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April 2006

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  • Spanish bank forms a joint venture with alternatives specialist Vega to cater for institutional investors.
  • The UAE capital markets received a boost last month when National Bank of Abu Dhabi (NBAD) issued a Dh2.5 billion ($680 million) tier 2 convertible bond through a private placement. It is the first time this type of hybrid security has been issued in the UAE.
  • 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.
  • Some bond investors have complained for years about the lack of covenant protection in the event of M&A activity. And during the past 18 months or so the increasing number of leveraged buyouts has heightened the fears of portfolio managers. Although some bond investors are once again trying hard to push for change of control (COC) covenants, many deals have priced recently without including this feature. In certain respects it is a simple matter of supply and demand. When demand for a bond is overwhelming it is relatively easy for issuers to refuse extra covenant protection. However, with the credit cycle widely forecast to turn it is clear that the buy side is becoming more circumspect.
  • Although the oil-rich emirate does not need other people’s money to finance big-ticket projects, it has shown an increasing appetite for project finance, reports Mark Ford in Abu Dhabi.
  • There has been a lot of talk about the use of computerized trading in foreign exchange. Discussions at a recent seminar in London suggest that there is real substance, not just hot air, behind the chat.
  • 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.
  • 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.
  • “I see you have the same problem as in my country: prostitutes everywhere!”
  • “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.”
  • Bank is making use of its wide geographical experience to build cross-border expertise.
  • Chief executive of the Chicago Mercantile Exchange thinks pressure is building for exchange-traded model.
  • Icelandic bank spreads, which had been drifting wider late last year, moved out sharply in early March.
  • Plans by International Index Company (IIC) and Eurex to launch a CDS future have yet to resolve the question of how cash settlement will be achieved on reference entities that have defaulted. But once this problem has been solved, the initiative should open up the CDS market to investors that have so far been blocked from trading the OTC market.
  • The London Stock Exchange’s shareholders clearly have a lot to gain from Nasdaq’s bid for the market, especially if, as is widely expected, the New York Stock Exchange joins in the fray and pushes up the price even further. But what, if anything, users stand to gain is far from clear.
  • Excellent market conditions, M&A, special situations and heightened insurance activity drove record subordinated supply in the first quarter; more deals are in the pipeline.
  • There is a consensus view that European equities are cheap and that M&A will continue to drive the market up and keep the liquidity flowing. This rosy vision is built on the assumption that earnings will remain strong, that global growth is re-accelerating, that the risk from inflation is minimal and that interest rates are therefore likely to remain low.
  • The volume of European equity capital market deals from the real estate sector has been growing strongly over the past two years and is expected to increase again this year.
  • HK euphoria hit by rapid short circuit
  • 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.
  • Ed Mizuhara has left Lehman Brothers where he ran the sovereign, supranational and agency syndicate, to join Credit Suisse. He will report to John Fleming, head of syndicate, who moved fast to find a replacement for Nick Dent. Dent resigned in February to join Merrill Lynch.
  • WaMu for covered bonds
  • Tough regulations hold back trade volumes.
  • Joaquim Levy, Brazil’s treasury secretary, tells Lawrence White how the sovereign is restructuring its debt management profile.
  • Urban Vietnamese are leaping on the capitalist bandwagon, driving it as fast as they can in an effort to build a lead on the foreign companies that will inevitably tap a burgeoning market.
  • Are hedge fund databases trustworthy...
  • A report from Ibbotson Associates indicates that the returns reported in hedge fund databases are often much higher than they should be because of backfill bias and survivorship bias.
  • It seems no one has the right returns
  • The first wave of easy returns on commodities has passed, while allocations continue to grow. Traditional players are having adapt to a much more liquid market, swimming with a new breed of investors and their active hedging strategies. Peter Koh examines the changes.
  • The EU’s emissions trading scheme and Kyoto’s clean development mechanism are succeeding in promoting renewable energy. But electricity utilities are turning out to be surprise beneficiaries. Peter Koh reports.