Where have all the bank mergers gone?

US wireless giant Sprint eradicated any fears of lacklustre demand for high-yield debt last week with a US$6.5bn deal that was more than triple the size the issuer had hoped to raise and reminiscent of jumbo deals seen in pre-crisis days in 2007. The bond issue, heard to be coming since July, was well-timed, hitting the market quickly after the August slowdown and before an expected mammoth transaction from higher-rated Verizon, which has the potential to reprice the entire telecoms sector. According to Thomson Reuters SDC/IFR data, Energy...

European banks are stepping up plans to raise money via the bond market to top up their capital, following a green light from regulators that potentially opens up a sector worth up to €240bn. The hybrid bonds have equity-like features but are cheaper than equity and could help banks to meet the tough new rules to prevent a repeat of the 2007–2009 financial crisis, when taxpayers bore the brunt of bank bailouts. Regulators in the UK, France, Spain and Italy have agreed that banks can count hybrid bonds as Tier 1 capital – a key measure of...

HSBC has appointed former Marks & Spencer CEO Stuart Rose to its six-member European advisory council. While HSBC officials declined to comment, people familiar with the situation said Rose’s role would be to advise clients on the retail and consumer sectors, rather than working a day to day job at the lender. Rose left the top job at M&S in 2010. ♦ Lee Rochford, former head of the financial institutions group for EMEA at RBS, is joining Virgin Money as CFO from October, according to the lender. Rochford’s background is in the structured...

The difficulties faced by Allied Irish Banks and Banco Popular Espanol in accessing the public market last week, despite offering secured bonds, have prompted renewed fears that weaker eurozone peripheral banks will still require long-term ECB funding. Both issuers offered coupons of over 3%, but struggled to attract significant demand, despite neither being a jumbo (€1bn) sized bond. BPE just managed to cover its €750m four-year issue with over €800m of orders, while AIB only managed to build a €650m book for its €500m five-year offering....

The risk profile of CMBS is set to increase as underwriting standards of commercial real estate (CRE) loans backing such deals are likely to decline further, said analysts. Riskier lending practices are foreseen as CMBS lenders compete vigorously to capture an increase in demand for more leverage to offset a rise in funding costs. The CMBS market has had a new lease on life in the past three years but through its rejuvenation the market also experienced an incremental loosening in underwriting standards, though still not to the levels seen in...

The new governor of India’s central bank has turned out to be a lucky charm not only for the beleaguered Indian currency and stock markets, but also for leveraged finance from the country. As Indian markets rallied on the slew of measures Raghuram Rajan announced after taking up his job as new governor of the Reserve Bank of India last week, news also emerged of the first leveraged buyout from India in seven years. Four banks are underwriting an LBO financing of up to US$250m for Baring Private Equity Asia’s acquisition of a controlling stake...

Issuing bonds to fund share buybacks, a key theme in the US corporate market over the past 18 months, is unlikely to fall out of favour with corporate treasurers any time soon despite the back-up in rates that should, in theory, make such deals less attractive. Last week saw four retailers – Home Depot, Lowe’s Companies, Kohl’s and Macy’s – issue bonds to at least partly finance share repurchases. They follow a host of other issuers, including Merck Inc and Viacom, that have issued multi-billion dollar bonds this year to boost their share...

The US Department of Justice filed its US$5bn civil lawsuit against Standard & Poor’s in retaliation for cutting the US credit rating to AA from AAA. Or at least that was the view put forth last week by the rating agency and its parent McGraw Hill Financial. Having failed to get the suit dismissed, S&P offered 19 affirmative defences for the allegations in the US DoJ suit filed earlier this year, which accused the ratings agency of fraud in awarding top ratings for securities that would later prove to be worthless, and raising questions about...

As a fixed-income proxy, MLP valuations are predicated on stability: the more stable, the higher the valuation; the less stable, the more obligation to compensate for higher risks. Variable-pay MLPs, a structure designed to pass through all underlying cashflows, less capex, were specifically designed to contemplate such risks, passing through cashflows in good times and bad. Their track record – there are a half-dozen variable-pay MLPs – has been mixed. “The motivation for some of the variable-pay MLP sponsors has been to monetise an asset in a...

Indonesian companies are choosing to go offshore for US dollar borrowings from international banks as local lenders try to clamp down on domestic loans, while the central bank tries to boost its reserve requirement. Bank Indonesia raised the interest rate to 7% on August 29 to stabilise the local currency amid a stock market sell-off and has been providing dollar liquidity to selected banks to support the currency amid fears about the country’s current account deficit and reliance on capital inflows. So far this year Indonesian companies have...

Latin American equities have offered investors decidedly varied returns, as Brazil’s position as the top country remains precarious and other countries continue to win favour. New issues coming in the third and fourth quarters are facing headwinds while there is some relative value to be found in the secondary market for names across the region. “Brazil still holds the most opportunities as its capital markets have developed over the past 10 years,” said Nick Robinson, who oversees a US$15bn book of Latin American names as head of Brazilian...

Financial Stability Board chairman Mark Carney has called on G-20 leaders to help to stitch up a transatlantic split between regulators in their approaches to setting rules for the world’s largest banks. In a progress report on efforts to prevent another financial crisis such as the one prompted by the collapse of Lehman Brothers five years ago, he highlighted that more co-operation was required between regulators. Tensions have been growing between Europe and the US in recent months, especially over the US Federal Reserve’s proposals that...