The FT reported Indians are to be given a chance to trade their household gold by exchanging it for certificates that may be tradeded on the National Spot Exchange through brokers.  The commission to do this will be 50bp (far less than the current rate of 5-10% paid to jewellers who melt the gold and resell it).

gold

markets

The FT reported the ECB had injected €442bn of liquidity into the banking market (in the form of 12-mth loans) and it had the desired effect of reducing the €-LIBOR rates, but it failed to increase bank lending to companies because most ended up as overnight deposits at the ECB (because it is half-year reporting and banks want to manage their balance sheets!)

liquidity

markets

LIBOR

The FT reported former chancellor, Norman Lamont,  is joining the credit committee of a £20m fund set up by insolvency experts to provide turnaround advice and cashflow financing to troubled businesses.

turnaround

restructuring

The Times reported companies are exploiting renewed investor sentiment toward equities, by the spate of rights issues announced.  GKN is asking for £423 and Marstons £176, with underwriting fee of £20m and £10m. The continued reluctance of banks to lend is another incentive to milk investors whilst they are receptive.

Link to article 

rights issues

investor sentiment

underwriting

280 IDDmagazine.com reported European companies face $3.9 trillion of debt maturing upto 2012 incl, ($2.8 trn in the USA).  There is the risk of crowding out as sovereigns refinance also, forcing companies to offer higher margins.  However 87% of the maturing debt is investment-grade (55% in US).     Link to article 

refinancing risk

crowding out

cost of debt

The Times reported Dairy Crest has paid £160m for an insurance buy-in policy covering its pension payment obligations.  It has a hole in its £516m pension scheme of around £160m.   Link to article 

pension risk

insurance policy

The Times reported UK exports fell at the worst rate in a decade, despite GBP's depreciation, confirming the global contraction in demand.  There is also confusion over whether reduced lending by banks to companies is because companies are not seeking investment but instead paying off debt (as the banks claim), because a survey by the BoE says over 80% of companies have found credit harder to obtain and more expensive.   Link to article 

exports

credit demand

The FT reported a surge in convertible debt issuance by companies, incl. J sainsbury, with a strong pipeline.  H1 2009 issuance has been almost 2X that of H2 2008.  Investors are attracted because: they get debt exposure at relatively wide margins, plus equity exposure at relatively low prices.  Investors are arbitrage hedge funds and long only institutionals.

restructuring

senior/junior debt

The FT reported accounting rules might change so companies whose debt is at a discount may not post the gains to their P&L and so inflate profit, as this might hide the reality that the company is actually in a poor state.  Credit Suisse posted $614m gain in Q1 2009 this way.  A recent rally in banks has meant losses being posted.

accounting

mtm

270 The FT reported retail landlords, Liberty International and Land Securities, are said to be offering 5-year interest-free deals to retailers at their Cardiff shopping center, confirming retailers have the upper hand.  Many retailers however have gone under and others are picking up the remains at bargain prices (see Articles - Quotes)

rents

property sector

The FT reported healthcare company, Four Seasons, could undergo a restructuring where snr debt providers take 50% of the equity and junior debt providers take 12%, showing that unlike other restructurings (see IMO 18 Jun), junior debt providers retain some value where snr debt providers lose some.

restructuring

senior/junior debt

The FT reported Moody's might downgrade sub. debt of banks because governments have treated it as equity when bailing out banks.  Moody's had treated it as debt and so rated it higher than equity.  Regulators treated it as equity for cap adequacy.  Issuers might accelerate buying it back as its price drops farther after the downgrades.

subordinated debt

rating

capital adequacy

The FT reported senior lenders to carwash company, IMO, are offering to write off 40% of their debt for 100% of its equity via court-sanctioned scheme of arrangement. It would wipe out the entire mezz debt and they, not surprisingly, want a piece of the equity under the restructuring. The McCarthy & Stone restructuring set a precedent for wiping out junior debt if senior debt loses value.

restructuring

senior/junior debt

mezzanine debt

The FT reported Australian companies have raised record amounts through the equity market, a market they are reliant upon as their domestic corporate bond market is undeveloped, and international banks, at least, have turned off supply of debt. Equirty issuance globally has come into vogue, as investor risk appetite has returned.

equity

capital markets

265 The FT reported Teso has sold £430m of CMBS at 3.3% over 20-yr Gilts (much higher than the cost pre-crisis) but it's the first CMBS since the crisis.  It was 3X over-subscribed, and sold as a single tranche to asset mgrs, ins groups, and pens funds. It was arranged by G Sachs.

CMBS

The Times reported the UK govt has used a bank syndication sale process instead of the usual auction, to sell its 25 year Gilts. One insider said the cost of the bank fees would be less than the additional yield offered under an auction, and it seems to offer other benefits to the issuer.   Link to article 

Gilts auction

syndication

The FT reported CEO of US conglomerate, Honeywell, says the market for acquisitions is overheated, i.e., they fail to reflect the new reality by being over-priced.

pricing

acquisitions

The FT reported the West Brom. building society has remained independent through the creation of a new instrument similar to PIBS, which will replace current debt and so increase its tier 1 capital.  Also, the society was recently downgraded owing to its high exposure to commercial and BTL property.

new instrument

credit risk

building society

The FT reported a state-run Korean utility has issued upto $1bn in corporate bonds at a lower than expected coupon because of increased demand for them.  Investors in US, Asia, and Europe are increasingly attracted to the Korean economy and its corporates, and the Won's appreciation has allayed issuers' FX risk from issuing in USD.  A record $13bn has been issued by Korean corporates in 2009 as bonds.

bonds

currency risk

supply-demand

Korea

260 The FT reported ITV has offered its $500m debt holders a swap of their bonds for new bonds with a extra 3% coupon and cash upfront, but repaid 3 years later and ranking behind earlier maturing debt, thereby reducing ITV's refinancing risk.  Fitch said the exchange would enhance ITV's credit quality.

debt swap

refinancing risk

credit quality

The FT reported comments by CEO of Goldman Sachs on market value accounting: "Had fair market been implemented more widely...then people would have had an early warning and seen value erode", possibly thereby avoiding the severity of the financial crises that occured.

mtm accounting

The Times reported local authorities who outsourced their treasury management, might have been exposed to conflicts of interests of their treasury advisers who encouraged investment in Icelandic banks.   Link to article 

outsourcing

operational risk

The FT reported the US government has an average debt maturity of 4.7 years whereas the UK govt's avg is 14 years, suggesting the US has a mild maturity risk, of the kind experienced by arb. funds who funded with CP

maturity risk

The FT reported hedge fund, Paulson & Co, has taken a $156m loss on closing a short position on Barclays shares whereas Arab fund, IPIC, has booked a 5x gain by being long the shares bought at around the same time.

short selling

255 The FT reported utility, Northumbrian Water, has seen its energy bills and interest costs rise 56%.  Interest costs rose because of its inflation-linked bonds and inflation was high.

inflation-linked

debt

The FT reported mezzanine debt lender, ICG, has raised its bad and doubtful provisions from £46m to £273m in 2009, reported its first loss in 20 years and has rescheduled its debt by 2 years. Mezz debt providers were expected to do well in the crisis to fill the gap left by banks and captl markets, but their own loans turned bad (esp. to PE groups) and so they had no credit to lend themselves.

mezzanine debt

The FT reported 70% of european CFOs had tried to renegotiate terms with their suppliers.

suppliers

The FT reported investment-grade non-financials have issued $725bn in bonds in 2009, versus $410bn in 2008 and $280bn in 2007.  In the UK , issuance has been 33% more than in 2008.

bond issuance

The Times reported UK companies have drastically reduced their overseas M&As and so have foreign companies acquiring UK companies, perhaps preferring to get their house in order and keep it afloat.   Link to article 

M&A

250 The FT reported car dealer, Lookers, will pay 4% over LIBOR on £160m of debt and 10% over on £50m of debt.  It follows car dealer, Pendragon, who paid 3.25% over LIBOR (rising from just 0.9%) on £325m of debt.  Lookers might be forced to refinance with equity owing to the high rates.  

debt costs

interest margin

The FT reported Phoenix IT saw its share price rise 13% after it announced it would use part of its cash to repay debt acquired in an acquisition.

gearing

share price

The FT reported hedge fund CQS has seen its average gearing fall from 5x at the height of the credit bubble, to 1.5x.  Gearing was as much as 20x on some assets and is now nil on some (incl ABS).  Asset price falls has meant less gearing is needed to generate returns when high gearing and high asset prices existed.  The fund said a return to credit risk analysis and fundamentals was the way forward.

hedge funds

gearing

asset prices

The FT reported Rabobank issued $1.5bn of perpetual tier 1 subordinated debt with an 11% coupon, with a sharp step-up if not repaid at first call. The hybrid debt counts as equity for capital adequacy purposes.

hybrid debt

subordinated

The Times reported a move by investors into more risky assets on the basis the recovery is coming, causing the dollar, gold, and gilts to weaken and sterling, shares, and commodities to rise.   Link to article 

asset prices

245 The Times reported on the demise of GM, blaming management's arrogance and sluggishness.   Link to article 

bankruptcy

The Times reported the FSA has been stress testing banks and using a variety of assumptions.   Link to article 

stress testing

The Times reported brewer Heineken has bought the distressed debt of its major customer in an attempt to protect its 30-years supply contract by gaining a seat at the table if the customer's business falters.   Link to article 

distressed debt

The Times reported Vodafone and other companies are unhappy with the UK's tax system, including its CFC legislation to prevent companies diverting tax.   Link to article 

