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April 2006

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  • NIBC is planning a hybrid capital deal linked to the 10-year constant maturity swap rate. The deal, via lead manager Morgan Stanley, is fixed for the first five years at a whopping 8% before switching to the 10-year CMS plus 10 basis points. The coupon is capped at 8% with no floor. Such deals were extremely popular until a year ago but hybrid capital referenced to CMS coupons has fallen out of vogue since. The sector boomed during 2004 and the first quarter of 2005, with borrowers attracted by the highly aggressive all-in after-swap funding costs. But after the curve flattened many of these securities have traded at prices in the low 80s. With the curve as flat as it is, it seems the view is that the downside is now limited.
  • Corporate restructuring dominance makes GE personnel rich quarry for banks boosting leveraged finance teams.
  • Spanish bank forms a joint venture with alternatives specialist Vega to cater for institutional investors.
  • US growth companies faced with the increased cost of listing at home are among foreign issuers seeking a home on London’s junior market.
  • But standard documentation and eight dealers’ involvement might not be sufficient to spark investor interest.
  • As if investment banks didn’t compete enough with each other already, London-based employees of Barclays Capital, JPMorgan and Morgan Stanley couldn’t resist the opportunity to swap pinstripes for cricket whites in the chill of February for what has been billed the City Indoor Cricket Championship, held in Docklands.
  • HSBC is in the vanguard of foreign banks’ invasion of China and its partnership with Bank of Communications means that it is well positioned to expand. Chris Leahy speaks to HSBC’s China chief and his counterpart at Bocom about their businesses and the way they are working together.
  • SuperDerivatives, an option pricing, trading and risk management company, has added a glossary of funky financial terms to its website.
  • Dealers say the backlog of unconfirmed credit default swap trades has been reduced by 54% since September 2005. The New York Fed is asking for a further reduction by the end of June this year. How near is the market to having an infrastructure able to cope with massive growth and a broadening of the uses of CDS? Helen Avery reports.
  • Rising personal bankruptcy levels and an uncertain economic outlook in the UK might suggest that non-conforming and sub-prime mortgage lending is not the smartest business line to jump into at the moment. Try telling that to the succession of new entrants now preparing to try their luck in this sector – one in which veterans might suggest that they are already 10 years too late.
  • Euromoney meets the chief executive of a specialist financial services firm recently bought out by management. Such deals are rare in a sector where most participants are inherently leveraged through their day-to-day operations. Is the firm’s capital structure not now rather strained? Not at all, says the CEO. It could ask its backers or other third parties for more money tomorrow and get as much as it wanted. Raising money isn’t the problem. Almost anyone can get funding right now. Identifying the right investments to build the business – that’s the tough part.
  • Freddie Mac’s new treasurer, Tim Bitsberger, marks a break with agency tradition in being an outsider. But he reckons his US Treasury experience can only enhance Freddie’s transparent approach to raising money and its stringent risk management standards. Bitsberger’s hope is that these will serve it well as it builds out its retained portfolio again. Kathryn Tully reports.
  • French chemicals company Rhodia has announced several initiatives that will help Rhodia Energy Services optimize the value of its carbon emissions receipts, which have been generated from projects to reduce emissions at Rhodia’s plants in South Korea and Brazil. In its first hedge using carbon emission receipts, it has sold 8 million tonnes of CERs, of which 6.5 million will be sold at €15 a tonne, to be spread over 2007 and 2008.
  • Domestic criticisms of Deutsche Bank’s international focus have not passed it by, prompting plans to develop its business at home. But as Jürgen Fitschen, who leads the initiative, tells Philip Moore, his bank does not intend to imitate rivals’ indiscriminate wooing of medium-size companies.
  • WaMu for covered bonds
  • It’s a good job that many US investment banks have had such a strong first quarter. They need the cash to keep the regulators at bay.
  • Treat your back-office staff well lest they take umbrage and run away to a hedge fund.
  • The $67 billion AT&T/BellSouth merger catapults Evercore and Rohatyn up the league tables.
  • While rivals’ share prices roar ahead, Citigroup’s languishes. Investors love stocks that are easy to understand. So is it time for Citi to develop a clearer strategy?
  • Connecticut-based currency manager Tradex Capital Markets has been awarded the management of UBS’s external allocation programme for FX-only investments. Tradex will assume responsibility for portfolio construction, maintenance and manager negotiations on behalf of UBS. Steve Jury, chief investment officer at Tradex, says: “In addition to the continued growth of our conservative, low-volatility fund, Tradex aims to move aggressively into the business of building customized multi-adviser platforms for asset managers, pension funds and government institutions. The unique funding possibilities in FX allow for the creation of portable alpha strategies that can be created with very low cash requirements. The firm is researching new ideas including notes, swaps and index development that we will likely market jointly with large financial institutions. Our wealth of FX market experience allows us to assess and quantify currency managers. This edge will enable us to help investors build return and avoid the pitfalls in a difficult and developing asset class.”
  • US financier Carl Icahn’s audacious move on Korean tobacco and ginseng company KT&G has made great headlines and triggered apoplexy among Korea’s more xenophobic elements. Having amassed a combined stake of 6.72% with fellow investor Steel Partners, and pressed for a spin-off of KT&G’s ginseng division to return more capital to shareholders, Icahn has even mooted a takeover of the company. In March the Icahn camp finally won a board seat in a shareholder vote, the first time a foreign investor has been voted onto a Korean board against management wishes.
  • Bank is making use of its wide geographical experience to build cross-border expertise.
  • Hedge funds returns are rising; does this mean volatility is back?
  • There are high expectations for European public-to-private deals this year but there is much uncertainty in the sector about how many will actually make it to market
  • For some FX traders the prospect of an extended holiday seems to be the deal clincher for switching jobs.
  • “Oh, these are among the most toxic instruments we’ve created. And they’re absolutely a bull market instrument. In a bear market, it’s not a question of maybe losing just a percentage point. You can lose 10 points in a heartbeat.”
  • 5 The number of years it has taken the S&P 500 and the FTSE100 share indices to reach levels last seen in 2001. On March 15, the S&P 500 crossed the 1300 mark for the first time since May 2001. This is still about 15% below the index’s March 2000 all-time high. The FTSE 100 crossed the 6000 mark for the first time since March 2001 but is still almost 1,000 points shy of its December 1999 all-time high.
  • Unbundling of commission regulation will increase independent data provision.
  • Bank telecom advisory fees are on the up, but that won’t last for long.
  • Ultra-rich investors are seeking out higher-volatility hedge funds. But they will be hard to find until strategies catch up with demand.