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Date |
News (Jul-Dec 2010) |
Subject |
24/08/2010 |
CityAM.com reported controversy over the course of interest rates. Over supply of money by the govt would raise inflation, and then interest rates - upto 8% (a rate that has been dismissed as 'complete rubbish'). A consensus suggests base rate will be 2% by end 2011 and 3.5% by end 2012. Link to article | money supply UK Base Rate money supply |
24/08/2010 |
CityAM.com reported Vale (the world's largest iron ore producer) was forced under government pressure into a $5bn joint venture - illustrating another case of government pressure on corporate strategy. Lloyds was said to have been encouraged to takeover ailing HBOS, by the UK prime minister at the time. Link to article | takeover government control |
23/08/2010 |
The NY Times reported on cyber criminals not being punished and actually being condoned by Russian officialdom because the attacks are on foreigners not on Russia. This echoes the attitude of Chinese officials condoning counterfeiting (see Articles). Both governments's behaviour is contrary to moral and legal rules of fairplay. Link to article | ethics counterfeit |
23/08/2010 |
CityAM.com reported some investor retaliation at the prospect of a heavily debt financed takeover of Potash by BHP at a high multiple of PE too, suggesting instead BHP buys back $20bn of shares. Link to article | hostile takeover share buyback |
20/08/2010 |
The NY Times reported on the problems of Swiss exporters from an appreciating SFr vs €, and the failed attempt by the government to stem its appreciation by printing money. Link to article | currency risk money supply |
19/08/2010 |
The NY Times reported on parties in securitisation transactions that did not bother to undertake due diligence, instead relying on reps made. Ironically, they will have to spend the time and cost now to verify these loans' quality to claim, or defend claims for, compensation. Also see: Articles/Quotes Link to article | securitisation due diligence |
18/08/2010 |
The NY Times reported Barclays has been allowed to settle a charge it broke US rules prohibiting trade with countries by dealing on behalf of banks in those countries. It will pay $298m and claims to have spent $250m on its own internal investigation. Jusdt a day earlier the judge had claimed the settlement was a sweetheart deal. Link to article | corruption Barclays |
18/08/2010 |
The NY Times reported another example of corruption in Indian politics and the immoral financial and political gains from controlling iron ore mining rights. A ban on exports raised global prices of the ore by 4%, illustrating the impact of politics on markets. Link to article | corruption political risk exports |
17/08/2010 |
The NY Times reported on BHP's hostile $39bn bid for Potash, after the board rejected it despite the bid being at a premium of 16% and all cash. BHP has relatively little debt, but the deal would jeopardise its credit rating, and its shares fell 3.5% whereas those of BHP rose 28% on the announcement. Link to article | takeover valuation credit rating |
14/08/2010 |
The NY Times reported on a conflict of interest in banks who service 1st charges as agents but hold 2nd charges as principal: they will get the borrower to service the 2nd charge rather than the 1st. Link to article | conflict of interest mortgage servicing |
14/08/2010 |
The NY Times reported teh US economy could be nearing a double-dip recession. Investors are favouring security of Treasuries over shares, and noting that the return on Treasuries over 10 years has outperformed S&P 500 by 8.6%pa. The risk of a recession happening is: high unemployment, slowing GDP, low consumer demand and high public sector debt. On the other hand, there is: low interest rates, strong corporate profits, high demand for commodities, and QE (albeit mild) to stimulate the economy. Link to article | economy double dip recession QE |
13/08/2010 |
The FT reported that the bill for the Pru's aborted takeover of AIG's asian unit was a mammoth £377m: £100m to hedge FX risk; £153m break fee to AIG; £58m uw fee to 3 banks who would have underwritten the rights issue to fund the deal; and £66m in various adviser's fees to prod the mammoth 936 page prospectus, and to bankers. The bill is similar to BHP's aborted takeover of Rio Tintto in 2008 (£190m in fees and £100m for a £55bn debt facility). | transaction fees takeovers AIG BHP |
