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Author profile

Stefan Isaacs

Years in the bond markets: 12

Specialist subjects: European credit and high yield corporate bonds

Likes: Football, music, summer, classic cars & travelling

Heroes: Scotland's finest export - Bill Shankly

WTI Crude Oil futures curve

Damsels in distress – Chesapeake and distressed exchanges

2009 through 2013 were some very good years for the US high yield market. And the energy subset was no exception. Returning  51%, 13%, 9%, 12% & 6% in each of those years, it’s not surprising that the BofA Merrill Lynch US High Yield Energy Index practically trebled in size. Voracious issuance, much of it to fund shale oil development, was met with equally intense buy-side demand and with it ca…

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15.12.15 SI blog1

Leverage ain’t always a shareholder’s best friend

The temptation to ‘juice-up’ shareholder returns with low yielding corporate debt has been too much to bear for many companies and their investors in recent years. This fad has been well documented and though it may not be a trend we creditors like to observe, we haven’t been entirely surprised to see it play out in 2015 given the seemingly large valuation disconnect between the cost of debt an…

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BHP turns to the bond markets for help

BHP turns to the bond markets for help

It has been a rough ride for metal and mining giant BHP Billiton. Revenues have come under persistent pressure due to weakening commodity prices. Despite one of the strongest balance sheets in the sector, promises made to shareholders have proven tough to keep.

With these commitments in mind the company turned to a nervous bond market earlier this week for some $6.44bn equivalent of hybrid deb…

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XPO Logistics

XPO Logistics. A $2bn high yield transaction and why we didn’t play.

As value investors we would generally assert that every financial asset has its price. Few bond market offerings tick all the boxes, but if we are to be suitably compensated, and subject to certain red lines, we are generally sanguine.

Yesterday saw XPO Logistics, a third party US based logistics firm raise $2bn equivalent of debt across Euros and Dollars to part fund its acquisition of Norbert…

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Krafty work – 3G and Berkshire Hathaway continue to play the arbitrage theme

Almost two years ago to the day we wrote about a return of animal spirits, the LBO of Heinz by Berkshire Hathaway and 3G, and the significant role debt had to play in the transaction. Yesterday Heinz announced that it is to merge with Kraft Foods to create the fifth largest food and beverage company in the world. The transaction will see Berkshire Hathaway and 3G invest an additional $10bn in t…

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Hybrid debt – another beneficiary in the hunt for yield

The rapid growth of the hybrid corporate capital market (non-financial) over the last few years has provided fixed income investors with an opportunity to access a quasi-equity income stream. Much like equities, hybrid bonds are perpetual in nature (though an option to call exists), and allow the issuer a degree of discretion over coupon payments. And, whilst they rank ahead of common equity in…

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Ten reasons to like US high yield today

Global growth concerns, fears of a less accommodative Fed, and limited high yield market liquidity coupled with complacent and crowded investor positioning has served to reprice the US high yield market over the past few months. Following on from the worst quarterly performance in Q3 2014 for some three years, the US high yield market arguably now offers a significantly more attractive entry po…

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Exceptional measures: Eurozone yields to stay low for quite some time

Richard recently wrote about the exceptional times in bond markets. Despite bond yields at multi-century lows and central banks across the developed world undertaking massive balance sheet expansions the global recovery remains uneven.

Whilst the macro data in the US and UK continues to point to a decent if unspectacular recovery, the same cannot be said for the Eurozone. Indeed finding data to…

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Is Europe (still) turning Japanese? A lesson from the 90’s

Seven years since the start of the financial crisis and it’s ever harder to dismiss the notion that Europe is turning Japanese.

Now this is far from a new comparison, and the suggestions made by many since 2008 that the developed world was on course to repeat Japan’s experience now appear wide of the mark (we’ve discussed our own view of the topic previously here and here). The substantial pick…

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High yield: bullish or blinkered?

I recently attended JP Morgan’s annual US high yield conference. It’s one of the best conferences around: well attended, and with more than 150 companies, panel discussions and specialist presentations. As such, the topics covered give a good flavour of the market’s latest thinking.

Unsurprisingly, many of the well-rehearsed arguments in favour of high yield resurfaced once again, with presenta…

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