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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (52834)2/6/2006 3:41:03 PM
From: mishedlo  Read Replies (1) of 110194
 
It's a whole new way of financing!
What's with this nonsense?
=======================================================
Companies scramble to exploit 'hybrid' finance
Companies around the world are lining up to exploit a new form of financing that cuts their cost of capital and could prove one of the most important developments in corporate funding in two decades.

Bankers are predicting explosive growth in a new generation of so-called hybrid securities, creating a potentially lucrative source of fees for investment banks. Companies will increase the amount raised from these securities tenfold to $40bn this year in the US alone, according to some Wall Street forecasts.

Investors view the hybrids as long-term subordinated debt, meaning they would rank behind all other creditors in a bankruptcy. The hybrids carry some equity-like risks, such as the possibility interest payments might be deferred, but have no share price upside though investors can gain from early repayment. Analysts at Citigroup calculate that if half the top 500 U.S. companies replaced 5 percent of their capital with
hybrids, it would increase their value by $100 billiion, the FT said.

The rest of this article is for FT.com subscribers only
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