bonds

More hedge funds to tap capital markets?

Jim Kim — Mon, 28 Jul 2008 14:47:12 -0400

The KKR move to become a publicly traded company throws the spotlight, once again, on alternative investment companies and the public markets. We may see more private equity companies try to somehow follow suit. The case for more hedge funds tapping the markets seems even more compelling. Financial News Online notes a recent Celent study that found more hedge fund firms seeking permanent capital to get through the fallout from the ongoing credit crunch. The fact is that prime brokers haven't exactly turned the leverage spigots back on, and it's unclear if they ever will. So more might follow Citadel, which became the first hedge fund firm to issue bonds in 2006. Others will seek to follow the likes of Man and Fortress and become public companies. While the benefits of a public offering are obvious, it's unclear whether investors will readily snap up such issues. At some point, hopefully sentiment will change.

For more:
- here's the Financial News Online article

Related Article:
KKR to go public after all

Wachovia's life insurance policies lead to huge loss

Fri, 09 May 2008 06:59:57 -0400

We've all been talking about writedowns for leveraged loans, subprime-related securities, and heck even plain loan losses. But life insurance policies? Huh? About $315 million of Wachovia's first-quarter loss of $708 million was due to writedowns stemming from a revaluation of the life insurance policies it takes out on its own employees. The Financial Times reports that banks take out such policies on their own employees. They pay off when employees die, even if they are no longer with the company. There are also some tax benefits. The article also notes that shareholders and regulator have criticized such policies, in part because few employees know about them. Hey, anything for revenue. You've got to wonder what other banks are thinking. Are more revaluations coming?

For more:
- here's the Financial Times article

ALSO NOTED: Merrill Lynch estimates cut again; Financial stocks soar after Bear Stearns-JP Morgan deal; and much more...

Fri, 04 Apr 2008 07:59:50 -0400

Company News:
> Merrill Lynch estimates cut again. Article
> Soros: More products should be regulated. Article
> Goldman Sachs bonds sizzling. Article
> B of A gets corporate purchasing card patent. Article
> JP Morgan Chase's stake in Bear Stearns at 45 percent. Article
> Moody's lowers financial strength rating of Countrywide. Article

Industry News:
> Credit crisis hits Q1 earnings. Article
> Since Bear Stearns/JP Morgan deal, financial stocks soar. Article
> Hedge funds move to cash. Article

Regulatory News:
> Are firms too interlinked to fail? Article
> Regulators defend Bear Stearns deal. Article
> Primer on housing sector aid plans. Article

And Finally... How not to win over the media. Article

Are Alt-As next to blow up?

Wed, 02 Apr 2008 07:59:56 -0400

The Financial Times notes that the many rumors that UBS had sold its entire portfolio of Alt-A related bonds to Pimco may well have been true, given the big UBS writedown this week. Some think the sale valued the bonds at around 70 cents on the dollar. So far, Alt-A-backed securities have held up fairly well, especially in light of what has happened to its nefarious cousin, subprime-backed bonds. But some think all of that is bound to change. I'm not so sure that all of those people with decent credit scores who took on added debt for vacation and rental homes won't default the same way subprime borrowers did. Maybe not to the same degree, at least.

For more:
- here's the Financial Times article

Related Articles:
Subprime delinquencies still rising. Article
Street growing ever more bearish on Citigroup. Article
Just how will banks reduce mortgage exposures? Article

Lehman Brothers still faces antsy markets

Wed, 19 Mar 2008 07:59:56 -0400

For all the talk abut how Lehman Brothers no longer is just a bond shop, when the Bear Stearns news went down, the fear spread directly to Lehman Brothers. The sense that the firm is at immediate risk, however, has waned. It's 1Q earnings were not a disaster, and CFO Erin Callan seems to be saying all the rights things about transparency. According to Business Week Online, Deutsche Bank's star analyst Michael Mayo believes Lehman's $2 billion working capital line with 40 banks is "proof that counterparties haven't lost confidence in the broker-dealer." The new Fed facility also helps, as CEO Dick Fuld took pains to note. Still, people want more information about Lehman's exposure to toxic bonds. Until that happens, there will be continued skepticism associated with the firm.

