Latest news with #ShankarRamakrishnan
Yahoo
06-05-2025
- Business
- Yahoo
US banks modest use of risk transfers is credit positive, Moody's says
By Shankar Ramakrishnan (Reuters) -A very small proportion of U.S. banks have issued a complex product that enabled them to shed risk from loan portfolios and the relatively modest use of the products was a credit positive, Moody's Ratings said in a report after surveying 69 rated U.S. banks. In deals known as credit risk transfers, banks effectively buy insurance from hedge funds and other investors against the risk of losses from loans. They grew in popularity in 2022 as regulators proposed increases to capital requirements for large banks after the regional banking crisis and under the Basel III regulations that pushed banks to look for ways to improve their regulatory capitalization levels. Still only 15 out of 69 U.S. banks surveyed by Moody's issued CRTs and their use was relatively modest, reflected in a median capital benefit of a 25 basis point increase in the Common Equity Tier 1 (CET1) ratio - which measures the quality of a bank's assets, the report said. "More material increase of more than 1% would likely indicate an overreliance on CRTs and therefore be credit negative," it said. The total outstanding CRT balances for these banks exceeded $15 billion, referencing more than $150 billion in assets, it said noting issuance volume correlated with the size of the bank, which was also a credit positive. Of the 26 surveyed banks with assets of $100 billion or more, 11 (42%) have issued CRTs and of the 43 rated banks with assets less than $100 billion, only four (9%) have issued CRTs, it said. Banks completed only a few transactions, reflected in a median of three transactions and backed by high quality performing assets. The most active CRT issuers tend to be the global investment and universal banks, it said. CRT investors were also quite concentrated, with the largest investor holding around 40% of a bank's total CRT exposure and the top three investors holding around 80%. Most banks' CRTs had no more than 10 investors, the survey found. Most new CRT issuance in 2025 is likely to come from banks that have already engaged in such transactions and most of the survey respondents that had not already participated said they were unlikely to do so, said Moody's. (Reporting by Shankar Ramakrishnan; Editing by Lincoln Feast.)
Time of India
06-05-2025
- Business
- Time of India
Apple prices first bond offering in 2 years
By Shankar Ramakrishnan and Matt Tracy Apple sold $4.5 billion worth of bonds late on Monday, its first offering in two years, and said it plans to use proceeds to repurchase stock and repay outstanding debt. The offering included $1.5 billion of three-year notes and $1 billion each of five, seven- and 10-year notes. Apple has $8 billion in debt maturing from May through November. Eight other issuers in the investment-grade primary market also kicked off an unusually active week with an estimated total of nearly $35 billion of new debt offerings. These include notes from Comcast, DTE Electric Co and General Motors. New bond supply is rising as credit spreads, or the premium companies pay over Treasuries, have rebounded in the weeks since U.S. President Donald Trump first announced harsh tariffs and then provided temporary relief. Many issuers had planned offerings sooner but were thrown off by the uncertainty of Trump's policies. They are rushing to market before the Federal Reserve meets on Wednesday to avoid the volatility that usually follows the Fed chair's comments after such monthly policymaking meetings. Demand is expected to remain strong as uncertainty pushed investors to seek safety in higher-rated bonds, analysts said. Apple's debt sale had order books well over the amount it sought, a source familiar with the matter said, noting that orders totaled $10 billion. The issuance rush follows six consecutive weeks of outflows from investment-grade funds, the longest streak since November 2022, noted Dan Krieter, director of fixed income strategy at BMO Capital Markets. "It's a pretty attractive space to lock in these all-in yields," said Natalie Trevithick, head of investment grade credit strategy at Los Angeles-based asset manager Payden & Rygel. "The issuance is a lot of high-quality names today, (and) a lot of it is just regularly planned issuance. There are probably a couple deals that got pushed back from April," Trevithick noted. Apple likely timed its bond sale to take advantage of tightening investment-grade bond spreads since Trump announced he would ease tariffs on various countries late last month. The average investment-grade bond spread was 106 basis points on Friday, the latest data shows, or three basis points below levels touched the day before. "Apple does tend to be pretty good at timing their deals around tight (spreads)," said a second investor, who declined to be named commenting on specific offerings. Payden & Rygel expects $12 billion to $13 billion of supply on Monday, with roughly $58 billion of investor demand, she added.
