Monday October 26 Housing and Economic stories

TOP STORIES:

Renewable Energy Financing Hits a Snag - (www.nytimes.com) Only a few months ago, it seemed that the renewable energy sector could do little wrong: Stock prices were soaring and money was pouring in as investors flocked to get in on the action. That is no longer the case. Low oil and gas prices have roiled the energy markets, and the specter of rising interest rates has rattled investors’ confidence in the industry’s returns. Although energy and financial experts say that the basics of the business remain sound, the lofty stock prices have tumbled, leading renewable energy companies to scramble for new approaches to their businesses. Nowhere has the retrenchment been more acute than in a newfangled financing mechanism called a yieldco. Yieldcos, public companies conceived by renewable energy companies as a way to raise cheaper capital for project development, have attracted billions in new investments. The yieldcos buy and operate power plants, mainly those that their parent companies develop. The yieldcos then collect the contracted electricity fees and pay the bulk of them out as dividends. With investors hungry for stable returns, energy yieldcos were greeted with enthusiasm through initial public offerings of their stocks over the last year and a half.

Bond predators humbled by distressed bets - (www.ft.com) The cleverest predators of the bond market have suffered a humbling this year, after a heap of high profile bets have gone awry. So-called distressed debt funds seek lucrative opportunities in parts of the credit market where many other investors fear to tread, snapping up the bonds or loans of borrowers either nearing or who have filed for bankruptcy. Sometimes, the bet is that a company only needs more time and money to get on an even keel or the distressed debt fund steps in and takes it over in a restructuring. Usually, it is simply that the price of a company’s debts have been pushed below their fair value — based on the expected recovery value of assets — by panicky traditional investors, who flee at the slightest whiff of danger. This somewhat dangerous way to make money is the domain of some of the most respected money managers in the finance industry. But an unhappy confluence of market-wide challenges and idiosyncratic issues has proven exceptionally painful this year. “It’s been humbling for most folks,” says Edwin Tai, a distressed debt portfolio manager at Newfleet Asset Management. “Seven years of easy money has made even the most disciplined investors stretch a little.”

Market turmoil taking toll on once-invincible IPO market - (www.cnbc.com) The IPO market is painting a cold-blooded picture of the toll this summer's market turmoil has taken on innovation and growth: The number of IPOs this year could drop by as many as 20 below what was expected as recently as last month. The market is likely to see as few as 180 initial public offerings in the U.S. by the end of the year, down from an estimate of 200 in September and 275 deals last year, said Kathleen Smith, president of Renaissance Capital, a research and investment firm focused on IPOs. If the pace holds, it would represent a 35 percent decline from last year's deal flow. The toll has been even tougher for technology companies: Only 17 tech companies have gone public this year, Renaissance analyst Nick Einhorn said. Digicel, the cellphone provider serving the Caribbean, withdrew its IPO last week, one of 65 deals canceled this year. That's the most since 2012.

China Sausage Maker Says May Miss Bond Payment as Defaults Mount - (www.bloomberg.com) A Chinese sausage maker said it’s not sure if it can repay a bond after its director was put under house arrest, the latest case in China mixing corporate governance and debt problems. Based in the eastern province of Jiangsu, Nanjing Yurun Foods Co. is suffering cash shortages and great risks in its finances and operations, it said in a statement posted on the Chinamoney website. The company, which sold 1.3 billion yuan ($206 million) ofbonds at a yield of 5.49 percent in 2012, must repay 1.37 billion yuan in principal and interest due Oct. 18, according to the statement. As that’s a Sunday, the effective due date is the following day, it says. Investors are growing alarmed as slowing economic growth and a fight against corruption compound strains in China’s 42.2 trillion yuan bond market. There have been four defaults this year, including one by China National Erzhong Group Co., according to China International Capital Corp. Kaisa Group Holdings Ltd. became the first Chinese developer to renege on a debt obligation in the offshore bond market in April after founder Kwok Ying Shing resigned amid a corruption probe.

Petrobras Isn't Only State-Run Company Unloved by Bond Traders - (www.bloomberg.com) State-run companies are realizing government backing isn’t what it used to be. Tumbling commodities, a corruption scandal ensnaring Petroleo Brasileiro SA and slowing global growth are sapping demand for so-called quasi-sovereign debt across emerging markets, with state-backed companies in Brazil, South Africa, Colombia and Mexico faring the worst. Investors were demanding 1.09 percentage points more than sovereign debt to own the bonds of 200 state-run issuers this month, up from 0.63 percent in December, according to Barclays Plc, whose indexes include $556 billion in quasi-sovereigns. The debt from state-backed oil producers, utilities and banks across emerging markets have been among the hardest hit securities in the recent global selloff of higher-yielding securities. It’s a dramatic shift for many of the bonds, which are seen as less risky than those from similar companies without state sponsorship because of an implicit government guarantee. Faced with mounting losses, investors have started to question how firm the sovereign support really is, according to Bank of Nova Scotia.

OTHER STORIES:

Petrobras Isn't Only State-Run Company Unloved by Bond Traders - (www.bloomberg.com)
It's Glencore Versus Goldman in Metals as Miners Cut Production - (www.bloomberg.com)
Kuwait sovereign fund may sell assets to cover deficit - report - (www.reuters.com)
Cyberwar Ignites a New Arms Race - (online.wsj.com)

Islamic State is prime suspect in Turkey bombing, as protests erupt - (www.reuters.com)
Did U.S. weapons supplied to Syrian rebels draw Russia into the conflict? - (www.washingtonpost.com)
Meanwhile, Putin Is Also Arming Iran - (online.wsj.com)
U.S. Patrols to Test China’s Pledge on South China Sea Islands - (online.wsj.com)