In spite of the slack in bank lending, we have noted that global issuance of corporate bonds have been at a record pace.
This Wall Street article takes a view on where the proceeds could have possibly been channeled.
(all bold highlights mine)
``In the first nine months of 2009, companies around the world borrowed about $2.3 trillion by issuing investment-grade corporate bonds — more than in any entire year on record, according to data provider Dealogic. When they issue the bonds, they typically tell investors why they’re doing it, valuable information that Dealogic records.
``One would expect companies to say they’re using the money to build their businesses, if only to put up a strong front. And some did. Both Citigroup Inc. and J.P. Morgan Chase & Co., for example, listed “expansion” among the reasons for their borrowings. But they were in the minority.
``Only 10 of the largest 100 bond deals globally, and only 12 of the 100 biggest U.S. deals, were purportedly for expansion, capital expenditures, investments or project finance. For nonfinancial companies, the picture was even starker: 9 out of the top 100 deals globally, and 6 out of the top 100 in the U.S., were investment-related.
``For the most part, the companies’ explanations for their borrowing suggest they’re repairing their finances — or hoarding cash while the financial markets will allow it, just in case things get bad again over the next couple years. Some 28 out of the top 100 deals globally — and 65 of the top 100 non-financial deals in the U.S. — listed “refinancing,” “recapitalization,” “repay debt,” or “working capital” as their purpose. Taken as a whole, this kind of financial repair was the largest reason listed for borrowing, after the generic “general corporate purposes.”
``Many also listed “acquisitions,” in a sign that the takeover business is far from dead. That’s good for bankers looking to get big advisory fees, but not necessarily good for the broader economy. Takeovers don’t typically add to overall investment, and often don’t even add value."
My conjecture: Terms as "repairing finances", “refinancing,” or “recapitalization” could masquerade or function as euphemisms for equity or commodity or other financial asset trades or punts.
This Wall Street article takes a view on where the proceeds could have possibly been channeled.
(all bold highlights mine)
``In the first nine months of 2009, companies around the world borrowed about $2.3 trillion by issuing investment-grade corporate bonds — more than in any entire year on record, according to data provider Dealogic. When they issue the bonds, they typically tell investors why they’re doing it, valuable information that Dealogic records.
``One would expect companies to say they’re using the money to build their businesses, if only to put up a strong front. And some did. Both Citigroup Inc. and J.P. Morgan Chase & Co., for example, listed “expansion” among the reasons for their borrowings. But they were in the minority.
``Only 10 of the largest 100 bond deals globally, and only 12 of the 100 biggest U.S. deals, were purportedly for expansion, capital expenditures, investments or project finance. For nonfinancial companies, the picture was even starker: 9 out of the top 100 deals globally, and 6 out of the top 100 in the U.S., were investment-related.
``For the most part, the companies’ explanations for their borrowing suggest they’re repairing their finances — or hoarding cash while the financial markets will allow it, just in case things get bad again over the next couple years. Some 28 out of the top 100 deals globally — and 65 of the top 100 non-financial deals in the U.S. — listed “refinancing,” “recapitalization,” “repay debt,” or “working capital” as their purpose. Taken as a whole, this kind of financial repair was the largest reason listed for borrowing, after the generic “general corporate purposes.”
``Many also listed “acquisitions,” in a sign that the takeover business is far from dead. That’s good for bankers looking to get big advisory fees, but not necessarily good for the broader economy. Takeovers don’t typically add to overall investment, and often don’t even add value."
My conjecture: Terms as "repairing finances", “refinancing,” or “recapitalization” could masquerade or function as euphemisms for equity or commodity or other financial asset trades or punts. 