Results for tag "debt"

2 Articles

Repricing of debt and equity issues

In the current market, not a day goes by without news that the financing of another high-profile acquisition or buyout has run into trouble. The collapse of the US sub-prime mortgage market has wreaked havoc in the leveraged loans sector, as banks such as Citigroup, RBS and JPMorgan have suddenly found themselves stuck with private equity-related debt sitting on their balance sheets as a result of underwritten but as yet unsyndicated loans.

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Monetary policies in times of turmoil

The current weakness in the US financial markets has recently been magnified overseas as panic spread to foreign investors with exposure to U.S. asset backed debt. The recent sell off in global stocks was in general liquidity-driven and a consequence of mispriced risks in the US sub-prime, derivatives and international currency markets. Initially many investors, particularly those using leverage, were forced to meet margin calls by selling assets to raise cash. Since the assets causing the problems had little, if any, value, they were forced to sell other assets instead, causing prices to fall sharply. In addition, the increased risk aversion that followed led to de-leveraging of other speculative positions like for instance the yen carry trades; speculative-grade corporate bond issuance ground to a halt; and the asset-backed commercial paper market seized up, even for high-quality investors. Read More →