Journalism Redefined

Tom Davies' blog on student life, economics, education etc.

Archive for the tag “paper”

T-Mobile in strong debt issue


BRIEF: Pick a recent new issue of corporate debt and write a news report about its announcement. Make clear who the borrower is and at what interest rate; if possible say what the borrower intends to use the funds for. Talk about the way the market has been performing. 400 words. Time: 2.5 hours including research

T-Mobile USA has completed a robust $5.6bn bond issue amidst talk of a potential takeover.

The deal consisted of five senior notes. Four tranches, with maturities of 5.5, 6.5, 7.5, and 8.5 years were issued with a value of $1.25bn each. The remaining tranche, worth $600m, has a maturity of 9.5-years.

All securities opened sturdily with only the 9.5-year note pricing slightly below par. The yield-to-maturity for these bonds were 6.033%, 6.632%, 7.128%, 6.541% and 6.887% respectively. Moody’s rated the bonds at Ba3, three grades below investment standard.

The company sweetened the deal by offering a substantial 50 basis point new issue concession (this is the additional yield provided by new debt over the secondary market yield for the same security). By comparison, T-Mobile’s $500m transaction in August only offered a 25-30 basis point concession.

Although the issue performed strongly, growing takeover speculation dampened demand for the securities, according to a telecoms specialist at an asset management firm: “DT has always indicated they have been reluctantly involved in T-Mobile and they will continue to disengage as fast as they can.”

Dish, the satellite provider, and Sprint are leading candidates to acquire the telecoms company, but this would signal bad news for bondholders.

“If they do sell T-Mobile, that might not be a good event for any bonds that were bought above par, given the change of control language,” said the telecoms specialist.

A takeover is likely to increase the company’s debt burden, causing the value of existing bonds to fall. COC’s (change of control clauses) would allow the bondholder to sell the security back to the issuer at a set price. In this case, T-Mobile’s COC allows the holder to return the bond at a price of 101 in the event that the debt is downgraded by two ratings agencies.

The deal accounts for half the liability taken on by Deutsche Telekom (DT), T-Mobile’s parent company, when it acquired a 74% stake in pay-as-you-go carrier MetroPCS Communications. The remaining debt held by T-Mobile, which is resettable, is unlikely to be resold according to CreditSights.

Firms have been keen to capitalize on low interest rates by issuing debt, but the Fed is widely expected to taper its $85bn in asset purchases by 2014. This is the latest in a string of high value deals to hit the market in recent months. Earlier this year, Apple sold $17bn worth of bonds but this was surpassed last month by Verizon’s $49bn issue, the largest sale of corporate debt in history.

BA pioneers new debt issue


BRIEF: Write up this statement in about 150 words (source at bottom of page). Time: 40 minutes including research.

British Airways (BA) have issued a $927m publicly traded-bond issue which uses aircraft as collateral. Enhanced Equipment Trust Certificates (EETC’s) are common amongst US airlines, but the deal is the first of its kind carried out in the UK.

Two classes of certificates will be on offer, one with an annual coupon of 4.625% and the other a coupon of 5.625%. Both bonds pay out quarterly and have a maturity of a year.

Enrique Dupuy, CFO of IAG said: “This transaction marks a strategic milestone as we diversify our sources of funding. “

BA’s 2011 merger with Spanish airline Iberia has given the company access cheap debt according to an equities analyst from Goldman Sachs.

Citi was responsible for structuring the deal, which has been rated (A/BBB) by Standard and Poor’s.



British Airways inaugural $927 million EETC Bond Issue

International Consolidated Airlines Group, S.A. (“IAG”) today announces the successful launch by British Airways of an inaugural $927 million publicly-traded bond issue, using aircraft as collateral. These bonds are known as EETCs, or Enhanced Equipment Trust Certificates, and are a form of aircraft financing commonly used by US airlines.

The transaction includes Class A and Class B Certificates with an underlying collateral pool made up of six new B787-8 aircraft, two new B777-300 ER aircraft and six new A320-200 aircraft, due for delivery between June 2013 and June 2014.

