News digest for July 18, 2006

Hedge Funds Pile Into European Loans, Cut Costs as Rates Rise
“If corporate profits fall, a lot of companies will be under pressure,” said Edward Eyerman, who assigns credit rankings to high-yield loans for Fitch Ratings in London. Hedge funds may “threaten a company with bankruptcy if they don’t get the deal they want in a restructuring.”

Institutional investor confidence slips in July
Looking regionally, the confidence of North American institutional investors fell from 106.7 to 99.1. The confidence of Asian investors increased slightly to 81.5 from 80.2, and the confidence of European investors decreased to 85.4 from 86.5.

Bond investors worried about corporate debt, global tensions: survey
The majority of investors surveyed expect both the high yield default rate and corporate leverage to move moderately higher over the next year, and, 31% and 19%, respectively, believe significant credit deterioration will take hold in emerging markets and high yield.

Debrief from ISS’ Options Backdating Webcast
The larger implication goes to the investor confidence issue. While discounted stock options are nothing new and not illegal per se, it’s the cover-up that is most problematic for shareholders.

Studies: Deal Mania Will Continue
PwC found that private equity represented 30 percent of U.S. deal value in the second quarter, a level not seen in over 10 years. In fact, during the late 1990s, private equity’s share rose above 20 percent only once, and generally averaged between 10 percent and 15 percent, according to the report.

Moody’s to Change Downgrade Process
The credit rating agency is reevaluating how it scores companies that cross over from investment to speculative grade.

Show Me The Money — Linking Social, Environmental and Governance Issue to Company Value
This report synthesizes more than 1,000 pages of research from the mainstream financial analyst community. The report draws on work by a group of leading financial institutions and covers the impact of qualitative and new risk issues on company value. Download Show Me the Money (PDF 440KB, 56 pages)

Break or make
Break-fees are at best a necessary evil. While they can help a company get a bid on the table for its shareholders, they can, if misused, also prevent it from getting the highest price. Some boards are getting into situations where they may be doing more harm than good by paying break-fees.

Lessons in Corporate Blogging
Don’t blog for blogging’s sake. Make sure you have a clear business goal for your blog—and that you stick to that goal and track how well you’re fulfilling it. Remember that, for companies, blogging isn’t an ideology—it’s a tool.

You Can Be Chief of G.E. and Still Bounce a Check
Yes, rich people can bounce checks, too.

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