Third, there comes a point in the slide to bankruptcy when bond investors are trying to guess the potential recovery in a BK when pricing the bonds. IMO, the Linn bonds are not there yet but are moving in that direction. The Linn bonds popped some last Thursday when Linn announced that it was going to eliminate the common unit distribution and had bought back bonds at steep discounts. Most of that buying occurred in July when the Linn bonds collapsed in price.
The price spurt quickly went into reverse as sellers emerged en masse. One problem for those owning bonds issued by MLPs is that money is flying out the door to the common unit owners. The distribution elimination solved that issue for the time being. As noted below, I bought back the 8. That kind of return is a pulsating warning bell that Linn has only started to heed. The collective judgment of the Bond Ghouls, expressed in their bond pricings, needs to receive more respect from management.
Their opinion is that Linn is in jeopardy of failing even before the first maturity date in May Survival may depend simply on making it through , and that necessitates surviving first. Delaying the refinancing crunch for as long as possible is key. The mother of all price spikes would then be a possibility due to the mega projects being postponed and those projects generally take years to complete.
And, the shale producers are exhausting their most fertile production areas now in an effort to stay afloat and many will end up in bankruptcy before arrives. Without hinting directly or indirectly which firms will file, I generally pay attention to the message being sent by both the common and bond prices to identify those most at risk. Swift Energy's bond , for example, now trades near 35, with the common at less than a buck per share.
Those are buzz words. That 35 handle is about the same for the The 8. I sold that bond last February at I am not inclined to buy again given the current circumstances. I could go on and on with illustrations. Lawyers with a certain specialty and exorbitant fees will have no shortage of future clients.
I am not inclined to gamble with those bonds. Both the bond and common stock prices are sending the same signal: a BK is more likely than not with a limited recovery potential for senior unsecured debt owners. Those July purchases reduced the total outstanding to 2. At current prices, the remainder could be retired with a 1. That would leave the 6. There is no material interest payment savings derived from buying the 6. The Bond Ghouls are telling management that the odds of paying off the bonds at maturity are not high, and that is an understatement.
A list of the bonds purchased in July and prior to the 31st are listed in Linn's earnings press release. Linn could save more in interest payments by buying the 8. There is no shortage of institutional investors willing to sell these bonds. Linn was coy in its earning release whether it would continue buying bonds. A comment by the CEO at page 4 of the transcript suggests that cash flow will be devoted to further bond purchases provided the discounts are attractive enough.
Both the credit facility and term loan are secured debt, see page 99, and consequently has priority over senior unsecured debt. I bought the 8. I then bought the 6. The yield to maturity is shown at That is per year and assumes that all interest payments are made and Linn survives to pay off the bond at maturity. Finra Information on the Bonds Detail. I have been discussing this trading history and my thought process in the comment section to this Instablog that discusses the January purchase.
Bought Back The Linn Energy 8. Bought 2 Linn 6. Even at my higher price, the YTM is shown at That is The common unit owners have got that message loud and clear. The thought is expressed with the phrase "playing with the house's money". When that phrase pops into my mind uncontrollably, I am more inclined to gamble with that money. Anyone playing in the Linn bond sandbox needs to be willing to light a match to the money used to buy these bonds IMO.
Beazer Homes 5. ADS Waste Holdings 8. Ally Financial 3. Linn discusses the risks relating to its operations starting at page 19 of the Annual Report. Accrued Interest and Bond Premiums. On a final note I would add that the Berry senior unsecured debt has much lower yields than the debt originally issued by Linn.
I attribute that pricing differential to motivated sellers in the bonds originally sold by Linn. The Berry bonds are senior unsecured debt and were assumed by Linn after Berry's acquisition. Berry November Bonds Detail. Berry September Bonds Detail. This bond was redeemed at a premium to par value, a common occurrence for junk bonds as issuers found it beneficial to pay the premium and to refinance at lower rates while also extending the maturity.
This bond was bought in October and redeemed in June I view it as a victory to receive a 9. Exchange traded bonds trade flat, which simply means the buyer does not have to pay accrued interest to the seller and the owner on the ex interest date will receive the entire interest payment. The ex interest date for an exchange traded bond has the same meaning as the ex-dividend date for a stock. The 4 year maturity mitigates my interest rate risk. I have more credit risk on that one due to more things can go wrong over a longer period see generally, Now the Long Run Looks Riskier, Too, for Investors - NYT or just conceptualize owning Polaroid or Eastern Kodak bonds long term The interest rate risk is also higher than for the bond maturing in August A Caa1 rated 7.
I am more comfortable owning the bond simply due to it maturing about 5 years earlier. I do not believe that anyone would characterize that statement as an exaggeration looking a long term chart: RAS Interactive Stock Chart. RAS: 5. The company used the recently released positive earnings report as an excuse to sell stock. I would note that these exchange traded bonds are currently trading with far lower yields than the Linn bonds which are trading more like Ca credit risks IMO.
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Skip to main content. David van Bragt , Marc K. Francke , Stefan N. Singor and Antoon Pelsser. David van Bragt. Forgot your user name or password? Previous Next. The structure was also perfectly attuned with Sharia principles, given that the flexibility to cancel coupons and the perpetual maturity provided equity-like features to the instrument.