13/08/2010 |
The FT reported that grain-related food companies (such as InBev, Kelloggs, & Gen Mills) say they have hedged the rising cost of grain, apparantly learning their lesson in the 2007-8 rise that they cannot just pass on costs to consumers without protest. Hedges however are much shorter (12 mths typically) than hedges by energy and metal companies (upto 10 yrs). The FAO's food price index rose from 120 at the start of 2007 to 210 by mid-2008, and is currently about 160. | commodities hedging
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13/08/2010 |
The FT reported that Funding Circle.com has been set up to fill the gap where bank's do not lend to SMEs. It will charge 2% fee as an intermediary bween lenders who set rates by auction and can sell on loans. SMEs need to have been trading for 2+ years and may borrow upto £50k for 1-3 years. The scheme is similar to Zopa but that is only lending to consumers as it thinks corporates are a worse credit risk. | disintermediation Zopa |
11/08/2010 |
The LSE reported that shares in ROK tumbled 43% after the company announced "serious failings of financial controls" and the immediate suspension of its FD. Link to article | financial control equity value |
09/08/2010 |
The FT reported that despite healthy profits, Fitch rating agency is holding off upgrading european companies this year, because of the negative impact on the european economy by govt spending cuts. S&P is set to report that sub-par growth of highly geared companies might mean they struggle to repay their debts. |
european govt cuts rating agencies gearing |
09/08/2010 |
The FT reported the number of complaints abouts loans and ODs made by small companies(TO below €2m) to the Fin Ombudsman, has risen by 120% y/y. |
banks lending |
06/08/2010 |
The FT reported miner, Lonmin, has been told by the S Afrrican govt to 'refrain from selling metals with immediate effect' with no explanation! The ruling probably relates to a dispute over prospecting rights in S Africa. [Not health for its profitability] |
expropriation political risk |
06/08/2010 |
The FT reported iron ore producers are earning 'extraordinary' gains from changing to quarterly pricing of contracts with metal producers from annually. This is because ore'sprice is now more than 2x that of the last annual benchmark price. [What if it drops below?] |
commodity price pricing risk |
06/08/2010 |
The FT reported charities re forced to hold little or no reserves to qualify for funding, but this increases their liquidity risk, especialy now the govt has cut back on its £13bn annual spend on the sector. 36% of operating charities held no free reserves. |
charity finance liquidity risk |
05/08/2010 |
The NY Times reported another example of a US local authority getting into to complex instruments and getting burned when markets change and it wants to renegotiate the terms. Link to article |
financing complexity |
28/07/2010 |
The FT reported that the FSA said auditors showed a "worrying lack of scepticism" in some of their audits of financial institutions and that they fell "far short" of regulators' expectations. | auditors FSA |
28/07/2010 |
The FT reported a short squeeze in Yell shares raised them by 13% | short squeeze |
28/07/2010 |
The FT reported that European banks need to refinance £800bn by end 2012 (£25bn per month) and are managing just £12bn per month currently. Cutting back on staff bonuses and discretionary shareholder payouts would add £50bn to lending this year. | banks refinancing bonuses |
28/07/2010 |
The FT's John Kay reported that the European banks' stress tests, far from being outside the range of experience or expectation, were not far from the mean, making them in my opinion a sham. | stress tests banks |
27/07/2010 |
The FT reported that even though yields on equity relative to investment grade corporate bonds, were at their highest for nearly 30 years, investors are preferring bonds. The reasons: relative safety, less volatility, fear of a double-dip recession; int rates to be kept lower than prev expected. The yield on corp debt has been an avg of 6.6% over the last 20 years but it's currently just 4.07% so a good time to issue debt. Since companies are hoarding debt, the outlook for bonds seems good the FT says. | bond yield equity yield spread |
27/07/2010 |
