Archive - Feb 2009 - Story

Credit investors have been riding a high wave in the past few months. We have been sceptical of the breadth and duration of this exuberance for three main reasons:

1) The collapse of the shadow finance system. While issuers were historically allowed to offload capital needs to synthetic structures such as securitization and off balance sheet vehicles, companies now, more than ever, are forced to meet financing and refinancing needs in traditional pathways, involving convincing the investor pool of fundamental investment suitability.

Credit investors have been riding a high wave in the past few months. We have been sceptical of the breadth and duration of this exuberance for three main reasons:

1) The collapse of the shadow finance system. While issuers were historically allowed to offload capital needs to synthetic structures such as securitization and off balance sheet vehicles, companies now, more than ever, are forced to meet financing and refinancing needs in traditional pathways, involving convincing the investor pool of fundamental investment suitability.

In surprising news, David Bonderman's TPG has announced it is dramatically scaling down its distressed financial investing strategy. The company, which recently raised $6 billion to invest in distressed financial opportunities, has announced it will return 25% of that amount to investors.

In surprising news, David Bonderman's TPG has announced it is dramatically scaling down its distressed financial investing strategy. The company, which recently raised $6 billion to invest in distressed financial opportunities, has announced it will return 25% of that amount to investors.

The latest news from Detroit is that the U.S. Government has hired Cadwalader as bankruptcy counsel to the Distressed-3 sans Ford. Confirming that the government is known to throw away money first and ask questions later, Cadwalader is supposed to work with Chicago-based Sonnenschein to evaluate restructuring scenarios, including possible bankruptcy.

The latest news from Detroit is that the U.S. Government has hired Cadwalader as bankruptcy counsel to the Distressed-3 sans Ford. Confirming that the government is known to throw away money first and ask questions later, Cadwalader is supposed to work with Chicago-based Sonnenschein to evaluate restructuring scenarios, including possible bankruptcy.

Hilda Solis, labor secretary nominee, apparently shares not only the last name of Carlos from Desparate Housewives (don't ask why I know this), but also his penchant for tax evasion. In what is becoming a daily occurrence, another tax-scandal in Obama's camp has been uncovered.

Hilda Solis, labor secretary nominee, apparently shares not only the last name of Carlos from Desparate Housewives (don't ask why I know this), but also his penchant for tax evasion. In what is becoming a daily occurrence, another tax-scandal in Obama's camp has been uncovered.

We wouldn't expect anything else from Leon Black's mezzanine investment vehicle. The Drexelite knows how to raise capital when an efficient market (monkeys) is going against him in all his investments (throwing feces).

As Moody's was getting took much media attention today with assorted blurbs about worthless CMBS here and potential US downgrade there, S&P decided to strike right back with another wholesale downgrade, this time of the retail space after last week's energy whack. Six names were put on creditwatch negative:

Nordstrom: A-
JC Penney: BBB-
Macy's: BBB-
Sears: BB-
Dillards: B+
Neiman Marcus: B+

Moody's noted earlier that the U.S.' AAA rating is stable for now, although it is not clear how the government's interventions in the financial markets and economic stimuli will affect the deteriorating financial position. U.S. Treasuries issued to the public are "most certain" to be paid, wrote Steven Hess, Moody's senior credit officer, in a research report. If that isn't a good example of diplomacy and watching out for one's career, nothing is.

A few days ago the Fed had to (was forced to) postpone the expiration date of virtually all liquidity facilities designed to stop and prevent the mother of all bank runs, which followed the Reserve Fund's breaking the buck after Lehman's collapse. As few people pointed out, the removal of these contingencies would likely have brought the liquidity crisis back with a vicious bang. Furthermore, it reminds us once again of the truly bad shape the liquidity component of the U.S.

In some very important news on this day when everyone is arguing whether or not bankers should be getting bonuses and why Sandy Koufax invested in Madoff, this press release by Moody's may be actually huge. The rating agency is reviewing the ratings of $302.6 billion in CMBS conduit and fusion transactions initially rated (stupidly high) in the 2006-2008 period, which represents 52% of the outstanding rated US CMBS market. The two main criteria Moody's is focusing on are stressed cap rates and property cash flows.

The most liberal member, and first Jewish woman appointed to the U.S. Supreme Court, Ruth Ginsburg, was hospitalized with early stages of pancreatic cancer. She had previously battled colo-rectal cancer successfully in 1999.

A blurb about her judicial career, courtesy of wikipedia.

While Bono would be pacing in his San Remo penthouse with 2 inch earplugs and howling at the moon upon hearing this next clip, which is a curious reincarnation of U2's legendary "One", it does explain Bank of Countrywide Lynch's approach to boosting employee morale, and, as a result, why employee morale is where it is now.