More Bonds & BS Part IV
From Bloomberg: Kohlberg Kravis Roberts & Co. canceled plans to raise 1 billion euros ($1.4 billion) of loans for Dutch retailer Maxeda BV as investors shun high-yield debt.
More than 20 financing deals have been postponed or restructured in the past three weeks as losses from the U.S. subprime mortgage rout rattled investor confidence.
After failing to entice investors by reducing prices for the debt and introducing covenants to restrict future borrowing; Citigroup Inc. and ABN Amro Holding NV have guaranteed to provide the financing.
"Due to current volatility of the credit markets, Citigroup and ABN Amro have decided to postpone syndication to a later stage when they expect markets to have stabilized."
Citigroup and ABN Amro are charging as much as 3 percentage points over the European interbank offered rate on the loans, or 7.2 percent at current rates.
Debt from retailers is under scrutiny after Crewe, England- based Focus DIY Group Ltd., being acquired by Cerberus Capital Management LP, defaulted on 100 million pounds of notes last month. Investors received just 40 percent of face value.
Flecks latest gives a nice recap of Wall Street's dirty little secret...
the debt market process of mark-to-"fantasy model" and the pain of being forced to come clean by revaluation of rating and marking-to-market.
Key excerpts: Wall Street reacted by proclaiming the (Bear Stearns) problem "contained."
Though I essentially laughed at that sanguine response, now I understand what it meant:
Those in the know understood that nothing was going to be marked to market, so the subprime-loan-originator implosion didn't matter.
At the time, I said that redemptions were going to force price discovery into the market -- although, as Jim Grant so eloquently put it in a recent issue of Grant's Interest Rate Observer:
Bear Stearns had a totally different opinion: "Price discovery could wait until the return of blue skies and normal pulse rates. The first order of business was price suppression."
This price suppression was the outcome folks had hoped for.
After all, according to a July 11 article in Bloomberg, Wall Street took in about $27 billion in revenue from underwriting and trading asset-backed securities last year alone.
It's a mighty profitable business that they are protecting.
These 27 Billion motives tie in very nicely with the revelations in The 100 Year Storm III as to what REALLY happened at the Merrill Lynch CDO RMBS seized asset auction.
The Nattering One muses... much like Nixon's tapes and Rosemary Woods, can Wall Street keep this Magic Genie bottled up until the return of blue skies?
If not, can anyone fathom what happens when the Genie is unleashed? Me thinks we're going to find out faster than anyone really wants to.
More than 20 financing deals have been postponed or restructured in the past three weeks as losses from the U.S. subprime mortgage rout rattled investor confidence.
After failing to entice investors by reducing prices for the debt and introducing covenants to restrict future borrowing; Citigroup Inc. and ABN Amro Holding NV have guaranteed to provide the financing.
"Due to current volatility of the credit markets, Citigroup and ABN Amro have decided to postpone syndication to a later stage when they expect markets to have stabilized."
Citigroup and ABN Amro are charging as much as 3 percentage points over the European interbank offered rate on the loans, or 7.2 percent at current rates.
Debt from retailers is under scrutiny after Crewe, England- based Focus DIY Group Ltd., being acquired by Cerberus Capital Management LP, defaulted on 100 million pounds of notes last month. Investors received just 40 percent of face value.
Flecks latest gives a nice recap of Wall Street's dirty little secret...
the debt market process of mark-to-"fantasy model" and the pain of being forced to come clean by revaluation of rating and marking-to-market.
Key excerpts: Wall Street reacted by proclaiming the (Bear Stearns) problem "contained."
Though I essentially laughed at that sanguine response, now I understand what it meant:
Those in the know understood that nothing was going to be marked to market, so the subprime-loan-originator implosion didn't matter.
At the time, I said that redemptions were going to force price discovery into the market -- although, as Jim Grant so eloquently put it in a recent issue of Grant's Interest Rate Observer:
Bear Stearns had a totally different opinion: "Price discovery could wait until the return of blue skies and normal pulse rates. The first order of business was price suppression."
This price suppression was the outcome folks had hoped for.
After all, according to a July 11 article in Bloomberg, Wall Street took in about $27 billion in revenue from underwriting and trading asset-backed securities last year alone.
It's a mighty profitable business that they are protecting.
These 27 Billion motives tie in very nicely with the revelations in The 100 Year Storm III as to what REALLY happened at the Merrill Lynch CDO RMBS seized asset auction.
The Nattering One muses... much like Nixon's tapes and Rosemary Woods, can Wall Street keep this Magic Genie bottled up until the return of blue skies?
If not, can anyone fathom what happens when the Genie is unleashed? Me thinks we're going to find out faster than anyone really wants to.
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