2014 was quite an eventful year for Emerging market (EM) fixed income. After a period of strong performance which lasted all the way to September, markets corrected significantly in the latter part of the year as the escalation of the Russia crisis and the plunging oil prices triggered the most significant drawdown since the “taper tantrum” of June 2013. All in all, emerging markets still poste…Read the article
It’s this time of the year when banks and other investment research providers have released their outlooks for the coming year. For the EM corporate bond asset class, Asia was forecast to be the best performer in 2015, with most top picks being in India and China.
Most 2015 outlooks were released in late November or early December, when EM USD corporate bonds were boasting a solid 6.1% total re…Read the article
“Hail Caesar, those who are about to die salute you” may well have been the gladiatorial epitaph of choice two millennia ago, but the junior creditors of Caesar’s Entertainment Operating Co are unlikely to feel the same way.
In 2008, TPG and Apollo Global Management, two powerhouses of the private equity industry, led a $30.7bn buyout of Harrah’s Entertainment Inc, the US gaming business. This …Read the article
One of the many unintended consequences of structurally low interest rates over the past few years has been the emergence of mini-bonds in the UK. These are typically non-tradable debt instruments issued by companies directly to individual investors*. We’ve commented before on one such bond issued by Chilango, a London based vendor of Mexican food, and highlighted some of the risks relative to …Read the article
One of our local burrito vendors has been advertising a new 8% bond to its customer base. The company, Chilango, wants to raise up to £3m to fund expansion of its chain in central London. This will be done via a crowd sourced retail offering that’s already drawn some interesting coverage in the financial press. Having performed some extensive due diligence on the company’s products as a team, w…Read the article
On 29th April, Energy Future Holdings Corp (the energy business formerly known as TXU) filed for Chapt 11 bankruptcy, listing $49.7bn in debt liabilities. This came after several months of back and forth negotiations between various creditors and the owners of the business. As such the filing was widely expected and the market had been pricing this in.
One thing that was quite an eye-opener, ho…Read the article
As Mike just reported, we remain concerned with a number of internal issues as well as external vulnerabilities facing emerging markets. With economic growth fuelled by excessive credit growth, deteriorating current account balances and potential contagion risk if the Fed tightens monetary policy (leading to capital flows back to the US and Europe), another big sell-off can certainly not be rul…Read the article
The high yield market rightly pays a good deal of attention to leverage trends (the relationship between debt and earnings). The larger the quantum of debt a business carries relative to its earnings, the greater the risk. Other metrics are arguably as important, though it is the leverage metric that consistently garners the lion’s share of attention. With spreads near the post Lehman tights, i…Read the article
So far this year returns for the high yield market seem solid if unspectacular; 2.9% for the global index, 4.5% for Europe and 3.4% for the US. However, these overall numbers mask some interesting gyrations within the markets. It’s been a mixed year for government bonds but a solid year for credit spreads. Indeed, recent moves in the sovereign bond markets continue to focus investors’ minds on …Read the article
2012 was not a good year for peripheral European defaults in the high yield market. Spain’s default rate doubled from 7% to 14%, while Italy’s went from 5.7% to 9.5%. Clearly, that the Spanish and Italian economies are under stress is not news, but what I thought was interesting though was that German defaults have continued to fall. It is important to point out that this is not just the public…Read the article