Tick Tock, Debt, Freddie, Sears & H&R Block
Sung to Dude Looks Like a Lady... Do the Hanky Skanky, Do the Hanky Skanky. Then click your heels 3 times and repeat the mantra... there is no spillover.
What's that ticking sound?? The U.S. commercial paper market shrank for a 3rd week, extending the biggest slump in at least 7 years.
Commercial paper outstanding has fallen 11%, in the past 3 weeks. ABCP which accounts for 50% of the market, -$59.4 Billion, commercial paper -$244 Billion.
Total short term debt maturing in 270 days or less -$62.8 billion to a seasonally adjusted $1.98 trillion.
As the commercial paper fails to sell, the bulk of the declines are going on the books of the commercial banks that made the loans.
Something wicked comes this way... yesterday, the Bank of England, acting as the lender of last resort, extended $3.2 billion at its highest rate, a 6.75% penalty rate.
The facility was last tapped on Aug. 20, when Barclays borrowed 314 million pounds after a loan from HSBC Holdings was delayed.
The central bank declined to identify the borrower. Barclays is emitting a maloderous solvency stench...
Tick-tock, the debt ran down the clock... Hedge Funds typically sell commercial paper maturing in less than 270 days and use the proceeds to purchase bonds with longer maturities.
The profit delivered from this strategy had been cut by rising long term Treasurie yields. Help on the way? Treasuries being used as collateral in lieu of ABCP.
Yesterdays $18 billion 2 year note auction drew the most demand since 1992. Bid to cover ratio 3.97, the past 12 sales, the bid to cover ratio averaged 2.77.
Pot calling Kettles black, Part II... Lehman Brothers citing dislocation in the credit and asset-backed and mortgage markets, is saying that brokers will be hit by their subprime exposure.
Lehman, not being very brotherly... cut price targets on Goldman Sachs, Morgan Stanley, Merrill Lynch and Bear Stearns by 10%.
Cheese puffs... KKR's proposed $24 Billion buyout of First Data falling apart, as KKR is fighting over terms with the banks providing the funding.
Jeopardy... Credit Suisse slashed its price target on Countrywide Financial by 30% to $28 from $40 and now sees CFC losing money this year.
Underwear... #2 GSE Freddie Mac reported a 45% drop in earnings, net income declined to $764 million from $1.4 billion and posting a $320 Million loss on new mortgages.
Kmart... Sears Holdings posted a 40% drop in Q2 profits, as sales fell and the retailer marked down prices for shoppers coping with a tough economy.
Total revenue -4%; Same store sales Kmart -3.8%; Sears -4.3%. Cash position evaporating 33% from $3.7 Billion to $2.6 Billion.
Rain Man... Thornburg Mortgage followed Countrywides lead and sold $500 million of convertible preferred stock to help alleviate a shortage of cash.
Earlier in Aug, the jumbo mortgage specialist was forced to sell $20.5 billion of MBS at a discount and is now negotiating the securitization of $1.4 billion of ARM's.
Get loose then tighten the noose... The UK banks were allowing homebuyers to take on loans of up to five times their income... but today...
Deutsche Bank AG, Merrill Lynch & Co.'s Mortgages Plc, Northern Rock Plc and Residential Capital Corp.'s GMAC-RFC unit, raised their interest rates.
U.K. lenders responsible for 12% of Britains mortgages are tightening standards for loans on house purchases, withdrawing offers and raising the cost for borrowers with less than perfect credit.
The Payback... HBOS Plc, the U.K.'s largest mortgage lender, said last week that it would repay about $35 billion of commercial paper owed by its Grampian Funding LLC unit.
Ich Bin Ein Berliner III? WestLB AG, the state-owned lender under investigation by German prosecutors, posted a first-half loss after bad trades with the bank's own money cut income by $823 million.
Take off hoser... GM said last week it had cut production at six plants amid plunging (-26%) truck sales.
For the first time since the early 1990s, GM will eliminate a shift and lay off one third (1000) of its Oshawa, Ontario plant workers.
But, I'm the taxman... doubling the previous quarter's loss, Option One Financial contributed to a Q1 overall loss of $302.6 million for HR Block.
In April, HR Block had agreed to sell Option One to Cerberus for $1 Billion. Since the ABCP & MBS crisis, Cerebus has backed away from the deal.
HR Block is seeking to waive requirements that Option One fund $2 billion of loans within 60 days of closing and have at least $8 billion of warehouse credit lines.
HR Block is also attempting to renegotiate the sale of its Option One Mortgage Corp unit and said it may prefer to shutter the lenders doors, rather than absorp more losses. HR Blocks shares down 15% YTD.
