• Tag Archives Bondholders
  • Sears Crashes After Second Largest Shareholder Resigns From Board

    With Toys ‘R’ Us having already filed Chapter 11 bankruptcy, in a move that came as a shock to most of its bondholders, suddenly the race between Bon-Ton Stores and Sears Holdings who will file next, is entering its last lap.
    For those who may have missed it, late last week, in a scenario right out of the last days of Toys “R” Us, some of Bon-Ton Stores’s suppliers reportedly scaled back shipments and asked to be paid sooner in order to protect themselves from potential losses in case the department-store chain unexpectedly filed for bankruptcy, Bloomberg reported on Friday.
    The suppliers have insisted on getting paid with letters of credit or cash on delivery, which can be a drain on the company’s resources, said the people, who asked not to be named because the matter is private. The demands come just as the chain enters the key holiday-shopping season in the U. S. ‘We maintain constructive relationships with our vendors,’ Christine Hojnacki, a spokeswoman for the York, Pennsylvania-based company, said in a statement. ‘Our team has been working closely with all of our vendors, large and small, as we build inventory ahead of the holiday season.’

    This post was published at Zero Hedge on Oct 16, 2017.

  • The Case For Wiping Out Puerto Rico’s Debt

    President Trump, who knows a thing or two about bankruptcy, says Puerto Rico’s public debt should be wiped out. We agree.
    The commonwealth owes bondholders somewhere on the order of $70 billion, with most of that debt tied to general-obligation bonds, revenue bonds and bonds issued by the Puerto Rico Electric Power Authority (PREPA).
    Ahead of the wide devastation wrought by Hurricanes Irma and Maria, we were of the view that the commonwealth could manage perhaps 20 to 30 percent of its general-obligation and revenue-bond debt and that PREPA could pay off perhaps 30 percent of its debt.
    Now, as the island and its economy reel from the carnage of the hurricanes, we see the only viable way forward as a zeroing-out of the bonds in question and an immediate cessation of interest payments. Puerto Rico’s badly-crippled economy must rebuild, and the only way for that to happen is for legacy governmental debt to be handled in a way that won’t impair the restoration of markets and physical development.
    This is a necessary remedy that will affect three sets of bondholders.

    This post was published at Zero Hedge on Oct 9, 2017.

  • What Is Your City’s Debt Burden?

    What is your local government’s debt burden? Or in other words, how much of your local government’s annual revenue would be fully consumed by its liabilities?
    That’s a question that J. P. Morgan took on in its recent analyst report The ARC and the Covenants 3.0, in which it considered the total debt burdens of the governments of US cities, counties, and states.
    Read Transcending Government – A Future of Competitive Governance Driven by ‘Governance Entrepreneurs’
    Here’s an excerpt from the report’s Executive Summary, in which the private bank explains its interest in the results of the analysis and what liabilities are included in each level of government’s total debt, which goes into the calculation of their ‘IPOD’ ratio, which is their estimate of the true burden of debt local governments throughout the United States:
    As managers of $70 billion in US municipal bonds across our asset management business (Q2 2017), we’re very focused on credit risk of US municipalities. Last year, we completed our tri-annual credit review of US states. While a few states have very large debts relative to their revenues, many are in decent shape. This summer, we completed a review of the largest US cities and counties. In general, US cities and counties have substantially more debt relative to their revenues than US states. While most have several years to undertake remediation measures, some very difficult choices will be required in order for them to meet all of their future obligations. And when these choices become untenable and rare municipal bankruptcies do occur, bondholders have usually received lower recoveries than pensioners.

    This post was published at FinancialSense on 10/09/2017.

  • Junk Bond Debt Covenant Quality Drops To All Time Lows

    By Mark Rzepczynski of the Disciplined Systematic Global Macro Views blog
    Corporate spreads are tight and there is little room for further reduction given the absolute level of spreads.

    The reach for yield may be at an extreme. The bond spread is the compensation given bondholders for taking on the risk of corporate debt; consequently, it should become a concern when the quality of bond covenants or protections declines with spreads. Of course, if risk is declining, this is not the case, but at this point in the credit cycle it is hard to make that argument. An inverse relationship between spreads and covenant weakness means you are getting less compensation and less protection for the same risk, all things equal.

    This post was published at Zero Hedge on Oct 7, 2017.


