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900 | <s>[INST] But for all of the [/INST] risks, there is potential for big gains. </s> |
901 | <s>[INST] "It's rare to be able to [/INST] buy significant stakes in core industries" at a reasonable price. </s> |
902 | <s>[INST] Capital International, for example, helped finance the private [/INST] sector buyout of two big Mexican banks, Bancomer and Banamex (Banco Nacional de Mexico). </s> |
903 | <s>[INST] The firm's $2 billion Emerging Markets Growth Fund, [/INST] reserved mainly for institutional investors, has nearly $100 million invested in nonlisted securities. </s> |
904 | <s>[INST] BEA has a 9% stake in a private natural [/INST] gas distribution company in Argentina, and a 10% stake in a private Brazilian textile company. </s> |
905 | <s>[INST] Scudder holds a $5.6 million [/INST] stake in Nortel Inversora, an Argentine phone company. </s> |
906 | <s>[INST] The investment represents 9.7% of [/INST] the assets of the mutual fund giant's Argentina Fund. </s> |
907 | <s>[INST] Scudder also is working on [/INST] other private equity deals but won't disclose details. </s> |
908 | <s>[INST] Securities and Exchange Commission rules say open-end mutual funds can hold as much [/INST] as 15% of their assets in private, unlisted stock; there is no limit on private stock holdings for closed-end funds, the agency says. </s> |
909 | <s>[INST] Typically, private equity players seek at least [/INST] a 25% annual return over a period of four to five years. </s> |
910 | <s>[INST] But, in fact, private [/INST] stock investing in Latin America is experimental. </s> |
911 | <s>[INST] These are "obscure, exotic investments," says Richard [/INST] Watkins, chief executive of LatInvest Securities, a London-based investment and research firm. </s> |
912 | <s>[INST] Because there often isn't a public market for [/INST] this private stock, its value is largely a matter of assertion by the holders. </s> |
913 | <s>[INST] "Valuation of private equity is purely [/INST] an art form," cautions Hari Hariharan, an executive at Banco Santander. </s> |
914 | <s>[INST] Indeed, the mutual fund industry had [/INST] previous experience with unmarketable stock that was anything but pleasant. </s> |
915 | <s>[INST] In the 1960s, the Enterprise Fund, run [/INST] by Fred Carr, specialized in buying unregistered "letter stock" of start-up companies. </s> |
916 | <s>[INST] The fund performed fabulously in the bull market frenzy, but [/INST] when the market headed down, the value of the letter stock suddenly became zero because there weren't any buyers. </s> |
917 | <s>[INST] Today's hot demand for private stock [/INST] comes as many Latin American stock markets are performing poorly. </s> |
918 | <s>[INST] The Mexican stock market is down nearly 7% this [/INST] year, in U.S. dollar terms, primarily because of concerns over North American Free Trade Agreement negotiations. </s> |
919 | <s>[INST] The Argentinian market is down [/INST] 15%; the Chilean stock market is down nearly 2%. </s> |
920 | <s>[INST] Even so, some players believe the demand [/INST] for private stock reflects a long-term bullish view on these economies. </s> |
921 | <s>[INST] The recent round of strategic purchases in Mexico by U.S. [/INST] concerns "sends an unambiguously bullish signal," says William F. Truscott, portfolio manager of Scudder's Latin America fund. </s> |
922 | <s>[INST] "We think the Mexican [/INST] market is going to come roaring back". </s> |
923 | <s>[INST] In effect, U.S. money management firms are bypassing [/INST] investment banks and capital markets and taking an unusual step into merchant banking. </s> |
924 | <s>[INST] Many controlling families or investment groups of [/INST] Latin industrial companies see a new era of capitalism barreling toward them. </s> |
925 | <s>[INST] But their cost of [/INST] capital in the public markets is high. </s> |
926 | <s>[INST] Equity capital is expensive because inflation, political uncertainty, [/INST] and currency concerns cheapen the prices their stocks fetch in the public market. </s> |
927 | <s>[INST] In addition, some of these owners stuck with their companies through the crisis in [/INST] Latin economies in the 1980s and don't want to dilute the value of their stock with a public offering just when they might start realizing big returns. </s> |
