April 2001
| Euromoney April 2001 In a world where sovereign bondholders are disparate and disunited they are hard pressed to get a good deal if a defaulting sovereign and its bank advisers devise a unilateral exchange offer or other restructuring. With the often bitter experience of three such restructurings behind them, bondholders are getting together to protect their position. - Cracks in the new financial architecture
Jorge Gallardo, minister of finance and economy of the Republic of Ecuador, offers his views on sovereign debt restructuring. - Chronicle of a debt foretold
A small Andean nation proves that it is possible to successfully restructure a bond issue. And to a great extent, the success of the Ecuador exchange offer was a self-fulfilling prophecy. - Exit consents pose threat to creditors’ rights
The Emerging Market Creditors Association is becoming nervous because Ecuador included exit constraints in its exchange offer. Now they have been used successfully once, they may be used again elsewhere.
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Euromoney April 2001
As the European credit market has grown in the past two years, banks have struggled to position themselves to capitalize on the opportunity. In a bid to win much more lucrative underwriting business than high-grade, frequent issuers ever offered, they have poured money into credit research, importing staff from the US, where credit analysis is a long-familiar concept, and plundering the rating agencies for talent. But the response from investors has been mixed. While sell-side credit analysts may offer a convenient shortcut to essential facts and figures about a company, fund managers are quick to highlight their lack of independence. In a volatile credit market, buyers of credit bonds are doing more of their own analysis in-house. Still, brokers insist that this doesn’t mean their role is under threat.
Euromoney April 2001
Euromoney polled investors at 3,000 investing institutions in 31 countries, asking them to rank the individuals and teams whose credit research they rate most highly. The response was four times that of last year, with nearly 340 firms replying to our questionnaire. The winners were two bulge-bracket US firms and two of the largest European banks.
Euromoney April 2001
The German Pfandbrief market, in particular the jumbo sector, has grown dramatically in recent years and assumed a larger and larger slice of European bond fund managers’ portfolios. But now many of the leading issuers face significant challenges in the underlying lending businesses that generate Pfandbrief collateral. The German mortgage banks are seeking non-traditional business opportunities, as well as starting to sort out their underperforming mortgage lending businesses. Volumes are likely to shrink.
Euromoney April 2001
HypoVereinsbank’s decision to combine its mortgage banks under one roof has revived the long-running debate about the validity of the specialist bank principle - the foundation of Germany’s system of mortgage banks.
Euromoney April 2001
Turkey’s idiosyncratic form of financial engineering involved the creation of a web of corruption linking the governing elite, through the state banks, to its cronies. The private banks fed well off the massive government debt this generated. Then, in February, they hit the wall in a liquidity crisis that lopped more than 30% off the value of the Turkish lira.
Euromoney April 2001
Kemal Dervis, the new mega-minister of the Turkish economy and former World Bank vice-president, talks about the Turkish economy and the growing sense of imminent change in his country.
Euromoney April 2001
Turkish banks will have to roll over $6 billion in syndicated debt this year. Though first-tier banks will be able to roll over, albeit at higher interest rates, life will not be so easy for medium-sized and smaller banks.
Euromoney April 2001
The marble floors are still in place at the EBRD’s office on London’s Bishopsgate, the grand pillars and glass still deck the waiting area and the presidential suite remains with its grand vistas. But little else at the EBRD remains of the Jacques Attali era. Since he launched the bank with such a grandiose vision 10 years ago, it has fallen on leaner times. The grand claims to transform entire economies have been replaced by the limited promises to clean up management practices in its designated area of interest in eastern and central Europe. The men now running the show are no longer Europe’s heavy hitters but technocrats bent as much on curbing internal costs as doing imaginative deals.
Euromoney April 2001
Jean Lemierre, president of the EBRD, discusses the bank's role in central and eastern Europe, where it is still struggling to define its place.
Euromoney April 2001
A cooling in relations between Sergei Dubinin, former governor of the Russian central bank and now deputy chairman of Gazprom, and the EBRD lies behind the very public dispute between the bank and the management of Russia’s largest company.