    GOLD: $1272.10 UP $0.10
    Silver: $16.60 DOWN 1 CENT(S)
    Closing access prices:
    Gold $1274.80
    silver: $16.61
    PREMIUM FIRST FIX: $8.24 (premiums getting larger)
    Premium of Shanghai 2nd fix/NY:$13.00 (PREMIUMS GETTING LARGER)
    LONDON FIRST GOLD FIX: 5:30 am est $not important
    LONDON SECOND GOLD FIX 10 AM: $1283.10
    For comex gold:
    TOTAL NOTICES SO FAR: 2115 FOR 211,500 OZ (6.5785 TONNES)
    For silver:
    115,000 OZ/
    Total number of notices filed so far this month: 316 for 1,695,000 oz

    This post was published at Harvey Organ Blog on October 4, 2017.

  • Hartford and America: Suffering the Consequences of Political Malfeasance

    What happens when government officials spend with virtually no restraint and they don’t have a printing press that can crank out more money?
    Hartford, Connecticut.
    Last week, both S&P Global Ratings and Moody’s Investors Service downgraded Hartford’s credit rating deeper into junk status. According to a Reuters report, the downgrade puts Hartford near the bottom of the credit scale. This means the agencies view the city as essentially in default with little prospect for a full bondholder recovery.
    According to S&P analysts, ‘A default, a distressed exchange, or redemption appears to be a virtual certainty.’
    Hartford’s budgetary performance has been weak for several years, and the management environment remains constrained due to a structurally imbalanced budget with no credible corrective plan.’
    Moody’s said there is ‘increased likelihood of default as early as November’ adding that its rating reflects its expectation that bondholders will recover just 65 to 80% of their principal investments.
    In other words, if you invested in Hartford’s future, you’re probably about to get hosed.

    This post was published at Schiffgold on OCTOBER 4, 2017.

  • Puerto Rico Bonds Crash To Record Low After Trump Says Debt May Need To Be “Wiped Out”

    Echoing President Obama’s interference in the legal bondholder process of the General Motors bankruptcy, President Trump’s comments that Puerto Rico’s debt “will be wiped out” yesterday has sparked a bloodbath in PR Muni bonds. Puerto Rico’s 8s of 2035 have plunging to a record low 35 cents on the dollar this morning from 44 yesterday, as bondholders fled hitting any bid, worried that Trump would follow through on his warning.

    This post was published at Zero Hedge on Oct 4, 2017.

  • The Fate of Toys ‘R’ Us after Bankruptcy?

    Brick & Mortar Meltdown: Toys ‘R’ Us can’t solve what’s killing it.
    Bankruptcy indicators first started swirling publicly around Toys ‘R’ Us on September 6. Unlike other retailers that have been dogged by bankruptcy rumors for years, such as Sears Holdings, Toys ‘R’ Us threw in the towel only 12 days later, when its suppliers, fearing steep losses, reacted just as the company was trying to build its inventory before the crucial holiday sales period.
    It wasn’t bondholders or banks that pulled the ripcord, but trade creditors. The US and Canadian entities filed for bankruptcy protection in order to be able to restructure their debts and stock up for the holidays with a proposed $3.1 billion in debtor-in-possession (DIP) financing.
    Yet the toy industry has seen growing sales for five years in a row, hitting $20.4 billion in 2016, up from $16 billion in 2012. It’s respectable growth of around 5% a year. But TRU is getting clobbered by its competitors, including Walmart and Target, and particularly by the relentless shift to online shopping.

    This post was published at Wolf Street on Sep 25, 2017.

  • How Long Will Toys ‘R’ Us Survive after Bankruptcy?

    Retailers rarely survive bankruptcy, second filings are common, and Toys ‘R’ Us has not solved what is killing it.
    Bankruptcy indicators first started swirling publicly around Toys ‘R’ Us on September 6. Unlike other retailers that have been dogged by bankruptcy rumors for years, such as Sears Holdings, Toys ‘R’ Us threw in the towel only 12 days later, when its suppliers, fearing steep losses, reacted just as the company was trying to build its inventory before the crucial holiday sales period.
    It wasn’t bondholders or banks that pulled the ripcord, but trade creditors. The US and Canadian entities filed for bankruptcy protection in order to be able to restructure their debts and stock up for the holidays with a proposed $3.1 billion in debtor-in-possession (DIP) financing.
    TRU’s overall sales and same-store sales have been declining, even as the toy industry has seen growing sales for five years in a row, hitting $20.4 billion in 2016, up from $16 billion in 2012. It’s respectable growth of around 5% a year. But TRU is getting clobbered by its competitors, including Walmart and Target, and particularly by the relentless shift to online shopping.

    This post was published at Wolf Street on Sep 25, 2017.