928 | <s>[INST] Generally, U.S. credit rating agencies are reluctant to give companies higher credit [/INST] ratings than the sovereign nations in which they are based, no matter how good their businesses or how clean their balance sheets. </s> |
929 | <s>[INST] So, bond yields for Latin American companies tend [/INST] to be higher than U.S. or European yields, making the cost of debt uncompetitive. </s> |
930 | <s>[INST] By selling private stock, Latin American corporations [/INST] can set the terms, maintain confidentiality and avoid the costs of public offerings. </s> |
931 | <s>[INST] And buyers get a chance to [/INST] purchase large blocks of stock at prices often below book value. </s> |
932 | <s>[INST] "These families' eyes light up when I tell them that I have an institutional investor who isn't [/INST] interested in dividends or voting stock," says Dario Pedrajo, vice president at Vestcor Partners, a Miami-based investment bank that is buying private stock positions in a number of Latin American companies. </s> |
933 | <s>[INST] Audley Twiston Davies, managing director of Latin American Securities Ltd., London, [/INST] says controlling shareholders of many companies "are very happy to have a nonpredatory partner wih a five- to seven-year view". </s> |
934 | <s>[INST] Mr. Twiston Davies is assembling a [/INST] team of private stock analysts to find investments for his clients. </s> |
935 | <s>[INST] For investors buying private stock, acknowledges Mr. [/INST] Truscott of Scudder, "If you make a mistake, you still own it. </s> |
936 | <s>[INST] But the huge returns are made by those who went [/INST] in early, took the risk, then realize their returns later in the public market" when the companies go public. </s> |
937 | <s>[INST] ___ Document 358 of 400 Many Treasury prices rise on more speculation about possible changes [/INST] in U.S. borrowing mix Author: Lauricella, Thomas D; Vogel, Thomas T, Jr Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 08 Apr 1993: PAGE C17. </s> |
938 | <s>[INST] accountid=28034 Abstract: Investor speculation about possible changes in [/INST] the US government's mix of maturities in its issues dominated trading Apr 7, 1993. </s> |
939 | <s>[INST] The 30-Year Treasury issue rose almost 1/4 [/INST] point to 102 5/32, pushing the yield down to 6.95% from 6.96%. </s> |
940 | <s>[INST] Full text: NEW YORK -- Speculation about possible changes in [/INST] the way the government manages its debt dominated an otherwise quiet trading session as many Treasurys ended slightly higher. </s> |
941 | <s>[INST] The benchmark 30-year Treasury bond rose nearly 1/4 [/INST] point, or nearly $2.50 for a bond with a $1,000 face value, to 102 5/32. </s> |
942 | <s>[INST] The yield, which moves in the opposite [/INST] direction from the price, dropped to 6.95% from 6.96% on Tuesday. </s> |
943 | <s>[INST] The 10-year note rose nearly 1/8 [/INST] point to 101 11/32 to yield 6.06%, down from 6.07%. </s> |
944 | <s>[INST] But most Treasurys maturing in [/INST] five years or less ended unchanged on the day. </s> |
945 | <s>[INST] Meanwhile about $20 billion of so-called Brady [/INST] bonds from Argentina were officially freed to trade in the cash market. </s> |
946 | <s>[INST] These dollar-denominated bonds, which were created out of Argentina's commercial bank debt and past-due interest as part of its Brady Plan restructuring, increased the size of [/INST] the Brady bond market by about a third to about $76 billion, according to Salomon Brothers Inc. Meanwhile, trading volume in the U.S. Treasury market was on the light side throughout the session with many in the market sidelined ahead of key inflation data to be released today . </s> |
947 | <s>[INST] "This was the type of session you would probably have to expect in the midst of a [/INST] holiday-shortened week and without any real economic data releases to contend with," said William V. Sullivan, Jr., a senior vice president at Dean Witter Reynolds Inc. "It was a featureless session". </s> |
948 | <s>[INST] For the second consecutive day, what little activity there was centered around talk of [/INST] a reduction in the amount of 30-year bonds that are issued, as part of a change in the way the Treasury manages the federal debt. </s> |
949 | <s>[INST] Sparking the latest round of discussion about potential changes [/INST] in the borrowing mix was a report produced by the Goldman, Sachs & Co. economics group. </s> |
