Leaking Like a SIV Part II
Continued from earlier... Libor Up, Banks Down...
The BOE offered extra cash to financial institutions as the rate banks charge each other to borrow in dollars for three months rose for a 10th day.
The London interbank offered rate, or Libor, increased to 5.72%, the highest since January 2001, from 5.36% at the end of July,
Bad Moon Risin...
Moody's Investors Service expects the percentage of borrowers missing payments to double to 3.5% next year, as speculative-grade companies struggle to refinance about $22.7 billion of debt.
Yield spreads on junk bonds ballooned to an average of 4.59% on Aug. 16, the highest in three years, from a record low of 2.41% points on June 5.
The corporate bond market's favorite securities last year, so-called distressed debt, yield at least 10 percentage points more than Treasuries.
Since June, the amount of distressed bonds has risen more than fivefold to $24.8 billion.
More than 50 companies had to delay or rework debt offerings since June as demand dried up.
The amount of debt in the Merrill Lynch distressed bond index tripled in July to $13.8 billion, and about doubled again in August to $24.8 billion.
GMAC Distress??
Residential Capital's $2.5 billion of 6.375% notes due in 2010 traded yesterday at 80 cents on the dollar to yield 16.5%.
The debt is rated Ba1 by Moody's and has an investment-grade ranking of BBB- by S&P.
ResCap, the biggest closely held mortgage lender is a unit of GMAC who last week said it will inject at least $775 million into the mortgage unit.
General Motors the largest U.S. automaker, sold a 51% stake in GMAC last year to a group led by private equity firm Cerberus Capital Management; GM still has a 49% stake.
Less cluck, for your buck...
Tyson Foods, the biggest U.S. meat processor, cut its 2007 earnings forecast as Q4 cattle and hog costs rose more than expected.
Tyson said it has absorbed almost $300 million in additional grain costs this year, mostly to feed poultry.
Some poultry sales were lost after chicken prices were raised earlier in the fiscal year.
Tyson had a loss in fiscal 2006 and has closed or sold processing plants that weren't meeting profit goals, and instituted other cost-cutting measures.
Mortgage Insurer's Fail?
MGIC Investment, the biggest U.S. mortgage insurer, abandoned talks to acquire Radian Group Inc. for about $2.4 billion as subprime loans defaulted at the highest in five years.
Credit-default swaps on Radian climbed 192 basis points to 650 basis points today, an increase signals deterioration in the perception of credit quality and the company's ability to repay its debt .
Standard & Poor's said it's still reviewing the claims-paying ability of Radian's mortgage insurance units.
If Radian's mortgage insurance units' ratings fell below AA- it would "severely" damage sales and probably force Radian to raise new capital or sell itself.
MGIC partly attributed its reluctance to complete the purchase to the potential for losses from an 11-year-old joint venture it co-owns with Radian.
The venture, Credit-Based Asset Servicing and Securitization, invests in subprime loans. Both companies own a 46% stake and said in July their investments...
each valued at more than $500 million in June, may have become worthless because of ``unprecedented'' market dislocations.
MGIC insured $57.5 billion of new mortgages in 2006, giving it a 22% market share in the U.S. PMI Group Inc. insured $52.2 billion, or 20%, followed by Radian's $40.1 billion, or 15%. Bermuda Shorts anyone?
Speaking of Bermuda Shorts...
Since early 2006, ABN Amro Asset Management's Francois Moute has slashed his net holdings of shares from 85% of assets to 60%, the lowest he's allowed.
Almost 24% of his $343 million U.S. Opportunities fund now bets against indexes.
Moute, 62, "There is far too much debt. This isn't a good environment for stocks and it's time to be prudent.
The current credit crisis is a serious one but it's the tip of the iceberg. There is too much complacency. It's probably more serious than the equity market is pricing in."
Last year Moute sold out of financial institutions such as Wachovia Corp., the fourth-largest U.S. bank, because they were too exposed to consumer debt, YTD Wachovia -11%.
Moute now has "zero exposure" to finance companies or those that market to consumers in the U.S.
The only equities he is buying are those of U.S. commodity companies selling in emerging markets.
The Nattering One whispers loudly again, dry bulk goods, natural gas & crude oil SHIPPERS...