UK tax

The Times reported Morgan Stanley has dismissed a trader for front-running, and another has been banned for 2 years for concealing trades.   Link to article 

operational risk

240 The Times reported Sony is to cut its 2500 suppliers by 50%, saving £3.3bn, and raising efficiency.   Link to article 

economies of scale

procurement

The Times reported airline, BA, has moved from record profits to record losses, in 12 months.  Its debt has more than doubled to £2.4bn partly due to currency translation from the depreciation of £.  Fuel costs rose 45% to £3bn.   Link to article 

oil price

currency risk

The Times reported the resignation of M&B's CEO following the closure of the remaining hedge at a loss of £96m.  There was a further loss of £391m in 2008 for similar hedges closed out.  They were in relation to a property transaction that did not materialise owing to an inability to raise credit.  The hedges had been put in place in advance and had turned to massive losses as inflation and interest rates moved.   Link to article   Link to article

swap losses

credit crunch

hedging strategy

The Times reported Japan's GDP declined an annualised 15.2% in Q1 2009, its worst ever record.  The main reaons were: falling exports, appreciating yen, falling production, then weak consumer demand.   Link to article 

GDP

currency risk

235 The Times reported FSA's criticisms of the building society sector during the credit crisis, citing a failure in risk management, pricing, and judgement.  Some have since merged   Link to article 

building socs

risk management

The Times reported S&P has downgraded the UK govt to AAA with a -ve outlook following concerns about its level of outstanding debt in relation to income or output and its outlook.   Link to article 

UK govt debt

credit rating

The NY Times reported on Russia's damaging political influence on the business fortunes of oil and gas producer, Gazprom. Putin's agreement to buy Asian gas long-term at relatively high prices, has lost Gazprom money, and it has been forced to shut down its cheaper producing sites as demand for gas has fallen.   Link to article 

politics & business

gas prices

The Times reported RBS might lose 6% of profits if forced to hold more gilts for cap adequacy, and 20% off profits by refinancing upto £400bn of short-term debt with long-term debt.  Its shares fell as a result of reduced profit fears.

  Link to article 

interest rates

capital adequacy

refinancing

The Times reported Johnston Press has abandoned plans to sell its papers and renegotiate its debt at an estimated upfront cost of £10m and rise in interest from 6.25% to 8.5%, or face breaches of its covenants.  An example if ever there were, of banks having the upper hand, for which Press will pay dearly.  Link to article 

bank fees

interest rates

230 The Times reported Morgan Stanley was £1.4m by the FSA because it "failed to operate its controls properly, failed to supervise Mr Piper's books and failed to detect the problem as quickly as it should have done." The senior trader (Piper) was fined £105,000 for deliberately concealing trading losses of upto $120m.   Link to article 

operational risk

The Times reported UK plc rights issues have risen substantially, up from £800m in the same period in 2008 to £6.3 billion so far in 2009, and across 27 issues.  This is the highest issuance since the 1990s, and excludes the £12.5bn issue by HSBC.  Banks have been earning fat fees also.  It is expected the equity will be used to reduce the level of debt in companies' capital structures after years of easy money.   Link to article 

rights issues

fees

capital structure

gearing

The FT reported Colombian coffee's spot price rose to a 12-year high owing to reduced supply caused by heavy rain.  In India, failure of sugar crops raised the sugar price 52% from its mid-Dec 2008 level.

commodities

weather risk

The Times reported £ appreciated against the € on better than expected economic news and because of expectation that the ECB will lower interest rates to 1% owing to recessionary pressure in Europe. Link to article 

exchange rates

interest rates

Airport operator, BAA, reported in its 2008 accounts that it has incurred £324m in debt refinancing fees in relation to its acquistion by the Ferrovial consortium in 2006.  This equates to fees of 3.66% of the £8.845bn of debt involved.

debt fees

225 The Times reported shoe retailer, Adidas, has seen its quarter's profits fall 97% owing to reduced sales, higher raw material and wage costs, and depreciation of the $ and rouble vs the €; and was 67% below analysts' forecasts.  Debt has risen 40% to finance stock for a bigger retail network.  Margins and eps were expected to fall further.   Link to article 

revenue

currency risk

cashflow

The Times reported fraud by company directors was up and, as expected, follows the rise in company insolvencies.  The number of directors disqualified for fraud at isolvent companies has also risen.  Activities include setting up phoenix companies to ring fence assets from creditors, and transferring wealth to themselves. Link to article 

director fraud

insolvencies

fiduciary duty

The Times reported a 72% rise in the number of companies delisting from the UK small company share market: AIM, citing its cost versus benefits (it costs around £150,000 in fees a year to maintain a listing, share liquidity is a problem, and share valuation).  some companies however have had success raising finance, though the number of new floatations is down to just £3m in Q1 2009 from £300m in Q1 2008.  Link to article 

AIM

share flotation

fees

The Times reported 370 pharmacies are thought to be buying extra stock (a process called skimming) and selling it overseas rather than in the UK to take advantage of £'s depreciation, leading to a shortage of such medicines elsewhere.  Skimming has risen significantly in recent months. Link to article 

ethics

currency risk

The Times reported the UK M4 money supply (a measure which includes loans to companies and individuals) fell to its lowest level since 1998 (2.5%), suggesting that quantitative easing measures by the govt. to increase bank lending, are not having the desired effect. Link to article 

quantitative

easing

money supply

220 The Times reported personal insolvencies (incl. bankruptcy and IVAs) has risen 29% in the UK over Q1 last year.  Personal debt remained at record levels, unemployment was at its highest since 1997, and negative equity was rapidly rising.  Business failures rose around 55% Q1 2009 vs Q1 2008. Link to article 

personal insolvency

corporate failures

The Times reported publisher, Informa, is moving its tax base to Switzerland to avoid taxation of overseas earnings repatriated to the UK to pay dividends, thereby saving around £10m UK tax a year.  WPP and United Business Media have moved their tax base to Ireland (presumably for similar tax reasons).     Link to article 

taxation

overseas earnings

The Times reported services company, Rentokil, showed sales up almost 10%, however they were down if calculated on a constant exchange rate basis.  The figures were flattered owing to the depreciation of £ against €

Link to article 

currency risk

sales

The Times reported car dealer, Pendragon, has paid £35m in fees including the costs of giving the banks 7.5% of its equity as warrants, to secure a 3-year bank debt facility with its banks. It will also pay higher interest (rising from 90bp over LIBOR to 325bp over according to CityAM).  CityAM estimates the banks could net £110m (21%) over the 3 year loan.  In return it will have longer to repay and be given covenants it is unlikely to breach.  

  Link to article   Link to article

bank fees

covenants

bank debt

warrants

The Times reported owner of Currys and PC World, has lost cashflow following a reduction last autumn in supplier credit insurance to its suppliers, raising its net debt and forcing it into an equity issue.   Link to article 

cashflow

credit insurance

215 The Times reported train and hotel group, Orient Express, turned down a $60 per share offer 18 months ago and is now trading at $6 per share. It has forked out $10m to waive a debt covenant it breached.  The company is controlled by its board's holding of class B shares giving them superior rights over class A holders.  

Link to article     

fiduciary duty

debt covenants

bank fees

The FT reported Citigroup reclassified $64bn of its assets as held to maturity so they no longer need to be marked to market and corresponding losses are not taken to the P&L, but it has an equivalent amount of its own bonds which have become profitable as their value has fallen below their original booked value and who profits may be included in the P&L (note the accounting asymmetry).  £55bn of BarCap's own bonds have contributed £1.7bn to its P&L in this way, more than its £1.3bn profit in 2008.

creative accounting

mark to market

bond valuation

The FT reported insolvency firm, Begbies Traynor, says there has been an 87% rise in Q1 2009 over Q1 2008 in companies with 'critical problems' (they have £5K or more of CCJs or have wind-up petition-related actions against them).

financial distress

Marketwatch.com reported Swedish truck maker, Scania, saw its orders fall 70%, sales fall 28%, and deliveries fall 41%, all in Q1 2009.  Its Q1 profits fell 93%.  Its outlook for orders is unchanged    Link to article 

revenue

recession

The Times reported the UK leisure industry is seeing increased overseas tourists numbers owing to the depreciation of £, but many UK companies are cutting back on conferences, denting hotels' sales. Link to article 

currency risk

leisure industry

210 The Times reported shares in drug and travel companies have reacted sharply in either a positive or negative way to the current Asian health scare. Link to article 

share prices

markets

MarketWatch.com reported UK insurer, Aviva, has increased its sales by 11% in Q1 2009, but they have fallen 2% in local currency terms, highlighting the importance of seeing through headline numbers. Link to article 

currency risk

performance

MarketWatch.com reported the UK would not be allowed entry into the EU with its disasterous finances, saying it would take 20 years for its debt to fall back in line with GDP. The Chancellor predicts the budget deficit will be 12% of GDP in 2009-10.  Germany's deficit is currently 3.7%, much closer to the limit under Mastricht of 3% of GDP.   Link to article 

fiscal policy

UK govt debt

budget deficit

The Times reported private equity (PE) groups have had to inject additional funds into 3 water utilities they bought at the top of the PE boom in 2006, to avoid breaching debt covenants following falls in their asset values (their value is linked to RPI which has fallen).  The PE groups are themselves short of cash (3i is mulling a £700m rights issue)    Link to article 

private equity

debt covenants

asset values

The Times reported oil company Cheseapeake has paid its CEO over $100m, including contracts with companies he part owns, free use of the company's jets, company shares, and a bonus of $77m.  The CEO had lost his $2bn worth of company shares to meet a margin call.  The company bought $12m of artwork and books the CEO bought earlier for $4m.  The company is alleged to have breached its fiduciary duty and bailed out the CEO Link to article 

fiduciary duty

205 The FT reported more corporate bonds (£20 billion) have been issued in 2009 year to date than the whole of 2008 and 2007.  This might partly be because of the dearth of funding from the equity and banking sectors.

corporate bonds

204 The FT reported company failures in the construction, manufacturing, retail, hospitality and leisure.sectors are at a 5-year high.  Insolvencies have risen 57% Q1 08 vs Q1 09, and 14% in Q1 vs Q4 08.  One reason for the onset of insolvency is because companies leave the call for help too late.

rights issue

buy back

203 The FT reported the UK govt. is to use syndications and mini-tenders to increase its chances of successful issues of Gilts, following its first failed auction in 7 years last month.  The FT also reported the govt's credit status reflected in CDS spreads has worsened to 95bp, but still well below 180bp seen at the start of the year but well above the 20bp seen in mid-2008.  Its AAA rating could also be at risk.