The bonds, which priced at par, were trading at In a market where players all-too quickly come and go, Societe Generale has proved to be the rare exception, resolutely placing the equity derivatives business at the heart of its investment banking operations come rain or shine.
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The strategy is one that some rivals questioned given the tough market backdrop of the last four years, but the French bank has proved it can deliver impressive results, innovative client solutions, and unparalleled liquidity provision even under the harshest conditions. And was a year as tough as any. Against that backdrop, the divide between those houses with long-term commitment and those that had just come along for the ride in hope of better times ahead became more pronounced than ever. We saw a lot of banks retrenching, but because of our ability to generate profits, we can expand our business.
What makes us different is that stability. A full suite of engineering capabilities for both secured and unsecured notes were made available across the full range of payoffs and underlyings, with Bank of New York Mellon brought in as collateral monitoring agent and liquidation management agent to add an additional layer of comfort. In just a few weeks of launch, the bank ranked as a top three provider with hedge fund Marshall Wace.
Winning bigThe liquidity advantage. Helen Bartholomew. There was not much room for profit in the commodities business in High regulatory and capital costs looming via Basel III and Dodd-Frank, as well as increasing difficulties in gleaning trading profits in a slow-moving and directionless market, scared off several firms from the space. But top-tier banks remained successful by using the entire portfolio and expertise across the firm to provide unique hedging opportunities in illiquid markets.
But even without the general consistent bullish or bearish trends of previous years, Deutsche was able to offer innovative solutions and investment opportunities to its clients. For example, the bank solved a major hedging issue for gas distribution companies in Central and Eastern Europe. Those companies were buying gas based on oil indices, and therefore needed to hedge both the possibility that oil and gas prices would diverge, as well as the foreign exchange risk associated with buying gas denominated in euros and selling to clients in US dollars. In conjunction with the foreign exchange derivatives desk, the firm began offering forward contracts on oil indices denominated in both euros and US dollars, the first bank to do so.
The strategy paid off for clients early in the year when Iran threatened to close the Strait of Hormuz and oil prices spiked while gas prices stayed level, necessitating an oil versus gas price hedge that could be denominated in both currencies. The bank has since created an offering for forward transactions denominated in Eastern European currencies too. The North American gas business did not lag far behind.
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Deutsche executed 2. Going longThe bank also excelled in providing long-dated hedges in electricity markets, a sector where banks shy away from entering purchase agreements maturing in more than five years due to a lack of liquidity. That attracted the attention of small to mid-size consumers and producers that began outsourcing some of their off-hour trading responsibilities to the German dealer.
Even as the eurozone crisis reverberated throughout the rates world, the largest reforms in the history of the swaps market loomed. Banks were forced to adapt business models in view of Basel III, which lumps aspects of the interest rate swaps business — particularly long-dated, uncollateralised trades — with hefty funding and capital charges. Of more immediate concern was the US Dodd-Frank Act taking effect in — swiftly followed by similar legislation in Europe — requiring all standardised swaps to be centrally cleared and electronically executed, forcing banks to bolster infrastructure and prep customers.
They rank for sure in the very first [tier]. We feel our size, balance sheet and strong capital position have helped our client business boom from an already strong position. The good news is we have managed to maintain our top spot in revenues in a very good year.
This aligned risk management systems, with the rates business moving on to Athena, a pricing and risk management platform introduced in the FX business two years previously. Athena provides traders and salespeople with a one-stop shop to price and manage the risk on m. Christopher Whittall. After a stuttering start, the year ended strongly with the European equity-linked market running at a level of activity not seen in years.
Volumes eventually overtook those of both the previous two IFR award years. Yet it was not plain sailing, with an active first quarter followed by a very quiet second. Several banks had to wait until after the summer for their first deal of It earned a staggering Deutsche Bank was a bookrunner on every one. Deutsche Bank did not lead its market, it completely dominated it. Though a traditionally strong equity-linked house in Europe, Deutsche dropped back in the late noughties. The last two years saw the bank end fifth then fourth in the league tables by volume.
In the IFR award year to mid-November the bank led just four deals. Success in was driven by large deals on behalf of German issuers, but as multi-nationals with multiple banking relationships, none required a domestic bank. In January Siemens needed US dollars.click
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But its accounts and listing are in euros, and one thing investors and accountants do not like is cross-currency bonds. The bond with warrants structure used in February allowed the company to raise US dollar funding but issue euro-denominated warrants. The solution was not perfect as investors found the bonds could not be delivered against the warrants and there has been little liquidity in the bonds.
Deutsche was sole global co-ordinator and invited the other bookrunners to participate the night before launch. The lender was soon back with another issue on behalf of Siemens.
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Despite the jumbo transaction, the market was still starved of high-grade paper and bankers were aware that extra efforts were required to satisfy the investor base. Deutsche took this to a new level when Siemens wished to dispose of in-the-money warrants in technology company Draegerwerk. The easy trade was to simply sell the warrants or the converted equity in the market. Sourcing similarly dated Bunds, the two parts were packaged and sold to technical investors, and a few outright accounts.
The transaction was a clear s.