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May 2006

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  • New valuation models have underscored the need for accurate mark-to-market pricing for credit derivatives.
  • ResCap was able to pay back its domestic debt owed to GMAC ahead of market expectations following a $3.5 billion multi-tranche transaction ($1 billion of three-year sub, and $2.5 billion of senior – split into $1.75 billion of seven-year and $750 million of three-year).
  • UK companies struggling with pension fund shortfalls have been thrown a lifeline in the shape of investment banks and hedge funds. Wheels are in motion to create a market of defined benefit pension buyout ventures back by banks, hedge funds and entrepreneurs.
  • Boaz Manor, co-founder of Canadian $800 million hedge fund Portus Alternative Asset Management, says he doesn’t know what has happened to the $8.8 million-worth of jewels he bought with investors’ money, according to a lawyer investigating the fund’s failure. Manor is currently in Israel after fleeing there after his company’s meltdown. In total about $700 million has been secured after being found in 130 Portus bank and investment accounts in Canada, the Turks and Caicos Islands and the Cayman Islands, says the local press. Where the jewels are remains to be seen. Creditors meet in June.
  • A collection of valuable photos brought together by Refco over three decades is on sale at Christie’s in New York in an attempt to raise money to help pay back the $16 billion the commodities trading firm owes to creditors. Works by such photographers as Richard Avedon, Diane Arbus and Andres Serrano are included in the collection, which is expected to raise north of $6 million.
  • Will US issuers start to look at Europe’s institutional markets?
  • Deutsche Bank is about to launch an entirely new FX trading platform aimed squarely at attracting flow from the retail end of the market.
  • BNP Paribas has topped the investment grade section of the Euromoney credit research poll for the past three years but this success has not stood in the way of a shift to a new research model.
  • According to both EBS and FXall, the first quarter of 2006 was the busiest ever for FX trading. Talking purely about spot, EBS says daily activity in the quarter averaged $132 billion, a 2.3% increase on the same period in 2005.
  • (May 2006) It is early days but US issuers are seriously considering covered bond issuance. There are economic and regulatory reasons why this makes sense.
  • China-focused forestry company falls behind in land acquisition.
  • More than a few doubts have been raised about the rumoured plans of state lender China Construction Bank to buy a major stake in US investment bank Bear Stearns. However, sources in the firm’s Asian head office believe the plans are serious. “I haven’t seen a lot of guys with white socks walking around the office yet,” says a senior employee, “but there’s definitely truth to the rumour. It’s typical Bear strategy: late to the party, perhaps, but a smart call.”
  • Equity derivatives dealers have set up an industry group to improve trading efficiency and iron out operational issues in their market.
  • Recent figures from Reuters’ Loan Pricing Corporation show that borrowers have it better in the US now than ever before. Strong growth in the M&A market meant that syndicated loan issuance in the US reached the highest volume on record in the first quarter of the year.
  • ITG and Merrill Lynch have joined forces in a joint venture called “Block Alert, powered by Posit” that will create a global block order crossing service.
  • The New York Stock Exchange needs to have its hybrid system ready before Reg NMS takes effect but it has only just completed Phase I. It might not have too much to worry about, though, as many other market participants are unprepared and a delay is widely expected.
  • Germany’s True Sale Initiative received some much-needed publicity last month when the first CLO to be structured under the programme emerged from Dresdner Bank.
  • Morgan Stanley has made its most senior investment banking hire since John Mack took over as chief executive last year and since the departure of one of its star M&A bankers, vice-chairman Joe Perella, one of the key defectors during the turmoil at the bank in the first half of last year.
  • Is there enough room for both sorts of hybrid in the European acquisition finance market?
  • Having been fined £6,363,643 in April by UK regulator the Financial Services Authority for failing to observe proper standards of market conduct and failing to conduct its business with due skill, care and diligence, Deutsche Bank must be keen to promote a spotless reputation in all aspects of its business.
  • “Debt providers are becoming more selective about the opportunities they are willing to support and are now concentrating on companies with good forward earnings visibility”- James Stewart, ECI
  • When Gloria Estefan released her 1987 chart topper “Rhythm is gonna get you”, she was on to something. Nearly 20 years later she still has the crowd dancing in the aisles, or “partying on out” as she put it – even when that crowd is attending a swanky mid-week benefit dinner on Wall Street.
  • Saudi Arabia’s stock market regulator, the Capital Markets Authority, is in an invidious position. At the start of the year CMA officials tried in vain to warn naive retail investors about the dangers of piling into the under-researched, thinly traded speculative stocks that comprise nearly a quarter of the country’s public companies. They were ignored: dismissed as interfering, risk-averse bureaucrats. The market, driven by rising corporate profitability resulting from the high oil price, rose to absurd levels.
  • Investors will have to wait for deals to burn out before prepayments in European CMBS transactions begin to ease.
  • 10,000,000,000 the minimum amount in dollars that Russian IPOs, excluding Rosneft, are expected to raise this year, according to bankers. The Russian government hopes to raise as much as $15 billion from a London IPO of Rosneft this year.
  • There’s widespread agreement that there are too many portals providing FX prices but consolidation has been slow. Is the market going to stop waiting and roll out multi-asset platforms instead?
  • Few companies are pursuing leveraged share buybacks, but pressure from activist investors is putting the issue back on the agenda and there could be a lot more deals in the next 12 months.
  • Australian regulator’s charges cast doubt on legitimacy of prop trading.
  • A new IDB report says the financial community should take advantage of the benign economic conditions and produce instruments capable of automatically compensating for economic setbacks. They include bonds linked to commodity prices, national growth rates or the occurrence of national disasters.
  • While some analysts worry about the Austrian bank’s effect on prices in central and eastern Europe, others have a great deal of confidence in CEO Andreas Treichl and his X factor. Julian Evans reports.
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