For more:
- here's the Business Week Online article

Related Articles:
Repo market starting to strain? Lehman an issue? Article
Lehman to lay off another 5 percent. Article
Lehman all but exits mortgage business. Article

The paradox of a mortgage fund collapse

Tue, 11 Mar 2008 07:59:57 -0400

You would think that the Tequesta Mortgage fund would be seen as one of the more safe hedge funds. After it all, it specialized in prime loans of a certain heft. These jumbo loans--and I note the jumbo threshold has just been raised--were far from subprime and Alt-A. But they declined in value as the crisis clamped credit markets in general. Banks had to dump these bonds to get liquid, further slamming the market. The result: Even a conservative, low-margin hedge fund faced a series of margin calls from prime brokers--in this case Bears Stearns, Citigroup and others. The fund recently collapsed, no longer able to meet margin calls.

For more:
- here's the Fortune article

Related Articles:
Just how will banks reduce mortgage exposures? Article
Banks to take massive writeoffs. Article
What to make of Citigroup's big loss? Article
Crisis takes toll on Lehman and Bear Stearns. Article

Irony: Risk aversion making things worse

Fri, 07 Mar 2008 06:59:58 -0500

The abuse of risk strikes many as a leading cause of the credit meltdown. But now, as the New York Times notes, the discomfort with risk and the need for "absolute safety" may be prolonging the crisis, making a recovery that much harder. You gotta love the irony. The Times points to widening spreads between Fannie and Freddie bonds, and Treasury bonds, as an indication. Agency bonds traditionally have been considered just a notch below Treasury bonds on the safety scale. So this is profound. There were even rumors that the federal government was planning to guarantee agency securities.

For more:
- here's the New York Times article

Related Articles:
Credit issues a big topic this year? Article
But wasn't the risk supposed to be off-loadable? Article
Some radical ideas for credit rating agency reform? Article
How exposed is Fannie Mae? Article

The death of bond insurers?

Thu, 06 Mar 2008 06:59:54 -0500

When you think about it, this is stunning news: The state of California has just sold $1.7 billion in bonds to retail investors-sans bond insurance. Of course, they had to offer some of the highest yields in three years, notes the Financial Times. You would think that institutional investors would demand an even higher premium. The article quotes an official as saying that bond insurance at this point is a "waste of money." And he's on to something. It's not inconceivable that the industry will simply go forward without insurance, eventually getting comfortable with the idea. For now, other states will follow suit. We'll see if they go back to insurance once, or if, the industry gets its act together.

For more:
- here's the Financial Times article

Related Articles:
Buffet senses opportunity in bond insurance crunch. Article
Big picture view of bond insurers. Article
More fears over bond insurers. Article

Credit rating agencies hit on muni ratings

Mon, 03 Mar 2008 06:59:56 -0500

Now seems to be a good time to criticize credit ratings agencies. Their much-debated role in the on-going credit crunch may have made them more vulnerable on other fronts. The New York Times notes that more cities and states are taking these agencies to task for lower-than-warranted scores, which results in a lot more money shelled out in interest by taxpayers. California is leading a movement that would force agencies to rate bonds from states and cities the same way bonds from companies are rated. The audience may be more receptive now. Congressional hearings are set for this month.

For more:
- here's the New York Times article

Related Articles:
Some radical ideas for credit rating agency reform. Article
New credit ratings schemes likely to emerge. Article
Next big thing will elude credit markets. Article
More changes to come at ratings agencies? Article
Credit rating agencies hitting back. Article

Leon Black suffers most among PE kings

Mon, 25 Feb 2008 06:59:58 -0500

We all know the big boys of the private equity world are hurting. But who is suffering the most? Well, the buyout shop that has suffered the biggest declines in its portfolio company-issued debt is Leon Black's Apollo Management, notes the New York Post, relying on information from research firm FridsonVision. The report said that 40 percent of Apollo-sponsored deals over the past five years have had their bonds fall to distressed levels. That compares with 33 percent for Blackstone and only 10 percent for Kohlberg Kravis. Apollo deals that have fared worse include Realogy, a real estate firm, and two retail outfits.

For more:
- here's the article

Related articles:
More on hedge funds vs. private equity funds. Article
Rumor: Leon Black to take Apollo public. Article
Buyout debt tanking fast. Article