April 26, 2008

Bloomberg Readings: LBO bonds, China stocks, Asian bond markets

Filed under: investing — Kaushik @ 9:32 am

Rather than receiving the historical average recovery of 42 cents on the dollar in a default, owners of a third of high- yield, high-risk bonds rated B+ or lower may get no more than 10 cents, according to New York-based Fitch Ratings. About 22 percent are likely to get 11 cents to 30 cents.

Along with the surge in bank loans came covenant-lite loans, which typically don’t limit the amount of debt a company can have relative to earnings. A record $141 billion of covenant-lite loans was made last year, according to S&P.

China’s shares are a “sell” even after the government stepped in to support the world’s fourth- biggest stock market, according to Morgan Stanley and Credit Suisse Group.

Corporate earnings growth this year may disappoint, Morgan Stanley analysts Jerry Lou and Allen Gui said in a report today. Chinese companies’ Hong Kong-listed `H shares’ are more attractive than yuan-denominated `A shares,’ Credit Suisse’s Vincent Chan wrote in a separate note.

This is after the 50% drop in the Chinese market!

The Newport Beach, California-based firm’s Pimco Total Return Fund boasts $125 billion of assets — and an E.F. Hutton vibe. When Pimco talks, people listen. And the fund’s manager, Bill Gross, may be the closest thing the bond market has to a household name.

Hodge’s message, delivered at a conference organized by the Asian Development Bank in India’s business capital, is an encouraging one for Asia’s debt issuers: “We’re ready and able to supply the demand for Asian markets — we’re just waiting for quality investments.”

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