  • Natural Disasters Have Not Caused a Single Muni Default: Moody’s

    For the first time since we’ve been keeping track, two separate Category 4 hurricanes struck the mainland U. S. in the same year. It should come as no surprise, then, that the combined recovery cost of Hurricanes Harvey and Irma is expected to set a new all-time high for natural disasters. AccuWeather estimates the total economic impact to top out at a whopping $290 billion, or 1.5 percent of national GDP.
    With parts of Southeast Texas, Louisiana and Florida seeing significant damage, many fixed-income investors might be wondering about credit risk and local municipal bond issuers’ ability to pay interest on time. If school districts, hospitals, highway authorities and other issuers must pay for repairs, how can they afford to service their bondholders?
    It’s a reasonable concern, one that nearly always arises in the days following a major catastrophe. But the concern might be unwarranted, if the past is any indication.

    This post was published at GoldSeek on Thursday, 14 September 2017.

  • Offshore Drilling Giant Seadrill Files For Bankruptcy

    Seadrill Ltd., the London-based offshore driller controlled by billionaire Norwegian shipping magnate John Fredriksen, filed bankruptcy protection in the Southern District of Texas after working out a deal with most of its senior lenders to inject $1 billion of new money into the company pursuant to a pre-arranged plan of reorganization. The filing was largely expected and came just a couple of days before the company’s $843 million 5.625% Notes of 2017 came due.
    According to Bloomberg, Fredriksen spent more than 18 months trying to strike an agreement with creditors to restructure the industry’s biggest debt-load after crude’s collapse curbed demand for Seadrill’s services. Daily leases for the company’s rigs, which once commanded up to $800,000, have dropped to around $200,000 as cheap oil from U. S. shale drilling continues to flood the market.
    ‘The deal gives us a great liquidity cushion,’ allowing Seadrill to survive the ‘mother of all downturns,’Chief Executive Officer Anton Dibowitz said by phone. The new capital is ‘underpinned’ by top shareholder Hemen Holding Ltd. and more than 40 percent of bondholders support the plan along with 97 percent of Seadrill’s secured bank lenders, he said. Dibowitz expects more bondholders to sign up to the deal.
    Bondholders are currently predicting their ultimate recovery is worth about 25 cents on the dollar as of today.

    This post was published at Zero Hedge on Sep 13, 2017.

  • Here’s Hartford’s Risky Plan To Strongarm Concessions From Its Creditors

    After Hartford Mayor Luke Bronin had warned Thursday that the capital of the wealthiest state in the US could be broke in as little as two months, city officials scheduled a conference call with bondholders to begin restructuring talks, according to Bloomberg.
    As we noted earlier, Hartford’s financial troubles have been compounded by a broader crisis in the state government. But the city’s yearslong descent into insolvency has been hastened by corrupt and incompetent political leaders, fleeing middle-class residents – and now the hollowing out of the insurance industry that once provided a crucial tax buffer. Last year, insurance giant Aetna announced that it intended to move its headquarters to New York City, though it would leave thousands of employees to continue working in Hartford, the decision was still a financial – as well as a reputational – blow.
    According to Bloomberg, city officials, who’re being advised by law firm Greenberg Traurig, will try to convince creditors that restructuring is necessary to guarantee the city’s fiscal stability. Of course, to wrangle better terms from its creditors, it helps to have leverage. And in a recent column, the Hartford Courant’s Dan Haar reveals one ‘shocking’ strategy reportedly being contemplated by city officials: Asking that the state withhold aid unless the city’s creditors agree to concessions.

    This post was published at Zero Hedge on Sep 8, 2017.

  • Fearing Contagion, Russia Bails Out Bondholders in its Biggest Bank Collapse Yet

    ‘The panicky mood has been dampened down,’ as other banks are rumored to be teetering.
    True to the playbook of bank bailouts, the Central Bank of Russia (CBR) decided to bail out Bank Otkritie Financial Corporation, the largest privately owned bank in the country, and the seventh largest bank behind six state-owned banks.
    The Central Bank put in an undisclosed amount of money in return for at least a 75% stake. This is likely to be Russia’s biggest bank bailout ever, well ahead of the current record holder, the $6.7 billion bailout of the Bank of Moscow in 2011.
    Otkritie and its businesses would operate as usual, the Central Bank said. The banks obligations to creditors and bondholders, which include other Russian banks, would be honored to avoid contagion.
    The controlling shareholder of Otkritie bank is Otkritie Holding, with a 65% stake. The bank had grown by wild acquisitions, grabbing other banks, insurers, non-pension funds, and the diamond business of Russia’s second largest oil producer Lukoil. Otkritie Holding is owned by executives of Lukoil, state-owned VTB bank, Otkritie, and other companies. So clearly, this bank is too big to fail.

