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Bill needs more muscle

18.05.12

CONOR POPE

Planned insolvency legislation needs beefing up to deal with intransigent banks

MINISTERS WHO open conferences connected with their portfolio tend to come in, pass a few remarks about how wonderful everyone in the room is before heading straight back to their Mercs and on to to the next launch, lunch, cabinet meeting or late constituent’s funeral.

When the Minister for Social Protection, Joan Burton, arrived to address a recent conference on personal insolvency organised by the Free Legal Advice Centre (Flac) few people in the room expected her to linger.

She talked briefly but eloquently about the twin curses of personal debt and unemployment that have sent many Irish people into a tailspin, but rather than leave she took a seat in the audience and listened to a presentation delivered by a slight, mild-mannered law professor from Chicago.

What Prof Jason Kilborn had to say can’t have made comfortable listening for her. The draft Personal Insolvency legislation unveiled last January as one of the key planks of the Government’s efforts to tackle the financial crisis was, he said, pretty much doomed. At the draft’s launch, the Minister for Justice, Alan Shatter, described it as the “most radical reform of insolvency law since the foundation of the State” but, according to Kilborn, it would not work because it was voluntary, offered creditors an absolute veto on any deal and had nothing by way of a stick with which to beat financial institutions who refused to play ball in a meaningful way.

Source: Irish Times

Opportunities in higher-yielding bonds

18.05.12

With the recent gains, return expectations in fixed income over the near term appear modest, but longer-term investment opportunities in that sector can still be found in the following areas:

High yield. The yield spread between high-yield bonds and U.S. Treasuries has tightened, with absolute yields low by historical standards. Caution is warranted in the near term, given myriad global risks, but as the U.S. economy continues to heal, value will re-emerge. High-yield new-issue volume remains robust. Defaults are expected to remain low if the economic recovery progresses as expected, even if growth remains modest. Floating-rate bank loans in particular could perform well, especially if interest rates rise.

Investment-grade corporate bonds. Corporate credit risk appears to be in better shape at this time, as low rates have allowed firms to refinance debt and repair balance sheets. A specific challenge is secondary-market liquidity, which can be stretched in times

Source: InvestmentNews