Unstructured Finance

Only the lawyers are cleaning up

A man cleans a row of rickshaws in Karachi July 26, 2009. REUTERS/Akhtar Soomro A month of overcast skies and frequent showers indicates it is business as usual for the British summer, and for one company each day of rain brings particular displeasure.

British car cleaning firm IMO Car Wash is struggling with more than 350 million pounds of debt, and some detractors say demand for its services drops each time it rains. As such, the value of the company is almost as changeable as a British summer.

This is a headache for both its private equity owner and lenders, who have been trying to settle a restructuring of IMO’s finances since the start of the year. Disputes over valuations have sparked a battle between different groups of lenders, with the result set to be decided in a London court on Monday.

The court case has wider ramifications for European restructurings, as I wrote earlier, because the case is likely to set the tone for many restructurings to come.

Senior lenders hope to be able to clear out junior creditors from the list of borrowers if the value of the company falls below the amount of senior debt owed. The seniors think they have done enough to prove the value of the company is less than their debt; the junior lenders disagree.

100 stocks hit 52-week high on BSE

graphsensexxThe Sensex closed at 15,670 on Friday, the highest since mid June 2008, while the Nifty index closed at tad below 4,650, a mark closely watched by market participants.

Optimism has swept investors around the globe with good corporate results raising hopes that the worst of the financial crisis might be over.

In India, 82 percent of companies covered by a study by the ET Intelligence Group reported net profits compared with 70-72 percent in the previous three quarters.

Check Out Line: The extreme weather in July

Check out the chilly, wet weather continuing into July.

umbrella1Last month, retailers weathered the second-coolest June in 10 years, with record rainfall in cities like New York, Boston and Chicago, according to weather research firm Planalytics.

That put a lid on shopper demand for short shorts and tank tops, hurting June sales results.

July didn’t necessarily bring enough heat to make up for the June wash out.

Octopus’s Crawford eyes FTSE at 5,000

Some good news for the bulls.

rtrkisbOctopus fund manager David Crawford believes this year’s equity rally could lift the FTSE 100 to the 5,000 mark, from just over 4,600 currently, helped by energy stocks.

The call backs up that from hedge fund manager Crispin Odey, who earlier this year pointed to the start of a new bull market and then recently said there is “every reason to be hopeful that a major correction will not happen before September”.

“The rally in March was from a position of strong risk aversion, thus the stocks that led the rally were ones that were too hot to handle for most – retail banks, miners and other cyclicals,” says Crawford.

BAC to the Future

Now that the dark days of TARP force-feedings, congressional hearings and ill-conceived mergers are behind it, Bank of America is getting back to the business of expanding in the world’s most enduring pot of fabled gold, China. The bank sent a memo around saying it had rehired a China hand to head its corporate finance business there.

Wang Bing, who worked for Merrill Lynch between 2004 and 2008 in various management roles, including dealmaking in China, is back with Bank of America-Merrill Lynch as a managing director, according to the memo. On Thursday, we reported that Bank of America plans to set up a wholly owned subsidiary in China to bolster its corporate, investment banking and wealth management businesses.

In May, Bank of America sold $7.3 billion worth of shares in China Construction Bank. It needed the cash, so turning its back on such a long-term position made sense at the time. The news this week is hardly as dramatic, in scope or in value, but it is significant. If nothing else, it shows the bank trying to get back to the business of anticipating global growth. It will be interesting to see if the bank is any more effective at growing in China as a local business rather than as a partner with big, Beijing-favored China Construction Bank.

A little more conversation, a little more action?

It would be hard to describe July as a banner month for mergers and acquisitions.

Friday’s data from Thomson Reuters shows it was the first month since Sept. 2004 where announced deals totalled less than $100 billion, and the first month in almost six years without a single $5 billion-plus deal. But top executives are starting to talk M&A again, and bankers are starting to lay the groundwork for future deals. As Michael Erman and I wrote earlier:

“Bankers are pointing to early signs of a pick-up in mergers and acquisitions (M&A), with stronger stocks and easier credit conditions helping company bosses regain the confidence to do deals.