    This post was published at Wolf Street on Aug 30, 2017.

  • Goldman “Unexpectedly” Exempt From Venezuela Bond Trading Ban

    When the White House announced on Friday that Trump had signed an executive order deepening the sanctions on Venezuela, and confirming the previously rumored trading ban in Venezuelan debt that earlier in the week had sent VENZ/PDVSA bonds tumbling, we made what we thought at the time was a sarcastic comment that in light of the recent scandal involving Goldman’s purchase of Venezuela Hunger Bonds, that Lloyd Blankfein’s hedge fund, which now controls the presidency and next year will also take over the Fed courtesy of Gary Cohn, would be exempt from the trading ban:
    So all bonds owned by Goldman are exempt from the Venezuela sanctions until Goldman can sell them?
    — zerohedge (@zerohedge) August 25, 2017

    And, as it so often happens in a world controlled by Goldman (as a reminder, in 2018 the world’s three most important central banks, the Fed, the ECB and the BOE will be run by former Goldman employees: Gary Cohn, Mario Draghi and Mark Carney), sarcasm has a way of chronically turning into truth, and as Bloomberg confirmed overnight, one of Venezuela’s largest bondholders is “breathing a sigh of relief.”
    That would be Goldman Sachs Asset Management, which infamously bought $2.8 billion of notes issued by state oil company PDVSA in May, and has since faced sharp criticism for a deal that appeared to supply fresh funds to President Nicolas Maduro. Confirming our initial “sarcastic” reaction, while observers thought the Goldman bonds would be a prime target for new penalties, they were exempt from the order. In fact, the only bonds covered by the trading ban are notes due in 2036 that appear to never have been sold outside Caracas.

    This post was published at Zero Hedge on Aug 26, 2017.

  • Puerto Rico’s Housing Debt Likely To Be Paid In Full (Opposed to PR’s General Obligation and Agency Debt)

    Puerto Rico is seeking to reduce $74 billion of debt, but Federal housing bonds may be paid in full. Thanks to the US Department of Housing and Urban Development (HUD).
    (Bloomberg) – While Puerto Rico and its agencies seek to reduce $74 billion of debt in a record bankruptcy, commonwealth bonds repaid with federal housing money and tobacco settlement funds may dodge a restructuring, according to Moody’s Investors Service.
    After Puerto Rico first began defaulting on its obligations two years ago, a federal oversight board on May 3 sought for the commonwealth a form of bankruptcy called Title III. There are six entities remaining that have yet to miss payments to investors. Of those, debt sold by Puerto Rico’s Housing Finance Authority and the Children’s Trust Fund may avoid asking bondholders to accept losses on their securities, Ted Hampton, a Moody’s analyst, wrote in an Aug. 9 report.

    This post was published at Wall Street Examiner on August 10, 2017.

  • Are More Bankruptcies Next for US Shale Oil Drillers?

    Something that’s been whispered about in the last few months is now being talked about loudly: U. S. oil drillers’ debts. There have been a few notable warnings that shale boomers might want to slow down their production boost lest they bring on another price crash, but the truth seems to be that they can’t do it: they have debts to service.
    Now that international oil prices are once again on a downward spiral, drillers are facing a new challenge, according to Bloomberg: their bondholders are no longer optimistic.
    Shareholders were the first to start doubting the recovery as it became increasingly evident that OPEC’s production cut agreement is failing to have the effect that everyone – or almost everyone – expected. Energy stocks have generally been on a slide since the start of the year.

    This post was published at Wolf Street on Jul 18, 2017.

  • Schaeuble Says Italy Bank-Liquidation Aid Shows Rule Discord

    German Finance Minister Wolfgang Schaeuble joined his counterparts from the Netherlands and Austria in calling for a review of European Union bank-failure rules after Italy won approval to pour as much as 17 billion ($19.4 billion) of taxpayers’ cash into liquidating two regional lenders.
    Schaeuble said Italy’s disposal of Banca Popolare di Vicenza SpA and Veneto Banca SpA revealed differences between the EU’s bank-resolution rules and national insolvency laws that are ‘difficult to explain.’ That’s why finance ministers convening in Brussels on Monday have to discuss the Italian cases and consider ‘how this can be changed with a view to the future,’ he told reporters in Brussels before the meeting.
    Dutch Finance Minister Jeroen Dijsselbloem said the focus should be on E.U. state-aid rules for banks that date from 2013, before the resolution framework was put in place. Italy relied on these rules for its state-funded liquidation of the two Veneto banks and its plan to inject 5.4 billion into Banca Monte dei Paschi di Siena SpA.
    The E.U. laid down new bank-failure rules in the 2014 Bank Recovery and Resolution Directive after member states provided almost 2 trillion to prop up lenders during the financial crisis. The BRRD foresees small banks going insolvent like non-financial companies. Big ones that could cause mayhem would be restructured and recapitalized under a separate procedure called resolution, in which losses are borne by owners and creditors, including senior bondholders if necessary.

