Energy Default Alarms Get Louder as Pain Seen
Lasting Into 2016 - (www.bloomberg.com) Eleven
months of depressed oil prices are threatening to topple more companies in the
energy industry. Four firms owing a combined $4.8 billion warned this week that
they may be at the brink, with Penn Virginia Corp., Paragon Offshore Plc,
Magnum Hunter Resources Corp. and Emerald Oil Inc. saying their auditors have
expressed doubts that they can continue as going concerns. Falling oil prices
are squeezing access to credit, they said. And everyone from Morgan
Stanley to Goldman Sachs Group Inc. is predicting that energy prices won’t
rebound anytime soon. The industry is bracing for a wave of failures as
investors that were stung by bets on
an improving market earlier this year try to stay away from the sector. Barclays
Plc analysts say that will cause the default rate among speculative-grade
companies to double in the next year. Marathon Asset Management is predicting
default rates among high-yield energy companies will balloon to as high as 25
percent cumulatively in the next two to three years if oil remains below $60 a
barrel.
Chinese Defaults Spread as Cement Maker to Miss
Bond Payment - (www.bloomberg.com)
The buzzing mobile phone foretold trouble. During
an interview last month at the posh Shangri-La Hotel in Hong Kong, Henry Li
stepped aside four times in an hour to take calls. Creditors were frantically
trying to connect with the chief financial officer of China Shanshui Cement
Group Ltd., and they wanted to know one thing: Was his company about to
default? "Honestly speaking, banks are very worried about us, as you can
tell from the fact that I’ve received many calls,” said Li, sitting alongside
Shanshui Chairman Zhang Bin as they discussed the firm’s predicament with
Bloomberg on Oct. 14. On Wednesday, the creditors got their answer. Shanshui,
reeling from China’s economic slowdown and a shareholder campaign to oust
Zhang, said it will fail to pay 2 billion yuan ($314 million) of bonds due on
Nov. 12, making it at least the sixth Chinese company to default in the local
note market this year. Analysts predict it won’t be the last as President
Xi Jinping’s government shows an increased willingness to allow corporate
failures amid a drive to reduce overcapacity in industries including
raw-materials and real estate.
Portugal Bonds Hurt by Politics May Face QE
Eligibility Headwind - (www.bloomberg.com) Portugal’s
government bonds, the worst performers in the euro zone over the past month,
face another hurdle with a potential credit-rating downgrade that may see them
excluded from the European Central Bank’s asset-buying program. For Portugal’s
bonds to be eligible for purchase, the nation must be rated investment grade by
at least one major ratings company. It has already been junked by Moody’s
Investors Service, Standard & Poor’s and Fitch Ratings. But the country
still holds that crucial investment-grade status by DBRS Ltd. The Toronto-based
company is scheduled to review its position on Friday, raising the possibility
Portugal could lose a crucial source of support. “The fear is that if DBRS
downgraded them, it would trigger Portugal falling out of the eligibility,”
said David Schnautz, a London-based interest-rates strategist at Commerzbank
AG. “It’s obviously something that investors have to brace for. It’s a
low-probability but high-impact event.”
Dizzying Ride May Be Ending for Start-Ups - (www.nytimes.com) The
worth of hot technology start-ups seemed for years to go in only one direction:
straight up. Now there are signs of growing unease over the dizzying valuations
of some of the most richly priced private companies. The latest sign has
emerged with one such favorite, Snapchat, being discounted 25 percent by one of
its more recent investors, Fidelity, the mutual fund giant.
Another start-up, Dropbox, the widely used file storage service, was devalued
by the giant asset manager BlackRock this year. The funds’ markdowns may tap
the brakes on a fast-growing market. Investors, in the hopes of getting a piece
of the next Facebook or Google, have been pouring billions of dollars into
young private companies.
Coming to a Balance Sheet Near You: $2 Trillion Leases - (online.wsj.com) Some of America’s best-known companies—names such as AT&T Inc., CVS Health Corp. and Delta Air Lines Inc.—likely will soon have to effectively boost the debt they report on their balance sheets by tens of billions of dollars. The total possible impact for all companies: as much as $2 trillion. Within a few years, companies may have to add to their books the cost of many leases for real estate, aircraft and other items that aren’t already carried there. U.S. rule makers are set to vote Wednesday on whether to approve in principle long-awaited new rules requiring companies to make that addition, though the move wouldn’t take effect until at least 2018.
China's Shanshui Cement to Default on Onshore Bonds on Thursday
- (www.bloomberg.com)
Decision Time for President After Portuguese Premier Toppled - (www.bloomberg.com)
Russia Said to Plot Strategy to Block IMF Lending to Ukraine - (www.bloomberg.com)
Decision Time for President After Portuguese Premier Toppled - (www.bloomberg.com)
Russia Said to Plot Strategy to Block IMF Lending to Ukraine - (www.bloomberg.com)
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