Cracks in the edifice?
The FT reports today that the private-equity groups behind the biggest deal of recent times -- the $11bn SunGard Data deal -- are having trouble getting the financing. The bank group trying to put together a $3bn bridge loan for the deal are getting a "lukewarm" reception, and nobody seems to want the high-yield piece(s). The banks are supposedly very nervous -- that old joke about the so-called "bridge" turning into a "pier".
Meanwhile, a subprime lender from Southern California somewhere, name of Triad Financial Group, trying to do a buyout, had to scale back their $200mm high-yield deal to $150mm and up the coupon to 11 1/4 (for a B3/B- deal) to get their paper sold. The original talk on this deal was 9%. The last time subprime lenders had coupons like that was Metris, best I can remember, which very nearly went bust last year.
Meanwhile again, Deustsche Bank had to withdraw a $825mm issue that was supposed to fund the $2.6bn buyout of Masonite by KKR. Apparently DB had to eat the whole deal -- they really can't be liking that. If you can't get a deal done with the KKR name behind it, it's a sign of real trouble, methinks. There's quite a few private equity buyouts in the pipeline, pretty much all depending on the high-yield market to get them done.
In another interesting development, another reinsurer, Swiss company Converium, is being supoena'ed in the ongoing probe into MBIA. (Converium got into some pretty big trouble last year, too, as I recall). MBIA is the biggest bond insurer around. I'd say a huge chunk of the securitization market is backed by MBIA: they are the backing that gives comfort to all the investors in the AAA-rated top pieces in god knows how many trillions of mortgage, bond, credit card, and finance receivable deals. Well, I guess Fannie Mae is behind a lot of the mortgage deals -- real solid company there, what?
Maybe I'm just in a scare-mongering mood today, but this all looks like the beginning of a big shift in the debt markets. Treasuries remain calm, but I can see spreads over treasuries widening all over the place. And most of us are borrowing on spreads, not on the so-called "risk-free" rate. Take cover, chaps. The rebar is leaving the building..
Meanwhile, a subprime lender from Southern California somewhere, name of Triad Financial Group, trying to do a buyout, had to scale back their $200mm high-yield deal to $150mm and up the coupon to 11 1/4 (for a B3/B- deal) to get their paper sold. The original talk on this deal was 9%. The last time subprime lenders had coupons like that was Metris, best I can remember, which very nearly went bust last year.
Meanwhile again, Deustsche Bank had to withdraw a $825mm issue that was supposed to fund the $2.6bn buyout of Masonite by KKR. Apparently DB had to eat the whole deal -- they really can't be liking that. If you can't get a deal done with the KKR name behind it, it's a sign of real trouble, methinks. There's quite a few private equity buyouts in the pipeline, pretty much all depending on the high-yield market to get them done.
In another interesting development, another reinsurer, Swiss company Converium, is being supoena'ed in the ongoing probe into MBIA. (Converium got into some pretty big trouble last year, too, as I recall). MBIA is the biggest bond insurer around. I'd say a huge chunk of the securitization market is backed by MBIA: they are the backing that gives comfort to all the investors in the AAA-rated top pieces in god knows how many trillions of mortgage, bond, credit card, and finance receivable deals. Well, I guess Fannie Mae is behind a lot of the mortgage deals -- real solid company there, what?
Maybe I'm just in a scare-mongering mood today, but this all looks like the beginning of a big shift in the debt markets. Treasuries remain calm, but I can see spreads over treasuries widening all over the place. And most of us are borrowing on spreads, not on the so-called "risk-free" rate. Take cover, chaps. The rebar is leaving the building..
posted by econoclast at 5:06 PM
0 Comments:
Post a Comment
<< Home