The mortgage lender funded $29.8 billion of subprime loans last year, CEO Mark Ernst:
"The mortgage origination market is in the midst of the most severe dislocation that it has seen in years, maybe the most severe since the 1930s."
What's that ticking sound?? The U.S. commercial paper market shrank for a 3rd week, extending the biggest slump in at least 7 years.
Commercial paper outstanding has fallen 11%, in the past 3 weeks. ABCP which accounts for 50% of the market, -$59.4 Billion, commercial paper -$244 Billion.
Total short term debt maturing in 270 days or less -$62.8 billion to a seasonally adjusted $1.98 trillion.
As the commercial paper fails to sell, the bulk of the declines are going on the books of the commercial banks that made the loans.
Something wicked comes this way... yesterday, the Bank of England, acting as the lender of last resort, extended $3.2 billion at its highest rate, a 6.75% penalty rate.
The facility was last tapped on Aug. 20, when Barclays borrowed 314 million pounds after a loan from HSBC Holdings was delayed.
The central bank declined to identify the borrower. Barclays is emitting a maloderous solvency stench...
Tick-tock, the debt ran down the clock... Hedge Funds typically sell commercial paper maturing in less than 270 days and use the proceeds to purchase bonds with longer maturities.
The profit delivered from this strategy had been cut by rising long term Treasurie yields. Help on the way? Treasuries being used as collateral in lieu of ABCP.
Yesterdays $18 billion 2 year note auction drew the most demand since 1992. Bid to cover ratio 3.97, the past 12 sales, the bid to cover ratio averaged 2.77.
Pot calling Kettles black, Part II... Lehman Brothers citing dislocation in the credit and asset-backed and mortgage markets, is saying that brokers will be hit by their subprime exposure.
Lehman, not being very brotherly... cut price targets on Goldman Sachs, Morgan Stanley, Merrill Lynch and Bear Stearns by 10%.
Cheese puffs... KKR's proposed $24 Billion buyout of First Data falling apart, as KKR is fighting over terms with the banks providing the funding.
Jeopardy... Credit Suisse slashed its price target on Countrywide Financial by 30% to $28 from $40 and now sees CFC losing money this year.
Underwear... #2 GSE Freddie Mac reported a 45% drop in earnings, net income declined to $764 million from $1.4 billion and posting a $320 Million loss on new mortgages.
Kmart... Sears Holdings posted a 40% drop in Q2 profits, as sales fell and the retailer marked down prices for shoppers coping with a tough economy.
Total revenue -4%; Same store sales Kmart -3.8%; Sears -4.3%. Cash position evaporating 33% from $3.7 Billion to $2.6 Billion.
Rain Man... Thornburg Mortgage followed Countrywides lead and sold $500 million of convertible preferred stock to help alleviate a shortage of cash.
Earlier in Aug, the jumbo mortgage specialist was forced to sell $20.5 billion of MBS at a discount and is now negotiating the securitization of $1.4 billion of ARM's.
Get loose then tighten the noose... The UK banks were allowing homebuyers to take on loans of up to five times their income... but today...
Deutsche Bank AG, Merrill Lynch & Co.'s Mortgages Plc, Northern Rock Plc and Residential Capital Corp.'s GMAC-RFC unit, raised their interest rates.
U.K. lenders responsible for 12% of Britains mortgages are tightening standards for loans on house purchases, withdrawing offers and raising the cost for borrowers with less than perfect credit.
The Payback... HBOS Plc, the U.K.'s largest mortgage lender, said last week that it would repay about $35 billion of commercial paper owed by its Grampian Funding LLC unit.
Ich Bin Ein Berliner III? WestLB AG, the state-owned lender under investigation by German prosecutors, posted a first-half loss after bad trades with the bank's own money cut income by $823 million.
Take off hoser... GM said last week it had cut production at six plants amid plunging (-26%) truck sales.
For the first time since the early 1990s, GM will eliminate a shift and lay off one third (1000) of its Oshawa, Ontario plant workers.
But, I'm the taxman... doubling the previous quarter's loss, Option One Financial contributed to a Q1 overall loss of $302.6 million for HR Block.
In April, HR Block had agreed to sell Option One to Cerberus for $1 Billion. Since the ABCP & MBS crisis, Cerebus has backed away from the deal.
HR Block is seeking to waive requirements that Option One fund $2 billion of loans within 60 days of closing and have at least $8 billion of warehouse credit lines.
HR Block is also attempting to renegotiate the sale of its Option One Mortgage Corp unit and said it may prefer to shutter the lenders doors, rather than absorp more losses. HR Blocks shares down 15% YTD.
The mortgage lender funded $29.8 billion of subprime loans last year, CEO Mark Ernst:
"The mortgage origination market is in the midst of the most severe dislocation that it has seen in years, maybe the most severe since the 1930s."
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