The Class A Certificates ($721.6 million) have an annual coupon, payable quarterly, of 4.625%, and the Class B Certificates ($205.4 million) have an annual coupon, payable quarterly, of 5.625%.

Enrique Dupuy, CFO of IAG said: “This transaction marks a strategic milestone as we diversify our sources of funding. It is also the first time that British Airways has used EETCs and that this form of financing has been used in the UK”.

The transaction is rated by Standard and Poor’s (A/BBB), Moody’s (Baa1/Ba1) and Fitch (A/BBB-).
Citi acted as Lead Structuring Agent and Global Co-ordinator on the transaction.

Undergraduate education: the third degree

At present, A-level students are robotically completing past papers to make sure they can answer every single question written in every single exam. Teachers will be preaching the gospel that is “exam technique”. Pupils must be able to tick all the examiner’s boxes. I still remember preparing for my A-level Maths exams and completing the same question about 4 times on the day of the exam. I had no idea what I was doing, nor what it meant, I was simply memorizing steps that I could replicate in the exam. Needless to say, this strategy paid off and I was rewarded with 90%+ . Arguably, standardized testing is the best way of leveling the playing field given there is such a great disparity in teaching quality between state and private schools. In spite of this, as I made the transition from school to university, I began to ask myself- “is this what education is really about?”. The superficial nature of secondary education has long been a topic of debate. Year-on-year improvements in exam results can be juxtaposed with excessive “teaching to the exam” and 49% of the adult population demonstrating numeracy levels no better than the average 11 year old. Unfortunately, the same criticisms can be made of higher education.

Considering that exams comprise around 80% of formal assessment for most university courses, what is it that university exams actually test? When it comes to extended response questions, awarding an objective mark to a subjective piece of work can prove problematic. In an ideal world, for any piece of work or exam, a marker would make a justified decision in accordance to grade descriptors on a paper-by-paper basis. In spite of this, given that undergraduates are a secondary focus for the majority of academics, it is a natural tendency for markers to award marks on the basis of a checklist system as opposed to the strength of argument presented.

If one script has included something on the checklist that another has omitted, it will be awarded a higher mark even though the latter candidate may have elected to omit the detail for a perfectly legitimate reason. All too often, I find myself writing what is expected of me as opposed to writing what I believe to be correct. Frustratingly, as one of a hundred candidates, there is no scope to challenge the accepted view or, indeed, the question itself. Naturally, the necessity to tick as many boxes as possible in an exam means that quantity most definitely takes precedence over quality. Exams are thus so time pressured that original thought is not even a possibility. For subjective exam questions, the ability to write quickly is a considerable determinant of your mark.

Whilst this may be more applicable in courses that do not fall neatly in either the “arts” or “sciences” categories, the superficial nature of the marking system is not conducive to promoting depth of knowledge. In an attempt to feign a detailed understanding of the relevant academic literature, students may only read the abstract of a journal before including a tenuous reference to this in their exam. Since it is impossible for a marker to cross-reference every single paper, a student will get credit for this. What incentive is there for a student to engage with their subject if others are awarded the same mark after cramming for a two-week period before exams? Time after time, students are rewarded for “good presentation” whilst genuine academic interest and intellectual rigor are often overlooked. In the past, I have written essays that have been marked strictly on a checklist system. Points were awarded, almost in a literal sense, for ticking boxes.

Ultimately, there is little incentive for a university to implement sufficient checks and balances to ensure that grades are “just” (see here). A superficial system of exams has placed an all-consuming emphasis on exam technique and ticking boxes. Today’s undergraduates are not encouraged to think for themselves and are therefore incapable of doing so. In science based subjects, if a student is presented with a problem that does not appear in a format they have seen previously, they will struggle to solve it. This is the problem with over-standardization of exams and a lack of focus on learning from first-principles.  The entire education system promotes a mechanical approach to learning. Surely this isn’t what education is really about?

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