Search results for

Legal & General Group is planning to use interest-rate swaps to hedge upcoming five-year bond issues. Although the company has no immediate plans to issue five-year notes, it floats them on a frequent ongoing basis, said John Whorwood, treasurer in London. He said the insurer's issuance would depend on its mortgage-lending activity, but should total approximately GBP200 million (USD287 million) this year. The firm typically only enters swaps on its five-year bonds because these fund its mortgage-lending business.

Buyers were seeking high-strike caps and out-of-the-money cap/floor straddles last week because of a belief that volatility would increase in the front end of the curve. Traders said that the activity was likely driven by customer flow. Buyers are banking on increasing volatility in the short end because of the beginnings of an economic recovery coupled with uncertainty in the Middle East and the rise in oil prices.

Stanfield Capital Partners is preparing to launch a structured investment vehicle (SIV) that will be able to issue up to USD4 billion in term debt and use derivatives to manage interest-rate and foreign exchange risk, according to an investor who has seen preliminary marketing materials. Officials at Stanfield Capital in New York declined all comment.

Volkswagen has issued a PLZ100 million (USD24 million) bond and converted the proceeds into euros via an fx swap as a cheaper way of raising capital. In the swap, the company pays zlotys and receives euros, but Clement Denks, treasurer, declined to detail the exchange rates. He said VW entered the swap because it was offered an arbitrage opportunity via a reverse enquiry from Morgan Stanley. Morgan Stanley is also the counterparty to the swap and is one of VW's relationship banks.

Lombard Odier, which manages E1.5 billion in European corporate credit, is taking a step back from the market to gauge the expected flood of new issuance, after which it will begin to look at the primary market. Rodrigo Araya, corporate credit portfolio manager based in Amsterdam, says the market may come under pressure from large amounts of issuance and that he is waiting for spreads to widen out before getting back in to the market. He would like to see more issuance from the industrial sector to gain some diversifaction in his portfolio. "If [the issue] is interesting it's gone and your allocation is very low," he says of the current state of the primary market.

Some Loan Market Week surveys have been tougher than others to track down despite efforts by traders to persuade investors to turn them in. When a staffer tried to get one buysider to respond, he wasn't too enthused to vote for anyone, but on second thought he decided there could be some opportunity in it. He jokingly shared his strategy for selecting desks to fill the top spots. "I figure I should just auction off the slots--first place goes to the bank that buys me a round of golf, second for a day at a spa, and third for some great cigars," he quipped.

The Deal Roll-off Chart, provided by Dealogic Loanware, lists the 50 largest leveraged credit facilities in the U.S. market that are due to mature in the coming month. It is designed to provide a look at potentially available money in the market as credits are renewed or retired.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market for the week of April 8. It also tracks facility amounts, ratings, pricing and maturities.

AMR Investment Services is looking to add up to $400 million in bonds of brokerage firms. It will sell U.S. government securities to finance the move. Bonnie Mitra, portfolio manager of $4 billion at the Dallas money management firm, says he wants to capture additional yield while guarding against the extreme volatility and credit risk that has plagued lower-rated corporate sectors, such as telecommunications. Mitra argues that brokerage firms are less susceptible to the kind of off-balance sheet accounting practices that have roiled the credit market in recent months because they mark their assets to market every day at the close of trading. The portfolio manager also says that brokerage firms, unlike banks, are not greatly affected by rising interest rates and a flattening Treasury yield curve.

William Blair Investments will increase corporate exposure by 10%, or $150 million, in its portfolio by selling mortgage-backed securities. Bentley Myer, portfolio manager with the Chicago-based firm, says the recovery should lead to continued corporate spread tightening. He says the corporate rally will be sustained as the economy is improving and cost-cutting strategies have improved the outlook for corporate earnings.

Investors anticipating a Panavision recap that would replace bank debt with senior secured notes, got burned last week, as the planned $250 million note offering was shelved late on Thursday when bond investors refused to bite. One banker said the bank debt was trading at a big discount, but then traded up as opportunistic buyers predicted the proposed subordinated debt would repay paper. Trading in the mid-90s earlier last week, the name fell at least 10 points on news of the failed deal, a banker commented. "The market is selective, and the envelope was pushed," a banker said of the proposed bonds and new credit. A spokesman for Panavision said market conditions made the note offering impossible at this time. He declined comment on whether the offering would ever go through.

Portuguese bank bonds are said to show significant value in comparison to their lower tier-two peers, especially those in Spain with exposure to Latin America. Banco Comercial Portugues (BCP) and Banco Espirito Santo (BES) offer both yield and stability in the lower tier-two market, which is otherwise quite rich, says Carlo Mareels, analyst at Morgan Stanley in London. He believes BCP and BES will likely maintain stable credit profiles in the near- to medium-term, whereas continued uncertainty in Argentina could adversely affect Spain's Banco Santander Centro Hispanio (BSCH) and Banco Bilbao Vizcaya Argentaria (BBVA). His top pick is BES' euro-denominated lower tier-two debt due in '11, which as of last week was offered at roughly Euribor plus 70 basis points, five basis points wider than similar debt of BSCH.