    This post was published at bloomberg

  • The Death of the European Banking Union

    In early June, the failure of the Spanish bank Banco Popular seemed to work smoothly under the new European resolution rules. The relatively new Banking Union seemed to work in achieving its goal to limit moral hazard. Losses were imposed upon junior bondholders and shareholders whereas Spanish taxpayers did not pay a dime. Although there are many defects with the new resolution framework, it seemed to be a step in the right direction. This impression was short lived and died when the Italian government agreed to use 17 billion of taxpayer’s money for two failed banks, Veneto Banca and Banca Popolare di Vicenza, in late June. Thus, Italian senior bondholders will be protected despite the philosophy of the new bail-in framework according which bondholders shoulder losses if a bank fails. Consequently, the two banks’ senior bond prices rose by more than 15% on Monday.
    What is the Banking Union? After the 2007 financial crisis and during the 2010 – 2012 debt crisis, the European banking sector was weakened to a considerable extent. Consequently, the European Central Bank (ECB) and national governments made an extensive use of bail-outs to stabilize the banking sector. As an unintended consequence, the liquidity and capital provided to banks meant that the financial position of both the monetary authorities and the national governments deteriorated and the incentives for banks to act prudently were distorted.

    This post was published at Ludwig von Mises Institute on July 4, 2017.

  • Many European Banks Would Collapse Without Regulators’ Help: Fitch

    Only two things keep these banks alive: ‘a State willing to support them and a regulator that does not declare them insolvent.’
    Dozens of Greek, Italian, Spanish and even German lenders have volumes of troubled assets higher or similar to that of Spain’s fallen lender Banco Popular. They, too, are at risk of insolvency. This stark observation came fromBridget Gandy, director of financial institutions for Fitch Ratings, who spoke at a conference in London on Thursday.
    The troubled banks include:
    Greece’s HB, Piraeus, NBG, Eurobank and Alpha; Italy’s Monte dei Pachi di Siena (which is in the process of being rescued with state funds), Carige (9th largest bank, now under ECB orders to raise capital or else), CreVal, and the two collapsed banks, Veneto and Vicenza (whose senior bondholders were bailed out last weekend); Germany’s Bremer Landesbank (which just cancel interest payments on its CoCo bonds) and shipping lender HSH Nordbank. Spain’s Liberbank and majority state-owned BMN and Bankia, which are completing a merger after private-sector institutions refused to buy BMN. Now, the problems on BMN’s balance sheet belong to Bankia, which already has its own set of issues, Gandy said.

    This post was published at Wolf Street by Don Quijones ‘ Jul 1, 2017.

  • Autopsy of Banco Popular Shows Fragility of EU Banking System

    What would a disorderly bank collapse in Spain and Italy have done?
    By Don Quijones, Spain & Mexico, editor at WOLF STREET.
    New information has revealed just how serious a threat a disorderly collapse of Spain’s sixth largest bank, Banco Popular, might have posed to Spain’s banking system. In its final days, Popular was bleeding deposits at a rate of 2 billion a day on average.
    Much of the money was being withdrawn by institutional clients, including global mega-fund BlackRock, Spain’s Social Security fund, Spanish government agencies, and city and regional councils, prompting accusations that Spain’s government was using insider knowledge to withdraw large amounts of public funds, which of course hastened Popular’s demise.
    All the while, Spain’s Economy Minister was telling the bank’s less privileged investors, including retail shareholders and junior bondholders, that there was absolutely nothing to worry about. Those that believed him lost everything.
    Between the end of March and its last day of trading, Popular shed 18 billion of deposits, roughly a quarter of the total. On the night of June 6, Europe’s Single Supervisory Mechanism decided that the bank could no longer cover its collateral. Popular, warts and all (take note, Italy), was sold for the meager sum of 1 to Banco Santander, though Santander will have to raise 7 billion of fresh capital to fully digest the bad stuff on Popular’s books.

    This post was published at Wolf Street on Jun 29, 2017.