This page has been archived and commenting is disabled.
And Now This: Fitch Downgrades CDOs Guaranteed By Spain, Margin Calls Anyone?
CDOs guaranteed by Spain? These must be underwritten by Goldman Sachs.
FITCH TAKES RATING ACTION ON CDOS GUARANTEED BY SPAIN
Link to Fitch Ratings' Report: BBVA-2 FTPYME - ICO, Fondo de Titulizacion de Activos 28-MAY-2010
Fitch Ratings-London-28 May 2010: Fitch Ratings has today downgraded 10 classes of CDO notes and affirmed 14 classes of CDO notes following the agency's downgrade of Spain's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'AA+' from 'AAA'. A full list of the affected securities is available on Fitch's website at www.fitchratings.com. .
All of the CDO notes benefit from an irrevocable and unconditional guarantee by the Kingdom of Spain. Fitch has downgraded the notes that do not have sufficient standalone credit protection to withstand a 'AAA' stress and had therefore relied on the Kingdom of Spain guarantee for their prior 'AAA' rating. The notes Fitch has affirmed have sufficient credit enhancement to maintain a 'AAA' rating without the guarantee. Spain's Country Ceiling remains at 'AAA'.
"The sovereign downgrade reflects Fitch's assessment that the process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium-term," says Brian Coulton, Fitch's Head of EMEA Sovereign Ratings.
"Despite government debt and associated interest costs remaining within the 'AAA' range, Fitch anticipates that the economic adjustment process will be more difficult and prolonged than for other economies with 'AAA'-rated sovereign governments, which is why the agency has downgraded Spain's Long-term IDR to 'AA+'," Coulton adds.
This issue is addressed further in a special report published today, entitled 'Sluggish Recovery a Key Risk for Spain', which is available on Fitch's website.
Although the rebalancing of Spain's economy is firmly underway, the inflexibility of the labour market and the restructuring of regional and local savings banks (cajas) will, in Fitch's opinion, hinder the pace of adjustment, particularly in the aftermath of the real estate boom.
Fitch used a combination of its Rating Criteria for European Granular Corporate Balance-Sheet Securitisations, its Global Rating Criteria for Single-and-Multi-Name Credit-Linked Notes and its Global Rating Criteria for Corporate CDOs to assign these ratings.
»
- 7988 reads
- Printer-friendly version
- Send to friend
- advertisements -
Tyler, be gentle!
LOL
Hold the Boat......
WTF is Spain doing guaranteeing CDO's?
Oh yeah, I forgot. Another imaginative way to take debt off it's books. Guarantee your own. That's the ticket!
Doobie time at the Finance Academy.
pls anyone to tell me a period of financial history that indxes go up while banks in us and europe go down??
Oops. and all this going into the US long weekend. No wonder the put-call ratio spiked this morning, nobody willing to risk a weekend without insurance. Of course, all that insurance will probably generate a green market next week.
According to CNBC, this wasnt a good time to announce the downgrade...actually, according to them, there is NEVER a good time to announce anything remotely negative.
Yes, 'if we ignore it, its like it never happened'.
Speaking of the Satan Channel (CNBC), earlier this week a guest said the USA is in worse shape than Spain and while the bubble-heads agreed, they LITERALLY hushed him up (saying HUSH to him) very fast and moved on to their usual sunshine and rainbows and pony unicorns.
I wish I was able to see that. The game is coming undone, it's a convergence of forces happening at once that have been pushed away for so long that they now have the strength to reach us. The baby boomers retiring and the bankruptcy of all the programs that should have had the money invested, but it was borrowed. The coming collapse of US pension system (if you don't believe it google pension busts and/or people not getting their pensions). The collapse of the munibonds and treasuries. The collapse of the fiat currencies here in the US and abroad (especially the Euro). And thats just a few, it's all converging and they are trying to keep this game going but there's no more chips and everyone is bluffing "yea the money's there, yea were solvent etc.".
