You think you’ve had a bad time in the markets for the past year? Here’s a guy who’s had a bad time in the markets for the past year:
Brazilian billionaire Eike Batista lost more than a quarter of his net worth after the state development bank said he offered personal guarantees for 2.3 billion reais ($1 billion) in loans and a rout of his publicly traded companies deepened.
Batista is now worth $2.9 billion, down from $4.1 billion at the close of trading July 2, according to the Bloomberg Billionaires Index. The loans are part of the 10.4 billion reais that Batista’s companies contracted with the state-run lender, known as BNDES, since 2007. BNDES provided the tally of the loans and their respective guarantees in response to a request by Bloomberg under Brazil’s freedom of information law. The bank didn’t say how much is outstanding.
Batista’s fortune has plunged from a peak of $34.5 billion last year after he repeatedly failed to meet targets he had set for his startup companies. The latest disappointment came when his flagship OGX Petroleo & Gas Participacoes SA (OGXP3) said July 1 that it may shut down its only producing oil field, prompting a selloff that’s since erased $1 billion in market value from his six publicly traded units.
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The information provided by BNDES follows a July 1 report from Bank of America Corp. that estimated that the Rio de Janeiro-based lender was the most exposed of Brazil’s banks to Batista’s companies, having lent 4.9 billion reais, or 5.8 percent of the bank’s regulatory capital.
The best thing about bond ETFs is that they provide liquidity. The worst thing about them is that they provide liquidity:
Investors who sought exchange-traded funds as a faster way to trade corporate bonds are finding that they can be as expensive to trade as the underlying debt.
As trading in the three-biggest credit ETFs surged to unprecedented levels last month amid the market’s biggest losses since 2008, the funds’ shares dropped as much as 1.1 percentage points more than the net value of the less-traded securities they hold. The two largest high-yield bond ETFs have lost about 6 percent since reaching a five-year high May 8. That’s about 2 percentage points more than the loss for the Bank of America Merrill Lynch U.S. High Yield Index.
The gap reflects the extra charge investors paid for a speedier exit in a declining market by using ETFs that trade like stocks rather than buying and selling the less-liquid debt. Investors yanked about $1.83 billion of shares from the two-biggest junk ETFs last month, forcing sales of their holdings at a time when demand was evaporating.
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Shares of BlackRock Inc.’s $13.7 billion iShares iBoxx $ High Yield Corporate Bond ETF, the biggest of its kind, plummeted 4.3 percent in the six days ended June 24, while the net value of its assets dropped 3 percent, data compiled by Bloomberg show. The fund’s share price fell to the lowest level in 12 months on June 24, to $89.04. The lowest value last month for the underlying assets was $89.66, the data show.“The price reflects where you can exchange risk,” said Matt Tucker, head of iShares fixed-income strategy at BlackRock, the biggest ETF provider. “It’s the correct price. The reality is the majority of the high-yield market doesn’t trade every day.”
Blackstone Group LP (BX), the private-equity firm that has spent $5 billion on more than 30,000 distressed houses, is preparing to expand its bet on the housing recovery by lending to other landlords.
The firm, which already owns more rental homes than any other investor, has set up B2R Finance LP to offer loans starting at $10 million, according to four people who reviewed the terms. B2R is reaching out to landlords with portfolios of properties seeking to grow in the burgeoning industry for single-family homes to rent, said the people, who asked not to be identified because the discussions are private.
The world’s largest private-equity firm said last month that it was entering the later stages of its buying spree after leading a group of institutional investors who’ve spent at least $17 billion on more than 100,000 homes over two years, helping fuel the fastest price gains since 2006. By increasing its stake in the rebound through lending, New York-based Blackstone could benefit from smaller landlords already investing in what Goldman Sachs Group Inc. estimates to be a $2.8 trillion market.
Live by market-timing, die by market timing:
John Paulson, the billionaire hedge-fund manager seeking to rebound from losses tied to bullion, posted a 23 percent decline in his PFR Gold Fund last month, according to a letter to investors.
The drop brings losses in the strategy, formerly known as the Paulson Gold Fund, to 65 percent since the start of the year, the firm said in the July 3 letter, a copy of which was obtained by Bloomberg News.
This report was delayed due to the incompetence of Toronto Hydro.
