AIG is steadily getting closer to repaying the $132 billion debt that it took in 2008 from the government to avoid collapse. The latest step in the direction is AIG’s agreement to sell its international life insurance unit, American Life Insurance Co. (Alico) to MetLife Inc. [Read more…]
Leveraged Buyouts Could Be Revived Soon
Private equity firms have always preferred leveraged buyouts as the main method of acquiring a new company. The past couple of years have seen the private equity market going through a rough phase and activity almost drying up. The last time a major buyout was announced was that of Hilton by Blackstone in July 2007. Ever since the financial downturn, the only major buyout has been that of IMS Health. [Read more…]
Corporate Bonds Explained
Companies often borrow money by issuing bonds when they need funds for a new project or for expanding their business. Any purchaser of a corporate bond is merely lending to the company for interest, which is paid at the end of the specified period. It is usually a low risk investment as compared to stocks, though the failure of the company may lead to non-payment. [Read more…]
Low Risk High Return Investments
Whenever interest rates drop, people look out for investments with higher returns and low risks. But it is important to remember that all options that will offer higher returns will also involve relatively greater risk.
Take for example, reverse convertible notes or revertible notes, which are financial instruments with returns tied to a stock value. These instruments offer a higher rate of return, but if the stock value drops, you can suffer significant losses. In some cases, even the principal amount might not be recoverable. Yet another example is investing in a bond fund where you run the risk of losing your investment when the interest rates increase. The risk will increase with the term of the bond. [Read more…]
Private Equity Firms and Hedge Funds Face Uphill Battle
The worst of the recession seems to be over, but the crisis has done irreversible damage to many industries. Hedge funds and private equity firms are among those that are finding out that life after the recession is not as easy as it used to be before it.
At the height of the financial crisis, both private equity firms and hedge funds faced some serious redemption pressure which threatened their very existence. Many companies simply refused to repay the investors at that time or imposed severe restrictions on withdrawals. This completely changed the investors’ perception of these funds and the investors have now become much more demanding. These companies are now finding out the hard way that you can not just make your investors angry and get away it. [Read more…]