Also have you guys seen the shakeup at CNBC, they have a new program That has David Farber in the lead chair called Strategy Session. It will be one hour and take the time slot of 12:00 in the afternoon to 1:00 pm, taking away at least 60 minutes from power lunch. Then they are making Fast Money following it to a half-hour, so what is to happen with the Power lunch people. I think they are getting rid of the cheerleading squad, just watch. I'm not saying the others won't but they do such a clear cut job of it that you know they are rooting for up up up days.
http://www.businessinsider.com/story-behind-david-faber-new-show-cnbc
Don't know if anybody saw this but MCC had 2 pundits on this past afternoon that basically spent the whole time explaining to her exactly why we're completely f-cked when it comes to housing and at the end of the interview she actually said "I'm cutting you off because it is a Friday before the long weekend and I don't want to hear any more sadness."
http://www.cnbc.com/id/15840232?video=1507039880&play=1
WTF?
Another reason they're putting a no shorts rule in.
Trust in governments, trust in fiat currencies, and trust that there is enough capital willing to serve and repay all the accumulated debts in the Westernworld is disappearing.
Suddenly gold is a good investment for deflation, inflation, political instability, and as a "hard" currency. My goodness what a mess.
Gold is to sovereign debt as the VIX is to the SPY.
And Spain is to Greece, as Katla is to Eyjafjallajökull : )
Good luck on those SATs
Good one!
Excitable Fringe Blogs Bitches
Why the junks?..lol
I am sarcastically mocking those who tagged Zero Hedge with this label.
http://ftalphaville.ft.com/blog/2010/02/24/157996/a-grεεk-bank-run-smackdown/
Short memory guys.
This should be entertaining. How about some more gas on that fire?
Now expect a gold run in Spain...
3....2.....1.... as the buzzer sounds...
And that's the game ladies and gentlemen.
Spain 2010 Article of Consultation - concluding statement of the mission..
Paragraph 12. The banking sector is sound but remains under pressure. Although impaired assets have increased with the downturn, Spanish banks overall report robust capital and provision buffers, supported by a strong supervisory framework. But the risk remain elevated and unevenly distributed across institutions, focused mainly on the savings banks. The situation is also complicated in that much of the banks' repossessed real assets is land, which is particularly difficult to value...
This continiues on on and on... Check your premise. The focus sits on the cosmetics of balance sheets and ratios. The reality is rather ... what substance is there behind the numbers...
Now thats an understatement of the year. Basically all construction loans which were issued to companies that did business building appalling houses along Costa Brava and Costa del Sol are maybe worth 0.40/1. Not to mention HY bonds that the likes of Banuelos used to fund bigger projects. Spain is fucked, more than any other EMU country [but less than the insolvent UK]. BS of the banks that jumped on the RE bandwagon are underwater by a high margin, and since many of those banks were the famous Cajas, and lacked the sophistication to securitize and sell the loans, you can see what will happen [i mean what is happening]. I will say it again; i know objects [ie. my wall] which could do a better job than 90% of bankers.
Spanish bank balance sheets as fine as long as they use US GAAP accounting that allows plugging in whatever number you need on the asset side.
Most of the world uses IFRS
Shitloads of disclosure none wants to, but probably should read.
See where that is going?
I've been meaning to tell you that you look really good in those smarty pants!
As compared to what?
Jefferson County Sewer District?
Voila!
Great news gents!!! I hope everybody used the gift that The Squid gave us yesterday.
Market is already trying to pretend it didn't happen.
You mean those cardboard beach condos on the Costa aren't going to double this summer? Someone musta cancelled.
Spanish banks are playing the same game as U.S. banks: holding onto vast quantities of underwater residential real estate, not biting the mark-to-market bullet (they'd be instantly insolvent if they did), and hoping they'll eventually recover. As ZH has pointed out repeatedly, it's really accounting fraud on a gigantic scale.
Hmmm. How can CNBS spin this as a positive?
Look, according to Cramer, this Eurozone stuff has nothing to do with American stocks.
Buy-side algos, ENGAGE.
Get Dennis Kneale - Problem solved
CNBS...
Cause they're now AA+!
That's better than getting an A on your exam!
We work for Sigma6!
Cheaper prices for Parmigiano Reggiano...