Euromoney April 2001
Whatever Russia's government is or is not doing, Russian companies have found their own reasons for making improvements in corporate governance and boosting shareholder value. At least one market player dubs this consolidation process reprivatization. However there is still much to be done to restore the brittle confidence of local investors and only after this has happened will foreign funds consider returning to a market which knows how to burn them. Ben Aris reports from Moscow
Euromoney April 2001
Evgeny Shvidler, president of Russia’s sixth largest oil company Sibneft, talks about corporate governance and strategy.
Euromoney April 2001
Euromoney April 2001
Ruben Vardanian, president of Russia’s leading broker Troika Dialog, talks about the changing structure and behaviour of Russia’s companies and investment opportunities in them.
Euromoney April 2001
In Russia, large financial-industrial groups exist alongside a new breed of commercially-minded and successful industrial groups that have made their money by more traditional and honest means.
Euromoney April 2001
The Romanian government, many observers reckon, is playing a game of bluff. The IMF is told tales about privatization and restructuring while the populace is fed sops. The government, meanwhile is mired in inaction. Investors aren’t going to
rush into such a market until they are offered deals that are sufficiently attractive to outweigh unexpected risks.
Euromoney April 2001
Romania is not planning to over-compensate for scarcity by issuing heavily. But it is clearly keen to establish itself in the international debt markets.
Euromoney April 2001
Understanding sovereign risk is the key to investing in central Europe, where foreign investors have an important role to play, says Ashmore Investment Management’s Jerome Booth
Euromoney April 2001
Those central and eastern European countries that have pushed furthest and fastest with privatization have benefited from healthy government finances, restructuring and modernization of key industries and enhanced economic growth. That’s undeniable. But privatization remains ever politically contentious. Selling their banking systems to foreigners was hard to stomach, and now these countries are selling even more essential services, their energy generators and power distributors. If they can maintain the political will, at least governments will find buyers in these sectors, unlike in telecommunications.
Euromoney April 2001
The international strategic investor has become, and will continue to be, the key figure in eastern European privatization. The most effective sales seem to be those that have involved transferring a substantial equity stake to a foreign company.
Euromoney April 2001
The markets’ goal of next-day settlement of equities and bonds will only be achieved if there’s full implementation of straight-through processing. The more volumes continue to increase, the more urgent this becomes. Yet two rival systems have not agreed on common standards and sceptics fear that implementing full STP and T+1 settlement will be a decade-long project for cross-border trading.
Euromoney April 2001
The huge growth in the number of European corporates of varying credit quality tapping the capital markets has led to massive demand for ratings. The ratings agencies are staffing up to meet this challenge. But there remains a question mark over the value of the service they provide, especially in high yield, the most credit-intensive area of all.
Euromoney April 2001
Credit default swaps have proved a popular derivatives instrument with banks and other credit investors, but one possible trigger for default – the restructuring of a bond or loan – has cast uncertainty over the market. It is possible that liquidity might be damaged by the proliferation of different classes of instruments.
Euromoney April 2001
With south-east Asian economies recovering, governments are making cautious moves to restructure and expand their power industries to meet increased demand. None wants a California-style crisis. However, foreign investor interest is likely to be limited and financing must be provided by local debt and equity markets.
Euromoney April 2001
Indonesia is still trying to get back on its feet after a crippling economic downturn. As if that is not hard enough, the country is also looking to make the transition from a dictatorship to a democracy. The currency weakened again last month and the ratings agencies are nervous. Against the odds, Indonesia’s crisis management skills are improving.
Euromoney April 2001
Egypt has weathered the economic storms of the past two years and looks set for steady growth over the next decade. But tough decisions must be taken on the exchange rate and privatization if the country is to achieve its long-term potential.
Euromoney April 2001
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Issuer: RHM Finance
Amount: £650 million
Type of issue: whole-business
securitization
Date of issue: February 28
Arranger: JP Morgan
Euromoney April 2001
Economic and competitive pressures facing
telecoms operators in Europe and
internationally could, in turn, expose the
equipment suppliers to heightened credit
and legal risk.
Euromoney April 2001
Chairman elect, Hawkpoint
Euromoney April 2001