tag:blogger.com,1999:blog-4815867514277794362.post546089106359444869..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: A Morphology of the Sin of Bad LendingJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4815867514277794362.post-74336763313541965922010-02-12T06:36:37.983+11:002010-02-12T06:36:37.983+11:00This isn't real estate but I still get a laugh...This isn't real estate but I still get a laugh: Evergreen Solar lent Lehman 25 million shares (1/4 the company's value) in conjunction with a convertible debt offering. It lowered their borrowing cost by 1/2%. The bond holders promptly sold short the shares to lock in their risk free loan to Evergreen. The accountants didn't make Evergreen declare the shares as outstanding since they were loaned to Lehman. Lehman went bankrupt. Evergreen is not getting their shares back. Evergreen gave away 1/4th the company to lower their borrowing costs by 1/2%. Ooops.FRED ROGERSnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-21106184973013238662010-02-11T10:21:12.868+11:002010-02-11T10:21:12.868+11:00The sins are mitigated by the excess of capital th...The sins are mitigated by the excess of capital that wish to feast on a carcass that is too small. One dead dog and 40 vultures doesn't make for happy vultures!<br /><br />Listen to the REIT calls of firms that raised capital when their stock was down to profit from the coming depression. Now the sellers are depressed that they sold so much stock.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-7518852188293138062010-02-10T03:07:50.981+11:002010-02-10T03:07:50.981+11:00If these busted markets are seeing any traction it...If these busted markets are seeing any traction its no surprise that the bearded one is now talking about exit plans. <br /><br />For this kind of data the likes of Real Capital Analytics or just your good ol' Cushman Wakefield / CBRE market data can't be that bad. There's been a hell of a lot of money raised for distressed debt funds that is probably under utilized given the LBO syndicate loan apocalypse ended in early-mid 09 from a pricing point of view.Nemo Incognitohttps://www.blogger.com/profile/07345185457108156269noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-38867003179734518872010-02-09T23:16:11.135+11:002010-02-09T23:16:11.135+11:00With regards to the UK and Ireland, just where do ...With regards to the UK and Ireland, just where do we begin, some of my favorites <br /><br />1) Lending agaisnt leashold property where the freeholder has forfiture on insolvency of the leaseholder provisions. The leaseholder gears up their assets, then purchases the freehold and declares the leasehold owning vehicle insolvent thereby generating a 100% loss for the bank, and a 100% windfall for themselves <br /><br />2) One Scotish Bank and an Icelandic bank who didn't seem to understand the difference between a residual, used in a development, and an investment valuation <br /><br />3) The Irish bank who was more than happy for their borrowers to put in their "equity" by way of a personal g'tee. Many of the guarentees were never actually signed and those that were are meaningless anyways. <br /><br />4) The UK bank, of Scotish origin, what is it with the Scots, Irish and commercial property, who, thinking themselves to be very clever, carried out cash backed synthetic securitisatons. The only problem being that the cash had to be moved once the arranging bank was downgraded by the rating agencies <br /><br />5) All those German Banks who took senior positions and didn't realise that the arranging bank, whose skin in the game was kept by a mez position, was effectivly the controlling creditor. Actually the Germans, on the whole, were pretty sober with regards to direct UK lending (not with regards to buying anything rated AAA) <br /><br />6) The Irish building socirty who tried to copy Bank Of Scotlands integrated finacne model, only at lease Bank of Scotland got most of the development profits, whereas this building soc come opportunity fund, was more than happy for their borrower/JV partner to keep almost all of the upsdie. Indeed they were even happy for developers to take all their profits out on day 1 by effectivly selling the residual land to the bank <br /><br />7) The clever bank who lent one well known invester a £945m loan, representing a 105% LTV (The 105% being the top of the market). The loan was a securitisation bridge for a year but the swap was, of course, for 30 years. The investor gets a 100bps management fee out ahead of senior interest. So not only did they get a day one dividend of £45m, they also get a £9m management fee. The bank can only stop this fee by enforcing, which would mean taking a bath on the swap. Ooops <br /><br />8) All those banks who wrote, 30, 40 year swaps, on the basis that long dated swaps were a semi-property hedge - they did actually used to tell credit that. Of course booking tbhe PV of 30 years worth of 20-30bps in their P&L had nothing to do with it. Also the fact that at the top of the market this was the only way to get high senior leverage on a cash pay basis was just a coincidence.DCBhttps://www.blogger.com/profile/13259196354687205426noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-77682548850538416022010-02-09T18:29:42.840+11:002010-02-09T18:29:42.840+11:00I think they already presented the solution. It...I think they already presented the solution. It's to restore then to financial viability and hate them hard and in public. You can't have housing market in a good shape with GSE's in this sorry position they are in now.<br /><br />So what do we have? Politically they will hate them. We knew that.<br /><br />Financially, they removed caps and nationalization/r-ship option also unwinding option is out.<br /><br />On the plus side, they are allowed to return crap back to the bank (big break for them).<br /><br />They are given time to heal. Per John Hempton, they should be in working order in 2013, but with return of bad paper, it's way earlier.<br /><br />They can't say in public anything good about GSE's, and they keep mum. What does that mean?<br /><br />We need time and nothing crazy from the govt to heal, we are getting that + other perks. Nobody is going to crazy stuff now, so lets see what ernings are this year. I think they 2 will be profitable this year, and will grow equity. The more they make and the more equity they have, the less they are at the whim of politicans. Once equity breaks govt sr pfds, we are bona fide in the money. There is certainly no reason to price $0 wipe out now for pfds.<br /><br />John Hempton addressed 10% rate too, so hopefully he is right with his math, and I would take his work over CBO estimates that are basically average whole loan collateral price - current coup TBA price.<br /><br />It's a stale mate situation for the govt with regards to GSE's, they can't do anything to disband them, except to curse them out in public.mbersimenkonoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-37878706391369569682010-02-09T14:14:34.101+11:002010-02-09T14:14:34.101+11:00From the north-east-
I'll trade you my dead h...From the north-east-<br /><br />I'll trade you my dead horse for your dead cow.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-23166092146770451862010-02-09T13:31:29.487+11:002010-02-09T13:31:29.487+11:00Frannie shoving loans back to the banks makes some...Frannie shoving loans back to the banks makes some difference - but no matter what the accounts say the MAIN ACTUAL LOSSES are in the Private Label Securities - and those do not have that benefit.<br /><br />-----<br /><br />Alas the political risk is real becuase Frannie are being used to achieve budget objectives off budget. The political risk still keeps me awake at night.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-77738326586126768842010-02-09T12:35:59.181+11:002010-02-09T12:35:59.181+11:00John,
Now that Fannie Mae and Freddie Mac can sho...John,<br /><br />Now that Fannie Mae and Freddie Mac can shove the bad loans back to the banks, would they become profitable much sooner than your projected time frame in 2012?<br /><br />You mentioned that the political risk is what keeps you up at night, are you able to sleep better now knowing that it is getting harder for them to get rid of GSE's as each they are counting on them more than ever to lift the housing market up?Hank Paulson the Criminalnoreply@blogger.com