Gilts

syndications

CDS

rating

202 The FT reported more corporate bonds (£20 billion) have been issued in 2009 year to date than the whole of 2008 and 2007.  This might partly be because of the dearth of funding from the equity and banking sectors.

corporate bonds

201 The Times reported retailer, Bay Trading, has written off £17m payable on leases it might break early and which are over badly-trading shops.  Also, its board is said to have rejected a takeover offer without considering its price or terms.   Link to article 

leases

break costs

fiduciary duty

200 The FT reported discount retailer, Primark, has lost gross margin owing to the depreciation of £ because it had committed to buy goods from China and India pegged to the dollar.

currency risk

199 IDDMagazine.com reported Morgan Stanley would have posted a Q1 profit if it had not written back into its P&L, an improvement in the credit status (market value) of its own bonds. Since they are a liability, write-backs are treated as a cost in P&L terms.

credit risk

P&L

198 The Times reported French utility, EDF, might be preparing a bond issue aimed at the retail investor.  This will increase its transaction costs because targetting retail investors forces it to issue a full prospectus.  On the other hand, corporates might be able to get away with offering them a lower interest rate and weaker bond terms.

Link to article 

corporate bonds

retail investors

197 The Times reported UK RPI (including mortgage interest, food and energy costs) has turned negative for the first time since 1960, as the cost of oil is adjusted down from its historic highs last year.  Some companies might be taking the opportunity to raise their margins because core inflation has risen to 1.7%.  Wage rises are set to be lower or nil, where they are based on RPI.         Link to article 

inflation

RPI

196 The Times reported the debt of sub prime lender, Cattles, is trading at 6p per £1 and its shares are worthless, following revelations of its questionable practice of cleansing of bad customer loans, a potentially £850m hole in its balance sheet, and its looming administration unless it can roll a £500m credit line. It has failed to obtain a banking licence or buy one.  Six directors have been suspended.         Link to article 

arrears policy

operational risk

bank debt

195 The Times reported chemicals company, Ineos, is seeking acceptance by its banks of a revised business plan that would enable its debt covenants to be renegotiated later in the year. In November 2008, the Times reported the company would pay a $30m fee and an extra 1-1.2% in interest in return for a waiver by a syndicate of 230 banks on a debt covenant, in response to a decline in the company's prospects. In Oct 2008, the Times reported the value of Ineos loans had fallen to 50% of face owing to its risk of default.  Link to article    Link to article

debt covenants

interest costs

cashflow

194 The Times reported Citigroup's reported headline profit in the first quarter 2009, was after: excluding the interest cost on pref shares costs, asset losses, and including a $2.5bn gain from the reduced market value of its own debts.  Clearly, a reported improvement in performance must be assessed with full knowledge of how it is arrived at. Link to article 

performance

reporting

debt revaln

193 IDDMagazine.com reported various companies had been downgraded by S&P for various negative risks, including: capital structure, liquidity, refiancing, reliance on distressed customers (big car makers), unanticipated cost increases, operating environment (constrn and auto sectors), customer concentration, poor sales outlook, and because of deliberate or forced default on interest payable.         Link to article 

rating actions

default

credit risk

192 The FT reported property fund company, Grosvenor, has increased its equity by £304m from FX gains - largely owing to its policy of not hedging translation exposure of its overseas operations and £'s depreciation.  It also suffered a revaluation loss of £1.3bn on its properties and turned a profit of £430m in 2007 into a loss of £480m in 2008.        Link to article 

currency risk

revaluation

191 The New York Times reported shopping mall owner, General Growth Properties, has entered bankruptcy after bondholders refused to defer interest owed.  The company had mistakenly funded with cheap but short-maturity mortgages it could not refinance in the ensuing credit crisis, and it faces reduced rent to hold onto its tenants and others have gone out of business.  Asset sales are not possible because buyers can't get credit either.  It has debt of $27bn and has been granted a Debtor In Possession credit line.         Link to article 

funding risk

asset values

bankruptcy

cashflow

190 The Times reported the administration of Lehman's European operation has earned over £100m in fees to lawyers and accountants in 6 months, with PwC's lowest hourly rate being £143 and partners charging an average of £620.  A further £115m has been paid to retain 800 Lehman staff to sort out trades.  It could be the longest UK administration case, surpassing the BCCI's 12-year term.   Link to article 

administration

fees

189  IDD Magazine.com reported that findings by the US Treasury says regulators (incl. FDIC and OCC) had consistently failued to act quickly to warning signs at US bank and thrifts they supervised.   Link to article 

regulation

supervision

188 The Times reported $ 3m LIBOR has been falling and the spread between overnight swaps (OIS) and LIBOR has fallen to its lowest since last Sep, both indicating confidence in economic outlook and in inter-bank lending. LIBOR is expected to fall further.    Link to article 

inter-bank

LIBOR

confidence

187 The Times reported research has shown far more UK companies have cut their dividend in the first qtr 2009 compared to the same period in 2008. In the US, dividend payouts have been the worst since 1955.  The cuts come on top of low interest rates and share capital losses for investors.   Link to article 

dividends

cashflow

recession

186 The FT reported that Moody's rating agency said the ratio of companies being downgraded to upgraded is at its highest for 25 years - reflecting the worsened credit status of companies internationally (EMEA and north America) and across auto, hotel, leisure, and finance sectors. The default rate of European junk issuers was forecast to rise to 21% by year end.

ratings

credit risk

185 The Times reported HSBC's £12.5bn rights issue will net its advisers £400m in fees plus an extra 0.5% (£64m) as a success fee. The issue was to plug a hole created largely by sub-prime losses at its US sub.  Link to article 

advisery fees

rights issue

184 The Times reported the US trade deficit fell by about 28% in Feb, its sharpest fall for 12 years, owing to depressed consumer demand for imports (which fell 5%) in the face of the global recession, unemployment, and loss of confidence.  

trade deficit

183 The Times reported owners of shipping fleets face bankruptcy as shipping rates continue to fall and as new ship orders add to already overcrowded shipping fleets. China has reduced its imports (partly owing to earlier stockpiling) and reduced exports, adding to the decline in shipping trade and need for vessels.    Link to article 

exports

revenue

over-supply

182 The Times reported 91% of almost 8000 final salary pension schemes are in deficit to the tune of £219 billion as at Feb 2009.   Link to article 

pension deficit

181 The Times reported the UK's water companies are collectively losing £1m per day through inefficient planning, procurement management, and low cost-visibility enabling contractors to charge a premium for outsourced risks.  The industry could achieve upgrades at 20% less capex than they are requesting from Ofwat.   Link to article 

supply chain

inefficiency

180 The Times reported how a celebrity chef initially blamed its bank for pulling the plug on his business but later admitted he was to blame for failing to respond to reduced margins from overstaffing and increased raw material prices, and an over-stretched debt position and falling customer demand.   Link to article 

recession

revenue

margin

179 The Times reported building supplies business, Travis Perkins, might be seeking to acquire competitor, Galiform, but would probably need a rights issue to do so.  Additional equity would also avoid likely rises in interest and bank fees on debt it might default on and must renegotiate but does not need to repay for 4 years. A value-enhancing acquisition would also increase the chances of a rights issue being taken up. Its shares rose 9%.    Link to article 

equity

debt costs

acquisition

178 The Times reported on the moral hazard of councils and incompetence of local councils and charities that continued to invest in Iceland after its rating fell, and some of which will be bailed out by the government, though not the councils, meaning council taxes might rise to cover their losses on Icelandic deposits.   Link to article 

moral hazard

credit risk

177 The Times reported an appreciation of £ versus the $ would not be welcome for UK exporters but it would reflect growing optimism and risk appetite of investors for the UK, though it might hinder a UK recovery and sectors such as UK tourism, and companies who report in $.   Link to article 

currency risk

economy

176 The Times reported that RBS admitted it paid £15-20 BILLION too much for ABN AMRO.  Also, it wrongly paid most of the price in cash. Its timing was awful, at the point when the sub-prime mkt began to implode.

valuation

175 The Times reported FNMA and FHLMC employees will receive bonuses totalling $210m to retain their services, despite the agencies being bailed out with $200 BILLION by the US government.  Link to article

moral hazard

bonuses

174 The Times reported that uK company failures rose 35% y/y, and between 45-65% Q/Q from Q4 08 and Q1 09, both in the manufacturing, construction, and retail sectors.

business failures

173 The FT reported banks are keen to buy back their hybrid debt securities because they trade at substantial discounts to face value and the difference can be booked as additional core capital so boosting their capital ratios.  Investors might be reluctant to sell however, because a sale will crystalise a loss for them.  Hybrids had been popular form of finance because they qualified as capital (albeit tier 2) and so boosted leverage and RoE, but with the credit crisis, regulators are likely to expect banks to hold relatively less tier 2 capital.

hybrid debt

capital ratios

172 The FT reported diamond miner, Gem Diamonds, almost doubled its revenue in 2008 to $297m but its pre-tax profit fell from $68m to a loss of $577m owing to an impairment charge caused by a fall in diamond prices and costs of closing mines and projects.  Diamond prices fell about 50% from Sep-Oct 2008.  A £75m share placing dropped the share price 17% to £1.24 (it was £11.00 in May 2008).

