You people need to learn how to condense. No one wants to read a book to get your point.
On Oct 17, 5:38 am, "\"Lone Wolf\"" <[EMAIL PROTECTED]> wrote: > Armageddon' Loan, Bond Prices Keep Debt Investors on Sidelines > > By Pierre Paulden and Caroline Salas > > Oct. 17 (Bloomberg) -- Credit markets have fallen so far that they are > providing a ``once in a lifetime opportunity,'' and investors are > still selling. > > Prices of loans rated below investment grade declined to a record low > 66.1 cents on the dollar, virtually guaranteeing investors get their > money back, based on historical recovery rates, according to data > compiled by Standard & Poor's. Yields on corporate bonds show > investors expect 5.6 percent of the market will go bust, the highest > default rate since the Great Depression, according to Christopher > Garman, chief executive officer of debt research firm Garman Research > LLC in Orinda, California. > > While central banks injected $3 trillion into the global economy, > credit markets are tumbling because banks are clamping down on > lending, forcing investors to unload assets they bought with borrowed > money. The Federal Reserve said Aug. 11 that its quarterly survey > shows most ``domestic institutions reported having tightened their > lending standards and terms.'' > > ``There has been widespread liquidation of assets that has nothing to > do with fundamentals,'' said Scott D'Orsi, a partner at Boston-based > Feingold O'Keeffe Capital, a hedge fund which has $1.3 billion in > assets. ``Investors in bank debt are being presented with a vast > number of extraordinary opportunities; opportunities that I would > characterize as once in a lifetime.'' > > The selling is being compounded by hedge funds and mutual funds > dumping holdings to meet redemptions, which may push prices even > lower, according to analysts at UBS AG. > > Assets Seized > > Barclays Plc, the U.K.'s second-biggest bank, is auctioning $642 > million of loans seized this week from Dallas-based Highland Capital > Management LP, according to people with knowledge of the sale who > declined to be identified because the sale hasn't been announced. > Hedge funds Tudor Investment Corp., run by Paul Tudor Jones, and SAC > Capital Advisors LLC, managed by Steven Cohen, sold assets this month > to raise cash as stock prices dropped, according to people with > knowledge of the sales. > > Barclays spokesman Brandon Ashcraft, and Jack Yang, a partner at > Highland, declined to comment. > > Prices of high-yield, or leveraged, loans tumbled 22.2 cents since > Sept. 9, and are down from 95 cents on the dollar since the start of > the year, according to New York-based S&P's LCD unit. Because bank > debt holders typically recover about 70 cents on the dollar in > bankruptcy, almost every loan in the market would need to default > before investors would lose money, LCD said. > > `Priced in Armageddon' > > Corporate bond prices plunged to 79.9 cents on the dollar on average > from 94 cents at the end of August and 99 cents at the end of 2007, > according to index data compiled by New York-based Merrill Lynch & > Co. > > About 90 percent of the market trades like high-yield, high- risk, or > junk, debt, Garman said in an Oct. 3 report to clients. Prices imply a > 5.6 percent default rate, the most since the record 8.4 percent in > 1933, he said. Junk bonds are rated below BBB- by S&P and Baa3 at > Moody's Investors Service. > > ``It's quite possible that we had priced in Armageddon,'' said Robert > Gahagan, head of taxable fixed-income in Mountain View, California at > American Century Investment Management, which oversees $23 billion in > fixed-income assets. > > Wall Street firms have curbed lending after taking $661 billion of > credit losses and writedowns since the beginning of last year, > according to data compiled by Bloomberg. The collapse last month of > Lehman Brothers Holdings Inc., the fourth-largest securities firm, > sparked a new round of selling as investors became concerned that more > banks may fail. > > `The Big Picture' > > The sales may hamper efforts by Treasury Secretary Henry Paulson to > unlock the credit markets and challenge the next president as a > slowing economy drives prices even lower. Industrial output fell 6 > percent in the third quarter, the most since 1991, and a factory index > for the Philadelphia region hit an 18-year low this month, Federal > Reserve figures showed yesterday. > > ``The big picture is the economy is just starting to deteriorate,'' > said Mark Kiesel, executive vice president at Pacific Investment > Management Co., the manager of the world's biggest bond fund. Kiesel > runs $180 billion in corporate bonds from Newport Beach, California. > ``We still think there are a lot of redemptions and hedge fund > liquidations coming.'' > > Hedge funds may be forced to dispose of half their $135 billion in > high-yield loans to fund redemptions, Stephen Antczak, a UBS credit > analyst in Stamford, Connecticut, wrote in an Oct. 10 report to > clients. That may send loan prices as low as 60 cents, he said. > > No `Turnaround' > > ``The de-leveraging that we're witnessing will probably continue,'' > said Paul Scanlon, team leader for U.S. high yield and bank loans at > Boston-based Putnam Investments LLC, which manages $55 billion in > fixed income. ``My sense is that's not turning around in the very near > term.'' > > The biggest hedge fund run by Citadel Investment Group, which manages > $18 billion, fell as much as 30 percent this year because of losses on > convertible bonds, stocks and corporate debt, people with knowledge of > the returns said. Citadel founder Kenneth Griffin blamed ``reduced > availability of credit'' for the declines. > > Investors withdrew a record $43 billion from hedge funds in September, > according to TrimTabs Investment Research, which has been tracking the > data since 2000. The industry had declines of 9.4 percent this year > through the end of September, according to Chicago-based Hedge Fund > Research Inc., the worst year in two decades. > > Commercial Mortgages > > For buyers to lose money on some top-rated bonds backed by mortgages > on offices, hotels, apartment buildings and other commercial > properties, the circumstances would have to surpass the worst > conditions on record, according to Darrell Wheeler, global head of > securitized strategy at Citigroup Inc. > > Commercial-mortgage securities rated AAA that require an unprecedented > three-quarters of the underlying loans to default for any loss of > principal are trading at about 70 cents, according to New York-based > Citigroup. > > ``We're not at these prices because of the fundamentals: We threw > those out the window a year ago,'' he said. ``This is strictly people > want to sell something to raise cash, and it's easy to sell these CMBS > because it's a liquid market.'' > > Yields on AAA commercial mortgage bonds were at a record 620.7 basis > points over benchmark swap rates on Oct. 15, up from 47.8 basis points > a year ago, according to Bank of America Corp. A basis point is 0.01 > percentage point. > > To contact the reporter on this story: Pierre Paulden in New York at > [EMAIL PROTECTED]; Caroline Salas in New York at > [EMAIL PROTECTED] --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
