This Week in Corporate Finance
Global Capital Markets
Bank of America and Goldman Sachs led lenders in arranging $2.26 billion of leveraged buyout financing in October, the most this year and more than eight times the amount raised in the first quarter.
GMAC sold $2.9 billion of three-year notes guaranteed by the Federal Deposit Insurance Corp. on Oct. 28. The sale exhausted GMAC’s ability to issue FDIC-guaranteed debt after the lender received approval in May to borrow as much $7.4 billion with government backing.
Universal City, the Florida theme-park operator, and homebuilder Hovnanian led the most speculative-grade bond sales in five months as investor demand for higher returns broadened access to capital in October. High-yield transactions rose to $18.3 billion, the most since $24.3 billion of the bonds were sold in May.
Rogers Communications Inc., Canada’s largest wireless carrier, sold C$1 billion ($926 million) of senior debt in two parts.
Dubai raised $1.93 billion in its first Islamic bond sale, the biggest from the Gulf region this year, as the emirate benefits from rising demand for Shariah- compliant debt.
U.S. Treasuries
Treasuries rose, trimming a monthly loss, as a report showing consumer spending declined in September spurred speculation recovery from the deepest slump since the Great Depression will be slow.
Volatility in Treasuries fell to the lowest in almost two years this month on speculation the Federal Reserve will follow through on its plan to keep interest rates “exceptionally low” for an “extended period.
Treasuries rallied as a record $44 billion sale of two-year notes drew the strongest demand since the financial crisis began and a report showed confidence among U.S. consumers unexpectedly fell this month.
Commercial Paper Update
The U.S. CP market rose for an 11th straight week, Federal Reserve data showed on Thursday, reflecting a broader credit market recovery as the economy started to rebound from a long recession. This is now the longest-running expansion of the market for CP since May and June 2007, before the credit crisis began. Cumulative gains in the past 11 weeks are $302 billion, or a 28 percent increase in the size of the market.
For the week ended Oct. 28, the size of the U.S. CP market rose by $10.6 billion to $1.377 trillion outstanding from $1.366 trillion outstanding the previous week. U.S. asset-backed CP slipped to $543.0 billion outstanding in the latest week from $548.6 billion outstanding last week. Unsecured financial issuance outstanding rose by $20.9 billion after increasing by $27.9 billion in the previous week.
Central Banks
Norges Bank raised its key interest rate a quarter point from a record low and signaled steeper increases than it previously forecast over the next three years as inflation accelerates and unemployment remains low. The Oslo-based bank raised the overnight deposit rate to 1.5 percent, becoming the first European central bank to reverse its easing cycle since the credit crisis started to abate.
Russia’s central bank cut its key interest rates to record lows.
Banking
U.S. regulators closed more than 100 banks in a single year for the first time since 1992, signaling the financial crisis hasn’t abated for lenders struggling with mounting losses tied to commercial real estate.
Seven banks — three in Florida and one each in Georgia, Wisconsin, Minnesota and Illinois — were shut last week, according to the Federal Deposit Insurance Corp., pushing this year’s total to 106. That’s the most since the savings-and-loan crisis led regulators to shutter 179 institutions in 1992.
Credit Ratings
The Province of Ontario had its debt rating cut to AA- by S&P a week after the government forecast a record budget deficit of C$24.7 billion ($23 billion) for this fiscal year.
S&P lowered its outlook on Ukraine’s credit rating, citing concern that the country’s cooperation with the IMF may be stalled.
Rating Agencies
Moody’s said it’s planning a review of U.S. home-loan securities that will likely lead to “significant” rating changes based on a new view that property prices won’t bottom until next year’s third quarter.
Federal Reserve
The Federal Reserve completed its $300 billion Treasury purchase program.
M&A
Ares Capital, a closed-end investment management company, agreed to pay $648 million in stock for Allied Capital Corp.,
Hydro-Quebec, Canada’s biggest electric utility, agreed to buy most of New Brunswick Power Corp. for about C$4.75 billion ($4.4 billion) to expand in eastern Canada and tap U.S. markets.
IPOs
The market for initial public offerings, hurt by the worst returns in at least 14 years, suffered another setback after AEI pulled its sale.
Vitamin Shoppe Inc. priced a 9.1 million share initial public offering at $17 each, above the high end of its forecast range, as the retailer of nutritional supplements joined the busiest period for U.S. listings in almost two years.
Bankruptcy
Capmark Financial Group Inc., the lender owned by companies including Goldman Sachs and KKR & Co., filed for bankruptcy protection after posting a second-quarter loss of about $1.6 billion
FairPoint Communications Inc. sought bankruptcy protection.
CDS
The cost to protect against defaults on corporate bonds using a benchmark derivatives index fell for the first time in five days, after a report indicated the U.S. economy has emerged from the worst recession since the 1930s.
Commodities
Crude oil, wheat and soybeans are set for their biggest monthly jumps since May, keeping commodities on pace for their best performance in five months as governments around the world ramped up stimulus spending to lift their economies out of the worst postwar recession.
Gold headed for a second monthly advance as a decline in the dollar buoyed demand for the metal as a hedge against further weakness in the U.S. currency.
Currencies
The dollar fell toward its fourth monthly drop against the euro, the longest stretch since 2004, as the U.S.’s return to growth renewed optimism a global recovery will quicken, aiding demand for higher-yielding assets.
The dollar and yen declined the most against the euro in at least seven weeks as a government report showed the U.S. economy grew in the third quarter more than economists forecast, spurring demand for higher-yielding assets.
The pound was little changed, headed for its biggest weekly advance against the euro since January, after reports showing gains in consumer confidence and house prices added to signs the U.K. economic recovery is taking hold.
Australia and New Zealand’s dollars were little changed, set for their longest stretch of monthly gains since the 1980s, as the U.S. economy’s return to growth boosted demand for higher-yielding assets.
World Economics: Carbon
Singapore, Asia’s biggest oil- trading center, may allow the sale and purchase of emissions on a new exchange as part of its plan to become Asia-Pacific’s carbon hub.
Tags: Banking, Bankruptcy, carbon, CDS, Central Banks, Commercial Paper Market, Commodities, Credit Ratings, Currencies, FED, Global Capital Markets, IPO, M&A, rating agencies, U.S. Treasuries, World Economics
