by Tim Delaney | Apr 28, 2010
We stumbled upon these striking charts in an article in the Financial Times recently. It has interesting implications for credit analysis. The last decade’s boom in credit has been remarkable, led, of course, by mortgage-backed securities. But debt funding by...
by Tim Delaney | Apr 13, 2010
Last post, we argued that Lehman’s Repo 105 balance-sheet-management tactic was not the worst thing Lehman Brothers did on its way to extinction. Volume 8 of Anton Vakulas’s Bankruptcy Examiner’s report details a bunch of blunders with far more serious consequences....
by Tim Delaney | Mar 30, 2010
A few weeks ago, the world was shocked to learn that Lehman Brothers was guilty of “window dressing” its balance sheet throughout 2007 and 2008. As the New York Times’ Dealbook put it, ”In Lehman’s Demise, Some Shades of Enron.” The outrage is based on information in...
by admin | Mar 9, 2010
What do Calisto Tanzi, Bernie Ebbers, and Edward Groves have in common? Several things, actually. For one, they all ran major companies. Tanzi was CEO of Parmalat, an Italian food company; Ebbers was CEO of WorldCom, an American telecommunications firm; and Groves...
by Ron Carleton | Feb 16, 2010
The return investors receive for owning a debt instrument, whether a loan or a bond, is driven by the various risks of owning debt. This Job Aid from Financial Training Partners does a good job in explaining the major risks faced by debt investors.
by Ron Carleton | Feb 9, 2010
In earlier posts, we compared the pricing of corporate loans and corporate bonds. Here, we’ll look at how these markets interact, both in primary issuance and secondary market trading. First, some definitions: The Primary Market is where financial...
by Ron Carleton | Feb 1, 2010
In our last post, we described how to compare the cost of a floating rate instrument, such as a loan, to the cost of a fixed rate instrument, such as a bond. For one company, Jarden Corporation, we showed that the bond’s cost is 50 basis points higher than the...
by Ron Carleton | Jan 26, 2010
Jarden Corporation (Ticker JAH) is a diversified consumer products company whose brands include First Alert, Holmes, Mr. Coffee, and Sunbeam. On June 30, 2009, it had approximately $2.7 billion of debt outstanding, half of which was in the form of Term Loans due...
by Ron Carleton | Dec 29, 2009
We hope everyone is having happy holidays. Last time, we defended Lehman Brothers from Andrew Ross Sorkin’s attack in Too Big to Fail. We’ve stolen some time from the seasonal festivities to take another look at the numbers, and we still feel there’s a strong case to...
by Ron Carleton | Dec 9, 2009
Except convince anyone it was doing anything right at all. In his new book Too Big to Fail, Andrew Ross Sorkin portrays the firm’s fall as a tale of arrogance, blindness, stupidity, complacency, and greed – nearly every vice but gluttony and lust. But the numbers...
by Ron Carleton | Nov 18, 2009
There are lots of measures of liquidity. The classics are the current ratio and the quick ratio, but they’ve fallen out of favor because they don’t include cash flow, a critical component of liquidity. Cash burn is too recent to be classic, even though...
by Ron Carleton | Nov 5, 2009
The heavy burden of hidden debt BT Group, plc, is one of the world’s largest telecommunications companies. Since the telecom crash in 2001, it’s been struggling with operating, management, and reporting problems. You can add financial problems to the list as well....
by Ron Carleton | Oct 29, 2009
The November 2009 issue of The RMA Journal, The Journal of Enterprise Risk Management, includes an article entitled “Using Subordination to Define Intercreditor Priority” by Ron Carleton and Tim Delaney of Financial Training Partners. The RMA Journal is...
by Ron Carleton | Oct 19, 2009
In the last 6 months, we’ve seen a number of “amend and extend” transactions. Typically they involve: The extension of the maturity of a term loan and/or revolver (typically for syndicated, non-investment grade loans). This is only for lenders who...
by Ron Carleton | Oct 13, 2009
Getting Better and Worse The worst seems to be over for the housing industry in the United States. It may even be on the mend. In the competition for building sites, companies with less financial risk will have an advantage. Hovnanian Enterprises, the sixth largest...
by Ron Carleton | Aug 11, 2009
High Credit Spreads Match High Credit Risk Since the credit crisis began in the summer of 2007, and especially since the credit markets fell of the cliff in the fall of 2008, we have seen credit spreads in the loan and bond markets increase dramatically. Some...
by Ron Carleton | Jul 27, 2009
The job market for recent MBA graduates has changed dramatically. A recent article in Business Week (MBA Jobs: For Some, a Waiting Game) described how some firms are delaying start dates for MBA hires. Job offers, and even interviews, are hard to get. Shifting Job...
by Ron Carleton | Jul 22, 2009
In How the Mighty Fall and Why Some Companies Never Give In, Jim Collins lists five stages of corporate decline. We used them to analyze Xerox in our last post. Collins uses behavioral terms to describe how companies falter, not financial measures. We have a framework...
by Ron Carleton | Jul 6, 2009
How the Mighty Fall Jim Collins is among the best researchers and writers on management effectiveness working today. He’s turned his attention from how companies succeed to how they fail. In his new book How the Mighty Fall and Why Some Companies Never Give In,...
by Ron Carleton | Jun 24, 2009
According to Bloomberg.com, American Airlines is asking its lenders for a covenant waiver. A conference call was held on June 22 and responses are due by June 25. Why the rush? The covenant would be waived for the quarter ending June 30, so the company wants the...
