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Wednesday, 17 September 2008
Macquarie Slumps; Denies Reported Refinancing Problem
Macquarie Group Ltd., Australia’s biggest investment bank, fell to its lowest in more than four years in Sydney trading as it sought to defuse speculation of a potential funding shortfall. More in comments...
Macquarie Slumps; Denies Reported Refinancing Problem
Sept. 17 (Bloomberg) -- Macquarie Group Ltd., Australia’s biggest investment bank, fell to its lowest in more than four years in Sydney trading as it sought to defuse speculation of a potential funding shortfall.
The stock slumped 7.8 percent while the cost to protect Macquarie’s debt jumped to a record high. The Sydney-based company said a report in the Australian newspaper that it may face difficulties refinancing A$5 billion ($4 billion) of debt was misleading.
The global credit crisis that’s sent Lehman Brothers Holdings Inc. bankrupt and forced American International Group Inc. into the hands of the U.S. government is raising doubts about Macquarie’s debt-driven funding model. Babcock & Brown Ltd., the Sydney-based firm that also borrows to buy assets to bundle into funds, lost 97 percent of its market value this year.
“Questions were raised as to whether Macquarie would be able to meet its funding requirements,” said Angus Gluskie, who helps oversee $500 million at White Funds Management in Sydney.
“In the current conditions, people are skeptical.”
Macquarie is confident it can refinance debt even as the global credit squeeze worsens, spokeswoman Paula Hannaford said in an interview today.
“The fundamental story at Macquarie is very different from anything you’ve seen in the U.S.,” said Patrick Winsbury, an analyst at Moody’s Investors Service in Sydney. “They have done an extremely good job avoiding all the pitfalls so far in the crisis.”
Macquarie’s shares fell A$2.87 to A$33.93 at the close of trading in Sydney, the lowest since August 2004. The stock’s lost 26 percent this month alone amid the global credit squeeze that’s wiped A$12 billion from the company’s market value this year.
Debt Protection
The cost to protect Macquarie’s senior bonds against default, as measured by credit-default swaps, surged to a record high today, showing investors think the company is less likely to repay debt.
Contracts on the bank’s senior debt increased about 75 basis points to trade at an all-time high 600 basis points, ABN Amro Holding NV prices show, meaning it costs $600,000 to protect 10 million of debt from default for five years. Credit-default swaps rise as perceptions of credit quality deteriorate.
Macquarie raised funds by selling mortgage-backed bonds, convertible preference shares and debt to private investors, according to a presentation in New York last week by Richard Sheppard, deputy managing director.
Macquarie can borrow A$3.8 billion through an unused credit facility and doubled its so-called “liquid assets” to A$20 billion at June 30 from a year earlier, it said today in a statement to the Australian stock exchange.
‘Good Buffer’
“Macquarie has a good buffer of capital, more than 40 percent over what the regulator says it needs,” Winsbury said.
Babcock & Brown, the third-worst performer on a global stock index, had the credit rating of its international unit cut by Standard & Poor’s.
Babcock & Brown International Pty, a wholly owned unit of Babcock & Brown, was cut one grade to BB from BB+, S&P analyst Sharad Jain said in an e-mailed statement today.
The new rating, which is two levels below investment grade, has a “negative” outlook, which means it may be cut further.
Babcock & Brown shares fell 12 percent in Sydney to 92 Australian cents.
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Macquarie Slumps; Denies Reported Refinancing Problem
Sept. 17 (Bloomberg) -- Macquarie Group Ltd., Australia’s biggest investment bank, fell to its lowest in more than four years in Sydney trading as it sought to defuse speculation of a potential funding shortfall.
The stock slumped 7.8 percent while the cost to protect Macquarie’s debt jumped to a record high. The Sydney-based company said a report in the Australian newspaper that it may face difficulties refinancing A$5 billion ($4 billion) of debt was misleading.
The global credit crisis that’s sent Lehman Brothers Holdings Inc. bankrupt and forced American International Group Inc. into the hands of the U.S. government is raising doubts about Macquarie’s debt-driven funding model. Babcock & Brown Ltd., the Sydney-based firm that also borrows to buy assets to bundle into funds, lost 97 percent of its market value this year.
“Questions were raised as to whether Macquarie would be able to meet its funding requirements,” said Angus Gluskie, who helps oversee $500 million at White Funds Management in Sydney.
“In the current conditions, people are skeptical.”
Macquarie is confident it can refinance debt even as the global credit squeeze worsens, spokeswoman Paula Hannaford said in an interview today.
“The fundamental story at Macquarie is very different from anything you’ve seen in the U.S.,” said Patrick Winsbury, an analyst at Moody’s Investors Service in Sydney. “They have done an extremely good job avoiding all the pitfalls so far in the crisis.”
Macquarie’s shares fell A$2.87 to A$33.93 at the close of trading in Sydney, the lowest since August 2004. The stock’s lost 26 percent this month alone amid the global credit squeeze that’s wiped A$12 billion from the company’s market value this year.
Debt Protection
The cost to protect Macquarie’s senior bonds against default, as measured by credit-default swaps, surged to a record high today, showing investors think the company is less likely to repay debt.
Contracts on the bank’s senior debt increased about 75 basis points to trade at an all-time high 600 basis points, ABN Amro Holding NV prices show, meaning it costs $600,000 to protect 10 million of debt from default for five years. Credit-default swaps rise as perceptions of credit quality deteriorate.
Macquarie raised funds by selling mortgage-backed bonds, convertible preference shares and debt to private investors, according to a presentation in New York last week by Richard Sheppard, deputy managing director.
Macquarie can borrow A$3.8 billion through an unused credit facility and doubled its so-called “liquid assets” to A$20 billion at June 30 from a year earlier, it said today in a statement to the Australian stock exchange.
‘Good Buffer’
“Macquarie has a good buffer of capital, more than 40 percent over what the regulator says it needs,” Winsbury said.
Babcock & Brown, the third-worst performer on a global stock index, had the credit rating of its international unit cut by Standard & Poor’s.
Babcock & Brown International Pty, a wholly owned unit of Babcock & Brown, was cut one grade to BB from BB+, S&P analyst Sharad Jain said in an e-mailed statement today.
The new rating, which is two levels below investment grade, has a “negative” outlook, which means it may be cut further.
Babcock & Brown shares fell 12 percent in Sydney to 92 Australian cents.
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