They did! They brought in a guy that said if the euro can close about 1.22 then investors have already priced it in.
I, for one, think the market is about 1 nanosecond forward looking.
They, Fitch, must be high on crack.... or something...
didnt help much of that bank of spain presentation ;))..sure sign of panic mode. I think it was ment to work as a softener for this downgrade...pumping up euro yesterday was prolly a part of it...
?
The potentially troubled exposure amounts to €165.5 billion
?
Doubtful loans: €42.8 billion
?
Loans in which some instalment has not been paid for a period of more than 90 days, and those exposures in which there are reasonable doubts as to total repayment under the terms agreed
?
Substandard loans: €59 billion
?
Loans showing some general weakness associated with the fact they are to a specific troubled group or sector, but which do not translate into losses for the borrower
?
Asset foreclosures, dation in payment and acquisitions: €59.7 billion
?
Assets ownership passes to the credit institutions, as a result of the application of these regular tools in a crisis situation such as the present. Supervisors prevent them from becoming potential mechanisms to defer the recognition of losses
?
Loan write-offs: €4 billion
well these are quite ugly numbers but I think they have forgot couple of zeros here..;)
They must be going further in debt to buy the ipads introduced abroad recently.
Well, from the globalist perspective, spain, portugal, greece, and italy are all relatively minor players. Even if they all blow up its small potatoes. Whatever. :_)
The comments on this blog are definitely above average. I think I can complete in that department. Now I need a cool avatar. 'Cause there are some cool ones on here.
I didn't realize this was a completition?
The changing room for trying on avatars is around back. Beware of the resident Doberman pinscher . . . he's armed to the teeth.
Death by self-immolation in first completitive event.
+ Priceless
Feeling angry. Temperature rising. Rage flowing.
The "Wolfpack" says: "Hey, there's Spain! Dogpile!"
I'm long ZH. Tyler needs a little tracker on the homepage for site traffic, so we can watch as more and more people catch on to where the real news is being reported.
(Now I'm wondering if there is already such a tracker on the home page. I'll go check....)
These are imperfect proxies as they use small samples of the internet population rather than capturing every single visitor, but would all support your (and my) position of being long ZH:
http://www.alexa.com/siteinfo/http%3A%2F%2Fwww.zerohedge.com#
http://www.quantcast.com/zerohedge.com
http://siteanalytics.compete.com/zerohedge.com/
Interesting, thanks! I see that quantcast and siteanalytics have pretty divergent estimates of unique visitors.
An interesting proxy for how in-the-dark most people are.
Yes, they are only useful directionally, not in absolute terms. Weathervane/windsock rather than wind speed meter.
......and now what? Did Fitch restore the AAA rating? ES is back at 96. Bounce.
Nah Tex, just that nothin much matters 'round these here parts on Wall St... Bad news? What bad news? I still see TWO A's and a + sign! Pretty darn good really, at least you dont have to ride next to Tuco all day. Anyway I think its high time to go buy me some stocks I been hearin so much about.
no. all of the stuff they downgrades was already CCC or C(already junk) so it wont have any effect.
Liked the way Fitch tried to quietly sneak this downgrade in the midst of the boring holiday trade. Reminded me of when the Treasury announced they were increasing funds for Fannie Mae and Freddie Mac during last Christmas Eve's holiday session to mitigate downside pressure.
The award for insanity with debt goes to Spain, as it underwrote 24 classes of CDOs ...Yes it was pure insanity and is pure insanity when a nation state goes into the CDO guarantying business.
Ambrose Evans-Pritchard wrote an insightful Telegraph article entitled Spain Orders Banks To Come Clean On Debts To Restore Shattered Faith.
Mr. Evans-Pritchard relates ”€445bn (£377bn) of property debt accumulated during the credit boom, when real interest rates were negative”. This is a terrific level of what is now private sector debt, that unlike in the United States, has been, transferred to the central bank through the Federal Reserve’s TARP facility. Spain’s banks were not revitalized, that is, recapitalized, like their US peers. And furthermore, Spain has not been closing banking institutions like the FDIC has in the United States, in part because the cajas are owned/managed by the Catholic Church.
