- Some governments seek alternative ways to raise cash
- Emerging markets debt in focus at this week’s IMF World Bank meetings
- Lack of transparency will raise costs for borrowers, say investors
Finance
Frontier debt risks ‘going dark’ amid high costs and creative deals
LONDON/WASHINGTON, Oct 14 (Reuters) – The need for emerging economies to be more transparent about their debt is one issue uniting wealthy countries and multilateral lenders in a fractious, divided world where the international order and development finance face pressure.
The World Bank in June launched a call for “radical” debt transparency and the United States outlined transparency as a key goal for international financial institutions under President Donald Trump’s leadership.
Sign up here.
But in the past several years, the riskiest of those nations – so-called frontier market countries – have been taking on more private, complex and “creative” debt arrangements that inadvertently undercut the visibility of the terms of their debt.
“Everybody loves transparency…(but) whatever the confidentiality clauses say, we are seeing a lot less of the documentation of commercial bank and other private lending,” said Anna Gelpern, a law professor at Georgetown University in Washington, D.C. who works on debt issues.
Collateralised lending to countries in strife that had dwindling options of raising funds causes particular issues, she added.
“That means that everything is going dark in terms of debt transparency.”
LIMITED ACCESS FOR BORROWERS
Countries from Panama and Colombia to Angola and Cameroon have sought to weather double-digit bond yields by seeking less conventional borrowing – from private placements to resource-backed loans or complex debt swaps requiring collateral.
While this is not on its own untoward, it means the terms of the debt – the cost, the collateral and even sometimes the tenure or amount – are not public.
This contrasts with international bond issuance where terms of the borrowing are published.
Some investors say the borrowing is a smart, sophisticated way to wait out times when bond markets might not be so easily accessible. But others warn this makes the total debt pile less transparent.
“With regards to collateralized borrowing, these kinds of hidden instruments, institutions like the IMF should be very worried about it, because they really then make the concept of preferred creditor very complicated,” said Reza Baqir, head of sovereign advisory at Alvarez & Marsal.
NET NEGATIVE, COST SAVING
The IMF estimated in a paper earlier this year that private lending to low-income countries outside international bonds as a percentage of their public and publicly guaranteed debt had risen to 10% by end-2023 from 6% at end-2010. Overall private lending – including international bond issuance – rose to 19% from 6%.
Victor Mourad of Citi said international bond issuance from Sub-Saharan African markets had been net negative – meaning governments raised less than they paid back – for the past three years.
Governments have sought cheaper funding sources – such as loans backed by development finance institutions such as the World Bank – and also more “creativity” via private placements and borrowing facilities in different currencies, though the alternatives they seek vary.
Nigeria has in the past secured oil-backed loans using crude oil cargoes as collateral. Angola opted for a $1 billion “total return swap” with JPMorgan, with privately placed bonds as collateral.
Aaron Grehan, co-head of emerging market debt with Aviva Investors, said Colombia and Panama had also avoided public debt markets, the former with dollar-bond buybacks and a total return swap, the latter with private placements.
Both had done well in these deals, he said, but will need to return to capital markets before too long due to the sheer amount they need. “You kick the can down the road,” he said.
When they return to public markets, investors will need to unpick their debt to try to determine what governments can sustainably borrow and repay.
“We have to do the homework and figure out if what is happening makes sense,” said Elina Theodorakopoulou, managing director and portfolio manager with Manulife Investment Management.
“If there is not enough transparency, that will be translated into the yield that you have to face if you were to access the market.”
Countries themselves say the deals have saved them money. Angola is still deciding on whether to extend its total return swap with JPMorgan, despite getting stung with a temporary $200 million margin call when oil prices slid.
“The cost of those financings is lower than the Eurobond,” said Dorivaldo Teixeira, general director of the public debt management unit at Angola’s finance ministry, while acknowledging the risks involved.
PUBLIC BORROWING, BUT HARDER TO ASSESS
At this week’s IMF and World Bank annual meetings in Washington, one of the issues the Global Sovereign Debt Roundtable will seek to tackle is the trouble of restructuring private debt.
That has snared Zambia and Ghana in default for longer than expected.
Sources said governments and advisors underestimated how hard it would be to unpick, determining who holds it, on what terms and whether there was collateral which can put one borrower ahead in the queue. This complicates debt reworks, in which all borrowers, ostensibly, must get equal treatment.
“It raises risks,” said Thys Louw, a portfolio manager with Ninety One. “Anything that’s marginally opaque adds complexity.”
Reporting by Libby George and Karin Strohecker, Additional reporting by Nell Mackenzie; Editing by Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
Harley-Davidson’s new CEO wants to transform how people think about the iconic motorcycle brand, so the company is trying something different.
This week, Harley announced a new strategy that focuses on lower-priced bikes, rather than relying on older, more affluent customers to buy its higher-margin touring models.
“Back to the Bricks builds on our core strengths and competitive advantages, harnessing the passion of our riders to deliver profitable growth for the Company and both our dealers and shareholders,” Harley CEO Artie Starrs said this week. “As we drive towards this new phase of growth, we remain committed to the craftsmanship and dedication that define our brand.”
