Unstructured Finance

Bad data?

By Matthew Goldstein

The jobs situation is still pretty bad in the U.S. and the nation has a long way to go to make up for the millions of jobs lost during the financial crisis. But today’s job’s report and recent revisions point out that maybe things aren’t as bad as everyone feared just a few months ago.

Remember this summer, when everyone was convinced the U.S. was headed into another recession. The August jobs report seemed to confirm that bleak outlook when the Department of Labor said the nation produced a big fat 0 in terms of new jobs. But now we know that 100,000 jobs were created in August. And the Labor Department says the 103,000 jobs thought to have been added in September was actually 210,000.

The October number also was revised up by 20,000 to 100,000.

So who knows, maybe November’s report, which said the nation added 120,000, will be revised upwards next year when the December jobs reported is released.

If nothing else, as Floyd Norris notes, the revisions “are signs of a generally strengthening labor market.”

But it could also be a sign of something else, continuing trouble with the government’s ability to collect economic data. And that’s something to ponder because the poor jobs numbers of August and September helped cement the view on Wall Street and elsewhere that the U.S. was headed for a double dip.

Keeping score: IPO filings, U.S. debt, Porsche

Highlights from this week’s Thomson Reuters Investment Banking Scorecard:

·Nine Consecutive Weeks of IPO Filings in the US
Since late June, 32 Companies have filed to go public on US stock exchanges, marking nine consecutive weeks of IPO filings and the longest streak in over a year.  Notable names include Hyatt Hotels, Dole Foods, Dollar General and Ancestry.com.

·US Debt Capital Markets Activity Breaks Even
The volume of new debt offerings from US issuers totals $1.5 trillion for year-to-date 2009, exactly even with volume last year at this time.  US High Yield activity is up 139% over 2008 levels, totaling $72.4 billion from 166 offerings.

·Porsche-Volkswagen Tie-up Boosts M&A Rankings
As Porsche and Volkswagen prepare to merge operations, eight investment banks secured advisory roles in the transaction, boosting worldwide M&A rankings.  Most notably, Citi moved up one spot to third, while UBS moved to seventh from ninth.

Keeping score: JPMorgan leads the mid-market

Thomson Reuters data for July show the so-called “mid-market”, of deals below $500 million, has come off slightly compared to the month before, and steeply compared to the same month a year ago.

Year-to-date, JPMorgan is the busiest bank by dollar value of deals, displacing Credit Suisse, which falls from 1st to 6th. Freshfields overtakes Clifford Chance as the busiest legal outfit. A few highlights from the report:

“Global Mid-Market deal activity for July at US$40.8bn from 2,940 deals, down 6% from US$43.3bn from 3,284 deals in June. Down 42% compared to US$70.2bn from 3,627 deals in July 2008

Keeping score: Sukuk pickup, blank-cheque M&A

Highlights from this week’s Thomson Reuters Investment Banking Scorecard:

“Islamic Financing Reaches $10.9 billion

“Malaysia state oil company Petronas lifted the volume of Islamic financing for year-to-date 2009 with a $1.5 billion sukuk offering that was part of a $4.5 billion global financing package via CIMB Securities, Citi and Morgan Stanley. Year-to-date, Islamic financing volume has reached $10.9 billion, a 30% decline from last year at this time when new offerings totaled $15.7 billion.

“Issuers from Malaysia, Saudi Arabia and Pakistan have accounted for over 80% of this year’s Islamic financing activity, while Energy & Power companies have raised just over 40% of the overall proceeds in the market this year.

“Infineon Offering Marks Biggest EMEA Tech Deal

“A $1.0 billion secondary offering from Germany’s Infineon Technologies marked the biggest high technology equity offering in Europe, Middle East and Africa this year, bringing activity in the sector to $2.4 billion, a 52% increase from last year at this time.  Excluding financials, EMEA follow-on activity totals $78.5 billion for year-to-date 2009, an increase of 72% over 2008.

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).

Keeping score: signs of life in the mid-market

The so-called “mid-market”, of mergers and acquisitions (M&A) valued at less than $500 million, is showing tentative signs of life.

On an initial reading, first-half deal data from Thomson Reuters suggests a market still struggling, with deals down 45.7 percent from a year earlier in dollar terms, to $213.3 billion. But on closer inspection, the second quarter reveals itself to have been busier than the first, and in fact home to a stronger rebound than the overall M&A market.

Granted, second-quarter M&A plunged 43 percent in dollar terms and 12 percent by number of deals, compared to the same period a year earlier. But compared to the first quarter, the number of deals actually rose 4 percent, while the dollar value of deals struck bounced 20 percent. (In the wider M&A market, the number of deals rose quarter-on-quarter by a similar amount, but dollar values fell 2 percent.)

Keeping score: bankruptcy boom

The Thomson Reuters Investment Banking scorecard lands again. Here are the highlights:

BAAT Offers Largest Auto Loan Securitization of 2009

A US asset-backed offering fell among the top global debt deals of the week, as Bank of America Auto Trust (BAAT) offered a $3.9 billion TALF-eligible auto loan securitization, the largest such ABS offering this year.  In total, auto loan backed issues have accounted for 35.7% of US ABS, the largest share of the approximately $80 billion so far in 2009.

As a whole, securitizations are down 30% in the US and 39% globally over 2008 levels.  This week marks the third largest week for ABS activity in the US during 2009 with $9.7 billion of issuance.

Bidding war for Data Domain likely to surge on

datastorageEMC on Monday increased its offer for Data Domain by 12 percent to $33.50 a share, valuing the specialty storage maker at $2.4 billion and raising stakes in a bidding war against rival NetApp.

EMC also removed a breakup fee from its offer for Data Domain and said it was ready to complete a deal within two weeks.

The battle for Data Domain, which began with an offer of $25 a share from NetApp,  has grown increasingly acrimonious. Last month, EMC took out a full-page ad in The San Jose Mercury News explaining to Data Domain’s employees why a deal with EMC is better than one with NetApp.

Keeping score: Rio, real estate, rising rates

This week’s Thomson Reuters “Investment Banking Scorecard” is out. Here are the highlights:

“BHP/Rio Tinto Deal Changes Global M&A Landscape

“The announcement of a joint venture between Australia’s BHP Billiton and domestic rival Rio Tinto last Friday ranks as the second largest worldwide deal this year and may prove fruitful for some investment banks.  Advisors Gresham Partners, Lazard, Morgan Stanley, and Goldman Sachs will advise on the deal, translating to valuable deal activity in a year where M&A volume is down 43%.  Earlier this year, Chinalco announced a multi-continent $19 billion investment in Rio Tinto, which was withdrawn as a result of the new mega-deal.  Of the seven banks on the initial Chinalco deal, only Morgan Stanley, ranked first for worldwide M&A year-to-date, secured a role on the BHP deal.

“Real Estate Equity Capital Markets Activity up 85%

“Equity capital markets offerings from real estate issuers have soared so far in 2009, while activity in the M&A, DCM, and loans segments remains down from 2008.  Real estate ECM volume is up 85% over last year at $36.5 billion.  Activity in the Americas accounts for 44.7% of the total volume across the sector, followed by Asia (including Japan) with 36.6% and Europe with 18.4% share of the market.

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