The BOE offered extra cash to financial institutions as the rate banks charge each other to borrow in dollars for three months rose for a 10th day.
The London interbank offered rate, or Libor, increased to 5.72%, the highest since January 2001, from 5.36% at the end of July,
Bad Moon Risin...
Moody's Investors Service expects the percentage of borrowers missing payments to double to 3.5% next year, as speculative-grade companies struggle to refinance about $22.7 billion of debt.
Yield spreads on junk bonds ballooned to an average of 4.59% on Aug. 16, the highest in three years, from a record low of 2.41% points on June 5.
The corporate bond market's favorite securities last year, so-called distressed debt, yield at least 10 percentage points more than Treasuries.
Since June, the amount of distressed bonds has risen more than fivefold to $24.8 billion.
More than 50 companies had to delay or rework debt offerings since June as demand dried up.
The amount of debt in the Merrill Lynch distressed bond index tripled in July to $13.8 billion, and about doubled again in August to $24.8 billion.
GMAC Distress??
Residential Capital's $2.5 billion of 6.375% notes due in 2010 traded yesterday at 80 cents on the dollar to yield 16.5%.
The debt is rated Ba1 by Moody's and has an investment-grade ranking of BBB- by S&P.
ResCap, the biggest closely held mortgage lender is a unit of GMAC who last week said it will inject at least $775 million into the mortgage unit.
General Motors the largest U.S. automaker, sold a 51% stake in GMAC last year to a group led by private equity firm Cerberus Capital Management; GM still has a 49% stake.
Less cluck, for your buck...
Tyson Foods, the biggest U.S. meat processor, cut its 2007 earnings forecast as Q4 cattle and hog costs rose more than expected.
Tyson said it has absorbed almost $300 million in additional grain costs this year, mostly to feed poultry.
Some poultry sales were lost after chicken prices were raised earlier in the fiscal year.
Tyson had a loss in fiscal 2006 and has closed or sold processing plants that weren't meeting profit goals, and instituted other cost-cutting measures.
Mortgage Insurer's Fail?
MGIC Investment, the biggest U.S. mortgage insurer, abandoned talks to acquire Radian Group Inc. for about $2.4 billion as subprime loans defaulted at the highest in five years.
Credit-default swaps on Radian climbed 192 basis points to 650 basis points today, an increase signals deterioration in the perception of credit quality and the company's ability to repay its debt .
Standard & Poor's said it's still reviewing the claims-paying ability of Radian's mortgage insurance units.
If Radian's mortgage insurance units' ratings fell below AA- it would "severely" damage sales and probably force Radian to raise new capital or sell itself.
MGIC partly attributed its reluctance to complete the purchase to the potential for losses from an 11-year-old joint venture it co-owns with Radian.
The venture, Credit-Based Asset Servicing and Securitization, invests in subprime loans. Both companies own a 46% stake and said in July their investments...
each valued at more than $500 million in June, may have become worthless because of ``unprecedented'' market dislocations.
MGIC insured $57.5 billion of new mortgages in 2006, giving it a 22% market share in the U.S. PMI Group Inc. insured $52.2 billion, or 20%, followed by Radian's $40.1 billion, or 15%. Bermuda Shorts anyone?
Speaking of Bermuda Shorts...
Since early 2006, ABN Amro Asset Management's Francois Moute has slashed his net holdings of shares from 85% of assets to 60%, the lowest he's allowed.
Almost 24% of his $343 million U.S. Opportunities fund now bets against indexes.
Moute, 62, "There is far too much debt. This isn't a good environment for stocks and it's time to be prudent.
The current credit crisis is a serious one but it's the tip of the iceberg. There is too much complacency. It's probably more serious than the equity market is pricing in."
Last year Moute sold out of financial institutions such as Wachovia Corp., the fourth-largest U.S. bank, because they were too exposed to consumer debt, YTD Wachovia -11%.
Moute now has "zero exposure" to finance companies or those that market to consumers in the U.S.
The only equities he is buying are those of U.S. commodity companies selling in emerging markets.
The Nattering One whispers loudly again, dry bulk goods, natural gas & crude oil SHIPPERS...
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