debt

  • 29 Apr 2013 at 6:46 PM

Apple’s Bankers Angling For The Chance To Work For Free

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Now that Goldman Sachs has succeeded in its mission of helping Apple fend off David Einhorn’s demand that it raise a two hundred plus billion dollars of preferred stock, I guess it’s time for someone at Goldman to sit down with Apple and say “now, guys, really, you ought to think about raising two hundred billion dollars of preferred stock, it’s just the sensible thing to do.” Or something. This debt-financed share-buyback plan doesn’t sound like too much fun for the bankers:

On April 23, Cupertino, California-based Apple said it would return an additional $55 billion in cash to shareholders to compensate for a stock that’s dropped on signs that the company’s growth is slowing. Although it has $145 billion of cash, Apple said it will use debt to help finance a total capital reward of about $100 billion to shareholders. …

Because investment-grade debt offerings typically pay low fees, banks may offer to do the transaction for little or no charge, [Sanford Bernstein analyst Brad] Hintz said.

“This is going to be a prestige-per-share, not an earnings-per-share, deal,” said Hintz, who worked as Morgan Stanley’s treasurer and as the chief financial officer at Lehman Brothers Holdings Inc. earlier in his career. “We’re really talking about a deal that’s going to be done as close to gratis as you can get.”

The amount Apple will be raising is a little unclear but $50 billion over the next three years is … possible? Maybe?1 Read more »

  • 13 Nov 2012 at 3:35 PM

Tampa Bay “Social Planner” Told To Keep Her Hands Off Paula Broadwell’s Man Could Use A Bailout

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Jill Kelley, the woman who alerted the FBI to the “harassing” emails she’d been receiving from All In author and possible bunny boiler* Paula Broadwell, has run into some financial trouble. Read more »

  • 20 Sep 2012 at 6:29 PM

Are Lev Fin Bankers Trying To Create Work For Their Restructuring Friends?

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If you work in a pretty cyclical business, like bankruptcy and restructuring, it behooves you to moonlight in some other line of work since some days there are no bankruptcies. Some restructuring bankers and lawyers are golf instructors or lounge singers or cowpokes on the side, but many prefer to advise on debt issuance transactions when bankruptcies are scarce, since the skills are more overlapping.

But while some bankruptcy lawyers may enjoy the variety of litigating in bankruptcy court one year, and writing credit agreements or performing at the Tropicana the next, others tend to get sad in their off years, and pine for their true love. (That being bankruptcy.) “I’d really rather be running a bankruptcy process,” they think, “but here I am stuck writing credit agreements. If only I could change that.” And then some of them, cynically, think: “Oh wait, I can. I’ll just convince this company to lever up 10x and put a reminder in my calendar to pitch the bankruptcy business in, say, two years.”

Lots of people suspect something like this of all bankers and, to a lesser extent, lawyers.1 Which is understandable and probably not all that untrue: if you work in a transactional business, you want more transactions. Most transactions are reversible, and the more reversals you can talk a client into, the more money you can make. Transactions that contain the seed of their own reversal are the best transactions. (This is why private equity firms are good clients: every buy-side creates a sell-side, or IPO, in 3 to 7 years. Strategics sometimes just buy companies and keep them.)

Stephen Lubben knows what I’m talking about:

The debt issued today is the stuff of tomorrow’s bankruptcy cases. … With interest rates this low – the yield on 30-year single A debt is below 5 percent – investors seem to be discounting the likelihood of a future bankruptcy.

But if this is the low point for interest rates for a good long while, 30 years from now could be interesting. The “wall of maturities” that will hit then could provide for some happy times for the bankruptcy lawyers of the future. Cold comfort for those with little to do today.

Well you just need to diversify! Like some people I guess are doing, as debt issuance is going gangbusters, with $700bn in US IG issuance so far this year and high-yield at all-time highs. So perhaps this levering-up-to-blow-up theory is worth a look? Here is a look:

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  • 19 Jan 2012 at 7:28 PM

Carl Icahn Is Angling For A Piece Of Phil Falcone’s Walkie Talkie Passion Project

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Investor Carl Icahn has been buying up debt of LightSquared Inc., the wireless network backed by billionaire fund manager Philip Falcone, according to people familiar with the matter. The stake could enable him to take control of the company should it restructure or file for bankruptcy, one of the people said. Mr. Icahn snapped up LightSquared loans, which are traded on the market like securities, after prices of the debt nosedived last year. Two other distressed-debt investors, David Tepper and Andrew Beal, also bought some of the loans. [WSJ]

  • 03 Nov 2011 at 6:41 PM

BofA Wants To Make A Little More Money On DVA

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Financial institutions normally prefer not to have everyone think they’re a shitty credit, because that can lead to doom, or MF Doom, or glitchy intimations of doom that quickly get sorted. But it can also sometimes lead to profit.

