Much has been written regarding the recent EU and US sanctions targeting the Russian capital markets, military and oil sectors (our own commentary can be found here) and the broad nature of the sanctions has, it would seem, produced some (probably) unintended consequences when applied to the mechanics of day to day capital markets operations.  On their face, the capital markets sectoral sanctions are designed to cut off the ability of the sanctioned companies to access funding in the equity and debt markets.  Hence, broadly speaking, anybody who must comply with EU or US sanctions cannot participate or deal in any new debt or equity issued by a sanctioned entity once they have been put on the sanctions lists.  Existing debt or equity issued prior to the implementation of sanctions is grandfathered.

Continue Reading The issue of sanctions

With yet another foreign convertible bond default hitting our desk, we cannot help but wonder what the future has in store for Asian convertible bonds and debt capital markets restructurings.  This is particularly relevant when you consider that Indian companies and banks issued foreign currency bonds aggregating up to approximately $6.3 billion in the first quarter of 2013.  This momentum continued throughout 2013 with Indian companies expected to raise another $10 billion by the beginning of 2014 by issuing foreign currency bonds in the international capital markets.

The Story so far

The convertible bond has always been a favourite of corporate India.  Turning back the clock, one would recall that, particularly between 2005 and 2008, several companies across multiple industries used a variety of structures to access the international debt capital markets by issuing foreign currency convertible bonds (FCCBs) to investors. Such issuers included National Thermal Power Corporation, Indian Oil Corporation, Bharat Petroleum Corporation, Power Finance Corporation, Tata Steel, Tata Communications, Vedanta, Bharti Airtel, Amtek Auto and Rural Electrification Corporation (just a few names amongst an endless list of issuers back in the day).

Fast forward to 2014 and FCCB defaults have dominated recent headlines (think major companies like Sterling Biotech, KSL and Industries and Suzlon Energy).
Continue Reading Indian Bond Defaults and Bond Restructurings: More Scheming Ahead?

So called ‘sunshine backed bonds’ are one of the newest and most exciting asset classes to enter the asset-backed securities market since the financial crisis. The resurgence of the market has led to a number of esoteric ABS issuances in recent months but it was solar energy that seemed most ripe for applying securitisation techniques (which provide an especially powerful financing tool). Indeed, given how this financing technique revolutionised the mortgage finance market 30 years ago, it now seems poised to play a role in transforming the renewable energy markets across Europe.

The case for securitising solar

In essence, securitisation allows companies to access the capital markets and in so doing to bring down their cost of capital and improve liquidity. Pools of illiquid assets are sold to bankruptcy-remote vehicles which then issue bonds to investors which are backed by the pool of assets. The originator of the assets is able to turn illiquid assets into saleable securities and in so doing shift those assets, and the risk of ownership, off its balance sheet in return for new finance.
Continue Reading Sunshine backed bonds – time to look on the sunny side?