asset valuation

equity value

profitability

171 The Times reported the US FASB has bowed to pressure from banks, lawyers, and politicians to relax mark to market accounting and allow banks to use their internal valuation models. Bank shares rose on the news.  Opposition groups warned the move decreased transparency and trust as the changes have been rushed through and could be effective next quarter.   Link to article 

mark to market

accounting

trust

170 The FT reported housebuilder, Taylor Wimpey, has renegotiated its debt covenants away from EBITDA to cashflow and gearing based measures, which it considers more suited to the current property market.  In return the company will pay 10.5% instead of 6.5% on debt if it fails to raise new equity and lower its debt by £150m.  Such lenders will hold warrants on 5% of the company's equity.  Later, 8 Apr, the FT also reported Wimpey will pay £60m in refinancing fees.  Its shares trade at 80% discount to NAV and its pre-tax loss fell to £2bn owing to asset writedowns of about £1bn and £816m in impairments.

debt covenants

cashflow

equity

refinancing

bank fees

asset valuation

169 The Times reported a study suggesting £'s depreciation was a strong factor in boosting demand for UK goods, with the new export orders index at its highest since last October. £ has fallen 25% against currencies in the past 18 months.   Link to article 

exports

currency risk

168 The FT reported how baring Asset Management uses a contrarian strategy to generate alpha, by investing in commodities when they fall in price, and by avoiding the US equity market (which it claims is one of the most liquid and efficient) and investing in relatively inefficient capital markets.

investment

contrarian strategy

efficient markets

167 The Times reported how lucrative fees had driven hedge fund manager, Fairfield, to neglect its due diligence obligations to its investors, whilst falsely claiming it performed them.  See Articles/Quotes Link to article 

due diligence

hedge funds

166 The Times reported shares in hire company, Speedy Hire, rose 25% on news it had renegotiated its 3 year bank loan. It also announced annual costs savings of £42m, and a one-off restructuring charge of £25m incl.a £4.5m (1.5% of debt) as an amendment fee for renegotiating the debt (according to the FT).  Two months ago, its shares fell 50% on news that profits were forecast to be 27% lower.    Link to article 

covenants

debt

restructuring

fees

165 The Times reported shares in Lupus fell 30% as it announced it had decided not to pay interest due on its debt because it was in discussion with banks on renegotiating its loans, but it admitted it had not obtained the consent of all its syndicate to defer the payment.  See Articles/Quotes for more    Link to article 

covenants

debt

share price

164 The Times reported the company that owns Southampton footbal club has suspended its shares owing to uncertainty over its status as a going concern, because its funding has not been increased or refinanced, and it is heavily in debt.  It borrowed heavily to build a new stadium and has had reduced income following relegation.  It also sold off its best players.  Link to article

revenue

gearing

163 The Times reported subprime lender, cattles, has said its board received inaccurate or incomplete information from its management team.  The company is undergoing an investigation into a failure of internal controls and 6 executives have been suspended.  Its share price has fallen from 340p to 3.4p in 2 years    Link to article 

internal controls

share price

162 The Times reported on many large projects that run over budget, partly due to easy money, optimism, and a lack of discipline.   Link to article 

budgetting

controls

161 The Times reported car distributor, Pendragon, is to pay £25m for renegotiating its bank covenants, comprising: £7.5m as an up-front bank fee, £12.5m additional annual interest, and £5m advisory fees.  The cost is almost 2/3 of the company's mkt value and relates to debt acquired to takeover a competitor.    Link to article 

bank debt

fees

bank covenants

160 The Times reported an analyst warned that BT would have to inject at least £500m pa into its pension fund when it's revalued.  This with falling revenue from broadband and losses in a subsidiary, would leave it with insufficient cash to  pay a dividend.  Its shares fell 3.5%

cashflow

pension liabilities

159 The Times reported RBS and Lloyds have each bought-back their bonds at about 50% of face (they had been at around 28%).  The move will reduce interest costs and enhance capital adequacy, and caused their shares to rise by 3% and 11% respectively.  Analysts had approved of the buy-backs.   Link to article 

debt buybacks

capital adequacy

158 The Times reported AIG had to post £500m in cash collateral to Canary Wharf owner, Songbird, following AIG's rating downgrade, because it is rent gaurantor for Lehman and Citigroup's leases at offices in Canary Wharf.

credit rating

guarantor

The Times reported Kent Council lost £3m owing to a dealer not checking an Icelandic bank had been downgraded before placing a deposit, because he failed to open an email.  See 11 Jun 2009, for further news    Link to article 

operational risk

157 IDDMagazine.com reported sovereign wealth funds (SWF) are worth over $3 trillion (a 59% increase of the $2.02tr in 2007), and led by the Abu Dabai fund at $750bn then China's and Norway's at around $300bn each.

sovereign wealth

156 The Times reported a survey by consumer watchdog, Which?, found that energy utilities are using excessive DD collections of consumers' money, as interest-free loans. 65% of consumers surveyed were in credit (8 million) but still being over-charged, and 25% surveyed were at least £100 in credit.

interest free loans

cashflow

155 The Times reported newspaper distributor, Dawson Holdings, saw its share price fall 40% as it failed to renew two major contracts worth £139m pa. The contracts were awarded to the market's two other operators, whose share prices rose around 20%.

cashflow

revenue

154 Marketwatch.com reported US new commercial equipment financing fell almost 40% y/y in Feb (according to ELFA) as customer credit quality deteriorated and they cut back on capital investment.  The US mkt is worth $650bn.

equipment finance

153 The Times reported how companies have almost doubled issuance of corporate bonds year on year, owing to the dearth, and high cost, of bank finance.  Equity issues have also risen, to refinance maturing bank debt. 

 Link to article 

corporate bonds

equity issues

bank debt

152 The Times reported accounts by a whistle blower of the expropriation of wealth by RBS's former CEO's lavish lifestyle.    Link to article

fiduciary duty

expropriation

151 The Times reported shares in oil explorer, BenLeven, rose 160% to 107p after it confirmed it has a suitor offering cash of 150p.  Though a substantial premium, the company warned the offer could be at a discount to its future value given the market was currently in a depressed state.  The company had come to the AIM mkt in Dec 2004 at an issue price of 363p.

valuation

takeover

premium

150 The Times reported shares in car distributor, Inchcape, rose 18% on announcement of its £232m rights issue, that will put off debt refinancing until 2012 and secure its future. Its annual debt interest charge is £60m yet pre-tax profits have fallen to just £4m, illustrating its distressful position.    Link to article

rights issue

financial distress

debt maturity

149 The Times reported commercial property investor, Brixton, shares rose 17% when it announced it would not breach its debt covenants prior to June.  It might avoid a debt-for-equity swap but a £250m rights issue might happen.  Its 2008 results show its D:E ratio has doubled as it took a £673m hit on asset declines to P&L turning a £58m profit in 2007 into a £769m loss in 2008.  Net rental income had actually risen in the period. Asset:net debt has fallen from 2.72 to 1.86, and interest cover from 2.2 to 1.9   Link to article

valuation

covenants

property

148 The Times reported the hotel market globally is depressed, and though asset values have dropped (several hotel LBOs have been affected, including Blackstone probably losing its $5.5bn equity stake in Hilton), lack of credit is preventing acquisitions, and the risk that values, revenue and occupancy rates (revpar) will each fall further.  New builds are also being prevented through lack of funding, as are franchising opportunities.    Link to article

valuation

LBOs

revenue

funding

147 The Times reported financially distressed van maker, LDV, has offered its creditors its vans in part payment.    

cashflow

146 Marketwatch reported American Express paid its CEO $27m in 2008, incl. $874K in perks which included $414K for personal aircraft use.  The company's shares have fallen 66% over the last year.    Link to article

company perks

expropriation

145 The Times reported the head of the FSA has criticised the UK govt for promoting a culture of debt and asset inflation, and criticised pension funds for investing in securities they did not analyse, relying on rating agencies and for not controlling bankers' bonuses.    Link to article

debt

governance

credit crisis

144 The Times reported shares in insurer, Aviva, fell 14% after an analyst criticised its decision to pay a £500m dividend that would prejudice its capital strength and expose it to the mercy of the markets.    Link to article

capital strength

dividend

144 The Times reported newspaper publisher, Johnston Press, could see its interest cost rise from £23m projected to £35-45m owing to its financial distress and the shortage of supply of credit, illustrating the relative power banks have over borrowers under stress.  The company's share price has fallen 96% in the past year and it is seeking bids for its titles to raise cash; it might be forced to ask for its £477m debt to be renegotiated.  80% of revenue has come from advertising traditionally, but this has fallen 36% and will continue to fall in the recession.  Link to article

financial distress

interest cost

asset sales

revenue

143 The FT reported insurer, AIG, had not needed to post collateral against its CDS positions owing to its high rating, but after its downgrade, the call for collateral when it spositions were marked to market was so large it became in effect insolvent, necessitating a bailout of $160bn so it would not default on its CDS positions.

