Commentaries
Now raising intellectual capital
from Rolfe Winkler:
Could England be headed for a “sudden stop?”
From Landon Thomas at NYT: In Britain, visions of Japan's decade of stagnation
Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan’s lost decade of the 1990s.
I still don't understand why we refer to Japan's "lost decade," singular. The country is now moving into its third consecutive lost decade.The Nikkei is still at 1984 levels.
But back to the UK: the NYT piece quotes the latest research from Variant Perception (no link). I got it in my inbox earlier this week and it's a fascinating (though not pleasant) read. Notably, they talk about the outside possibility of a "sudden stop" event. As mentioned in this space before, a "sudden stop" is what happens to emerging economies when they lose access to capital markets. Confidence is lost in the government's ability to pay back debt and everyone races to get out of the system. See Argentina.
The problem is acute for indebted emerging markets because they don't borrow in a currency they can print. So, the argument goes, you can't have a sudden stop in Britain, or the US, because we print the currency in which our debt is payable.
Four Seasons debt odyssey – still one more year to go
Four Seasons Healthcare, the UK care home operator, has finally completed its 1.5 billion pound debt restructuring, after a year of creditor wrangling. The group has ended up in the lap of lenders including RBS, which owns about about 40 percent of the company.
Now it has to set about refinancing 600 million pounds of asset-backed debt due next September, which makes up the bulk of its remaining 780 million pound debt pile. If the company can pull it off it will be extra good news for RBS, which managed to negotiate a deal giving it an extra slug of equity (just over two percent) in exchange for advisory services, based on performance.
CMBS rides again
Well, sort of.
UK supermarket retailer Tesco is planning a 559 million pound securitisation of retail stores and distribution centres.
It’s good to see some kind of CMBS market getting going in Europe given the vast amount of real estate loans that need refinancing in coming years. But, like some of the earlier deals this year, this transaction is just a very tentative toe in the water, rather than a market revival.
Give your favourite UK NED the nod
Non-executive directors — particularly at certain British banks — are not exactly flavour of the month.
There has been widespread questioning of what precisely it is many non-execs actually do, other than take home a sometimes handsome reward for attending a scattering of board meetings.
A dark hour for CMBS
The last week has been a bit of a shocker for Europe’s already crumbling commercial mortgage-backed securities market (CMBS).
Investors have had to cope with steep declines in the value of their bonds and a wave of downgrades by rating agencies.
Now, to add insult to injury, there has been a jump in legal and structural issues. Bondholders are having their rights diluted over or taking on fresh liabilities they didn’t even realise they had.
Granite crumbles
Standard & Poor’s dropped a minor bombshell last night when it placed over 100 bonds issued by Northern Rock’s mortgage funding vehicle Granite on creditwatch negative.
Of course the rating actions are lagging the market and a lot of pain is already priced into the bonds. Some of Granite’s mezzanine BBB bonds are trading below 20 pence on the pound.
You are not a loan, RBS ads remind customers
Is the Royal Bank of Scotland softening up the public and politicians ahead of its results on Aug 7th with a series of newspaper advertisements telling us how many loans it is dishing out?
The 70-percent state-owned bank is expected to post a pre-tax profit of 1.2 billion pounds for the first half of the year, according to a Reuters poll of analyst forecasts.Â
Don’t hold your breath for European flotations
A web-based survey of more than 40 European institutional investors by investment bank Jefferies shows most – 83 percent of those who responded – are not expecting a re-opening of the IPO market in the UK and Continental Europe before the middle of 2010.
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Only 23 percent of the analysts, portfolio managers and dealers surveyed reckon the IPO market will re-open by the end of this year.
Times tough for info security guards
With all the cyberscare stories about North Korea making headlines these days, the last place you might expect to see job losses is among information security workers.
However, a survey by UK recruiters Barclay Simpson says the number of IT security professionals looking for work has risen 17 percent so far this year, even as the number of new positions has fallen by 57 percent.
No early bank exit for Britain
John Kingman has finally stated the obvious. After nine months of near-silence, the civil servant responsible for managing the UK government’s bank shareholdings has piped up to say Britain must be patient in recovering the 35 billion pounds it has so far injected into Royal Bank of Scotland and Lloyds Banking Group.
But Kingman has not gone far enough in stating his objectives. If British taxpayers are to fully recover the sums they have pledged to rescue their banks, they should hold onto their shares for a very long time.
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The Wall
