- American Home Can’t Fund Loans, Says It May Have to Liquidate
- C-Bass Subprime Venture in Talks With Investors to Ensure Funds
- Heard on the Street: Betting on Mergers Can Pay Despite Widening Spreads
- Corporate Buyers Hit Gas on Deals
- Subprime Troubles Spread To Commerzbank, IKB
- A Stumble for ‘Bank Loan’ Mutual Funds
American Home Can’t Fund Loans, Says It May Have to Liquidate – Bloomberg
American Home Mortgage Investment Corp., the lender whose stock stopped trading after it disclosed a cash shortage, said it’s unable to fund loans and may have to liquidate assets.
The company has been cut off from credit and wasn’t able to fund $300 million of loans yesterday, it said today in a statement distributed by Business Wire. Another $450 million to $500 million probably won’t get funded today, it said.
American Home hired Milestone Advisors and Lazard Ltd. to evaluate its options.
American Home said it’s “seeking the course of resolution, in this environment, that is least disruptive to its business and to the many thousands of homebuyers to whom it has committed to provide mortgages.”
C-Bass Subprime Venture in Talks With Investors to Ensure Funds
- Bloomberg
Credit-Based Asset Servicing and Securitization LLC, a New York-based subprime loan company, said it’s in talks with investors to ensure it has sufficient funds after turmoil in the market for high-risk borrowers.
Mortgage insurers MGIC Investment Corp. and Radian Group Inc. yesterday said their C-Bass joint venture may be worthless, requiring more than $1 billion in writedowns. MGIC, the largest U.S. insurer of home loans, and Radian, the rival it’s buying, said “unprecedented” volatility in mid-July may have destroyed their stakes, each valued at more than $500 million on June 30.
“The current severe state of disruption in the credit markets has caused C-Bass to be subject to an unprecedented amount of margin calls from our lenders,” C-Bass said today in a statement on Market Wire. “C-Bass is in advanced discussions with a number of investors to provide increased liquidity and is exploring all options to mitigate the liquidity risk.”….
Heard on
the Street: Betting on Mergers Can Pay Despite Widening Spreads – Wall
Street Journal
Investors always need a cast-iron stomach to play merger mania, but an added layer of Teflon now might be required.
In recent days, the so-called spreads on pending deals have widened drastically over concerns that tighter financing could put the transactions in jeopardy. The spreads — which represent the difference between a seller’s stock price and the price that a buyer has agreed to pay — are particularly wide on deals where the buyers are private-equity firms that are being financed in debt markets or funded by short-term bank loans.
Although the development has created nervousness among professional takeover speculators who profit when the spread narrows, the widening gap could still prove to be an attractive play for investors willing to bet the deals get completed as planned.
In a report issued Friday, Goldman Sachs Group Inc. recommended that investors bet on a basket of 22 pending leveraged-buyout transactions. David Kostin, managing director for portfolio strategy, calculated a 36% average annualized return for the group based on current spreads and an assumption the deals will be completed under existing terms at a date estimated by Goldman….
Corporate Buyers Hit Gas on Deals
- Wall Street Journal
With deal-related financing markets in disarray, private-equity buyouts are being delayed around the world, giving corporate buyers an advantage over the cash-rich private-equity firms for the first time in years.
Consider Virgin Media Inc. The British cable-television operator is proceeding with an auction of the company after already having received this month a nearly $10 billion takeover approach from Washington private-equity firm Carlyle Group. That could benefit the cable-industry players exploring a bid, a list that includes Liberty Global Inc., Time Warner Cable Inc. and Comcast Corp.
Carlyle and a competing consortium of four private-equity firms will likely have trouble making a firm bid until credit markets calm and banks are able to sell the stockpile of debt building up on their balance sheets, people close to the matter say. The cable companies, though, likely could plow ahead…..
Subprime Troubles Spread
To Commerzbank, IKB – Wall Street Journal
As HSBC Holdings PLC comes to grips with problems in the U.S. subprime-mortgage market, losses from the mortgages continue to sweep beyond the U.S. and through Europe, infecting two more European financial firms.
In Germany, two banks — IKB Deutsche Industriebank AG and Commerzbank AG — said exposure to subprime loans would hurt results. IKB’s problems are more severe: They led to the departure of its chief executive and forced a state-owned bank to step in to shoulder losses yesterday.
IKB’s surprise announcement underscores how the contagion of subprime has moved from primary lenders such as HSBC to the secondary market, where hedge funds and banks such as IKB have racked up losses in recent weeks. Hedge funds operated in the U.S. by Wall Street firm Bear Stearns Cos. and as far as Australia and the U.K. have reported losses because of investments that were exposed to home loans to U.S. borrowers with poor or risky credit histories…..
A Stumble for ‘Bank Loan’ Mutual Funds
- Wall Street Journal
With problems in the corporate-loan market, the fast-growing niche of bank-loan mutual funds has hit some bumps in the past several weeks.
With many funds posting losses, early indications suggest that some investors are beginning to withdraw their money — by one account, more than $450 million in outflows from the $40 billion-plus field.
Bank-loan funds own loans banks have issued to corporations and then resold to institutional investors. The loans themselves are typically below investment grade. Still, the mutual funds that own these loans are designed to be much more stable than funds that hold high-yield, or junk, bonds…
Tags: Mutual Funds, Private equity, Risk arbitrage
