Tuesday, November 11, 2008

Debt Pile Looming Over European Firms

I´ll bet that some will damm their debt financed aquisitions & stock buybacks ( for some "amusing" examples see "I Want My Buyback Back" ) ........ I assume that during the coming at least 2 years it won´t be the earnings that will dominate the stockprice .... It will be all about the balance sheet....... The management will be forced from a shareholder value oriented mood to "serve" their new masters aka the bondholders.......

Kann mir gut vostellen das einige inzwischen Ihre schuldenfinanzierten Übernahmewahn & die Aktienrückkäufe bereuen ( einige "amüsante" Beispiele gibt es hier zu bewundern "I Want My Buyback Back" ) ...... Bin mir ziemlich sicher das zumindest auf Sicht von 2 Jahren weniger die Gewinnsituation als die Bilanzqualität das beherrschende Thema der Aktienmärkte sein werden..... Das Management wird zukünftig nicht mehr die Aktionäre sondern die Bondholder in den Mittelpunkt Ihrer "Bemühungen" stellen......

[eu debt]

> The trouble is getting even greater when you combine the graph with the
spread charts via Mish

> Wie prekär die momentane Lage ist zeigt mehr als eindrucksvoll wenn man die o.g. Grafik mit den nachvolgenden Charts kombiniert Unternehmensanleihen auf Tauchstation via Zeitenwende/Mish

WSJ European companies, already in the middle of an economic downturn, face another uphill struggle as they seek to refinance $242.6 billion of maturing debt over the coming year, according to credit-ratings firm Standard & Poor's.

"Funding pressures in Europe have escalated sharply since September as stress in the global financial system accelerated," the report said.

According to the report, European companies will be forced to pay back or refinance $586.3 billion through 2011, with more than 40% of that debt coming due over the next year.
French nonfinancial corporate issuers account for the largest portion of debt to be refinanced, with 26%, followed closely by the U.K., Germany, Netherlands and Italy, which have a combined share of 79%.

No company rated below single-A has managed to access the bond market in recent months, offering little hope for companies further down the ratings scale

The report examined all debts rated by S&P including bank loans, notes and bonds.

>The banks will have to pray that the companies manage the refinancing of the debt... Otherwise they are forced to tapp corporate bank lines .....

> Die Banken dürften bereits jetzt anfangen zu beten das es möglich sein wird diese fälligen Anleihen zu refinanzieren...... Ansonsten bleibt den Firmen nichts anderes übrig als die bestehenden Kreditlinien der Banken anzuzapfen...... Sicher nicht der glücklichste Umstand wenn nahezu alle Banken dringend auf Ihre Kapitalstärke achten müssen......

Credit terms increasingly tied to risk FT Alphaville - US and European companies renewing short-term credit facilities are being forced to accept terms that link interest payments to their creditworthiness. In recent months, AT&T, Wal-Mart, Caterpillar, Halliburton, Nokia and Novartis have all renewed their short-term financing arrangements, including revolving credit facilities, and found that “relationship pricing” is no longer available. Instead,

companies are finding that banks - which had offered cheap loans to top corporate clients - now price these facilities based on measures of credit risk. In most cases, credit default swaps are being used.

The first deal for this new type of pricing for revolving loans, totalling an estimated $6,000bn worldwide, was done in April

Since then, such terms have become widely used. Banks hope this will discourage companies from tapping these credit lines unless they absolutely need to. Already, at least 20 such deals for 364-day revolving credit facilities – a type of overdraft for companies to ensure access to funds in case markets shut down – have been completed and at least as many are in the pipeline.

Update via Bloomberg Borse Dubai May Refinance $4.2 Billion of Loans at Higher Costs

Borse Dubai Ltd., the Gulf emirate's state-owned operator of exchanges, is in talks to refinance $4.2 billion of loans at interest rates tied to the price of credit- default swaps, raising the cost of the debt, said three bankers with knowledge of the transaction.

The new debt may pay interest of as much as 6 percentage points over the London interbank offered rate on loans for three years, said the bankers, who declined to be named because the negotiations are private. That compares with a margin of 1.1 percentage points on the existing loans, which were used to buy Sweden's OMX AB last year

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Anonymous Anonymous said...

Here is the original article :


2:54 AM  
Anonymous Anonymous said...

sorry for the link, here is the good one :


2:57 AM  
Anonymous Anonymous said...

Here is the article from the Ft :

European corporate debt

Published: November 11 2008 09:38 | Last updated: November 11 2008 16:04

No wonder policymakers are scared. Standard & Poor’s reckons a total of $2,100bn of European company debt will mature between now and the end of 2011, with more than $800bn due next year. Markets have never seen so much debt needing refinancing in such horrible conditions.

The financial sector accounts for 72 per cent of the total and nobody needs reminding how its cost of capital has soared: spreads on senior bank debt are nearly 10 times as wide as they were before August 2007.
Maturing debt risk set to hit telecoms sector - Nov-11
Upheaval takes its toll on corporate debt - Nov-05
Rise in cost of bond protection - Oct-22

Yet it is the smaller amount of corporate debt that is the greater worry. Governments and central banks have done a lot to ease banks’ pain. Secured debt, such as covered bonds, can now be refinanced with central banks. Meanwhile, for many European banks, new issuance of unsecured debt will enjoy selective government guarantees.

Companies, on the other hand, face a tougher haul. First, less of their debt is triple A rated compared with the banks. That hurts in this risk-averse environment, where yields on corporate bonds a notch above junk status have blown out by some 300 basis points over the past year to 9.3 per cent today – within a whisker of recent highs. Second, companies face banks that are, in turn, under pressure both to shrink and to remove risk from their balance sheets. Bigger companies can draw on credit lines to tide them over, but smaller companies may lack such facilities. For them, the downturn looks scary.

There will be some advantages compared with the last big recession in 1991. Back then a company was either OK or bust, with little in between, and the only company doctor anyone had heard of was Sir John Harvey-Jones. Companies now have more options. “Covenant-lite” loans, debt-for-equity swaps, restructuring experts, distressed debt investors, grace periods to avoid bankruptcy – these should soften this recession. Politicians also sound more supportive this time. They will lean on banks not to drive viable businesses to the wall. Ultimately, though, some companies have too much debt. Political rhetoric won’t be able magically to wish that away.

2:59 AM  
Blogger jmf said...

Moin Anon,

thanks for the FT article...

I have seen the headline but i´m not a subscriber and couldn´t get the text.

I think this quote sums it up...

"Ultimately, though, some companies have too much debt. Political rhetoric won’t be able magically to wish that away."

3:06 AM  
Blogger jmf said...

via FT Alphaville

In lieu of default

For the 12 months to Oct. 30, 2008, we found there were 38 covenant breaches, waiver requests, or related restructurings, compared with 18 in the previous 12 months - an increase of over 100%. In addition, the time from financing to experiencing problems with covenant tests has decreased dramatically in 2007 and 2008 compared with 2006. The number of companies experiencing covenant difficulties within three years of their last financing has increased to 29 in 2007 and 23 in 2008 year-to-date, from four in 2006.

There is much more data within the link

3:41 AM  
Anonymous Anonymous said...

To read an article in the Ft, just find the headline, find it with google news and you will be able to read it.....

11:53 PM  
Blogger jmf said...

Thanks for the hint!

Usually the content from the FT is far better than from the WSJ.....

1:06 AM  

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