This Week in Corporate Finance
Global Capital Markets
Borrowers sold $6.3 billion of U.S. corporate bonds that mature in 30 years or more, the biggest weekly total since January.
Banks are carrying more short-term debt on their balance sheets than at any time in at least 30 years. About $10 trillion of bank debt will come due between now and 2015, with $7 trillion maturing by 2012.
U.S. Treasuries
Treasuries headed for a weekly gain after the U.S. completed the sale of $81 billion of notes and bonds amid speculation the Federal Reserve will keep interest rates near record lows for the foreseeable future.
Commercial Paper Update
The U.S. CP market shrank for a second straight week, stalling a three-month expansion. For the week ending Nov. 11, the CP market fell $76.6 billion to $1.239 trillion outstanding from $1.315 trillion the previous week, Federal Reserve data showed.
Unsecured financial issuance dropped by $64.7 billion after falling by $39.9 billion the previous week. U.S. asset-backed CP fell to $510.3 billion outstanding in the latest week from $515.0 billion outstanding the previous week.
LIBOR
The cost of three-month loans in dollars between banks was little changed, according to the British Bankers’ Association. The rate was 0.273 percent for the fifth-straight day, the BBA said.
The Libor-OIS spread measures the gap between the London interbank offered rate in dollars for three months and the overnight index-swap rate, or what traders expect the Fed’s target rate for overnight loans between banks to average over the term of the contract. The gap fell to about 0.1 percentage point this quarter, below the 0.11 percentage point average between December 2001 and July 2007. The spread soared to a record 3.64 percentage points in the weeks just after the bankruptcy of Lehman in September 2008.
OTC Derivatives Reform
Companies that use derivatives to hedge their own risk, such as swings in commodity prices, wouldn’t receive full exemption from stricter capital and trading rules in proposed U.S. Senate legislation. A draft bill proposed by Senate Banking Committee Chairman Christopher Dodd, doesn’t match legislation in the House of Representatives that exempts most end-users from proposed rules reining in the $592 trillion over- the-counter derivatives market.
Banking
Banks are beginning to announce their departure from the FDIC’s Transaction Account Guarantee Program (TAG) effective December 31, 2009.
Credit Ratings
Moody’s raised China’s ratings outlook to “positive” from “stable,” citing the government’s success in steering the nation through the global financial crisis.
Iceland’s credit rating was lowered two levels by Moody’s, bumping the island’s debt down to the lowest investment grade, as its financial industry failure continues to hurt public finances.
Panama’s credit-rating outlook was raised to positive by S&P, putting the Central American country on the cusp of an investment-grade rating, as tax increases and faster economic growth help keep the budget deficit in check.
Ukraine’s credit rating was cut by Fitch Ratings after the International Monetary Fund suspended cooperation with the former Soviet republic and delayed payment of $3.4 billion needed to keep the economy afloat.
Rating Agencies
S&P cut credit ratings on a record 26,387 U.S. residential-mortgage securities in the third quarter, reflecting its reassessments of the debt as consumers struggle to make housing payments.
M&A
British Airways Plc agreed to a $7 billion merger with Spanish carrier Iberia Lineas Aereas de Espana SA.
Hewlett-Packard Co. plans to buy 3Com Corp. for $2.7 billion.
Liberty Global Inc., the cable company, agreed to buy Unitymedia GmbH for about 2 billion euros ($2.98 billion), gaining access to markets in 10 of Germany’s 20 largest cities.
Oracle Corp. was told by European Union regulators that its $7.4 billion purchase of Sun Microsystems Inc. may break antitrust rules even though the U.S. approved the deal.
IPOs
Dollar General Corp., climbed in its first day of trading after selling shares at the low end of the range it sought in a $716 million initial public offering.
Bankruptcy
Advanta Corp., the small-business credit-card issuer that cut off almost 1 million accounts as defaults soared, filed for bankruptcy and said its undercapitalized banking unit may be turned over to regulators.
CDS
The cost to protect U.S. corporate bonds from default climbed the most this month as stocks slumped and oil prices fell to the lowest in more than four weeks.
Commodities
Gold prices climbed to a second weekly gain as the dollar fell against the euro, boosting demand for alternative assets. Silver also rose.
Currencies
The Australian dollar surged to its strongest in 15 months as employers unexpectedly added jobs in October, boosting speculation the central bank will raise interest rates for a record third-straight month in December.
Canada’s dollar appreciated the most in five months against its U.S. counterpart as the Group of 20 nations agreed to maintain economic stimulus measures, boosting stocks and commodities worldwide.
Munis
U.S. state and local governments sold $9.5 billion of bonds this week.
Tags: Banking, Bankruptcy, CDS, Commercial Paper Market, Commodities, Credit Ratings, Currencies, Global Capital Markets, IPO, LIBOR, M&A, Munis, OTC derivatives, rating agencies, U.S. Treasuries