Yahoo
10-04-2025
- Business
- Yahoo
Analysis-Private credit secondary sales set to rise as market turmoil spurs hunt for cash
By Shankar Ramakrishnan, Tommy Reggiori Wilkes and Mathieu Rosemain NEW YORK/LONDON/PARIS (Reuters) - Investors are preparing to step up sales of their private credit holdings, as heightened market volatility unleashed by U.S. President Donald Trump's trade wars forces them to find new ways to raise cash, fund managers and executives say. Private credit, the name given to specialised lenders like Apollo Global Management, Ares Management and KKR that finance companies instead of banks, has boomed into a $1.5 trillion industry, drawing in big institutional investors like pension funds who invest in the funds that grant the loans. While so-called "secondary sales" of stakes in private equity funds have soared amid a downturn in dealmaking, assets in private credit seldom change hands. This week's dramatic market tumble may change that. Investors are enquiring about shedding their private credit investments in the secondary market because they worry about being overly exposed to private assets as public markets fall in value and as the need for accessing cash in more volatile markets grows, executives say. "We are hearing more and more from people seeking liquidity," said Greg Ciesielski, a secondary fund manager at HarbourVest, referring to interest in selling private equity and credit exposure. "This is going to be a real inflection point (for private credit secondary activity)," he said. On Tuesday, New York-based Pantheon announced it had raised $5.2 billion for a fund buying private credit stakes. Rakesh Jain, Pantheon's global head of private credit, said secondary market opportunities were "among the most robust we have seen". Last week, Coller Capital, a secondaries manager, said it had acquired a $1.6 billion senior direct lending portfolio from U.S. insurer American National. Negotiating a sale in the secondary market takes time, typically weeks, and is not the first place institutional investors turn to raise cash. The scale and speed of market selloffs this week have seen some hedge funds rush to offload private debt positions, however, with several forced to unwind highly leveraged debt purchases after lenders hit them with margin calls. "We were rung this week by an investment bank who said they have had to liquidate a hedge fund's U.S. debt position to meet a capital call,' said Symon Drake-Brockman, co-founder of Pemberton, a European private credit manager. Drake-Brockman said the debt was being offered at around 95 cents to the dollar, far from the panic selling seen during the 2020 COVID-19 crisis, when some banks offered underwritten loan positions at 65-70 cents. Today's market was offering "an opportunity to pick up quality credit at a discount to par, immediately booking an unrealized paper gain," Drake-Brockman added. Secondary market deal volumes hit a record $160 billion last year, driven by asset sales by leveraged buyout funds that could not exit investments through M&A and initial public offerings in volatile markets, and by their investors such as pension funds and insurers needing cash back faster than they could deliver. Private equity transactions account for a much larger share of transactions. Ares has said an estimated 2-3% of private equity assets are traded in the secondary market, against less than 1% in private credit. DENOMINATOR EFFECT One big driver for investors to sell is the "denominator effect", which leaves them with too much private market exposure when public stock and bond markets tank. That's because private assets are often marked to market, or revalued, monthly or quarterly, shielding investors from the volatility seen in public markets but leaving them overly exposed. Fund managers caution that there has been little sign of distressed selling yet, with discounts being discussed in the range of 5-10% below par. Trump's blizzard of tariffs last week, and his partial u-turn this week, have hit confidence and analysts say it likely means tougher times ahead for economies and investors. "It could be very negative for some of these limited partners (investors in private markets) because volatility is making it clear that liquidity is not going to come (through M&A and IPOs) in the short term so we are seeing interest to sell assets on the secondary market," said Greg Fayvilevich, global head of Fitch Ratings' fund and asset management group. These dynamics are also likely to lift private equity secondary volumes further. One New York-based secondary manager said it had been contacted by multiple U.S. endowment funds, which typically have little need to exit private equity investments but "whose financing methods have been turned upside down" by this week's market turmoil. Sign in to access your portfolio
Yahoo
05-03-2025
- Business
- Yahoo
Mars announces 8-part bond; headlines big M&A financing week
By Shankar Ramakrishnan (Reuters) - Family-owned candy giant Mars announced a eight-part investment-grade bond offering on Wednesday to help finance its takeover of Pringles maker Kellanova, according to a terms sheet, in what is expected to be one of the largest acquisition financing deals this year. Bank of America, BNP Paribas, Citigroup, JP Morgan, Morgan Stanley and Rabobank were the bookrunners for the offering, which is expected to raise anywhere between $25 to $30 billion, they said. Reuters last week reported the bonds will be announced this week. According to the term sheet of the offering, Mars, which is offering bonds with maturities that range from two years to 40 years, said it will redeem the notes at a price of 101 if the acquisition was not completed by August 20, 2026. The Mars bonds headlined what has been a heavy week for acquisition financing. On Monday, design software maker Synopsys raised $10 billion selling six tranches of bonds that had maturities from two years to 30. The bonds would help finance its $34 billion takeover of Ansys. Demand for Synopsys bonds was massive with books covered some three to five times the issuance size, according to Informa Global Markets data. If Mars raised $25 billion, it would become the eighth largest deal of all time and more than double the amount of M&A-related investment-grade bond issuance for the year, said IGM. The announcement of the bond was made on a day when markets were relatively stable after a selloff earlier in the week as U.S. President Trump escalated a global trade war on Tuesday by imposing 25% tariffs on top trade partners, Canada and Mexico, citing ineffective border controls. Sign in to access your portfolio
Yahoo
28-02-2025
- Business
- Yahoo
Exclusive-Mars readying over $25 billion bond sale for next week, sources say
By Anirban Sen and Shankar Ramakrishnan NEW YORK (Reuters) - Family-owned candy giant Mars is preparing to sell bonds worth between $25 billion and $30 billion as soon as next week to help finance its takeover of Pringles maker Kellanova, according to people familiar with the matter, in a deal that would headline a $40 billion rush of acquisition financing bonds. Banks led by Citigroup and JPMorgan Chase are preparing to market the bond sale to potential investors sometime next week, the sources said, cautioning that the timing of the bonds sale is subject to market conditions and could change. Depending on its final size, the bonds offering could feature among the top 10 largest M&A financing deals in the investment-grade bond market since 2013, according to Informa Global Markets data. Separately, design software maker Synopsys is preparing to sell between $10-15 billion of bonds to help finance its $34 billion takeover of Ansys, two of the sources added. Bloomberg earlier on Friday reported on Synopsys' bond sale talks. The two deals combined could result in issuances worth about $40 billion next week, the sources said, boosting supply in an investment-grade bond market that is already seeing a flood of issuance driven by investor demand to lock in yields in a high-for-longer interest rate environment. JPMorgan and Citigroup declined to comment. Mars and Synopsys did not immediately respond to requests for comment. On Thursday, S&P Global Ratings downgraded its issuer credit rating on Mars to A from A+ noting the company expects to fund its Kellanova acquisition entirely with net debt. "We do not forecast the company will restore leverage to below 3x or sustain discretionary cash flow (DCF) to debt well above 10% until fiscal 2027. We expected the company to maintain those metrics for the 'A+' rating," S&P said. Sign in to access your portfolio
