Search results for

Level 3 Communications' bank debt received a boost this week from the news that the company has signed a definitive agreement to acquire all the assets of bankrupt Genuity. Traders said that the bank debt rose to the 72 range up from the mid-to-high 60s. In mid-July, the company received approximately $500 million in new capital from Longleaf Partners Funds, Berkshire Hathaway and Legg Mason. At the time, there was speculation that Level 3 would be in position to begin consolidation in the telecom sector. Questions for Sureel Choksi, Level 3's cfo, were referred to a spokesperson, who did not return calls.

Issuance of sterling-denominated inflation-linked bonds is set to at least double next year and this should give the swaps market a boost. Inflation-linked bonds have been relatively uncommon in the sterling market, but pent up demand from pension funds and institutional investors is fueling increased interest from corporate and government issuers in the asset class, according to Mark Capleton, bond strategist at Barclays Capital in London. To date, there has been roughly USD1.5 billion in inflation-linked bonds issued this year and Capleton expects to see USD3 billion plus next year.

The Securities and Futures Ordinance was enacted in March 2002 and is widely expected to come into force by April. The SFO is a major piece of legislation, consolidating and superseding 10 primary pieces of current legislation relating to securities and futures.

"We have an atmosphere of liberalization toward these kinds of products." --Ciriaco Dator, head of banking group sector two, which regulates foreign banks, at the Bangko Sentral ng Pilipinas in Manila, on the reintroduction of foreign exchange products in the Philippines. For complete story, click here.

Bradford & Bingley, a U.K. building society, has entered a cross-currency swap to convert a recent USD500 million bond into a synthetic sterling liability. Peter Fullerton, head of dealing in the treasury in Bingley, U.K., said the thrift issued the bond in dollars to diversify its investor base to include Asian investors, where there was demand for its paper. The thrift had to use an fx swap because its loan portfolio is denominated in sterling. Fullerton said the exchange rate on the transaction is USD1.58, which is the spot rate of Nov. 19, when the bond was issued. The swap also gave Bradford & Bingley a marginal cost saving.

Derivatives powerhouses including Morgan Stanley, Salomon Smith Barney, JPMorgan, UBS, Deutsche Bank and IntesaBCI are pitching collateralized debt obligations of CDOs. One investor who has held discussions with investment banks about the new issues, said these are many of the firms' first such products in the U.S. market.

Alliance Capital Asset Management (India), one of the largest asset managers in India and an affiliate of Alliance Capital Management which has USD395 billion in assets globally, is looking to boost its use of derivatives for its USD550 million bond portfolio. "As liquidity increases we'll be increasing our activity," said Amitabh Mohanty, head of fixed income in Mumbai. He explained the asset manager has only used overnight-index swaps on the back of its bond portfolio. However, the asset manager will enter the derivatives market in a larger way next year as liquidity grows in the developing market. Volume in the interest rate derivatives market has roughly doubled in recent months on the back of rate cuts (DW, 10/13).

The academic debate over whether Marconi has defaulted, potentially triggering hundreds of millions of dollars of credit-default swap protection, recently ran up against hard reality when Ace Guaranty Re, a major seller of credit protection, said it would not yet pay out on Marconi protection. Major credit derivatives houses unanimously agreed Marconi had triggered the bankruptcy credit event in default swaps--and their position is backed by a Linklaters opinion--and started sending out notices in October. But some sellers of credit protection disagree. Officials at Ace declined comment.

Unibail, a French commercial property company, has entered an interest rate swap on a recent EUR300 million (USD297.6 million) bond offering to convert it to a floating-rate liability. The company is paying 77 basis points over Euribor and receiving 4.75%, the coupon on the bond. Julie Fagart, an official in the treasury management office in Paris, said the company entered the swap to maintain its fixed-to-floating rate debt ratio. The company typically keeps 5-10% of its debt portfolio with floating-rate exposure because the majority of its rental income has a fixed rate of interest.

The price of euro/dollar options fell by around 1% last week as trading activity slowed in the run up to the U.S. Thanksgiving holiday. Last Tuesday one-month implied volatility was 7.4%, having stood at 8.4% the previous week and been as high as 9.6% in the weeks leading up to the holiday, noted a New York-based trader. The euro tripped under parity, trading at USD0.99 last Tuesday, down from USD1.0025 where it had sat the previous week. Trading activity has been lackluster, with most traders willing to wait until after Thanksgiving to take on new positions, said the trader. There was little speculative or corporate interest in any dollar pairs, which is what generally drives upward movement in volatility, he added.

The International Swaps and Derivatives Association has circulated the final draft of the new credit derivatives definitions and market players have set Feb. 1 as the date when the definitions go live. The trade association has opted to go for a compromise on the most contentious issue of defining a restructuring by including three definitions. Users can opt for either the so-called "modified modified" restructuring proposed by the European dealers, modified restructuring used in the U.S. and old restructuring Protection buyers can also opt to leave out restructuring altogether.

The price of credit protection on France Telecom tightened five to 10 basis points early last week on the back of rumors the French government was considering lending the company EUR9 billion (USD8.93 billion) in the form of a mandatory convertible that it would purchase. Mid-market swap spreads tightened to 295bps on Wednesday morning from 305bps Monday as investors perceived the potential cash infusion as a positive for the credit. Convertible arbitrage fund managers were not out in force purchasing protection because the rumored convertible is not guaranteed to materialize but even if it does, it would have a mandatory conversion.