Wednesday, June 27, 2007

MISC Shelves $750M Bond Offering

by Bill McBride on 6/27/2007 04:41:00 PM

From the Financial Times: Debt deals pulled as banks feel subprime chill

Companies are pulling financing deals across the globe, in one of the clearest signs yet that investors’ worries about rising interest rates and US subprime mortgages could be infecting other areas of the credit world and driving up the cost of corporate borrowing.
MISC, the world’s biggest owner of liquefied gas tankers on Wednesday shelved its $750m bond offering. The move came a day after US Foodservice, the American division of Ahold, the Dutch supermarket group postponed its $650m bond offering and Arcelor Finance put plans for its euro-denominated benchmark bond issue on hold, citing turbulent market conditions.

The bonds and loan deals were pulled after investors refused to buy them under the proposed terms, demanding higher premiums and more protection.

Stephen Green, chairman of HSBC, on Wednesday fuelled investor concern when he forecast that some large corporate deal was going to “end in tears” because of over-leverage. He warned the losses could be high because the parcelling out of risk to some many parties would make it more difficult to organise a financial reconstruction.

In an interview with the Financial Times, Mr Green admitted that he was “worried by the degree of leverage in some big ticket transactions nowadays” and felt that “something is going to end in tears”.
UPDATE: Another interesting quote from MarketWatch: Hedge fund CEO: 'day of reckoning to come' in credit market
Eric Mindich, the chief executive of Eton Park Capital Management ... said the "day of reckoning" may be here, in reference to recent problems in the securitized debt markets. "There's dry timber out there," Mindich said at the Wall Street Journal Deals and Deal Makers Conference on Wednesday. "There are people's lives that are going to be changed by what happens."