The survival of Sigma Finance, the world’s biggest structured investment vehicle, through eight months of the credit crisis has been impressive. Asset manager Gordian Knot has successfully managed to shrink the vehicle from $57bn to $41bn, while avoiding downgrades. But last week Moody’s put it on review. Gordian Knot is widely admired, but how will it ride out this challenge?
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Since sovereign wealth funds have so much money and freedom of action, speculation about their likely actions is out of control. Last week private equity chiefs suggested they might replace investment banks in the leveraged finance market. Such tales are impossible to disprove, but rather than believing every fable, market participants should proceed from what is known. Many of the more high-flown stories would then seem fabulous.
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The real scandal on view in the UK Parliament’s debate on Northern Rock last week was not the Granite securitisation vehicle but the appalling ignorance of most people who attacked it. Politicians are cynical but lazy media reporting also fuels a culture of misinformation that is genuinely dangerous for the UK’s stability as a financial centre. The capital markets urgently need to find some eloquent and telegenic champions who are willing and able to restore some sanity to the credit crunch debate.