imgadp

Top-Hot-Stocks

Hot Article ------ Favorites this page

2010-03-04

JPM To Reopen Kangaroo Bonds

JPMorgan Chase & Co. (JPM: 41.92 +0.39 +0.94%) said recently that it intends to be the first Wall Street firm to issue Kangaroo bonds in Australia since Lehman Brothers collapsed in 2008, Bloomberg reported.
 
Kangaroo bonds are denominated in Australian dollars and primarily sold to Australian investors. However, anyone who has Australian dollars can buy these bonds.
 
The attraction among foreign companies to raise Australian dollar denominated debt is driven by favorable swap rates that make it cheaper for the borrowers to raise money in Australia.
 
JPMorgan is planning to issue both fixed and floating rate notes at a rate of 130 basis points over the swap rate. In 2007, JPMorgan last issued an A$950 million Kangaroo bond and paid just 20 basis points spread over the swap rate.
 
The major Wall Street firms including Morgan Stanley (MS: 29.20 +0.88 +3.11%), Citigroup (C: 3.43 +0.03 +0.88%) and Bank of America (BAC: 16.40 +0.03 +0.18%) were active issuers of Kangaroo bonds prior to the collapse of Lehman Brothers in 2008. The demise of Lehman Brothers had dissuaded investors from issuing these types of Bonds.
 
Recently, JPMorgan received more than A$1 billion ($906 million) worth of bids for its five-year benchmark issue at 130 basis points over the swap rate. The kangaroo bond offers A$700 million in fixed rate notes and A$300 million in floating rate notes.
 
JPMorgan's latest issue is rated "A+" and "Aa3″ by Standard & Poor's and Moody's Investors Service, respectively.
 
JPMorgan's fourth quarter earnings came in at 74 cents per share, substantially ahead of the Zacks Consensus Estimate of 61 cents. This also compares favorably with earnings of 6 cents in the prior-year quarter.
 
Better-than-expected results of JPMorgan were primarily aided by continued strong performance of the Investment Bank. All the other segments except Consumer Lending and Card Services also delivered solid results during the quarter. However, high levels of consumer credit costs and increased provision for credit losses were the primary factors, which negatively impacted the results.
 
We anticipate continued synergies from JPMorgan's diversification and strong capital position, but increasing provisions and rising consumer credit costs will be a drag on upcoming results. However, we are impressed to see some improvement in credit quality during the reported quarter.

0 comments: