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Capital Markets

Capital markets across the decades

Euromoney has covered every twist and turn of the capital markets since it was launched 50 years ago. Our archive serves as a history lesson for all practitioners in the market today.

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The 1960s & 1970s

At the time of Euromoney’s first issue, the Eurobond market was recovering from one of its regular bouts of indigestion, frequently caused by problems in the delivery of bonds and later dubbed the ‘New York paperwork crunch’. Here we wrote about a market that had been stuffing itself with “whatever goodies take its fancy”

FE Aschinger at Swiss Bank Corporation wrote expressively about the role of the Eurodollar market in times of serious crisis: “The speculative funds which are latent in the market only become active … when the elements of crisis are already present. Speculation follows these elements like a shadow”

“What do the Euromoney markets look like from the other side?” we asked. The answer came from A W Clements, deputy treasurer of ICI. His account of the company’s financing strategy was a prescient analysis: Clements put many of the Euromarkets’ problems down to the fact that they were still reliant on individual, rather than institutional, investors

Stanley Ross, at the time working at Kidder Peabody Securities, would have many run-ins with the Association of International Bond Dealers over the course of his career as he tested the established order. Here was his account of the AIBD’s annual meeting

Bayer’s $200 million financing in January 1979 was certainly ambitious. Apart from two $50 million issues in December, the fixed-rate dollar sector had effectively been closed to new borrowers for around four months. One thing was for sure: without the attachment of warrants, the market would have been unable to swallow it



The 1980s

The grey market was a regular source of controversy, and Stanley Ross, chairman of Ross and Partners, was its chief proponent. But when Armin Mattle of UBS decided to teach Ross a lesson, the sparks would fly. The setting was a $100 million deal for the European Investment Bank in August 1980. With Mattle hitting Ross’s prices while controlling all the distribution, it soon turned into a classic short squeeze

Euromoney had warned of the dangers of leveraged buyouts in 1984, but two years later the market was growing well beyond its origins, fuelled by senior and mezzanine lenders and the market’s increasing tolerance of zero-coupon debt. The Federal Reserve had made early attempts to rein in the exuberance, but the seeds were being sown for problems ahead

By 1987, the tasty fees on offer in the sub-investment grade bond market were attracting even the most respectable firms on Wall Street. In the previous year, junk had accounted for more than 20% of all US corporate bond issuance. And at the head of the ravenous pack of lead managers in this surging asset class was none other than Drexel Burnham Lambert

When Black Monday saw markets crash around the world on October 19, bankers said the securities industry would never be the same again. Euromoney spent the next month investigating every aspect of the crisis, concluding that while swaps had emerged as a clear winner from the turmoil, a shuttered junk bond market looked set to play havoc with bridge loans

“Make no mistake, asset-backed securities will be one of the boom markets of the 1990s.” Such was our prediction on the eve of the new decade. Some $1 trillion of assets had been securitized by then, but trillions more waiting to be tapped, leading us to conclude that ABS “could make the corporate bond market look like a minnow”

The collapse of the $7.2 billion United Airlines buyout nearly turned the clock back to the global crash of 1987. For those responsible for producing and then marketing UAL’s incredible earnings projections, it was the most embarrassing deal in years



The 1990s

In early 1991, the most profitable – and potentially the riskiest – game for equity brokers was the bought deal. Had a new mechanism for distributing shares come of age or was it simply the product of an unsustainable bull market?

The third tranche of the privatization of British Telecom should have been a moment to savour, but as it progressed institutional investors grew so angry over attempts to protect the live share price by incentivising the buying of stock ahead of the deal that they accused global coordinator SG Warburg of rigging the market

They managed it, but only just. In early March, GPA sold $4 billion of asset-back global bonds, hauling the company back from the brink just weeks before directors at the Irish-based aircraft leasing company would probably have been forced to apply for receivership. The deal was one of the largest and most complicated private-sector bonds ever

By 1997, Donaldson Lufkin Jenrette had become the youngest member of Wall Street’s investment banking bulge bracket. But it was finding it tougher to keep pace with the growth in size of its clients – and was being pushed into more conventional, low-returning business in order to do so

Was it the summit meeting that saved world financial markets from Armageddon? Or was it the night on which Wall Street’s crony capitalists, backed by the taxpayer, looked after their own? “I sensed a lot of fear in that room,” one executive who was there told Euromoney in our cover story about a breathless five days that shook the world

By the late 1990s, bank regulators were still grappling to define what they meant by bank capital. It had to be perpetual, but didn’t have to be for ever. It had to feel like equity, but look like debt. Banks wanted to overhaul the system of risk weightings – in the words of one banker, “a horrendous can of worms which we’ll have to open at some point soon”



The 2000s

It was like the 1970s all over again – bankers arguing about skulduggery in the execution of Eurobond deals. This time it was the pot system that came under attack, as European syndicate banks began to push back on demands by lead managers to disclose their order books, who they accused of using the information to steal investors. At the heart of the argument was the question of whether or not banks’ commercial interests trumped those of a borrower

Credit derivatives were the hottest area in global fixed income, promising to transform the entire credit world by bringing greater liquidity and transparency. But the dramatic worsening in credit that was exemplified by Enron’s collapse, was set to severely test the market. Some feared that the explosive growth had stored up unseen problems

It was a sure sign of a nervous credit market when even a monoline insurer’s spreads could blow out by 30 basis points in a matter of days. MBIA said its triple-A rating was unimpeachable, but the worm of doubt had been released. When ABS funds started holding cash in monoline-wrapped bonds, it was so they wouldn’t have anything to worry about, said one investor. “Now it’s on our radar”

Distressed debt used to be a secondary-market play. But by the end of 2006, it was a primary-market business. Stressed companies didn’t avoid default by restructuring old debts any more – they just put on new ones supplied by the myriad new forced buyers of credit

It felt like the end of an empire. While Bear Stearns nearly went up in flames, chief executive Jimmy Cayne had played with cards at a week-long bridge tournament. But it was soon to become clear that the future of much more than one of Wall Street’s most prestigious firms was at stake. One year before the collapse of Lehman Brothers, this was the first-hand account by Euromoney’s Peter Lee of one of the most important weeks in Wall Street history

As financial markets struggled to come to grips with a leverage-fuelled meltdown that was set to echo around the world, Euromoney’s attention turned to the corporate defaults that would surely follow the onset of a global recession. We painted the apocalyptic picture of zombie companies stalking the earth, dragging their uncovenanted leverage multiples behind them



The 2010s

Trust had broken down between IPO vendors and issues and traditional investors in new stock offerings in Europe. Deal arrangers seemed incapable of bridging the valuation gap between the two sides; in bloody markets, hedge funds were the buyers of last resort. The only thing that all sides agreed on was that something needed to change

Having secured permanent capital just before the big equity market sell-off, Glencore had the financial strength to boost production and acquire cheap mining assets. In the long run, shareholders were predicted to reap the benefits, but for now, they were still licking their wounds after the Swiss firm’s record-breaking IPO. This was the inside story of the deal of the year

Verizon’s $49 billion bond deal rewrote the corporate finance record books, with banks saying it opened up new possibilities. Investors couldn’t believe they got them so cheap. So was Verizon’s real legacy a new type of bond deal, one where price didn’t matter? And what did that mean for the role of bookrunners?

The collapse of Phones 4U, which left PIK-note holders wiped out, was billed as a one-off event. But it was a stark reminder of the liquidity trap that lay in wait for yield-hungry investors as they chased each other further and further down the credit curve. Had European investors developed the credit skills they needed to invest in such risky assets?

By late 2015, banks had cottoned on to the power of the blockchain technology beneath Bitcoin, testing uses for rebranded distributed ledgers to replace their costly proprietary systems. Enthusiasts saw banks creating a new fabric for payments transfer and financial markets; doubters sensed it was all hype. Euromoney’s cover story delved deep into this brave new world

Additional tier-1 contingent capital bonds were entering their second generation, as issuers began to refinance the $200 billion asset class. But just two years earlier, the market looked close to collapse. Speaking to bankers and traders that had worked in the asset class since its beginning, Euromoney pieced together the run-up to a crisis that still echoes through bank capital today


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