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February 2006

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  • Bank of America is expanding its private banking business by targeting US families worth $50 mln+.
  • The second SVG Capital fund of funds securitization – SVG Diamond 2, again arranged by Nomura, has further developed the concept of private equity collateralized fund obligations. This is a managed deal where the assets are selected over time by SVG to deliver enhanced equity returns. Some €175 million of equity risk in the form of preference shares in the fund was sold to various external investors. This is drawable equity, meaning that this most expensive form of capital is not utilized until it is needed, thus enhancing the efficiency of the CFO. The rest of the financing comprises €328.5 million of rated paper (seven tranches ranging from triple A to triple B).
  • Eurex’s US woes are continuing. Last month the derivatives exchange’s chief executive, Rudolf Ferscha, stepped down. Ferscha had been behind the launch of Eurex US in Chicago in 2004 but sources say he was not given the support he needed to develop the US effort properly.
  • The name has changed but the business has not. Credit Suisse has demoted its First Boston heritage to a passing reference in its new logo, but it is far from jettisoning its US investment banking expertise. In January, it announced an expansion of its Asian leveraged finance team with three new hires in Australia, Hong Kong and Japan. Once this is complete, Credit Suisse will boast Asia’s largest leveraged finance team.
  • UK
  • UK breakfast cereal maker Weetabix will be one of the first companies this year to test the market for leveraged recapitalizations. The deal, expected to come to market in the next few weeks, will be lead arranged by JPMorgan. It takes out the £450 million ($803 million) leveraged loan backing the £642 million buyout of Weetabix in 2004 by private equity firm Hicks Muse Tate and Furst.
  • It seems that some banks will pull out all the stops to feature prominently in Euromoney’s influential FX poll. Word filters through of gifts being sent out and clients being lavished with entertainment. The managing director of one prominent bank was so eager to start the lobbying process that he emailed Euromoney asking: “Fri 5pm: should I unleash hell? Is the site ready? Let the games commence...” Just exactly which games he was about to unleash in hell is unclear, but one of his disgruntled clients has complained of being hassled, almost non-stop, to vote. “I told all the banks I’d fill it [the poll] in when I was ready, not before,” he moaned.
  • As gold has traded up to 25-year highs, the Canadian dollar has weakened, despite the products’ strong long-term correlation. Does this mean that the relationship has broken down?
  • Like so many other aspects of Japan’s financial system, its pensions schemes are paying for the sins of the past and struggling to pay for the future. Existing reforms do not go far enough, says Chris Leahy, and flirt dangerously with the country’s future prosperity.
  • Even after the stock market’s dramatic climb in 2005 and sudden sell-off in mid-January, a wall of money is heading into Japanese equities, reports Peter Lee. Securing greater retail investment is seen as crucial to the reconstruction of Japan’s entire financial system. Privatization, new-economy IPOs, J-Reits and private equity exits will keep the investment bankers busy until the big blue chips are ready to issue once more. In the meantime, can someone please fix the TSE’s problems?
  • Several emerging market countries have discovered that oil is a bane not a blessing, destroying domestic development. The current crop of oil champions may have stabilization funds, but Theodore Kim explains how things can still go wrong.
  • Moody’s says that it intends to keep GMAC’s senior unsecured Ba1 rating under review for the time being, breaking its rule of resolving ratings within three months of announcing a review.
  • Peter Weinberg, former head of European investment banking at Goldman Sachs, will join former Morgan Stanley star banker Joseph Perella in his as yet unnamed investment banking boutique. Perella left Morgan Stanley last April during the battle over the leadership of the firm and soon after was sole adviser to MBNA on its $35.8 billion sale to Bank of America.
  • The only court-sanctioned committee representing shareholders in the Winn-Dixie Chapter 11 restructuring has been disbanded by a US Justice Department official at the request of a group of unsecured creditors. This leaves shareholders without any official representation in the reorganization plans of the chain-store group.
  • According to data from research company HFR, the number of hedge funds going bust is rising rapidly. In 2005 to the end of the third quarter an estimated 484 funds went into liquidation, 81.8% more than in the whole of 2004.
  • It might make sense for hedge funds to buy traditional asset managers. When Citigroup sold off its asset management arm to Legg Mason last year, leaving the focus on its separate alternatives business, it supported the belief of many in the market that traditional asset management was becoming something of a dinosaur.
  • Romania
  • Foreign hedge fund managers registering with the SEC might be caught out by a NASD ruling on IPOs, say lawyers. Foreign managers investing in US or non-US IPOs are subject to the US securities regulator’s ‘new issue’ ruling if those managers use a US broker/dealer.
  • Lebanon
  • Despite much hype and enthusiasm, the DIFX, Dubai’s new international stock exchange, has got off to rather a slow start.
  • In the first of a regular series of columns, John Arrowsmith casts light on what at first sight appears to have been a sudden volte-face on interest rates by the European Central Bank.
  • As Latin American economies look forward to another year of robust growth, remittance flows continue to outpace expectations. With payments by expatriates worth a record $45 billion last year and increasing at more than 10% a year, it is little surprise that banks now want a piece of the action. Latin American and US banks are not only eyeing services to rival traditional wire services to bring in extra revenues, but also see money flows as a way to develop portfolios aimed at the small-scale Latin American customer, offering loans and mortgages.
  • Bankers and investors question the slew of Latin American perp issues.
  • CNOOC finally closed a significant Nigerian oil deal in January.
  • Japan’s corporate sector has spent the past few years selling businesses off to pay down debts and restructure but there is gathering evidence of the emergence of a more acquisitive bent.
  • Lotte Shopping, a stores-to-cinemas group and one of the biggest retailers in Korea, launched its IPO in January as a dual listing in Korea and London, with Goldman Sachs and Nomura Securities as joint global coordinators and Daewoo Securities handling the domestic IPO. Although pricing will not be fixed until the end of January, the valuation, believed to be up to $3.8 billion, means this will be comfortably Korea’s largest IPO. In addition to the domestic and international listings, Nomura Securities will undertake a public offer without listing in Tokyo.
  • SBI Capital Markets, the investment banking and project advisory arm of the State Bank of India , has agreed a strategic business alliance with Asian broker and investment bank CLSA to provide investment banking services in India . The two firms will work jointly on large equity capital market transactions, M&A and other advisory work as well as cooperate on research products. The alliance is for an initial period of two years but might be extended by mutual consent.
  • Asia Debt Management, a successful distressed debt fund manager based in Hong Kong, has teamed up with the Asian Development Bank to launch a $338 million closed-end fund targeting financially distressed companies that need rehabilitation. This is the second Maculus fund: the ADB also invested in Maculus I and this time has committed $45 million to the Maculus Fund II. The new fund will invest primarily in the capital structure (securities, loans, equity or other assets) of potentially viable, listed or unlisted companies, in financial distress due to excessive debt or unsustainable capital structures. The fund has a five-year life but might be extended for up to two consecutive one-year periods at Asia Debt Management’s option.
  • The Philippines’ capital markets have started 2006 positively. Capitalizing on the immediate strength of the peso, the Republic of the Philippines was Asia’s first sovereign to tap the market when it raised $2.1 billion from a $1.5 billion 25-year bond and a €500 million 10-year bond, one of the largest fund raisings from Asia for several years.