It was a day of modest recovery for the Canadian preferred share market; more modest than many recent days, but still a recovery! PerpetualDiscounts and DeemedRetractibles were both up 8bp, while FixedResets won 12bp. Volatility was more than one could generally expect on such a day; volume was average.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3645 % | 2,576.3 |
| FixedFloater | 4.24 % | 3.57 % | 43,975 | 18.12 | 1 | -0.3554 % | 3,879.2 |
| Floater | 2.72 % | 2.90 % | 78,760 | 20.00 | 4 | 0.3645 % | 2,781.7 |
| OpRet | 4.84 % | 3.37 % | 61,750 | 0.15 | 5 | 0.0156 % | 2,619.5 |
| SplitShare | 4.66 % | 4.28 % | 66,464 | 3.96 | 6 | 0.1618 % | 2,971.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0156 % | 2,395.2 |
| Perpetual-Premium | 5.62 % | 3.99 % | 102,674 | 0.08 | 12 | 0.1306 % | 2,281.6 |
| Perpetual-Discount | 5.36 % | 5.33 % | 138,830 | 14.76 | 26 | 0.0849 % | 2,404.2 |
| FixedReset | 4.95 % | 3.41 % | 239,169 | 3.59 | 83 | 0.1166 % | 2,485.6 |
| Deemed-Retractible | 5.05 % | 4.49 % | 177,810 | 6.90 | 44 | 0.0760 % | 2,392.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CU.PR.E | Perpetual-Discount | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-08 Maturity Price : 23.69 Evaluated at bid price : 24.04 Bid-YTW : 5.14 % |
| HSB.PR.C | Deemed-Retractible | -1.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.16 % |
| SLF.PR.H | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 3.19 % |
| GCS.PR.A | SplitShare | 1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.01 % |
| TRP.PR.B | FixedReset | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-08 Maturity Price : 23.16 Evaluated at bid price : 23.50 Bid-YTW : 3.38 % |
| FTS.PR.J | Perpetual-Discount | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-08 Maturity Price : 23.98 Evaluated at bid price : 24.35 Bid-YTW : 4.92 % |
| PWF.PR.L | Perpetual-Discount | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-08 Maturity Price : 23.71 Evaluated at bid price : 24.05 Bid-YTW : 5.29 % |
| BAM.PR.K | Floater | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-08 Maturity Price : 17.83 Evaluated at bid price : 17.83 Bid-YTW : 2.96 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.R | FixedReset | 59,400 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 3.72 % |
| CM.PR.G | Perpetual-Premium | 51,917 | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-07 Maturity Price : 25.25 Evaluated at bid price : 25.20 Bid-YTW : 3.88 % |
| PWF.PR.G | Perpetual-Premium | 44,100 | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-07 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 2.36 % |
| TCA.PR.Y | Perpetual-Discount | 43,343 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-05 Maturity Price : 50.00 Evaluated at bid price : 50.01 Bid-YTW : 5.00 % |
| TD.PR.S | FixedReset | 34,966 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.84 Bid-YTW : 3.54 % |
| MFC.PR.K | FixedReset | 34,400 | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.85 % |
| There were 34 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| ENB.PR.H | FixedReset | Quote: 24.40 – 24.79 Spot Rate : 0.3900 Average : 0.2611 YTW SCENARIO |
| GWO.PR.L | Deemed-Retractible | Quote: 25.40 – 25.79 Spot Rate : 0.3900 Average : 0.2721 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 25.72 – 26.09 Spot Rate : 0.3700 Average : 0.2688 YTW SCENARIO |
| MFC.PR.F | FixedReset | Quote: 24.60 – 24.97 Spot Rate : 0.3700 Average : 0.2689 YTW SCENARIO |
| CM.PR.K | FixedReset | Quote: 25.58 – 25.90 Spot Rate : 0.3200 Average : 0.2267 YTW SCENARIO |
| W.PR.J | Perpetual-Discount | Quote: 24.57 – 24.84 Spot Rate : 0.2700 Average : 0.1881 YTW SCENARIO |
Eike Batista!
His claim to fame (in Canada, anyway), is a gold company he started up, I believe in the late 80’s, and managed to go through the exploration/junior producer/large producer cycle at record speed, then finally selling the company for a major gain for the shareholders.
It went from pennies to dollars and cash out all in less than ten years, if memory serves me correctly. What was that company called?
TVX Gold
A classic Canadian gold story . . . thanks to Eike!
I didn’t know of the Canadian connection – thanks!