![]() Underscoring the challenges, mid-sized IndusInd Bank Ltd said on Saturday it was deferring its Monday board meeting to consider raising capital via debt issuance, including AT1 bonds. Nippon India and Franklin Templeton did not immediately provide comment to Reuters' queries. "A minimum 50-100 basis point rise in AT1 borrowing costs could happen." Only risk-hungry funds will be buying AT1 bonds now," said the fund manager, who declined to be named as he was not authorized to speak to the media. "You're in effect creating an environment where the liquidity dries up on AT1s. "What this incident does is penalize the good names too," said a fund manager, who holds Yes Bank AT1 bonds, adding some investors are now considering a legal challenge against the central bank's plan to wipe them out. Investors included Nippon India Mutual Fund, Franklin Templeton, a slew of local fund houses and retail investors. Yes Bank had about 88 billion rupees ($1.2 billion) in AT1 capital as of March 2019, its annual report showed, under the Basel III framework. They carry higher interest rates than more senior debt as investors accept the risk they can lose their investment at certain pre-agreed points if the funds are needed to bolster a struggling bank's capital. So-called AT1 bonds were introduced after the 2008 global financial crisis. It cut its quarterly dividend last month to just a penny per share after having slashed it 86% in March to save cash.The Reserve Bank of India (RBI) said it would work on a revival plan, as part of which bonds classified as Additional Tier 1 (AT1) capital will be written down "permanently, in full." "They've put themselves in a tough situation and have a long way to go to get themselves back in a healthy position, especially if oil prices stay low for longer." The company needs to complete asset sales, which remain "challenging in the current environment," said Jennifer Rowland, analyst with Edward Jones. "So far the only successful divestitures were some of the LNG assets in Mozambique," said Espen Erlingsen, an analyst at Rystad Energy. Occidental recently set a July 1 deadline to accept bids for properties in Wyoming and Colorado that could bring up to $700 million. ![]() The industry's total reductions could reach $300 billion starting this quarter, according to accounting and consulting firm Deloitte. The oil price crash has other oil and gas companies chopping the value of their assets. This will be the third consecutive quarter in which Occidental takes a writedown, bringing the total to as much as $12 billion in the last nine months, more than half of its market capitalization. The Anadarko purchase left Occidental "with over $35 billion of debt and $10 billion of preferred stock, compromising its financial flexibility to confront the collapse in oil prices," said Andrew Brooks, a Moody's vice president. Rival Fitch Ratings raised its rating on the notes to BB with a "stable" outlook. Ratings firm Moody's Investors Service on Thursday downgraded its rating on Occidental's debt one notch to Ba2 and issued a "negative" outlook. Occidental and Buffett were not immediately available for comment. "There’s no clear horizon to anyone getting any value other than Buffett," Hirs said. With its share price down 57% year to date, Occidental must pay the dividend with increasingly more stock, giving Berkshire a growing stake in the company, said Houston energy economist Ed Hirs. ![]() Warren Buffett's Berkshire Hathaway Inc, which last year bought $10 billion of Occidental preferred shares to help it finance the Anadarko deal, will receive a June 30 dividend in shares, Occidental said, to save cash. ![]() Occidental plans to replace $9.12 billion in notes due in 20 and issue new notes that would remove provisions that could have pushed it into default.
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