AFP Blogs

For the first time in quite some time, we awoke on a Monday morning with news of merger activity.

Baker Hughes Inc., the world’s third-largest oilfield-services provider, agreed to buy BJ Services Co. for $5.5 billion.

Walt Disney Co. said it agreed to buy Marvel Entertainment Inc. for about $4 billion in a stock and cash transaction, gaining comic-book characters including Iron Man, Spider-Man and Captain America.

Could this be more signs of a world economy warming up?

Stay tuned.

There’s been a mixed reaction to the Obama Administration’s  over-the-counter derivatives proposal:

Ira Kawaller, President, Kawaller + Co., and Manager of the Kawaller Fund: “In general, I applaud the call for centralized clearing and greater oversight. However, the devil is in the details, and I worry about regulation that could serve to constrain prudent risk management activity.” (more…)

Global Capital Markets

Procter & Gamble Co., the world’s largest household-products maker, and industrial gas producer Praxair Inc. led U.S. corporate borrowers in August taking advantage of the lowest investment-grade bond yields in four years by selling at least $60.2 billion of debt.

Borrowing costs are falling as demand for corporate debt increases on speculation rising profits and a recovering economy will make it easier for companies to meet debt payments. Investment-grade bond yields fell to 5.29 percent this week, the lowest since Oct. 4, 2005.

The extra yield, or spread, investors demand to own investment-grade debt instead of Treasuries tightened 20 basis points this month to 253 basis points.

Junk-bond spreads tightened 15 basis points this month relative to Treasuries to 907 basis points.

Including high-yield, high-risk, or junk debt, companies have borrowed $889 billion in bonds this year, a 35 percent increase from 2008.

U.S. Treasuries

Treasuries gained this week after investors snapped up a record-tying $109 billion of government notes amid skepticism about the sustainability of the economic recovery and the rising value of higher-yielding assets. (more…)

When amending existing loan documents or negotiating new credit facilities, savvy corporate borrowers are proactively requesting specific provisions addressing these issues. Borrowers recently have successfully expanded the definition of “defaulting lender,” says Robert J. Heinrich, senior counsel with Foley & Lardner LLP. And, he says, borrowers have obtained more robust remedies for handling defaulting lenders. (more…)

Get the latest regulatory and legislative developments on efforts to reform the over-the-counter (OTC) derivatives market in a complimentary webinar hosted by Reval® featuring insights from AFP.

“Eye on OTC Derivatives Reform–How It Will Impact Your Hedging Costs” begins at 2:00 pm, Sept. 10.  (more…)

North American firms doing business in China must better integrate treasury and operations to gain more visibility into their cash position there. Dr. Zening Ge, president of SSA & Company Asia, a consulting and training firm, said firms used to lack proper systems and processes to understand their cash position in China, but that’s changed. (more…)

Treasurers and controllers are the targets of cyber-fraud, according to the Financial Services Information Sharing and Analysis Center, receiving e-mails that contain a virus-laden attachment or a link that installs mal-ware designed to steal passwords upon opening. The scammers then conduct wire-transfer fraud in increments of less than $10,000 to avoid banks’ anti-money-laundering reporting requirements. (more…)

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, took over ailing Guaranty Financial Group Inc. of Texas to expand in the U.S. South, and regulators shut banks in Georgia and Alabama, pushing the 2009 toll to 81.

Branches of Guaranty in Texas and California today become offices of Birmingham, Alabama-based BBVA Compass, the U.S. affiliate of the Spanish bank, in a deal brokered by the Federal Deposit Insurance Corp., the agency said. Regulators seized three other banks with total assets of $927 million including two in Georgia, pushing that state’s tally this year to 18.

Guaranty had $13.5 billion in assets and $12 billion in deposits and “was in an unsafe and unsound condition because of the deteriorating quality of its loan portfolio, critically deficient earnings, capital insolvency and strained liquidity position,” the Office of Thrift Supervision, the lender’s regulator, said in a statement.

The collapse is the 11th biggest bank failure in U.S. history as regulators close lenders at the fastest pace since 1992, when more than 120 lenders were shut. Of banks seized this year, three had assets exceeding $10 billion: Guaranty, Alabama’s Colonial BancGroup Inc., seized Aug. 14, and Florida’s BankUnited Financial Corp., closed May 21. BB&T Corp. bought Colonial and private-equity firms bought BankUnited.

The failure will cost the FDIC deposit fund $3 billion, and the closings in Georgia and Alabama will drain $262 million, the agency said. The fund, which pays customers for deposit losses up to $250,000 and is generated by fees on banks, had $13 billion at the end of the first quarter, according to the FDIC.

BBVA said adding Guaranty’s assets and deposits will create the 15th biggest U.S. commercial bank, with $49 billion in deposits and 767 branches in Alabama, Arizona, California, Florida, Colorado, New Mexico and Texas. BBVA will be the fourth-largest Texas bank, with 411 offices, the company said.

Copyright © 2009 | Association for Financial Professionals, Inc. |  All rights reserved

Consider using risk-based collections instead of targeting the largest and oldest dollar amounts first. That’s the advice from Rob Olsen, VP/Chief Risk Officer, Wright Express Financial Services Corp.

The result: Wright’s DSO is 19, helping to minimize costs and maximize cash flow. (more…)

Global Capital Markets

Viacom Inc. and Yum! Brands Inc. led corporate-bond issuers selling debt in the slowest week in more than four months as evidence grew that the credit-market rally has run ahead of a U.S. economic recovery. Corporate-debt issuance of $9.9 billion declined 63 percent from the previous week. Viacom, the owner of MTV Networks, sold $850 million of 5- and 10-year notes, and Yum, the owner of the Pizza Hut and Taco Bell restaurant chains, issued $500 million of 6- and 10-year debt. Viacom and Yum both tapped the bond market for the first time in almost two years.

Dole Food Co., the world’s largest producer of fresh fruit and vegetables, is delaying its $325 million debt sale as yields on speculative-grade bonds relative to benchmark rates rose for the sixth trading day in a row. Dole postponed its offering of seven-year secured notes, citing “market conditions,”. Dole said in an Aug. 14 statement that it had planned to sell the notes to redeem outstanding debt.

Russia’s plan to sell $58.5 billion of bonds in the next three years, its first international debt sale since the 1998 default, may be hampered by private borrowers competing to raise funds, the government said.

U.S. Treasuries

Treasuries fell after sales of existing homes jumped more than forecast in July and Federal Chairman Ben Bernanke said the global economy is “beginning to emerge” from recession.

(more…)