Deals of the year 2010: Riding the rollercoaster

LAST YEAR THE global economy, as a whole, emerged from the recession and experienced an across-the-board period of growth. Bond and equity markets normalized after their 2008 trauma, corporate profitability was on the rise and default rates continued to fall. In theory, these were good conditions for an ­active year in the capital markets. However, the issuance boom of 2009, when market access was the only green flag that an issuer cared to think about, was always going to be difficult to match. Combine that with a sovereign debt crisis that cut a swathe across Europe, and bond issuance in ­corporate markets was down by 55%, according to Dealogic. With Greece and Ireland both bailed out by the European Union and the IMF, and other peripheral European sovereign borrowers finding access to bond markets challenging, sovereign syndicated deals in Europe fell by 57% year on year. Issuance by banks and financial institutions was also down by 21%. Two key trends dominated 2010’s deals of the year: governments disposing of assets in structured finance and equity markets that they had inherited from the financial crisis, and the creation of new instruments designed to fortify the banking sector. These trends were encapsulated in the overall concerns about sovereign creditworthiness through the recognition of the weight of distressed assets that governments were forced to absorb. Distressed bank assets have become distressed sovereign assets. The transactions that stood out were those that helped disperse the troubled legacy assets, recoup some value for the US government and broke new ground in offering more robust loss-absorbing bank capital against the backdrop of the Basle III accord. In these two regards, 2010 was a distinct year.