International cash management meets the global challenge

In Japan emerges from the shadows, February issue, we reported that Nikko Citigroup had led a ¥120 billion domestic bond deal for Sanyo last September. In fact, the deal was for Sony. Apologies to all concerned.

Asian-based hedge funds generated 30% of all reported commissions earned by brokers over the past 12 months on trades of Asian stocks.

Stock market reforms and restructuring portend further share price rises. There is money to be made, say fund managers, for those with patience and diligence.

The FSA took a couple of years but the UK regulator has finally accepted the concept of covered bonds; the Netherlands will be next.

Cheyne Capital Management sold one of the largest-ever European arbitrage CLOs last month via Nomura. The €1 billion Cheyne Credit Opportunity CDO 1 incorporated several structural features to overcome problems that could arise from its relatively large size. In contrast to typical CLOs, which are normally half the size, 40% ramped up at launch and have around a year to complete sourcing loans, Cheyne Credit Opportunity has a two-year time period to ramp up fully. This extra flexibility will be particularly useful. The competition for leveraged loans will be greater than ever, given that an estimated 35 CLOs are operating this year, compared with about 25 last year.

Jollibee Bee, mascot, all dressed up to collect company's award for Best-managed consumer goods company in Asia.

Summer cum laude

The ASEAN tigers: back with a roar?

Regulators outnumbered the regulated at a meeting at the Federal Reserve Bank of New York on February 16. Representatives of 15 bank and securities regulators and exchanges were relieved to hear that the world’s 14 largest credit derivatives dealers had fulfilled their promise, made last October, to cut by 30% the number of credit derivatives trades remaining unconfirmed for 30 days or more by January 31 2006. The backlog, which arose from high-velocity trading and assignment by hedge funds in a market with underdeveloped systems for initial confirmation of trade details, had sparked widespread alarm across the industry. More good news: electronic confirmation has risen to 62% of trade volume, from 46% in September 2005.

Second-lien financings grew dramatically in 2005. Total US second-lien loan issuance alone amounted to more than $22 billion in 2005. In Europe, second-lien issuance totalled €5.75 billion in 2005, rising from €1.88 billion in 2004.

The Chicago Mercantile Exchange has launched a snowfall index. From the end of February, investors were able to trade snowfall futures and options based on snowfall in New York and Boston. “From municipal snow removal budgets to holiday retail sales, snowfall, or lack thereof, can have a major impact on local and regional economies,” says Scott Mathews, president of CTA WeatherEX. “Our clients will be able to hedge the expense or revenue side of the snowfall equation.” It will be a little too late for those affected by the snowstorms in New York in February. A record 27 inches of snow fell in 24 hours, costing the city an estimated $20 million.

Fund managers' priorities for 2006

73.4

“Citigroup should wipe the floor with everyone in credit derivatives. What happened?”

Latin America’s local-currency markets are no longer a sideshow for esoteric investors. Today, many emerging market portfolio managers have exposure. But, as Felix Salmon reports, the growth of domestic supply and demand will drive these markets forward.

Flushed with the success of its 2005 activities, with more than $20 billion raised through privatizations for the Turkish treasury, the country’s privatization administration wants to reattempt the sale of tobacco firm Tekel. The government’s latest attempt to sell the firm was just last year, but no bids were received. This was blamed on an increase in tax on tobacco products. It also tried, but failed, to sell the company in 2003. Other entities slated for privatization this year include Halkbank, petrochemicals firm Petkim and Turkish Airlines.

Manic demand for returns is putting Latin American issuers in the driving seat, calling the shots on subjects such as length of maturity, target investor base and restructuring opportunities. Theodore Kim reports.

Further consolidation in Latin America’s banking industry is expected on the back of strong economic growth and financial stability. Foreign banks, which were active acquirers in the 1990s, are expected to play a big part in this. Leticia Lozano reports.

How will money be made in emerging markets debt when bid-ask margins are anorexic and expected returns uncompetitive?

Where developed western markets go, Asia’s markets usually follow. Bankers in the region are confident that’s true of hybrid securities. From a buy-side perspective, hybrids have arrived already. As many as a dozen international issuers, most conspicuously from Latin America, have successfully tapped an Asian retail market driven principally by private bank clients hungry for yield.

Latin America’s infatuation with the perpetual bond market shows no signs of slowing down. Metrofinanciera, one of Mexico’s biggest mortgage lenders, is the latest corporate to reveal its interest in issuing a perp. The company’s chief executive, José Armando Guzmán González, says that he is mulling over the idea but declines to provide further details.

The Swiss bank is making determined efforts to grow its US private banking business.

Foreign investors are back in Thailand to scoop up bargains. The timing couldn’t be better for a new drive to develop the capital markets but politics could get in the way of some important deals. Peter Koh reports.

Bank of America gets the edge with its acquisition of Financial Labs.

The organizers of Rosneft’s IPO, tentatively scheduled for October or November, are considering placing the shares in Tokyo as well as in Russia and London, according to Valery Nazarov, head of the Federal Property Management Agency. However, he has so far ruled out a simultaneous flotation.

The country’s banks are successful and stable. But a small domestic market leaves a difficult choice: concentrate on building at home or seek to expand overseas. Laurence Neville reports.

The syndicated loans sector’s transformation from dominance by bank holders to a growing role for institutional investors has already happened – now the predominance of hedge funds is encouraging new technology.

Hedge fund managers are increasingly shopping around and using more than one prime broker at the same time.

Lehman's Grant Bowman has a taste of Superbowl fame in the Pittsburgh Steelers practice squad.