950 | <s>[INST] Goldman analysts argued that as part of likely changes [/INST] in debt management, the government will move to semiannual 30-year bond auctions from the current quarterly structure. </s> |
951 | <s>[INST] According to the report, that would [/INST] mean no 30-year bond auction at the May refunding. </s> |
952 | <s>[INST] The Goldman analysis said the Treasury's final plan for changes [/INST] in the borrowing mix will "probably closely resemble" those suggested several weeks ago by the Senate Budget Committee. </s> |
953 | <s>[INST] The committee recommended a 50% cut in the amount of long [/INST] bonds issued, an elimination of the seven-year note and a 20% cut in the amount of five-year notes that are auctioned. </s> |
954 | <s>[INST] At the same time, the Treasury will move to increase bill [/INST] auction sizes later this quarter to compensate for the reductions in the other offerings, according to the Goldman report. </s> |
955 | <s>[INST] A Goldman Sachs economist who produced [/INST] the report stressed it was solely their group's own analysis. </s> |
956 | <s>[INST] A similar report that affected the market Tuesday, by [/INST] Stone & McCarthy Research Associates, was based on information from an unnamed source in Washington. </s> |
957 | <s>[INST] A spokesman for the Treasury Department said an [/INST] internal group studying the question of changing the borrowing mix hasn't yet made any decisions. </s> |
958 | <s>[INST] The findings of the study group are due [/INST] to be made public before the next quarterly refunding auctions are announced on May 5. </s> |
959 | <s>[INST] Treasury Secretary Lloyd Bensten has repeatedly [/INST] said he didn't anticipate any "radical" changes in the borrowing mix. </s> |
960 | <s>[INST] In response to the Goldman report, traders pushed the price of the [/INST] long bond higher, creating what is known as a flatter yield curve, as the interest rate gap between short-term and long-term Treasurys narrows. </s> |
961 | <s>[INST] During the early part of the session, the gap between the [/INST] yield on the two-year note and 30-year bond fell to 3.00 percentage points from 3.05 percentage points late Tuesday. </s> |
962 | <s>[INST] flattened the curve from the very start of the morning," said Andrew Brenner, a government securities trading [/INST] manager at Nomura Securities International Inc. Also helping long-term issues was another decline in commodities prices, which helped to ease some of the inflation concerns that have been plaguing the market. </s> |
963 | <s>[INST] The Commodity Research Bureau [/INST] index closed down 1.22 points at 210.25. </s> |
964 | <s>[INST] "Inflation is still a problem for the market [/INST] but the CRB declined and that alleviated things a little bit," Mr. Brenner said. </s> |
965 | <s>[INST] Bond investors fear inflation because it [/INST] reduces the value of investments with a fixed rate of return. </s> |
966 | <s>[INST] Meanwhile the Treasury sold [/INST] $22.53 billion of three-month and six-month bills. </s> |
967 | <s>[INST] The weekly bill auction had been postponed from Monday while the Treasury [/INST] waited for the Senate to pass an increase in the amount of debt that the government is allowed to have outstanding. </s> |
968 | <s>[INST] The Senate voted to [/INST] increase the debt limit late Monday evening. </s> |
969 | <s>[INST] Among the data slated to be released today , the [/INST] March producer price index report will be of particular interest against a backdrop of heightened concerns about inflation. </s> |
970 | <s>[INST] The average forecast among economists surveyed by Dow Jones Capital Markets [/INST] Report calls for a moderate increase of 0.3%, both with and without the volatile food and energy category factored in. </s> |
971 | <s>[INST] Also due out today will be [/INST] initial unemployment claims for the week ended April 3. </s> |
972 | <s>[INST] Most economists are looking for a [/INST] partial reversal of the steep 33,000 rise reported last week. </s> |
973 | <s>[INST] Whatever response there is to the economic data will be short-lived [/INST] as the government securities markets are slated to close at 2 p.m. EDT ahead of the Good Friday holiday. </s> |