AIG

CDS

mark to market

142 The FT reported spreads on European investment grade corporate bonds rose to their highest level (487bp) as investors shied away.  Volvo's recent 5-year bond issued at a record 787bp over Bunds, was now trading at 1000bp over.

corporate bonds

credit risk

interest cost

141 The FT reported media company, Thompson, has negative equity of €135m after goodwill impairment, asset write-offs, and restructuring charges (versus a positive figure of €2bn last year).  It intends to ask its banks to waive 60% of their loans to raise its credit rating from CC. The company says this low rating will hamper its ability to win business and deal with suppliers.

financial distress

negative equity

rating

140 The Times reported investment banks are raising their fees for arranging corporate financings Pensions funds and company boards share some of the blame for allowing this transfer of wealth.   Link to article

advisory fees

rights issues

139 The FT reported GE Capital will save $9bn by reduciong its div and its hsre buy backs.  If its rating falls to under AA- it will have to post $8bn in collateral, and another $8bn if it falls to BBB.  Its $4bn 30 year debt issued in Jan at 98.48% now trades at 72%, reflecting its worsened credit risk.

financial distress

cashflow

rating

138 The FT reported the Swedish govt appears unconcerned about the SKr's depreciation of 20% vs € and 27% vs $ since last Sept.   Though it helps exports, there is the risk it will import inflation (imports become costly so stoking inflation).  The disregard could be a form of protectionism by the govt. to revive its economy. One former banker said: "Sweden is carrying out a competitive devaluation, something that is not appreciated in the outside world."

currency risk

inflation

economy

protectionism

137 The FT reported Gilt yield fell to 2.95%, their lowest since records began in the 1950s, on expectations the UK govt would buy up Gilts as part of its quantitative easing plan to inject cash into the economy.  The fall should depress coprorate borrowing costs, and 10-year swaps have fallen to almost a record low of 3.47%pa.  Ironically, pension deficits are expected to rise by £80bn because Gilt yields are used as the discount rate to value them.  The injected cash could thus be diverted to plug pension scheme holes instead of reviving economic trade.

quantitative easing

cashflow

corporate yields

Gilts

136 The FT reported the New York Times has entered into a sale and leaseback transaction to raise $225m to reduce its $1.1bn debt. The rent will be high but not as much as the 14% coupon it will pay on a recent $250m loan to refinance its debt.  The company has been criticised for increasing its div by 31% in 2007 and share buy backs.  In 2008 it cut its div by 74% and suspended it in 2009.

cashflow

dividends

sale & leaseback

share buy back

135 The Times reported betting company, IG, has reduced its doubtful debt charge by 75% following an improvement in its credit risk management.  in 2008 the company lost £223m from a fall in its share price after it said it had increased its bad debt exposure by £12m in just one month and £15m over the past 6 months (versus a bad debt charge of just £4m for the whole of 2007). Its shares fell today by 30% however after it announced falling sales.

credit risk

equity value

sales revenue

134 The Times reported drugs company, Merck, is to acquire Schering-Plough, in a move expected to save $3.5bn in costs annually from 2011 and offset declining revenues.  Schering's shares will be bought by Merck at a premium of 34% however.   Link to article

acquisition

share premium

cost savings

133 The Times reported telephone company, BT,was downrated by a Morgan Stanley analyst on fears it would have to put in more than expected to fund its pension deficit.  Its share price fell 11%.  To meet annual top-ups of £750m might necessitate a cut in dividend.  Its pension deficit was £6.6bn in Dec 08 and could have risen since then by a further £2bn following asset declines.  even so, at £30bn, BT's pension is worth 3 times the value of the company.   Link to article

pension deficit

share price

funding risk

132 The Times reported banks are charging double for underwriting rights issues (from 2% to 4%), despite issues being heavily discounted so reducing the underwriting banks' risks of being called.  Fees passed on to sub-underwriters have fallen as a % of total fees, implying leads are keeping a bigger % of the total fees. Building supplies distributor, Wolseley, paid £50m for raising £1bn.  Premier Foods paid 5.7% underwriting fees of £23m and total fees of an incredible £76m (18.8% of the £404m raised).  Another company paid total fees of 15%.  Property company, Segro has paid underwriting fees of £18.3m (3.66%) despite its rights issue being at a massive discount of 85%.     Link to article

rights issues

underwriting fees

131 The Times reported jet-engine maker, GE, has seen the cost of insuring GE Capital's debt (using CDS) rise to 20% upfront and 5% pa, a record high.  It follows fears its AAA rating could be cut and it might have to raise equity capital.  Losing its AAA rating would force certain investor groups to sell their stakes. It cut its divident by 66%, saving $9bn in cash.  Its shares fell to an 18-year low.   Link to article

default risk

rating

CDS

130 The Times reported sub-prime lender, Cattles, has suspended senior directors as part of a review by its auditors on the improper application of its impairment policy owing to a breakdown  in internal controls.  The review could lead to substantial reduction in expected 2008 profits, yet to be reported.  Its shares fell a further 43% (and have lost 99% y/y).  Its shares are valued at £15m and it has £2.4bn of debt, £500m of which is due to be repaid in July.  The company failed to secure a banking licence that would have provided retail financing.    Link to article

operational risk

fiduciary duty

value

129 The Times reported black cab maker, Manganese Bronze, is reliant upon just one supplier for each of its car parts, and reduced supplier credit could put its working capital at risk.  As a condition of renewing its overdraft, it has scrapped its dividend.  It has a stocking loan facility secured on its manufactured cabs for sale.  Sales have fallen 40% owing to cabbies finding credit difficult to obtain, plus the worsened outlook for their business.

working capital

supplier credit

overdraft

cashflow risk

128 The Times reported video rental firm, Blockbuster, is trying to refinance $378m of loans in its highly geared capital structure.  Fears it might enter bankruptcy cut its share price by 77%; its rival, Netflix, saw its share price rise 6%.  Its declining rental business and a dry credit market exacerbate its financial distress.

financial distress

capital structure

127 The FT reported Allied Irish Bank increased its bad debt provision by 1700% year on year, 66% of it relating to its €71bn Irish loan book.

bad debts

credit risk

The FT reported housebuilder, Persimmon, has renegotiated its debt for an additional 280bp in interest plus possibly additional costs such as fees.  It will now pay 4.4% over LIBOR.  In Dec 2008 Bovis agreed 3.5% over LIBOR.  Its loan agreement includes cashflow based interest cover, min net worth and gearing covenants.  Cashflow based covs. have become the norm with housebuilders.

covenants

interest margin

bank loans

126 The Times reported HSBC is to raise £12.5bn from a rights issue to raise its Tier 1 capital from 8.5% to 9.8% in the wake of writing off $10.6bn on loans and provisioning $25bn for other bad loans.  It will also cut its dividend by 29% in $ terms.  Its shares fell 19%

capital adequacy

credit risk

125 The FT reported broker, Tullet Prebon, has set up a desk to broker transfers of hedge fund (HF) investors' holdings that they cannot redeem.  Holdings of closed to new investment HFs had been trading at a premium last July but by end 2008 holdings in HFs that could not be redeemed were trading at an average discount of 13%, and as low as 45%.

hedge funds

secondary market

124 The FT reported RICS thinks the commercial property sector is only half way through its valuation correction, so values could fall another 25% over the next 2 years

commercial property

valuation

123 The FT reported $300bn has been raised globally in Jan & Feb 2009 (the largest ever in a 2-month period).  Issuance however has been dominated by investment-grade issuers.  Issuers at the lower end who are in sectors likely to deteriorate (such as retail) have been shut out by investors in case issuers fall below investment grade and investors are forced to sell immediately and at a loss, to comply with investment policies.  Issuers in defensive sectors are able to issue, e.g., utilities (National Grid), Unilver, and Siemens.  Yields on bonds are at their widest over govt. debt since the 1930s (good for investors; bad for issuers).

corporate bonds

credit risk

margin

industry sectors

122 The FT reported AAA-rated sub-prime mortgages are worth 40% of par according to the ABX. Of $450bn of CDOs of ABS & MBS issued between 2005-07, $305bn are in default and of these $102 have been liquidated.  Recoveries of the super-senior AAA tranche secured on riskier MBS CDOs has been just 5% (32% for less risky ABS CDOs).   Link to article

asset securitisation

credit risk

credit rating

121 The FT reported semiconductor company, NXP, is planning to restructure its debt, possibly by replacing its jnr unsecured bonds with secured bonds, decreasiong its gearing and increasing its debt maturities, at higher interest cost.  its bonds trade at 20% of par and it's Europe's biggest junk bond issuer.  It has also been affected by FX because its revenues are mostly in $ but its cost base is €.  It has been criticised for a possibly unsustainable capital structure and high gearing.

capital structure

gearing

currency risk

debt restructuring

120 Bloomberg reported Latvia's credit rating has been reduced below investment grade and the premium on CDS on its debt has risen to over 10% (distressed status) owing to its negative economic prospects.  It is at risk of defaulting on its IMF €7.5bn loan following a boom-bust economic change. Link to article

sovereign risk

CDS

119 The FT reported Ireland has issued debt at 2.5% over German Bunds, reflecting its economic and financial risk.  Debt issued by governments is at risk of not being fully subscribed (the US is scheduled to issue $2.2 trn in 2009), but this risk is lessened as long as falling equity markets are out of favour with investors.

govt debt

sovereign risk

118 The FT reported pharmaceuticals company, Roche, has raised $46bn in 2 $ & € bond issues, including $30bn in the past week.  The subscription reflects a boom in corporate bond issuance as bank credit markets contract, and is in contrast to the bank-fuelled credit boom enjoyed by companies of all sizes.  Roche paid margins from 225-310bp over mid-swaps for 4,7,&12 yr €-bonds, and 275bp over Gilts.  It should be able to meet its entire $42bn purchase price for Genentech, with the balance coming from cash and CP and none from bank loans.