The FT's Jim McCaughan reported that US bank stress tests were a big factor in steadying investor sentiment and reducing volatility and mkt uncertainty, because they included a worst case assumption, and because banks then raised necessary capital to reduce solvency risk. European stress tests by comparison have been unstressful - for political reasons - explaining why just 7 of 91 banks failed them. | stress tests banks |
26/07/2010 |
The Wall St Jnl reported European banks are likely to face funding pressures when they refinance over €2trn of debt upto 2012, if their usual funders - mutual funds and ins companies - turn away, potentially affecting bank funding to non-fin. SMEs and economic growth. Link to article | bank refinancing SME mutual funds |
26/07/2010 |
The Daily Mail & LSE reported shares in Connaught fell 80% today as it revealed it will breach its covenants, has an "urgent requirement for additional funds", and its net debt will rise significantly. It has been put under pressure by its suppliers and sub-contractors. Link to article | cashflow suppliers |
26/07/2010 |
The Daily Mail reported the govt is scathing about the banks' tardiness at lending to SMEs and is to force them (like RBS and Lloyds) to meet lending targets if they don't themselves. Link to article | bank lending SMEs |
24/07/2010 |
The NY Times reported how Wall St banks used bad mortgage loans bought from originators to increase their profit margin when these mortgages were securitised. See Quotes in Articles Link to article | asymmetry of info securitisation |
22/07/2010 |
The NY Times reported Dell has paid $100m to the SEC to settle claims it misled its shholders over its financial statment earnings figures in relation to $billions it got from Intel as rebates for using its chips. The CE paid $4m. See News 12 Nov 2009 - AMD sued Intel for anti-competitive behaviour. Dell's op profit fell 75% when Intel cut the payments after Dell included AMD as a chip supplier Link to article | accounting fraud Dell Intel AMD |
20/07/2010 |
The NY Times reported how mineral resources in Afganistan could lift it people out of abject poverty IF its government does not copy the corruption of politicians of other mineral-rich countries. Link to article | commodities wealth creation |
19/07/2010 |
CityAM.com reported a survey has found high street banks are charging customers upto 167% on unauthorised overdraft. Halifax was charging an effective annual rate of 3650% on an OD of £10, by charging £1 per day. Link to article | overdraft fees unauthorised OD |
19/07/2010 |
CityAM.com reported AIG has to pay $750m to pension funds who sued it for accounting fraud, and is part of a $1bn settlement where the former CE, PwC and a reinsurer will payout. Link to article | accounting fraud AIG |
16/07/2010 |
The NY Times reported on some of the under-hand (unethical) tactics auto dealers use on consumers, but which were kept out of recent regulatory changes. See Articles/Quotes also. Link to article | auto-dealers financing ethics |
15/07/2010 |
Speedy Hire in its 2010 year end accounts reported that a 27% fall in revenue led to a much bigger (65%) fall in operating margin because of operating gearing. Link to article | operating gearing operating margin |
15/07/2010 |
CityAM reported China's state Agricultural bank will pay just 1.28% in fees (incl uwriting) for its $19.3bn IPO, that will be split in two and part listed in Shanghai and part in HKong. This is a bargain compared to the £5.8m fee paid by Speedy Hire for its £105.5m rights issue (5.8%!). No wonder the OFT is investigating UK banks that arrange equity transactions. Link to article | underwriting IPO bank fees OFT |
12/07/2010 |
The FT reported european banks have taken advantage of a window of opportunity and increased their bond issuance substantialy (400% w/w),especially long-term so complying with regulators' wishes to bolster their balance sheets with longer term funds. | bonds banks regulation |
12/07/2010 |
The FT reported some major european companies have written to the EC warning of the risk of regulatory arbitrage (where companies take their business to less strict jurisdictions) if the EC implements onerous derivative rules necessitating the use of exchanges by corporates rather than the OTC market. The EACT has supported the companies' warning. | derivatives exchanges OTC |
09/07/2010 |