974 | <s>[INST] Here are the details of yesterday's auction by the Treasury [/INST] of 13-week and 26-week bills: Rates are determined by the difference between the purchase price and face value. </s> |
975 | <s>[INST] Thus, higher bidding narrows the [/INST] investor's return while lower bidding widens it. </s> |
976 | <s>[INST] The percentage rates are calculated on a [/INST] 360-day year, while the coupon-equivalent yield is based on a 365-day year. </s> |
977 | <s>[INST] The 13-week bills mature July [/INST] 8, 1993, and the 26-week bills mature Oct. </s> |
978 | <s>[INST] Foreign Bonds Yesterday's issuance of an estimated $20 billion in Argentinian [/INST] Brady bonds was the largest such issuance since January 1991, when Venezuela issued more than $16 billion of Brady bonds. </s> |
979 | <s>[INST] As money managers in the U.S. look for higher-yielding investments abroad, [/INST] Brady bonds have become an increasingly attractive alternative because many of them have their principals collateralized by zero-coupon U.S. Treasurys. </s> |
980 | <s>[INST] As with other Brady bonds, Argentina's Brady bonds were created [/INST] from commercial bank loans and past-due interest as part of an extensive restructuring of that nation's economy. </s> |
981 | <s>[INST] For the moment, less than 20% of these Argentinian dollar-denominated bonds can [/INST] be purchased in the U.S. and those may only be purchased by so-called qualified institutional buyers possessing at least $100 million in assets. </s> |
982 | <s>[INST] But after a 40-day "seasoning" period in the [/INST] Eurobond market, the remaining Argentina Brady bonds can be purchased by any American investor. </s> |
983 | <s>[INST] The Argentina Brady bonds come [/INST] in three versions: par, discount, and past-due interest bonds. </s> |
984 | <s>[INST] The par bonds were exchanged for [/INST] an equal face amount of loans and mature in 30 years. </s> |
985 | <s>[INST] This means that the first coupon payment [/INST] is 4% and increases each year until 1999, when it reaches 6%. </s> |
986 | <s>[INST] The discount bonds were exchanged for a [/INST] value equal to 65% of loans and also mature in 30 years. </s> |
987 | <s>[INST] They pay a floating coupon [/INST] of the London Interbank Offered Rate plus 0.8125%. </s> |
988 | <s>[INST] The par and discount bonds have their principal [/INST] payments and one year of interest payments backed by U.S. Treasury 30-year zero-coupon bonds. </s> |
989 | <s>[INST] The past-due interest bonds are not backed by U.S. Treasurys [/INST] but pay the same floating coupon rate as the discount bonds and have a 12-year final maturity. </s> |
990 | <s>[INST] In the first day of issuance yesterday, the par bonds rose half a point [/INST] from their close on Tuesday in when-and-if-issued trading, or $5 for a bond with $1,000 face value, to 48, according to Dow Jones Telerate Emerging Markets Service. </s> |
991 | <s>[INST] Municipal Bonds Municipal bonds extended the advance [/INST] that started Tuesday and finished with gains of 1/8 point to 1/2 point. </s> |
992 | <s>[INST] In secondary dealings, the Northeast Maryland Waste Disposal Authority's [/INST] 6.20% coupon revenue bonds maturing in 2010 finished 1/2 point higher at 99 3/8 to yield 6.24%. </s> |
993 | <s>[INST] This week's sudden resurgence of buying after the slump in March [/INST] is due to the Treasury bond market's strength and a long-awaited ebb in the flow of new muni issues, traders said. </s> |
994 | <s>[INST] , Health Facilities Authority's $80 [/INST] million of Series 1993 hospital revenue bonds. </s> |
995 | <s>[INST] The securities were given yields that [/INST] ranged from 4.00% in 1995 to 6.30% in 2022. </s> |
996 | <s>[INST] The March inflation data will determine whether [/INST] or not the market's climb lasts much longer, said a New York trader. </s> |
997 | <s>[INST] Some of that data, in the form [/INST] of the producer price index, are scheduled to be released today. </s> |
998 | <s>[INST] Corporate & Junk Bonds After remaining quiet for much of the week, [/INST] corporate bond sales surged, as interest rates fell for the third consecutive session and the market completed business before Friday's bond market holiday. </s> |
999 | <s>[INST] In secondary trading, most [/INST] issues ended flat to 1/8 point higher. </s> |
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