eurobonds

acquisition

bond markets

117 Commercial property company, Segro, is to pay £8.6m to banks to allow its gearing ratio covenant to rise to 160% from 125%, but it might still be breached if asset values continue to decline.  As a condition of the increase, banks will be paid an additional 110bp on £1.7bn of debt affected.   Link to article 

interest cost

debt covenants

financial distress

116 Bloomberg reported Latvia's credit rating has been reduced below investment grade and the premium on CDS on its debt has risen to over 10% (distressed status) owing to its negative economic prospects.  It is at risk of defaulting on its IMF €7.5bn loan following a boom-bust economic change.  According to AFOE, its eurobond is trading at 700bp over the equivalent maturity Bund, reflecting its heightened credit risk. Link to article    Link to article

sovereign risk

CDS

credit risk

115 The FT reported small and large Japanese companies rated below AA have been shut out of the domestic corporate debt market owing to its risk aversion.  Foreign currency loans are also harder to find as foreign banks have their own problems.  This leaves Japanese companies with CP and local bank debt, though such debt is unlikely to extend beyond short term, making finance for long term investments difficult.

capital adequacy

currency risk

bank funding

114 The FT reported approximately 70% of Polish mortgages are in foreign currency and defaults could rise if the zloty depreciates more.  For the same reason, upon currency translation, the foreign currency loan portfolio of Polish banks has risen by 40bn zloty in the last Qtr of 2008.  Polish banks' cap adequacy ratio has fallen from 11.5% to 10.8% and their assets' quality could deteriorate and banks could lose its local curency funding as savers switch out of the zloty, all of which are concerns expressed by Moody's.

capital adequacy

currency risk

bank funding

113 The New York Times reported foreigners have made an unprecedented acquisition of US Treasury bills, reflecting their risk aversion and flight to quality even though such bills pay virtually no interest.  Link to article 

credit risk

US T bills

The Times reported eastern European countries' currencies have depreciated substantially (now there is less demand for their goods and hence investment in the countries), making it almost certain some will default on their foreign currency-denominated debts to other European countries' banks.  The latters' economies might also suffer as eastern European countries' exports become relatively more attractive.   Link to article 

currency risk

depreciation

debt default

112 The Times reported the share price of drug developer, Neuropharm, fell over 80% after its lead drug gave trial results that were unexpected & disappointing according to its CEO. 

equity

value

119 The Times reported Japan's central bank is to buy upto Yen1 trillion in rated corporate bonds held by banks in an attempt to inject liquidity into Japan's banks and encourage them to lend to companies, even though Japanese banks have liquidity and relatively low credit exposure to toxic assets compared to US banks.  The cost of credit protection against Japanese companies defaulting has risen to its highest level and the economy is contracting at an annualised 13% and exports are falling rapidly.   Link to article

exports

bank liquidity

default

economy

118 The Times reported Travis Perkins is to cut CapEx by £80m and scrap its dividend, to pay down £125m of its £1bn debt pile.  Other possible measures include: asset disposals, a rights issue, plus more cost-cutting.  In October its shares fell 31% after it announced a drop in sales and fears it could breach debt covenants.   Link to article

distress

covenants

debt

117 Growth Business magazine reported a poll of SMEs says just 6% are confident they will obtain bank funding, down from 73% a year ago.  Another survey of 505 SMEs says 10% are going to family & friends for cash, a rise of 600% on last year.   Link to article

funding

SMEs

116 The Times reported shares in Kingfisher were sold yesterday amid worries over the currency translation exposure of its profits to the Polish zloty, which has depreciated 35% against £ since last summer.   Link to article

currency risk

115 The Times reported the cost of insuring against default of Irish govt debt tripled in a week to £3.50 per £100.  It cost just £0.10 a year ago.  Ireland is now considered the most troubled country in Europe.   Link to article

credit risk

insurance

114 The Times reported sugar maker, Tate & Lyle, and drinks can maker, Rexam, will each benefit from the strong US dollar vs £, though both had their earnings forecasts cut as fizzy drink sales fall.  The appreciation of the $ will prevent Tate breaching its debt covenants though.     Link to article

currency risk

revenue

debt covenants

113 The Times reported insurer, Legal & General, might need to raise cash if it fails its solvency test, or cut its dividend - its first cut since the 1960s.  It is thought it has over-stated the value of its corporate debt investments by using a less prudent valuation approach. Insurers have been warned by the FSA to reflect the current bond market values in their valuations, and to stress equity holdings assuming equity values fall 20% farther. 

Link to article    Link to article

valuation

cash call

investment

insurance

corporate governance

112 The Times reported EDF in 2002 had $27bn of debt following "...an ill-advised acquisition spree that destroyed shareholders' funds and forced a capital increase."  Now, in 2009, it is again approaching historic debt highs and is seeking to sell assets to give it "margin for manoeuvre to make acquisitions". This strategy implies the company can't raise further debt so is resorting to the desperate acto of selling assets to generate cashflow.

cashflow

gearing

acquisition

strategy

111 The Times reported Rio Tinto has ignored shareholders' pre-emption rights by offering shares to Chinalco, the Chinese-govt owned aluminium group and Rio's largest customer.  There is concern Chinalco will force Rio to keep its prices low.  It is being offered stakes in Rio's key iron and copper assets and will increase its shareholding to 18%.  Shareholders are concerned alternatives to raise cash have not been sought, that the assets are being sold to Chinalco at undervalue, and there is speculation the decision by the CEO to sell stakes to Chinalco instead of a rights issue, was to save his job. $19.5bn is being raised throug the Chinalco sales, enough to satisfy its $19bn debt repayable by 2010, out of its $39bn debt pile.    Link to article

corporate governance

pre-emption rights rights issue  commodity risk

110 The Times reported Swiss Re is to abandon it financial markets business, that led it to a SFr6bn write-off.  It's thought that as a condition of Swiss re raising further capital, its CEO (a former JP Morgan investment banker) had to be ousted.  He's been replaced by a veteran reinsurer.  See News 6 Feb 2009 for related news.

corporate governance

insurance

The Times reported drinks company, Diageo, could boost its earnings by £200m this year and £250m next year owing to a depreciation of £..

currency risk

109 The Times reported UK trade exports in the last Qtr of 2008 fell 8% despite a depreciation in £, suggesting an economic slump is offsetting the favourable impact of a depreciation of £ on UK exports.  The UK's trade deficit improved in dec 2008, but only because imports fell, not because exports rose.     Link to article

trade deficit

currency risk

economic growth

108 The Times reported housebuilder, McCarthy & Stone, is likelly to be taken over by its lenders HSBC & Lloyds rather than the banks accept offers for the company, one of which valued it at just £350m (the company was taken private for £1.1bn in 2007 and the privitisation funded with £900m of snr & mezzanine debt).  It's likely the banks will write off some of their debt (possibly in a debt-for-equity swap according to the FT 29/01/09) and buy the company out of administration in in a pre-packaged deal.

pre-pack

administration

debt

financial distress

107 The Times reported conglomerate, Tata, has pledged over £1.4bn of its shares to secure debt for working capital at least, raising concerns over its financial health as such a measure is unusual and suggests it is unable to obtain cash by alternative means, and it could lose control of its companies if it defaults on the debt so secured.  Not revealing pledging of shares can mislead shareholders.  The group was forced to reveal its pledging of shares by the Indian regulator, SEBI.  Since 2000, the group has spent $18bn, most of its using debt, in an acquisition spree.

secured debt

share-pledging

corporate governance

financial distress

106 The Times reported findings of a survey by the CBI that 47% of large firms (250-5000 staff) have laid off staff owing to "a credit-related issue".  63% surveyed have found credit to be less available in the past 3 months and the same % expect it to be even less available in the next 3 months. The CBI survey also found that more lenders were using LIBOR as the base for loan interest instead of the BoE Base rate.     Link to article

credit crunch

economy

105 The Times reported property company, Hammerson, is to raise £580m through a rights issue to avoid breaches of its banking covenants that limit its debt to 150% of NAV.  NAV in £ has dropped in the current property slump plus the adverse effect of the depreciation of £ vs the €.  Its share price rose 7% (perhaps from the positive effect of having avoiding the prohibitive costs of refinancing debt covenants), despite a cut in its div.     Link to article

gearing

asset valuation

currency risk

covenants

104 The Times reported publisher, Johnston Press, is seeking to sell assets to reduce its £465m debt mountain, which is over 10 times its equity market cap. Its Irish papers were offered for sale at less than haf the €140m price paid for them in 2005.  Its shares have fallen 96% in the last year.  After a string of acquisitions, it got stuck following a fall in advertising revenue.  By comparison, the Times reported on 7 Feb that a former Dawney Day property fund,Treveria, has a market cap. of £44m vs debt of £1.5bn (it's considering a restructuring).     Link to article

cashflow

asset sales

gearing

103 The Times reported Barclays endorsed the Madhoff investment fund to investors, saying in Dec 2008,: “Having submitted Fairfield and Madoff to our comprehensive due diligence programme, we concluded that this fund was an attractive opportunity for our clients." The endorsement is to be used by affected investors to sue the bank and fund managers.  Doubts over the value of the due diligence undertaken have been raised     Link to article

operational risk

due diligence

102 The FT reported that S&P rating agency estimates that almost 50% of sales of S&P 500 companies were overseas in 2007, up from 30% in 2001.  Many major US companies have cited currency risk as a reason for falls in profits and sales recently, including Procter & Gamble; Mattel, Starbucks; McDonald's. A JP Morgan survey noted 42% of its clients have hedged foreign income in Dec 2008, up from under 7% in April 2008.  G7 currency volatility in Q1 2009 was expected to be double the average since 2000.

currency risk

101 The FT reported Swiss Re has been bailed out following its loss - caused in part by its ill-judged foray into financial instruments that forced a writedown of SFr6bn, including SFr2.7bn on two CDSs.  The bailout from Buffet pays him a coupon of 12% and he has an option to buy shares that were less than market value.  Swiss Re's rating has been put on negative watch and its share price has fallen 28%.  