The FT reported emerging market bonds might be over-priced and so heading for a fall. Why? As governments' liquidity support is withdrawn, available funds will contract and this will push up corporate bond yields. Market bulls take the opposite view. Corporates have taken advantage of the bull market's low yields on bonds, whilst it lasts. | emerging markets bond yields |
09/07/2010 |
The FT reported the French regulator, Jouyet, has called for reorganisation and improvement in the european bond market. This market is likely to be increasingly important as economies recover, but banks are less willing to act as bond market makers which might therefore raise corporate bond yields. See Articles/Quotes | eurobonds market makers |
08/07/2010 |
The FT reported european companies have raised $177bn in bank loans in Q2, up 39% vs Q2 2009. Companies are concerned that banks' costs will rise so are 'making haste' and have increased the duration and amount of refinanced bank loans. A steady increase in bank loan refinancing is expected over the coming 3-6 months. | bank loans refinancing |
08/07/2010 |
The FT reported a Russian bank has defaulted on its €200m eurobond, the first time a bank has done so since the Russian debt default of 1998. See Articles/Quotes | eurobonds default |
08/07/2010 |
The FT reported yileds on Spanish bonds were just 7bp over German bonds, but this week Madrid paid 4.87% whereas yesterday German Bunds yielded on avg just 2.56%. How times (and credit risk) change. | bonds credit risk |
08/07/2010 |
The FT reported VC investment was its lowest for 10 years, in 2009. Start-up and early-stage investments fell 27% and 53% respectivelys. One reason was investors diverted their resources to supporting portfolio companies. | venture capital |
05/07/2010 |
CityAM.com reported Ocado is to go on a 2-week roadshow to market its IPO to investors. It's seeking £200m despite not making a profit in 10 years. Link to article | IPO roadshow |
02/07/2010 |
The FT reported 78% of German cos are facing problems getting traditional bank credit, and 59% will not have enough working capital to meet the upswing in trade orders (which have risen 60% y/y in May). | working capital bank debt |
02/07/2010 |
The FT reported BA has transferred longevity, interest rate and inflation, risks valued at £1.3bn and related to its pension fund, to an insurance sub of G Sachs. | pension risk |
02/07/2010 |
The FT reported UK companies witjh pension holes are using their assets as collateral. Diageo has transferred £500m of whisky to a fund which will earn it an income and it can sell the whisky to Diageo after 15 years. Not surprisingly, Diageo's share price fell (1.7%). Sainsbury's, Whitbread, and M&S have all transferred property to plug their pension holes. | pension holes collateral value |
02/07/2010 |
The FT reported an Icelandic court ruled that domestic car loans whose rate of interest was based on an index of FX rates, might be unenforceable by banks, putting them at risk of losses, esp if other similar types of loans are included. Icelanders took a punt on FX whilst paying lower interest on loans, but were badly caught out when the Krone depreciated over 33% vs major currencies when the global crisis hit. | FX risk consumer debt Iceland |
02/07/2010 |
The FT reported FHLMC & FNMA paid $635m in fees to banks underwriting its debt issues. This equates to 5-7bp, vs 20-80bp paid by corporates, and somewhere in between for issuing banks. The figs excl costs of banks buying debt at a discount. The biggest uwriters are: BarCap, GS, ML, JPM, and DB | fees underwriting FNMA |
01/07/2010 |
The FT reported that BP is now paying more in margin and fees to its lending banks for debt, signalling a change in the balance of power. | Debt fees & margins bank loans |
01/07/2010 |
The FT reported the dubious accounting practice of capitalising its costs instead of writing them off immediately through the P&L. | accounting P&L |
01/07/2010 |
The FT reported 17 companies were fined a total of €518m for price-fixing of steel (Arcelor Mittal paying €277m because it had previously been fined for being part of 2 cartels) over a staggering 18-year period involving 550 meetings. | price-fixing cartels |
01/07/2010 |
The FT reported securitisation issuance was 5% down in Q2 vs Q2 2009, owing to uncertainty over regulatory treatment, credit risk, and volatile debt markets. US reg changes would require banks to hold 5% of assets securitised on their B Sheets, which might adversely affect their capital adequacy. | securitisation capital adequacy |