The GlobalCapital Podcast

GlobalCapital

A weekly podcast from GlobalCapital discussing the most interesting stories from the world’s capital markets. Contact us at podcast@globalcapital.com read less

Ukraine: finance and economy, an insider’s view
Jan 13 2023
Ukraine: finance and economy, an insider’s view
Sergiy Nikolaychuk of Ukraine’s central bank offers an in-depth look at the country’s economy in wartimeCan the good times last in the primary bond market?Real estate looks for refi rehab and direct lenders end up as ownersSergiy Nikolaychuk is the deputy governor of the National Bank of Ukraine, the country’s central bank. Appointed to the job in 2021, he has been at the heart of Ukraine’s financial system and economy throughout Russia’s invasion. We spoke to him in Vienna this week about how the NBU makes plans during wartime, its expectations for the conflict and how its economy and financial system has held up as well as its latest agreement with the IMF.While Ukraine might not be able to come to the capital markets for now, bond issuers across different sectors are making the most of it. Issuance records both for individual borrowers and market sectors are tumbling just two weeks into the year. Issuers are suffering from FOMO, market participants tell us. But what else should they fear and can the good times in the bond market last? We find out.Not every type of borrower is able to get into the market, however. Issuers from the beleaguered real estate sector have debt to refinance in the coming years but had a tough time borrowing last year. We look at the mounting problems for the industry in capital markets.We also take a look at direct lenders who are increasingly taking the keys to the companies they have lent to that got into trouble. We look at how widespread this could become and the consequences for the direct lending market.
The bull run for bank bonds and scope for improvement in the SLB market
Nov 25 2022
The bull run for bank bonds and scope for improvement in the SLB market
How much longer can the extraordinary run of bank bond issuance last?Are sustainability-linked bonds too complicated to be meaningful?New bond, old tricks: the art of underwriting returnsIt has been a record November for bank bond issuance and one of the busiest months for that market ever. That is, of course, unusual. What is even more unusual is that many in the market expect the pace of issuance to run long into December.Typically, the market dies down after the US Thanksgiving holiday at the end of November. We look into what is driving this late spree of deals and ask what might stop it.Sustainability-linked bonds are not straightforward products and this week, one from Valeo, the French car parts maker, had investors expressing frustration. The deal itself was a success but investors are concerned about the complexity of some of the environmental targets the issuer and others like it are aiming for. They argue they lack the expertise to judge whether ambitions around emissions are meaningful. We look at their complaints and how an industry geared towards assessing financial performance can come to judge environmental progress.Finally, we look into a bond issue from Slovenia’s largest bank, NLB. The issuer tried the deal with a syndicate of banks but postponed it only to return with the same deal one trading day later with only one lead manager mandated, which had offered to underwrite the bond. We ask whether the art of dealers buying deals is making a comeback.
The Santa rally comes early and what killed Ithaca’s share price
Nov 18 2022
The Santa rally comes early and what killed Ithaca’s share price
Will the Santa rally in bonds last until Christmas?How much bond issuance will TLTRO repayments drive?Ithaca Energy: autopsy of an IPO The first UK IPO of significance in a year might have been hoped to be a bellwether for future deals and perhaps spark a revival for listings. But the IPO of Ithaca Energy has not worked out quite as the company and its investors might have hoped with the share price tumbling. We take an in-depth look at the company and the listing to find out what happened.In the primary bond market the tale has been, on the whole, much rosier. Investors have bet that central banks are nearing the top of their interest rate rising cycle – or at least they believe the pace of increases will slow. That means they are buying bonds again, giving a boost to the primary market. A better than expected US inflation number last week turbocharged that dynamic in this week’s primary market.But how long can this Santa rally last? And is the market good enough for all borrowers to take advantage? We look into some of the successes and failures in the bond market this week and give the tyres on which it is rolling a thorough kicking – no reindeers were harmed in the making of this episode.Meanwhile, the ECB is revealing data on repayments of its Targeted Longer-Term Refinancing Operations. Banks and some supranational and agency borrowers took trillions in cheap cash from the central bank but now the terms have worsened they are handing it back. A big chunk of this they will have to refinance in the bond market. We take a look at what that means for SSA and covered bond issuance.