Entry-level Harley-Davidsons cost about $13,000, while the higher-end Adventure Touring models average about $23,250, and the Premium Range &CVO models cost about $38,500, according to Reuters.
Harley’s new strategy targets a core profit of over $350 million from its motorcycle business by 2027 and over $150 million in cost reductions.
To kick off the new strategy, Harley is introducing Sprint, a new entry-level model powered by a smaller 440cc engine, later in the year.
What is Harley-Davidson’s “Back to the Bricks” strategy?
Harley’s new strategy relies on more than just pushing buyers toward cheaper vehicles to increase volume. The 123-year-old company has a set of five pillars on which it is building its future.
Harley-Davidson “Back to the Bricks” 5-point plan
-
Deep appreciation of Harley-Davidson’s competitive advantages and legacy: The Company’s iconic brand, diversified and powerful revenue channels, and best-in-class dealer network provide a powerful foundation for growth.
-
Renewed commitment to exclusive dealer network to drive enterprise profitability: Harley-Davidson’s dealers are a competitive advantage. The Company is planning actions to enable dealers to double profitability in 2026 and then double it again by 2029.
-
Immediate actions to recapture share in areas where Harley-Davidson has right to win: Harley-Davidson has strong legacy equity in existing markets including new motorcycles, used motorcycles, Parts & Accessories, and Apparel & Licensing. The Company’s new strategy is focused on positioning the Company to regain share and drive meaningful volume growth in categories where it benefits from credibility, scale, and deep rider connection.
-
Strong financial position with a path to stronger free cash flow and EBITDA margin: Cost and restructuring actions already underway support a path to stronger free cash flow and EBITDA margin over time.
-
Bolstered management team with balance of fresh perspectives and institutional knowledge: Harley-Davidson has made a number of leadership appointments that support the Company as it leverages its innate strengths.
Written by Jitendra Parashar at The Motley Fool Canada
Dividend investing can be one of the simplest ways to build long-term wealth while creating a steady stream of passive income. But in my opinion, a good dividend stock is about much more than just a high yield. Beyond dividend yield, investors should also look for companies with durable businesses, reliable cash flows, and a history of rewarding shareholders consistently over time.
That’s exactly why many investors turn to financial stocks. Banks and asset managers often generate recurring earnings through lending, investing, and wealth management activities, allowing them to support stable dividend payments even during uncertain market conditions.
Two Canadian financial stocks that stand out right now are AGF Management (TSX:AGF.B) and Toronto-Dominion Bank (TSX:TD). Both companies offer attractive dividends backed by solid financial performance and long-term growth strategies. In this article, I’ll explain why these two financial stocks could be worth considering for income-focused investors right now.
AGF Management stock continues to reward shareholders
AGF Management is a Toronto-based asset manager with businesses across investments, private markets, and wealth management. Through these divisions, the company offers equity, fixed income, alternative, and multi-asset investment strategies to retail, institutional, and private wealth clients.
Following a 59% rally over the last 12 months, AGF stock currently trades at $16.67 per share with a market cap of roughly $1.1 billion. At current levels, the stock offers a quarterly dividend yield of 3.3%.
One reason behind AGF’s strong recent performance is its increasingly diversified business model. The company has expanded its investment capabilities and broadened its geographic reach, helping it perform well across varying market environments.
In the first quarter of its fiscal 2026 (ended in February), AGF posted free cash flow of $36 million, up 14% year over year (YoY), driven mainly by higher management, advisory, and administration fees. These fees climbed to $92.5 million as demand for the company’s investment offerings strengthened.
AGF has also been focusing on expanding its alternative investment business and introducing new investment products. With strong cash generation and growing demand for alternative investments, AGF Management looks well-positioned to continue rewarding investors over the long term.
TD Bank stock remains a dependable dividend giant
Toronto-Dominion Bank, or TD Bank, is one of North America’s largest banks, serving millions of customers through its Canadian banking, U.S. retail banking, wealth management and insurance, and wholesale banking operations.
Britain’s financial watchdog said on Friday a tribunal hearing on legal challenges to its compensation scheme for mis-sold car loans was unlikely before October, and told lenders to prepare for a possibility that the scheme could be scrapped entirely.
-
Rhode Island2 minutes agoProposed tax hike would hurt small businesses and our communities | Opinion
-
South-Carolina8 minutes ago11 Unforgettable Small Towns to Visit in South Carolina
-
South Dakota14 minutes agoHuman trafficking survivor advocate to speak at Rapid City church event
-
Tennessee20 minutes agoEthan Mendoza injured as No. 4 Texas loses to Tennessee, 5-1
-
Texas26 minutes agoWarm Saturday in North Texas ahead of severe weather chances later for Mother’s Day
-
Utah32 minutes agoDiscover the deliciousness of New York-style pizza at Fini Pizza in Utah City
-
Vermont38 minutes agoVermont teen dies in crash with tree
-
Virginia44 minutes agoPHOTOS: Virginia Beach Police investigate firearm-related incident at Carriage House Apartments