NEWSLETTER of June 9, 2023

The following content has been added at finexpert:

Houlihan Lokey
PRIVATE PERFORMING CREDIT INDEX
We have been producing the Private Performing Credit Index (PPCI) for several quarters using a dataset of instruments we have valued since Q3 2017. Clients have asked us for a variety of data insights, and the question of whether different size loans persistently yield more has been common. To answer this, we turned to the same dataset we use to compute the quarterly index, but created quartile subindices for comparison purposes. >more

Deutsche Bank Research
IS LENDING TIGHT? FINANCING CONDITIONS FOR GERMAN COMPANIES
Corporate lending is slowing substantially but this is primarily a normalization and due to subdued demand at least as much as it is due to supply conditions, i.e. banks’ tighter credit standards. At +8% yoy, credit expansion is still substantial. Only two industries are currently seeing a contraction. More worrying is the drying up of the corporate bond market where net issuance has collapsed since autumn. It is suffering from the double whammy of much higher interest rates and the disappearance of its dominant buyer of recent years, the ECB. >more

KfW Research
KFW-KREDITMARKTAUSBLICK MÄRZ 2023
Corporate lending slowed in the final quarter of 2022 following record growth in summer. The easing of tensions in the energy markets and the subsiding of supply bottlenecks means that fewer loans are required to cover unplanned funding requirements. The increase in new loans from German banks to businesses and self-employed persons was, however, still significant at 19% year-on-year, as calculated by KfW Research. >more

UBS
QUARTERLY INSIGHTS INTO PRIVATE MARKETS - EDITION MAY 2023
In 2023, persistent high inflation, volatility across the global banking sector, and continued geopolitical conflicts remain key themes for many investors. Against this backdrop, public equities have performed surprisingly well, and markets are finally seeing signs of disinflation with the pricing weakness across the commodity complex, more visibility to peak rates, and contagion from recent bank failures seemingly under control. >more

STOCK-OIL COMOVEMENT: FUNDAMENTALS OR FINANCIALIZATION?
Alessandro Melone, Otto Randl, Leopold Sögner, and Josef Zechner
2023
The return correlation between U.S. stocks and oil has shifted from negative to positive since 2008. We use a return decomposition framework to demonstrate that the underlying reason for this structural change is a shift in the correlation between cash flow news for the two assets. Intuitively, as the U.S. turned from an oil importer to a net exporter, the correlation between the cash flow news associated with oil and the U.S. stock market turned positive. Our findings help to understand the set of potential determinants of equity-commodity correlations and the diversification benefits of investing in commodities. >more

EMPLOYEE COSTS OF CORPORATE BANKRUPTCY
John R. Graham, Hyunseob Kim, Si Li, and Jiaping Qiu
2023
Employees' annual earnings fall by 13% the year their firm files for bankruptcy, and the present value of lost earnings from bankruptcy to six years following bankruptcy is 87% of pre-bankruptcy annual earnings. More worker earnings are lost in thin labor markets and among small firms. Ex ante compensating wage differentials for this “bankruptcy risk” are approximately 2% of firm value for a firm whose credit rating falls from AA to BBB, comparable to the magnitude of debt tax benefits. Thus, wage premia for expected costs of bankruptcy are of sufficient magnitude to be an important consideration in corporate capital structure decisions. >more