Ukraine's false economy

A sense of euphoria was to be expected in the year that followed the 2008/2009, when banks and borrowers had to work hard to keep their heads above water. And in the 12 months from May 2009 to April 2010, the scope of this report, the debt markets have started to resemble something like their old selves: loans first became widely available, and then, increasingly as the year went on, even became competitively priced. Bonds had an even swifter return to prominence. But it has not all been good news. Towards the end of the period, the first...

Between now and 2013, approximately €556bn of corporate debt will mature, according to Thomson Reuters. Of that, roughly half relates to bonds that will mature by the end of 2011 and have been extended, leaving a pipeline of more than €250bn requiring refinancing. The biggest spike is in 2013, when €172.3bn of outstanding bonds will mature. That is focusing the minds of corporate treasurers and debt capital markets bankers alike. Welcome to the age of maturity. Despite the recent sovereign crisis that has hit spreads, the cost of funding...

For a long period at the end of 2008 and early 2009 there was little to exercise convertible bond originators as the sector gradually shut down across all regions. Asia continued to struggle through 2009, with volumes very low, but the European and US markets showed promise. In Europe a flood of new money and realistic pricing meant both issuers and investors went home happy at the end of the year, while in the US the call-spread overlay structure helped to ensure convertible issuance remained attractive. For the full year 2009, Asian...

Traditionally, regulators have lacked the teeth to enforce. But in the last two years, they have increasingly found themselves taking centre-stage. Regulators have been instrumental in establishing the new world order. However, though ostensibly laudable, their efforts to devise the safeguards that will ensure a sustainable long-term revival of the securitisation market are in reality politically driven by regional agendas. The resulting uncertainty risked undermining recovery – and even snuffing out securitisation as a funding technique...

Europe’s sovereign debt crisis may have closed the bond and equity markets to many of the continent’s borrowers, but the loan market remains – for the moment – in good health. But this willingness to lend has not translated into a busy market. Demand for new credit has been weak, with the first half of 2010 on course to be the quietest since 2002 according to data from Thomson Financial. Disappointing volumes should not detract from what has been a remarkable turnaround for the loan market. During the banking crisis that followed the collapse...

At the beginning of 2010 Spain was rated Aaa/AA+/AAA and was able to access the market at 75bp over 10-year Bunds; four months later its credit rating was Aaa/AA/AAA and the spread to Germany had roughly doubled to plus 145bp. During the intervening period, Spain had briefly traded as wide as plus 170bp. Rating levels took second place to fears of contagion from Greece, which had found itself unable to access the markets as a result of a large debt/GDP ratio. It had limited means to address this situation in a timeframe that would reassure...

Portugal came to the market four times in the 2009/10 financial year, in four hugely oversubscribed deals: three medium term notes and a 10-year jumbo bond. Especially impressive was the fact that two of the deals were done early in 2010, in increasingly difficult financial markets. At the time, worries over Greece’s fiscal position had already started to spread to other southern European countries, thought to be facing similar fates. Portugal still achieved its goals, albeit at wider spreads than seen in 2009. Portugal’s budget deficit is a...

The German development bank, KfW, remains a leader in most sectors of the capital market, with an estimated €70bn-€75bn financing requirement for this year. The Triple A issuer will achieve this – as it did in 2009, when it borrowed €74bn – through a combination of funding in all sectors of the market. As a borrower, it is always eager to exploit new markets and capitalise on opportunities in familiar ones. The agency, originally set up in 1948, has no option other than to act decisively when market conditions present opportunities for issuance...

The World Bank recently completed its US$25bn-$30bn borrowing programme for the fiscal year which finishes at the end of June. The issuer always completes a relatively small but significant number of capital market deals. But the Triple A-rated name has seen a sharp rise in its profile recently, as well as the first increase in its capital structure for over 20 years in May 2010. The World Bank’s current financing requirement is much greater than in the years leading up to the financial crisis of 2007. The International Bank for...

After pursuing British confectioner Cadbury very publicly for five months, Kraft Foods reached an agreement with its target in January 2010. The £11.9bn (US$17.14bn) deal comprised 40% stock and 60% debt. To see the deal to fruition Kraft used aggressive takeover tactics as well as the US debt markets to its advantage. Before the transaction was agreed, Kraft had put together a debt package of about £7bn (US$10bn). But most of the loan remained undrawn as Kraft braved the choppy debt markets in February and priced a four-part bond deal, which...

In the past two years Mexican cement giant Cemex has pulled itself back from the brink by renegotiating approximately US$15bn in bank debt and tapping multiple capital markets to reduce its leverage. Since September it has raised US$1.75bn with euro and US dollar denominated 2016 notes, US$750m with global convertible bonds and almost US$1.9bn through an equity follow-on. It also issued US$437m of new 10-year debt in exchange for a similar amount of its perpetual notes, and issued Ps4.1bn (US$315.3m) in local mandatorily convertible notes in...

America Movil has always been known as a skilful navigator in a debt market where it has benefited from rarity value and been able to squeeze pricing to its advantage. But after integrating with its fixed-line sister subsidiaries under the business empire of Mexican billionaire Carlos Slim, the mobile phone company has faced new challenges. This has mostly involved convincing investors that the new entity was a move in the right direction, and an essential part of any Mexico or telecom portfolio. A strong cash position meant it could be...