derivatives risk

bailout costs

100 The FT reported £ appreciated following the BoE's cut in its interest rate by 50bp.  The opposite effect on the value of £ (according to theory) could be attributed to no announcement by the BoE of quantitative easing (which would involve cutting its rate to zero), and an improved outlook for the economy.  

interest rates

exchange rates

The FT reported non-financial companies' deposits of cash at banks and building societies, have fallen by their greatest rate last Qtr, and have fallen in 5 of the last 6 Qtrs.  The fall signals rising insolvencies, reduced investment, job losses, worsening liquidity and retrenchment by companies this year, according to the FT.  

cashflow

insolvency

99 The FT reported US company, Philip Morris (which sells entirely outside the US), expects its 2009 profits to fall by $0.80 per share because of the continued appreciation of the $, and even though sales are expected to remain robust.  Excluding the currency impact, profits were forecast to rise 10-14% for the year.  The depreciation of the Russian Rouble, Turkish Lira, Mexican Peso, and Ukranian Hryvnia, will account for $0.,60 of the $0.80 impact.  

currency risk

98 The FT reported debt levels at software company, Sage, rose from £541m in Sep to £649m by 31 Dec 2008, because of currency translation (a substantial proportion of its debt is in $ and €).  However, the depreciation of the £ has boosted its profits in the same quarter.  

currency risk

97 The FT reported Icelandic investment group, Baugur, has been taken over by its lender, Landsbanki.  Landsbanki called in its £1bn loan following the loss of Baugur's equity value, and has assumed Baugur's place to control its retail investments, which it plans to sell off when the retail market revives.  The FT added: "Like the country of its foundation, Iceland, [Baugur] was leveraged to the hilt"  See Articles/Quotes for a quote by Baugur's CEO

bank debt

control

equity

96 The Times reported Russia's rating has been downgraded to BBB owing to the exodus of dollars (billiions of dollars of reserves have been used to support the rouble but it has depreciated almost 40% in 6 months).   On 3 Feb, the FT reported rouble loans by the govt. to banks to increase bank sector liquidity have instead, and immorally, been sold for dollars to earn an 80% pa return.

moral hazard

currency risk

95 The Times reported Buffet's firm, Berkshire Hathaway, has invested $300m in bailing out bike maker, Harley Davidson, but at a massive interest rate of 15% - twice that typically paid on junk bonds.  Shares rose 20%, probably more to do with the lifeline than its cost.

bonds

financial distress

interest cost

94 The FT reported Barclays shares fell 11% after Moody's downgraded it because of expected significant asset writedowns.   

credit rating

asset writedowns

93 The FT reported non-financial corporate bond issuance of almost $170bn globally in January was the highest on record.  The attraction for investors was the yield over government paper, which is at its highest since the 1930s.  Though corporates are paying a higher spread to govt debt, the actual rate is still relatively low owing to govt rates falling to revive economies.  Wal Mart for example issued 5-year debt at a higher than usual spread but its actual rate all-in at 3% was its lowest to-date for 5-year debt.  A further $450bn of corporate debt is expected to be issued this year as an alternative to the bank loan market which is being cut back.

bonds

debt yields

capital markets

bank loans

92 The FT reported toymaker, Mattel, lowered its annual EPS from $1.56 to $1.05.  Its CEO blamed: "a combination of lacklustre sales, lower gross margin and higher expenses.  The company had [irresponsibly and self-interestedly?] maintained an upbeat outlook prior to Christmas, with one exec. suggesting parents would cut certain items of household expenditure to continue to buy toys. its 4th Qtr profit fall of 46% was unexpected, according to the FT.

corporate governance

EPS

91 The FT reported that airline, Ryanair, "was hit hard by having hedged its fuel requirements for the [4th] quarter [2008] at levels well above the prevailing oil price in the quarter."  The Times noted it had hedged oil at $650 per tonne in its final qtr to mar 09.  Though this is 38% below Ryanair's average price for oil of $1050 in the 9 mths ending Dec 2008, it is much higher than the market price in the final qtr of $500 per tonne.  Ryanair said it has hedged 75% of Q1 & Q2 and 50% of Q3, 2009 oil at $650.  If this is its avg cost in the 09-10 trading year, it would reduce its oil bill by about $500m.     Link to article   Link to article   Link to article

commodity risk

hedging

90 The Times reported the purchasing managers' index (a barometer of manufacturing confidence) for Jan was 35.8, slightly higher than Dec 2008 at 34.9, but still the 3rd worst on record, and suggesting production is falling about 6% y/y and that "...the UK manufacturing sector is in dire straits" according to an economist.   

confidence index

economy

89 The Times reported the UK Govt is to consider underwriting some of the credit risk on company trade finance that major insurers such as CoFace, Hermes, and Atradius have pulled back from providing in the face of rising claims.  The demise of Woolworths was attributed partly to its loss of credit insurance.    

trade credit

insurance

The Thisislondon website reported the London property market has been revived by the depreciation of the £ against various currencies, attracting overseas investors from various countries.    Link to article

currency risk

property

The Times reported private equity firm, 3i, has been downgraded and risks further downgrade unless it raises cash.  The portfolio's top 50 investments fell 21% in the last 1/4 of 2008.    Link to article

cashflow

rating

88 The Times reported office lessor, Workspace, is to raise equity to avoid possibly breaching its LTV debt covenants following a 15% fall in property values in the last 1/4 of 2008.  Other property companies are expected to follow suit, though some (Land Securities & Brit Land) have chosen to reduce debt through asset disposals.    Link to article

debt covenants

asset sales

equity issue

The The FT reported Argentina has been locked out of raising funds in the international capital markets since it defaulted in 2001 on its debt obligations and is being sued for compensation and funds it might raise being subject to embargo.  It has been forced to fund domestically and from its ally, Venezuela .  

sovereign risk

default

capital markets

87 The FT reported equity underwriting fees could rise from 2% seen in good times to 3% now, so the 4% paid by Workspace looks dear (though there might be savings on direct advisory fees), of which sub-underwriters will get 1.5%.  Workspace's lenders will get £4.65m for waiving or removing debt covenants, and possibly another £3.76m for debt facility extension.  Such fees are thought to be much less than paid by some retailers to renegotiate their debt.

underwriting fees

equity issues

debt covenants

86 The FT reported L&G IM, a major shareholder in RBS, had asked in May 2008 for the RBS CEO and the Chairman to be removed  but had been fobbed off by its board.  LGIM said: "One would have to conclude that [NEDs] were not effective in controlling the actions of the executive directors, otherwise this could not have happened."  

NEDS

corporate governance

85 The Times reported Halliburton, the US energy services group, has agreed to pay a record $559 million to settle charges that a former subsidiary bribed Nigerian officials during a gas deal.  Baker Hughes, another US oil services group, was fined $44m in 2007 over improper payments in Kazakhstan.  Link to article

corporate governance

operational risk

84 The Times reported airline, BA, is expected to report a loss for the year partly because of the depreciation of the £ versus the $ and its depreciation, offsetting to some degree the price of oil crashing from $147 last summer to $49 per barrel currently.  BA had also hedged its oil, forcing it to pay a higher price.   Link to article

currency risk

commodity price

83 The Times reported the IMF has accused China of manipulating its currency to keep it undervalued against the $ to favour its exports, and follows USA's recent criticism of China's FX policy.   Link to article

currency risk

overseas trade

82 The El Paso Times reported the world's biggest airline, Delta, has lost $607m on oil hedges in the 4th qtr of 2008.  Its average cost was $100 per barrel in 2008, twice what it's budgetting for in 2009.  Hedges at oil prices that looked reasonable earlier in 2008 forced airlines to pay more than market price later in 2008.   Link to article

currency risk

commodity risk

81 The FT reported building materials supplier, Wolseley, has seen its net debt rise by 22% owing to the depreciation of £ against the €, which it has now (belatedly??) hedged.  Though € revenue rose in £ terms, trading profits fell 45%.  Invoice discounting has helped reduce debt and job cuts and lower working capital has helped, the company is still expected to breach its net debt covenant of 3.5x EBITDA.  A rights issue is thought inevitable, or costly debt renogotiation.  Its shares fell almost 33%   Link to article

currency risk

invoice discounting

rights issue

80 The Times reported governments are protecting their domestic economies through import tariffs and setting conditions for getting state funding that local industries and jobs are protected and favoured.  Link to article

trade barriers

protectionism

79 The Times reported many UK companies are looking to tap markets to raise equity capital to reinforce balance sheets dented from crashes in asset values, depleted equity, and poor profits.  Link to article

equity

asset values

78 The Times reported newspaper publisher, INM, is looking to sell its assets. Concern over its €1.4bn debt pile (€300m of which is maturing in May), sent its shares down 46%, and they've fallen 92% over the year, valuing the company at just €159m.   Link to article

company value

gearing

asset sales

77 The Times reported housebuilder, Barratt, might have to renegotaite its debt because tax rebates no longer eligible as assets (because it is unlikely to be profitable in the next 2 years) would reduce its equity by £325m thereby breaching its debt covenants unless it issued more equity.  Its shares fell 17%.   Link to article

tax rebate

covenants

76 The Times reported the UK is officially in a recession and identified which sectors have suffered.  Link to article

recession

75 The Times reported gas supplier, Centrica, has been branded 'measly' in its cut in gas prices by 10% when wholesale prices have fallen by 47% since last summer.  Analysts said it could have cut more. 

