Puerto Rico exposes dearth of bond vigilantes

January 7, 2016

Tax perks and a thirst for yield meant bond buyers tolerated bad fiscal practices for years. They only seriously pushed up borrowing costs after the island’s $70 bln debt crisis became all too obvious. Foolish financial crowds had better wise up to other U.S. danger zones.

Puerto Rico debt payment marks end of fiscal rope

December 1, 2015

The cash-strapped U.S. territory scraped together $355 mln for creditors, avoiding default on its government-guaranteed debt. A $945 mln payment due on Jan. 1 will be harder to deliver. Unless Congress offers relief soon, bondholders will still face a messy restructuring.

Investors in China haunted by “key man” clause

November 13, 2015

Creditors to mainland companies sometimes insist on repayment if a top executive leaves. The provision looks like prudent risk management but it can make a bad situation worse. Cement maker Shanshui, which faces liquidation amid a shareholder spat, is the latest to suffer.

Greek default should not be taboo topic

April 6, 2010

Forget about Greece for a moment. Just think about country X, which has lived well beyond its means for years thanks to loans from inattentive or foolishly optimistic lenders. When the crunch comes, the X-people will have to cut back on spending. And the X-lenders will generally suffer from the famous rule of banking: "Can't pay, won't pay." If Herman Van Rompuy, the president of the European Council, has his way, Greece is not going to be country X.

Has Greece delivered another Trojan horse?

January 14, 2010

The Trojans were shocked after Greek guile got them in. The feeling may be similar at Eurostat, the European Union's statistics office.

Don’t wave Dubai bye yet

December 24, 2009

Dubai's reputation has ended the year in tatters, but there's no need to wave Dubai-bye quite yet. Abu Dhabi, the capital of the United Arab Emirates and the source of rescue loans for its neighbor, has good reasons to keep Dubai on life-support.

China trust default is least painful option

January 17, 2014

A troubled product called “Credit Equals Gold” is days from defaulting. If it fails a few rich investors will lose money and some risky borrowers will face higher rates. Bailing it out would imply the authorities stand behind the shakiest investments. It’s not a difficult choice.

Credit chains are China’s weakest link

March 11, 2014

Debt levels have grown, but not nearly as much as chains of interconnected borrowers and lenders. Poor capital allocation has encouraged companies and individuals to step in where banks don’t. Longer chains could magnify the effects of a default and turn confidence to chaos.