CDOs (Collateralised Debt Obligations) are being hailed in some quarters as the next split cap catastrophe. As a result of the US sub prime mortgage crisis, some CDOs that are heavily exposed to the US subprime mortgage crisis have fallen dramatically in value and hedge funds that have a big exposure to these CDOs are on the brink of collapse. There are legitimate concerns with some aspects of …Read the article
Rating agencies have come under fire recently. A number of perceived gaffs haven’t helped the agencies’ credibility (we covered Moody’s changes to its bank rating methodology on this blog), but the biggest concern at present is regarding structured credit.
Some investors have always treated ratings agencies with a degree of scepticism, arguing that there must be a conflict of interest when comp…Read the article
20 years after Gordon Gekko told us that “Greed is Good” in Wall Street, 20th Century Fox has announced that a sequel called “Money Never Sleeps” is in pre-production. Is this the top of the market for equities then? The last film was released just ahead of the 1987 crash.
You used to have to rely on a shoe-shine boy to give you a stock-tip to gauge if the markets were getting frothy, but more …Read the article
In my catch up reading from holiday (Argentina – stunning and very very cheap!), I noticed that World Directories, a European telephone directory company, has re-financed its euro-denominated leverage loan to be ‘covenant-lite’. Covenants are very important for us as bond investors. This is because they impose restrictions on a company’s management by preventing management from undertaking acti…Read the article
Defaults are few and far between in the European High Yield market at the moment but we have another today as Schefenacker, a German auto supplier that makes mirrors and lights, has announced a financial restructuring. Holders of the €200m bond issued in February 2004 have been offered 5% of the equity.
This should serve as a reminder to the current jubilant credit market that companies can go…Read the article
More choice is a sign of greater prosperity, right? That tall skinny soya cappuccino extra hot (without chocolate on top) was just what you wanted, wasn’t it? It might not be. It turns out that the more choice you give people, the less satisfied they will be. It used to be the case that if you didn’t like the coffee from the shop it was the shop’s fault for only selling an instant brand. Now, i…Read the article
The ‘founder’ of the High Yield market, Michael Milken, was in town yesterday at a conference I attended. Mike is the guy who restarted the High Yield market in the 1980’s (high yield bonds were around during the great depression) when he saw great returns available on fallen angels. Mike served 22 months and paid almost a billion dollars in fines for securities fraud after making a fortune at …Read the article
Enron is still a case study for the rating agencies – they rated it investment grade 5 days before it went bust. Malcolm Gladwell has written an article (click here to read article) in the current New Yorker about the perils of having too much information to analyse and how everyone was missing what was going on at Enron even though the financial statements were revealing a lot of it.Read the article