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Tag >> Deals
As companies branch out beyond traditional funding sources, many are considering tapping the unrated bond market. Investors are snapping up deals – enjoying the higher returns from unrated bonds—and companies are starting to recognize that demand. While they may have to pay a premium to make up for the lack of a rating, and the disclosures that go with it, the development could augur less reliance on rating agencies, whose value has been called into question.
A number of deals have gone forward in both the US and in Europe—although more in Europe, which traditionally has a larger unrated market. For example, UK rail company National Express launched a $570 million, 7-year deal in January, which came in with a coupon of 6.25 percent.
The venture capital business is trying to battle back, but with mixed success.
On one hand, during the second quarter, 15 IPOs by venture-backed companies raised $899 million, up from just three offerings which raised $232 million in the same period last year, according to Dow Jones VentureSource.
High-yield bonds are slowly recovering from the fallout related to the European sovereign debt crisis.
Junk bond mutual funds saw inflows of $1.39 billion in the week ended June 28, according to data provided by Thomson Reuters. It's the second week in a row of inflows. Prior to that there were only outflows since the end of April.
US corporate and financial treasury system supplier Wall Street Systems announced earlier this month that it has snapped up rival City Financials--further consolidating the treasury management system (TMS) marketplace and reducing the options for companies looking at sending out an RFP for treasury technology.
The buy-and-integrate approach has long been a hallmark of the TMS space. In fact, few of the biggest-name providers from 15 years ago are still around – aside from Wall Street Systems, SunGard, and IT2. A number of upstarts have since entered the market—such as Kyriba—and some have entered and been bought out—like FXPress.
As companies continue with global restructuring, spin-offs are increasingly being used to slim down and focus on central businesses, bring in some capital, and help the individual businesses to build market value separately. Whether through an IPO, an MBO, an LBO or simply by issuing shares to current shareholders, US and global companies are shedding assets left and right.
Lockheed Martin is restructuring to change its focus on long-term growth, and the company is putting some less-strategic units up for sale as part of the process. Most of its Enterprise Integration Group and its Pacific Architects and Engineers unit--both now falling under its Information Systems & Global Services business—will be spun off. In addition, as the firm tightens its focus within the defence sector, the divestitures are also part of a move to comply with recently-drafted Pentagon conflict of interest rules for contractors, according to the company.
Although many private equity firms are still in sell-off mode—as Marine Cole reported last week —those firms that are buying are doing smaller deals, which could be good news for the many companies looking to shed non-core assets as consolidation continues.
Of the deals being done, US private equity group TPG is the most recent, announcing last Friday that it would purchase UK fashion retailer Republic for £300 million ($445 million). The deal will be financed entirely through equity.
So much for those dire forecasts calling for massive defaults of junk bonds.
Fitch Ratings says the pace of high yield defaults has slowed so dramatically in 2010 they have even defied the most optimistic forecasts.
Wal-Mart is finally moving into the financial services business.
The discounting giant, whose efforts to get a bank license in the United States have repeatedly been thwarted since 1999, may have found a roundabout way to beat the opposition and get its hands on a banking asset – by buying a stake in financial services company Green Dot, which in turn has a stake in a small bank.
Small and medium-sized banks will suffer through another year or so of pressure related to commercial real estate. Even as prices slowly approach a bottom, prompting investors to gear up to grab distressed assets and revive the industry, it will take some time before banks see any benefits.
The implications are largest for community banks, whose concentrated exposure to this segment is pushing up their nonperforming loan ratios and pushing down their regulatory risk-adjusted capital, according to a report published by Standard & Poor's Tuesday.
Is the stock market once again safe for IPOs?
A number of companies seem to think so, given the current calendar.