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10 November 2008
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Distressed Debt Exchanges on the Rise Financial Times, 6 November 2008 More companies are looking to restructure debt outside of bankruptcy by renegotiating debt payment terms with bondholders. This approach provides companies a way to circumvent tight capital markets to raise cash and avoid the costs associated with bankruptcy. |
Our view: While debt exchanges are not new instruments, finance officers are better off generating and liberating as much cash as possible internally,or pushing traditional funding providers for more moderate innovations (e.g., special credit terms). |
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Cable and Wireless Postpones Planned Demerger Financial Times, 10 November 2008 Britain's second biggest telecom company has postponed plans to demerge the group into European and international operations due to excessive volatility. |
Our view: With so much focus on M&A, we often miss the other side of the story: divestitures that had been underway are now in limbo. Thinking about the implications for cash flow and balance sheet management, companies should recognize the option for a quick-fire sale to shore up their broader portfolio may not be on the cards at palatable terms for the next 6–12 months. |
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China Announces Stimulus Package MarketWatch, 9 November 2008 The Chinese government will spend 4 trillion yuan (US$586 billion) over the next two years to reverse slowing economic growth. The funds will be spent on low-income housing, rural infrastructure, water, electricity, transportation, and improvements to the environment. |
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Goldman Sachs: The Worst Is Yet to Come Bloomberg, 7 November 2008 Economists from the investment group forecast that the U.S. economy will contract 3.5% in the fourth quarter and 2% in the first quarter, marking the steepest recession since 1981. |
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Europe's Second Largest Steel Maker Cuts Production by 30% BBC, 7 November 2008 In yet more signals that the world's companies are drawing in their horns, Corus, Europe's second largest steelmaker, announced it will cut production by 30% over the next six months. It cites weakened European demand as the reason. As an example of companies having to be flexible in this uncertain environment, Chief Executive Philipe Varin said Corus had to respond “to the changing environment with maximum speed.” No job cuts are expected to be announced; the company will temporarily close some of its operations in the United Kingdom and Holland. Related News: So far, the union response to Corus has been positive. As more and more companies look to slim operations, however, workforce relations and mediation will become increasingly important. In the United States, President-Elect Obama's support for the Employee Free Choice Act, could certainly accelerate this trend. |
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“Heard in the Suite”—Companies Lack Confidence in Their Ability to Manage Supply Chain Risk When asked in a recent survey to indicate their level of confidence in sensing and responding to supply chain risks such as supplier solvency, 75% of responding executives acknowledged they are only “somewhat confident.” Executives have also reported to us that they are underprepared to manage unforeseen supply risk; only 19% of respondents to a recent survey claim to be “well prepared.” |
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Daily Capital Markets Review: Markets Pare Losses on Hunch of Fed Rate Cuts This summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads and new issuances. If you would like to receive the Review after markets close (as opposed to the next morning), please click here. |
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