Sometimes that profit is fake, or fake-ish. When banks book a mark-to-market profit on their own credit spreads widening, that looks … a little fake. We don’t particularly object here, since it reflects a sort of economic reality, but it is probably temporary – your liabilities roll forward and eventually either you pay them off at par, in which case your DVA gains fritter down to zero through PnL, or you don’t, in which case the permanency of your accounting gains are not of much interest to most people.

In any case, because it looks fake, or fake-ish, banks actually don’t much abuse the privilege. Thus most of the DVA gains that banks booked last quarter were on derivatives, where US GAAP requires you to mark DVA to market, or on derivatives-looking things like structured notes where it seems more plausible than not. You don’t see a lot of banks taking a lot of DVA gains on vanilla debt.

So when you have $295bn of public debt (with, I don’t know, maybe a 2 year weighted average duration, whatever) and your CDS blows out by 300bps in a quarter, you don’t book $18 billion of gains. You book, um, $4.5 billion. You never get to taste most of that delicious credit widening.

Now, if only there were a way for a bank to (1) get a gain on its vanilla public debt and (2) make it permanent. Like, say, this, from Bank of America’s 10-Q filed today:
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  • 29 Aug 2011 at 11:27 AM

This Weekend’s Hurricane Was Apparently God’s Way Of Suggesting We Ease Up On Spending

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Balance that checkbook or next time it’s gonna be a golden shower. Read more »

  • 26 Aug 2011 at 5:29 PM

Moving Off Gold Standard Responsible Not Only For Inflation, Deficits, Unemployment, But Also Fall Of Roman Empire

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When I was at my last job, I tried occasionally to take a step back from deals and markets and get perspectives on the bigger picture. To that end, I once went to a talk given by the anthropological theorist David Graeber, who is perhaps best known for being fired from Yale just maybe because he was an anarchy activist who was occasionally arrested at protests. After this talk – about theories of value from a Maussian-Marxist perspective – Graeber took questions. The tone of the questions, which often began “when I was in grad school” and went on to cite Weber and Nietzsche, and the variety and topiary ambition of the questioners’ facial hair, led me to believe that I was probably the only investment banker in the room.

Graeber now seems to be courting a financial-industry audience, however, with a well reviewed new book out about the history of debt, and an interview with Naked Capitalism today. It’s a good read, both because Graeber loves to be provocative and because it has things to like for both Ron Paul voters and Paul Krugman readers.

For example, think that paper money will destroy America and QE3 would be treason? Graeber’s takes a long-term perspective. Really long-term:
Read more »

  • 06 Aug 2011 at 2:44 PM

China Suggests The US Stop Living In The Past

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China, the largest foreign holder of United States debt, said Saturday that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the rating agency Standard & Poor’s downgraded America’s long-term debt…“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” read the commentary, which was published in Chinese newspapers. [NYT]

  • 15 Jun 2011 at 2:22 PM

Accumulating Debt Makes Young Adults Feel Really Good About Themselves

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The more college loans and credit card debt that young adults age 18 to 27 have, the higher their self esteem — and the more control they feel they have over their lives. They tend to view debt positively, rather than as a burden. [NYT, related: drug highs vs debt highs]

  • 23 Jun 2009 at 10:01 AM

$2 Trillion Debt Is “Manageable”

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The Acting Assistant Secretary for Financial Markets, Karthik Ramanathan, gave a bit of a pep talk yesterday regarding US debt issuance for 2009 and 2010. People should take comfort knowing that the US has funded nearly 80% of its total “expected borrowing needs” of $2 trillion to fund the fiscal deficit for this year and is “well situated” on its funding needs for next year. However, left out of this feel good speech was any guidance on the administration’s demand forecast for US debt that falls into the “unexpected borrowing needs category” on the off chance the government’s macroeconomic assumptions are a tad too optimistic.
US Treasury: Funding Needs Large But “Manageable” [Dow Jones via Nasdaq]

  • 30 Apr 2009 at 11:26 AM

Breaking: TARP Complicates Bankruptcy (Who Knew?)

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Maria Bartiromo is reporting that a number of Chrysler’s non-TARP senior bondholders are precluded from conducting direct talks with the government at all.
That is entertaining.
Developing.