Fortnightly Market View: Global Market Turmoil Hits India

After two years, bulls are on the back foot


The previous fortnight, I had written...
Premium Content
Monthly Digital Access


Already A Subscriber?
Yearly Digital+Print Access


Moneylife Magazine Subscriber or MSSN member?

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Top Tobacco Bond Banker Departs Barclays
Kym Arnone handled more than $40 billion in deals in which states and other governments borrowed against income from the landmark tobacco legal settlement of 1998
The go-to dealmaker in the market for tobacco bonds is gone from her post – a surprise departure that raises questions about the future direction of a once-burgeoning corner of Wall Street.
Kym S. Arnone, a senior banker who, by her own count, helped engineer more than $40 billion of tobacco bond deals, is no longer with Barclays Capital, a bank spokesman confirmed last week. 
The reasons for Arnone’s departure are unclear. Some clients contacted by Barclays said they had been told the separation was “mutually agreeable” but not whether Arnone was joining a competitor. Bankers at competing firms also told ProPublica they were not aware if she had been hired elsewhere. Arnone did not respond to calls and emails, and the Barclays spokesman would not provide details. 
Tobacco bonds had been a hot segment of the $3.6 trillion market for municipal government debt. A 1998 legal settlement with cigarette manufacturers created demand for bonds, which netted upfront cash for state and local governments that were promised billions of dollars in future payments to compensate them for health-related costs of smoking.
As ProPublica reported, tobacco bonds were a booming business from 2005 to 2008, when bankers like Arnone persuaded dozens of settlement recipients to borrow against their cut of the accord, sometimes for pennies on the dollar. These days, few new deals are coming to market. The most recent, a $750 million Louisiana transaction we wrote about in April, failed to get state legislators’ approval.
Instead, governments have been retooling past tobacco bond issues that are heading for default thanks to bankers’ use of a risky form of borrowing known as capital appreciation bonds, or CABs. These bonds typically carry higher interest rates and require big balloon payments, often decades in the future. 
Last year, Arnone engineered a bailout of two such bonds sold by New Jersey. As we reported, a hedge fund cleared a $100 million profit on its holdings of the rescued bonds, which were expected to default. 
New Jersey officials said the rescue was a good deal for taxpayers even though the state had to pledge about $400 million more of its future tobacco settlement money to prop up the bonds. They were part of a larger tobacco bond issue that Arnone handled for the state back in 2007. 
Since October 2014, Arnone has served as chair of the Municipal Securities Rulemaking Board, the industry’s self-regulator. A spokeswoman for the MSRB said Arnone would continue to serve out her term as chair of the MSRB’s board until her term expires on Sept. 30. As chair, Arnone is paid $80,000.
Courtesy: ProPublica


Allow us to cancel power deals: Kejriwal

Kejriwal also declared that power companies would be fined if they cut electricity for more than one hour


Accusing private companies of supplying costly electricity, Chief Minister Arvind Kejriwal on Sunday urged Prime Minister Narendra Modi to let the Delhi government scrap previous power agreements.

"If this permission is given, then the electricity tariff in Delhi will further come down," the Aam Aadmi Party (AAP) leader said at the launch of a scheme to redress disputes over electricity bills.
Kejriwal also declared that power companies would be fined if they cut electricity for more than one hour.
A preliminary report of the Comptroller and Auditor General, which stated that the capital's three power discoms showed inflated loss, has given a shot in the arm for the AAP government which has accused these firms of fudging their account books.
He urged the prime minister to allow the Delhi government to buy cheaper power, saying this was available, the AAP tweeted.
He said power tariff was high in the national capital as Delhi was buying more than half its electricity needs at Rs.5.50 a unit.
"We have come to know that many power companies are ready to supply power at Rs.2.5 to Rs.3 a unit.
"When we can get electricity at this rate, why should we buy it for Rs.5 or Rs.5.50 a unit?
"When we examined the issue, we realized that the previous government had entered into an agreements valid for 30 years.
"The power companies now tell us that since these agreements are in place, you will have to buy power from us. The companies are pressurising us. Why should people suffer?"
The chief minister said: "We also appeal to the central government and Modi to allow us to cancel the costly agreements reached earlier with private companies."
The one-time power amnesty scheme, which was launched in east Delhi's Vinod Nagar, is for those who have complained of inflated bills, tampered billing meters and the ones who had unauthorised connections.
The one-month scheme will benefit about 2.5 lakh households, Kejriwal said. "I feel no scheme can be better than this. No matter how old the dispute is, those living in jhuggis (slum) can pay Rs.250 to settle it."
Besides, he urged the power discoms to ensure that their staff do not issue inflated bills to the people.





Meenal Mamdani

2 years ago

I recently read the various illegal means by which the power companies have been diddling the consumers. Those interested in details can check it out here <>
I was saddened to see the venerable name of Tata in the list of rogue companies. Tata is a business house, so we don't expect it to forego profits. But to rob the poor people thus is shameful.
It has taken time for Tatas to build up trust in their brand. They are likely to lose it in short order.

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)