The arc of the covenants and Korean callable chaos
Nov 11 2022
The arc of the covenants and Korean callable chaos
The re-emergence of lender protection in leveraged financeHow one Korean insurance company caused chaos in Asia’s bond marketClimate resilience comes to sovereign bondsSome serious people in the leveraged finance market believe that covenants designed to protect investors are on their way back. That would mark the reversal of a trend that has been going on for perhaps 20 years of borrowers, and the people that own them, pushing the conditions that govern their borrowing ever more in their own favour.  It is early days – to the extent some market insiders do not believe it is even happening – but we investigate this week what restraints lenders are demanding and how far they can push back with interest rates rising and recession looming. Financial institutions’ autonomy in deciding to redeem their regulatory capital early or keep it in place is often a controversial topic. This capital is designed to be called but a borrower’s call option is just that: an option, not an obligation. Nonetheless, chaos ensued in the Asian market recently when Heungkuk Life, an insurance company, made some very strange decisions about what to do with one of its callable bonds. It was a story of how on company’s confusion spread throughout the bond market dragging in all manner of innocent bystanders.Finally, we take a look at an announcement made at COP 27 in Egypt this week and what an effort to build climate resilience into bonds means for the small, low income countries most vulnerable to climate change.
Saudi issues ‘bond beyond oil’ as other borrowers try every trick in the book
Oct 7 2022
Saudi issues ‘bond beyond oil’ as other borrowers try every trick in the book
Following the PIF’s debut bond, is Saudi Arabia a credible green investment?The multitude of unusual tactics bond issuers are using to get deals done in difficult marketsThe Public Investment Fund, Saudi Arabia’s sovereign wealth fund, made a huge splash in bond markets this week with its debut deal. But the $3bn sale across three green tranches, including a 100 year bond – an unprecedented feat among debut issuers – was not without controversy.While the deal execution itself could not be hailed as anything other than a success, investors had wildly differing opinions about whether a green bond from Saudi Arabia is a credible ESG investment or not. The country is in the middle of a bold plan to transition away from oil income, which had one of the deal’s lead managers calling the 100 year piece a “bond beyond oil”, but is it doing everything it can? We examine the deal and the arguments for and against lending money to the PIF if your priorities are the environment, social wellbeing and sound governance. If anything, the deal shows there are no simple choices in ESG debt markets.Nothing is simple in the wider bond market either, it seems. Getting deals done is tricky with markets so volatile and uncertain. There is little to suggest they will become more placid, or that funding costs will fall, any time soon either. We look at how borrowers are using all of their wiles to get funding through the door while they can.
Anarchy in the UK and never mind the Buoni
Sep 30 2022
Anarchy in the UK and never mind the Buoni
The way out of UK market disarrayItalian banks in a better stateBring back the bonus cap, say bankers We analyse the disruption to capital markets this following new UK chancellor of the exchequer Kwasi Kwarteng’s plan to fund tax cuts and energy bill support through extra government bond issuance, which spread across currencies and asset classes and ended — or perhaps just paused — with the Bank of England making an emergency purchase of some of those bonds just as the government was in the market issuing some. Sovereign debt managers often tell us they like their markets to be dull and predictable — this it most certainly was not.But where does the UK go from here? We asked the market and heard that the way out of this mess was the government’s to navigate and that it could not rely on the Bank of England stepping in to maintain orderly markets as a permanent solution.Italy is a country that has been more closely associated with volatile politics and markets in recent times. Indeed, an election result last week drove up the spread between Italian government bonds (Buoni del Tesori Poliennali, or BTPs) and German ones — a key indicator that shows investors believe Italy is becoming a more risky investment prospect when it rises.  That in turn affects Italy’s banks, of which there are many and which are big users of the markets to raise funding and capital. But, even as one Italian bank failed to price a deal in the markets this week, we uncovered the reasons why the funding picture for this key group of institutions in the European economy is better than one might think. And finally, back to the UK where we have gauged reaction in the markets to the removal of the bankers’ bonus cap — another policy from Kwarteng’s mini budget. Spoiler alert: it’s not what you'd expect.