Banking & Capital Markets

Best of 2010: Capital Markets

Ample liquidity let companies issue lots of cheap debt in 2010, but little of the proceeds went toward corporate investment.
Vincent RyanJanuary 7, 2011

Best of 2010

The capital markets gaveth and the capital markets tooketh away in 2010. While corporate debt issuance — including the high-yield kind — bloomed, the market for initial public offerings was less robust, and sovereign debt woes in Europe weighed on institutional investors throughout the year.

Overall, though, liquidity was in abundance, and the Federal Reserve continued to pump cash into the markets. An accommodating U.S. monetary policy made for historically low bond coupons, and even the leveraged loan market found its way back from oblivion.

But most of the capital went into extending maturities or restructuring bank debt; it didn’t stimulate large amounts of corporate investment. Uncertainty about the global economy kept a lot of companies from pulling the trigger on mergers and acquisitions or reinstituting their dividends, and a jittery stock market confirmed their fears. While buybacks returned to popularity, most CFOs simply held on to cash, and they struggled with how to invest it in such a low-rate environment.

While capital building is still good risk management, a strengthening economy in 2011 will put CFOs on the hot seat: if they don’t find uses for all the liquidity on their balance sheets, investors will start to revolt. The capital markets can be fickle that way.

Time to Get Off Your Cash?
Companies are content to sit on their cash hoards, but investors are losing patience. What’s a CFO to do?

Weighing Your Next Move
Rock-bottom interest rates and new regulation call for a reexamination of short-term cash investments.

The Buyback Backlog
The amount of announced share repurchases is climbing, but actual buying activity is sluggish. Why?

Seven Pillars of Hedging Wisdom
In volatile markets, it pays to remember the foundations of effective hedging.

Yen Effects
Japan’s central bank throws uncertainty into the forex strategies of U.S. companies.

Modeling What Comes Next
Robert Broatch, CFO of The Guardian Life Insurance Company of America, is preparing for new regulatory and economic risks.

Giving Up on Federal Help, E*Trade Turns to Self-Help
CFO Bruce Nolop discusses how the online brokerage firm recapitalized itself without aid from the Troubled Asset Relief Program.

Private Equity Finds Liquidity, Finally
Financial sponsors are extracting dividends from their portfolio companies while credit is still cheap.

FASB Clarifies Troubled Debt Restructuring
The standard setter releases new proposed accounting guidance to better define what is – and is not – a troubled debt restructuring.

End Run Around Equity
It can be faster to acquire a company by buying its bank debt – as Penn National Gaming did.