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Posted by mcole in IPO, Deals
It's astonishing how quickly the window for companies to go public can open and close.
Less than two weeks ago, CFOZone reported that IPO activity hit a two-year high in the fourth quarter of 2009.
But then just last week, Stephen Taub wrote about an increase in delays and postponements for scheduled offerings. This week has been no better.
Citing doubts that the government will continue to help too-big-to-fail financial institutions, Standard & Poor's revised its outlooks for Citigroup and Bank of America to negative from stable.
"The outlook revision reflects our increased uncertainty about the U.S. government's willingness to provide additional extraordinary support to highly systemically important financial institutions in a way that will benefit debt holders," said the credit ratings agency in a press release Tuesday.
The global default rate rose quickly after the financial crisis intensified a year ago and it may fall just as fast now that a recovery seems on its way.
The rate fell to 12.5 percent in January from 13 percent in December, Moody's Investors Service said Tuesday. It was at just 5.3 percent a year ago.
Moody's expects the default rate to range between 3 percent to 7.1 percent in a year.
The revolving door in financial services jobs shows no sign of stopping.
CIT Group, the commercial lender just emerging out of bankruptcy, hired John Thain as chairman and chief executive.
It's the same Thain who went on a spending spree to redecorate his new office when he joined Merrill Lynch just over a year ago, even though the bank was still suffering from bad bets on mortgages. Thain was also accused of hiding losses and extravagant bonus payments as Merrill Lynch was being sold to Bank of America.
But CIT is not the only firm with short-term memory.
For companies looking to do deals across the Atlantic, they may notice significantly less competition from private equity shops, as the financial crisis may have permanently altered that industry and how it conducts business, according to new research.
More than 70 percent of European private equity professionals think the repercussions of the credit crunch will be felt for years to come or even that the industry is changed forever, according to a survey of over 500 such executives conducted between November and January by Private Equity News. The figure is up from 45 percent last year and 13 percent two years ago.
Conduits and structured investment vehicles didn't completely disappear with the financial crisis, but banks that sponsor them are now being cautious with the types of assets they fund.
In particular, they are shying away from assets with long-term maturities such as mortgages and instead sponsoring new conduits with short-term assets that match the maturities of the commercial paper that funds them.
Although many financial institutions have tried to focus more on small businesses over the last few years, these businesses are increasingly dissatisfied with their banks.
For financial institutions, that could mean lost customers and revenue at a time when many banks are struggling to survive.
The $2 billion covered bond sold by Canadian Imperial Bank of Commerce on Wednesday has reignited speculation that there's a need for a market for such bonds in the U.S. But considering the current state of U.S. banks, it may not be a good idea.
Covered bonds are similar to securitized bonds with the difference that banks that issue them keep the loans -- often mortgages -- on their balance sheets. They are already popular in Europe and Canada, but despite predictions since even before the crisis that growth of a U.S. market is imminent, one has not developed, mostly due to a lack of regulation.
In a major victory for ratings agencies, a judge on Tuesday dismissed claims against Moody's Investors Service and Standard & Poor's that they defrauded and misled investors who bought about $100 billion of mortgage-backed securities.
"It was a very good day for ratings agencies," Moody's lawyer James Coster told Bloomberg.
CFOs may find it makes sense to take a near-term hit to earnings in exchange for lower interest costs going forward.
Adobe Systems decided the trade-off is worth it by raising $1.5 billion in new notes to pay down existing debt and replace floating-rate debt with fixed-rate bonds.
The move comes in anticipation of an expected rise in the London interbank offered rate, on the basis of which most floating-rate debt is calculated.