Keeping score: big-ticket M&A drought, bond bonanza

Highlights and low points — syndicated loans, for example, at their lowest since 1993 — from the July Thomson Reuters Investment Banking Snapshots:

DEBT CAPITAL MARKETS

Asia Pacific & Chinese Issuers Reached New Corporate Bonds High in July – Asia Pacific issuers raised a record US$41bn in July, up 11% from June 2009 (US$43.3bn) and double the level of July 2008 (US$24.1bn). Chinese issuers accounted for 49% of the regions’ activity with a record US$23.4bn raised, up 3% from June 2009 (US$22.7bn) and up 218% from July 2008 (7.4bn). Financials (US$16.2bn, 70%) and Materials (US$4.7bn, 20%) were the main sectors driving the surge in China.

European High Yield Bonds Hit 2 Year High – Global issuance of high yield bonds reached US$12.3bn in July 2009, down 27% from June 2009 (US$16.7bn) but up 270% from July 2008 (US$3.3bn). This marked the third highest level of activity for a month of July on record and the best since 2003 (US$18.6bn). European issuers accounted for 44% of total with US$5.4bn raised, the highest monthly volume since June 2007. European activity consisted of two issues, Wind Acquisition Finance (US$3.7bn), the second largest HY bond of the year globally and the second largest European bond ever issued after NXP Semiconductor (US$5.95bn, 2006) and Fiat Finance & Trade ($US$1.8bn).

Deals du Jour

Ford Motor Co has slowed the sale of its Volvo car unit as it plans to open up the auction to losing bidders for General Motors’ Opel, the Wall Street Journal cited a person close to the company as saying.

In other M&A related stories reported by Reuters and other media on Friday:

Russian mobile network Mobile TeleSystems (MBT.N) is set to pay $1.28 billion, or $5.98 per share, for a 51 percent stake in fixed line carrier Comstar (CMSTq.L), newspaper Kommersant reported.

Low-cost carrier Southwest Airlines is preparing a bid to acquire bankrupt Frontier Airlines for a minimum of $113.6 million, exceeding the $108.8 million bid from Republic Airways Holdings. For the Reuters story, click here.

A parting shot by Duquesne?

coalDuquesne Capital Management, Alpha Natural Resources largest shareholder, has been working to scuttle the company’s takeover of Foundation Coal for the past two weeks. In perhaps its last at shot at swaying shareholders before tomorrow morning’s vote on the deal, Duquesne released its latest reason investors should oppose the deal on Thursday: the payout Alpha Chairman and CEO Michael Quillen will receive if the deal goes through.

Duquesne, which is run by financier Stanley Druckenmiller, has already said it believes the proposed deal will hurt Alpha shareholders financially. It believes the merged company would lower Alpha’s relative exposure to more profitable metallurgical coal and international thermal coal markets.

Now, it raises the issueof the payout and the fact that Quillen , who will be staying on as chairman of the merged company, would be treated as if he had been terminated without cause.

Analyst put on the DL

BASEBALL/Duncan Niederauer, the head of New York Stock Exchange operator NYSE Euronext, opened the company’s quarterly earnings conference call with this riddle on Thursday:

“What do Rich Repetto, Carlos Delgado, and Jose Reyes have in common? …They are all on the disabled list as a result of baseball-related injuries.”

“So, Rich, I heard you hurt yourself at Yankee Stadium the other night and I hope you’ve recovered,” the CEO continued. ”I was pleased to hear that while you were crashing into the wall you managed to hold on to the ball and make the catch in spite of being knocked unconscious. Congratulations. Hopefully you’ll be back in the lineup sooner than Delgado and Reyes.”

Repetto, the popular financial analyst at Sandler O’Neill, wasn’t pinch hitting for the New York Mets. Nor the Yankees for that matter. And turns out he didn’t actually crash into a wall. But he was playing shortstop when those attending a corporate event last week decided to play a little pick-up softball game in the outfield, after taking a tour of the new Yankee Stadium.

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