commodity prices

74 Motorcycle maker, Harley Davidson, reported it has written down the value of its assets by $63m owing to higher expected credit losses, and a higher discount rate to calculate fair value of its receivables.  Link to article

asset value

credit risk

73 The Times reported telephone company, BT, had overstated its profits by £340m owing to aggressive cost savings that have not materialised and bullish assumptions of contract renewals. Fingers have been pointed at auditors, managers and senior managers, and a call for bonuses to be returned.  BT's shares fell 15% wiping £1.5bn off its value.  An earlier article exposed fraud by BT to meet call center targets   Link to article    Link to article

operational risk

moral hazard

profitability

72 The Times reported oil company, Tullow Oil, has increased its chances of getting bank funding for exploration, by having first raised equity that will bolster its balance sheet.   Link to article

funding

capital structure

71 The Times reported oil companies such as Shell will experience falls in cashflow as demand for oil in 2009 is forecast to be significantly lower than previously forecast.  Shell's cashflow is expected to drop $7bn y/y in oil receipts but funds $3bn more y/y on capex.  It's still a buy given its strong balance sheet.   Link to article

cashflow

sales forecast

crude oil

70 The Times reported UK property companies such as Land Securities, are facing financial distress from a fall in asset values and loss of rental income from tenants that have collapsed or prospective tenants that are holding-off committing to renting in case their business suffers and they lay off staff so do not need further office space.  The property companies might need to raise more equity to maintain their gearing ratios and could breach lending covenants if property values decline further (they fell a record 27% in 2008).   Link to article

asset values

gearing

covenants

property sector

69 The Times reported the financial dilemma at electronics company, Sony, caused by its exposure to currency risk (80% of sales are outside Japan and it has lost out to China and Korea, and the strength of the Yen against the USD). High fixed costs could depress profits further, in addition to the effects of pricing pressures and loss of consumer confidence in a recessionary environment.  Cashflow could become critically low.   Link to article

currency risk

cashflow

product pricing

68 The Times reported the FSA has fined chip designer, Wolfson, for failing to publicise price sensitive information promptly to shareholders.  The subsequent announcement (that it had lost a sales contract) caused shares to fall by 18%.  Woolworths and other companies have been fined for similar offences.  Link to article

corporate

governance

67 The Times reported drinks retailer, JD Weatherspoons, has decided to scrap its dividend and to curb spending, in case it cannot refinance its £100m loan due in September owing to the credit crunch.  It paid £17m in divs. last year.

Link to article

dividend

cashflow

funding risk

66 The Times reported retailer, JJB sports, has paid a £8.3m fee to its three bankers to postpone payment until 30 Jan 09 of a £20m bank bridging loan owed to Kaupthing on 14 Dec 08.  The company's interest rate on the other bank loans has risen to match the Kaupthing loan's as a consequence of the postponement. Total debt stands at £60m.  

Link to article

debt interest

bank loans

distress

65 The Times reported HMRC property manager, Mapeley, is desperately seeking £48m of funds via a convertible bond to be issued to its majority shareholder and paying a massive 20%pa coupon, claiming it might become insolvent without it and it might default on a bank loan due to be repaid in April.  Shares were floated at £23 in 2005 and a bid at £19 per share last year failed.  Shares now trade at 76p.  The transfer of HMRC property to Mapeley was expected to save HMRC £344m over 20 years, but that might not now be realised fully.   Link to article

convertible debt

cashflow

distress

64 The New York Times reported on the high cost of raising debt for US companies. The margin over govt debt for investment grade companies has doubled since Jan 2008 and it's at a record 15% over for junk-grade companies.  It cited a company raising $1bn at an additional interest cost of $34m pa. The situation is worsened by possible crowding out by govt debt issuance, and because $700bn of corporate debt is maturing this year.   Link to article

debt crowding out

interest cost

63 The Times reported a proposal to merge airlines, BA and Quantas, would have involved listing in the UK and Australia, a strategy that has worked successfully in the mining sector for companies such as BHP and Rio Tinto, but which has been used less so by other sectors. 

equity dual listing

62 The Times reported a proposal by the board of housebuilder, Bellway Homes, to pay its directors each a bonus of £hundreds of thousands, despite the company's shares falling 28% and a drop in the company's value, were comprehensively thwarted by a shareholder rejection.  Link to article

corporate governance

executive bonuses

61 The Times reported brewer, Marston, has renewed £400m of bank debt until 2013,but at an implied interest margin of more than 1.5% hgher than previously.  Certainty of funding was considered more important than the margin, which was actually said to be lower than many recent refinancings.  Link to article

debt

interest margin

funding risk

60 The Times reported on the financial distress of Canadian IT company, Nortel, owing to competition and obsolete products.  Its share price has fallen from $900 in the dot.com bubble to $0.32, and it has suffered froma financial scandal.      Link to article

bankruptcy

fraud

sales

59 The Times reported falls in UK and US equity markets on news of larger than expected falls in sales.  

Link to article   

equity

sales

economy

58 Growth Magazine reported an 18% increase in business failures in 2008, and a 32% increase for the last quarter.  Biggest hit sectors were construction, retail, and transport & communication.  Link to article   

business failures

57 The Times reported a clear case of insider dealing and the penalty imposed by the FSA.    Link to article   

insider dealing

56 The Times reported the UK trade deficit rose more than expected owing to falls in exports to US and Japan of 21% & 11% respectively, and a rise in the trade gap with the EU.  The widening gaps depreciated £ further.  The gap would have been worse had imports not fallen (due to weak UK demand).    Link to article    Link to article

trade deficit

currency risk

55 The Times reported auto dealer, Inchcape, is looking at funding options to bolster its balance sheet though it has net debt of £541m and available bank debt of £1bn), including a rights issue.  It expects diminishing sales revenue owing to the global slump in car sales, the plan by manufacturers to price car sales in USD - which is likely to dampen Russian sales owing to the depreciation of the roubl - and the ending of new car lending in Australia by GMAC. 

cashflow

funding

currency risk

54 The Times reported steel producers are looking to their iron ore suppliers to cut their prices (which have risen 500% since 2000) to help offset the 70% reduction in steel prices and in demand.  A further article said Toyota is breaking with tradition to buy steel from Korea, exploiting the appreciation of the Yen, and perhaps sending a signal to Japanese suppliers to lower their prices. Link to article      Link to article   

commodity prices

exchange rates

53 The Times reported Lloyds insurance market syndicates have been asked to inject more cash into the central fund used to pay insurance claims for 2009 (claims' value is forecast in £ but paid in $) owing to the depreciation of £ against the $ from the forecast rate of $1.99 to its current rate of $1.54.  Some syndicates might need a rights issue to fund the cash call.    Link to article   

cashflow

currency risk

insurance claims

52 The Times reported the minister for the City (who is a former hedge fund manager) has criticised the investor community and the ABI, for failing to challenge shortcomings in corporate governance (risk and compensation), that possibly fuelled the financial crisis.    Link to article   

corporate governance

51 The Times chronicles the boom to bust story of a DIY chain funded by leveraged debt and private equity and which rewarded a small group enormously as the housing market bubble expanded, but which cost the holders a bundle when the housing and economic bubble burst and the company collapsed under a mountain of debt.

Link to article   

private equity

leveraged debt

M&A

economy

50 The Times reported one the OECD's view that the current financial crisis was caused by improper regulation, citing Basel II that allowed off-balance sheet vehicles, the US govt's low interest rates and high capital requirements on FNMA and FHLMC, which encouraged a rise in mortgage securitisation and private MBS, and the SEC's decision to allow investment banks to gear up from 15X to 40X.  It also cited other shortcomings   Link to article   

financial crisis

regulation

gearing

securitisation

49 The Times reported estate agency, Foxtons, has breached its bank performance-related covenants and its private equity owner is refusing to inject more cash.  It bought the agency at the top of the housing market in 2007 in a leveraged debt deal.  It hired a bank in Aug 2008 to review its business and funding. See 24/8/08 article.

Link to article      Link to article

leveraged debt

covenants

distress

48 The BNET blog cites some interesting examples of governance failures in the US that has contributed to the current US financial crisis.    Link to article   

governance

47 The Times reported Indian IT services company, Satyam's chairman, had fraudulently inflated its assets (by as much as 50bn rupees) for years.  See News 18 Dec 2008 for details of a scam to sell two companies to plug the asset shortfall.  Since that scam was discovered, directors have resigned. Satyam, which means 'Truth', has been blacklisted for 8 years by the World Bank for offering improper employee benefits.  See 9 Jan 09 article for widespread accounting corruption in India. On 3 Feb, the FT reported Satyam's market value has fallen from $7bn in May 2008 to about $800m.       Link to article    Link to article

corporate governance

fraud

accounting

46 The Times reported UK retailer, Next, might raise its sales prices or face reduced margins owing to the depreciation of £ by 25% against the $ since summer 2008, raising its £ cost of imports (most of which are imported from $-linked Asia not Europe).  The company has written to its suppliers for a firm 5% reduction in supplier prices.  Rises in Next's sale prices would occur in the summer as it hedges 6 months forward.  Debenhams which imports 65% of its goods from the Far East, is hedged at $1.90 until the end of March.   Link to article   

FX risk

Hedging

profit margin

45 The Times reported media company, Sports Media, has been notified by its bank that it has breached a bank loan agreement covenant.  Its share price fell almost 30% on the news.  The bank has given a 2-month extension and the company is negotiating a remedy of the breach and alternative finance.  

debt covenants

The Times reported restaurant company, FishWorks, has asked for its shares to be immediately suspended from trading on AIM pending clarification of its 'financial position and strategic options' amid challenging market conditions.

share suspension

financial distress

44 The Times reported european countries are facing shortages of gas piped from Russia via Ukraine, owing to a dispute between them.  Europe gets 25% of its gas from Russia, 80% of which comes via the Ukraine.    

Link to article   

operational risk

commodities

debt

cashflow

capital structure

FX risk

debt

cashflow

capital structure

cashflow

credit

M&A

risk management

debt for equity swap

markets

rights issue

covenats

exchange rate

FX hedging

debt

cashflow

capital structure

bankruptcy

corruption

fraud

debt

equity

control