Spain’s banks need to raise ”€125bn by late 2011″ through commercial paper presents an impossible hurdle. Deutsche Bank was diplomatic in saying that “the savings banks are in a very weak and risky position”; the cajas underlying problem really is insolvency; they are insolvent; they are technically bankrupt; they are zombie banks.
Credit risk has spread as “The Wall Street Journal reports that BBVA has been unable to roll over €1bn in commercial paper”. Other European financial institutions, EUFN, now have to pay increased rates on their commercial paper funding as they have interlocking loans with Spanish banks: credit contagion and funding issues have spread Europe wide.
Mr Evans Pritchard notes the level of credit evaporation and lack of operating capital, in relating that “no Spanish bank has raised money on the capital markets for a month. They are relying on the European Central Bank’s lifeline. ECB funding has reached €89bn, the highest level since the Lehman Brothers crisis”: this is the very definition of insolvency. And it underlies a fundamental truth: there is a common debt union, and a common treasury in Europe, overseen by Mr. Trichet, The European Treasurer, which in turn establishes the need for and current realty of a European Economic Government. Europe is by definition of capital and banking market operations under a region of Global Governance. A regional-business integration, a state corporate entity, has arisen on a scale that has never been seen before. This is truly spooky; spooky enough to send Arab and Asian investors fleeing to the safety of the yuan and the yen. The debt of one nation has been spread to all 27 nations that share common EU Treaty law. As there is a Common Treasury, and as Seigniorage aid was extended to Greece, national sovereignty has been sacrificed. There is no national citizenship; there is only residency in a region of Global Governance. And as for Libertarians, they are living in a self contained bubble, thinking that they are sovereign individuals: the debt of one has become the debt of all; each individual in Europe, whether he thinks himself to be sovereign or not, does bear, must bear, and will bear the debt of all.
Frankly, the Spanish central banks; debt recognition rule is very mild, in that it brings the cajas to the level of bad debt acknowledgement currently in place at Santander and BBVA: the cajas must set aside reserves using a rising scale of up to 30 percent.
Mr Pritchard relates: ”The Bank of Spain risks opening a Pandora’s Box since nobody knows how many cajasare insolvent once loans are marked-to-market.” Well, the author would have been better to state, “no body knows how many cajas are insolvent, once the loans are written down to the 30% level”, as the current rules do not, repeat do not, bring the loans to market, as like in the United States, there is much shadow housing inventory, where the banks are allowing the debtors to live in the property without making a payment; that is the banks have not begun foreclosure procedures and have no interest in starting foreclosure as it reduces community market value; the banks will continue to withhold properties from the market so as to keep market prices high. Mark-to-market is an illusion, and in the European area yet another fear factor, that will continually drive the Euro, and the European Financial shares, EUFN, lower. This in turn will cause carry trade investment out of traditional investments, and into credit default swaps and short selling instruments such as the ProShares 200% inverse ETFs; the individual investor can only find refuge and investment integrity in gold; and unfortunately for European investors gold has gone sky-high on a much lower Euro.
Mr. Evans-Pritchard in relating that “CajaSur, lost €596m last year, much of it on holiday homes on the Costa del Sol”, brings forth an important issue: how can vacation homes, in a distressed marketplace, be valued? What is ”the market” for such; these properties should be written off by much more than 30%.
Mr. Evans-Pritchard states that “the crackdown will bring matters to a head rapidly, forcing cajas to disgorge property holdings onto the market.” Well, no, the banks may not bring them to market; they may only do what is required, that is write them down by 30%. Debt deflation has only just begun; it’s only a cold which will become phenomena, but this will take at least a year; and then the patient will suffer a painful and long term death.
The projections of “Madrid consultants RR de Acuña, are gloomier, saying buildings in the pipeline will push the overhang to 1.6m and will take six years to clear,” are in line with reality not mirage: shadow housing inventory in Spain is only now beginning to come to light. And I have to ask who will the buyers be in the next six years? Few, that is there will be only a very small handful of buyers as unemployment in Spain exceeds 20%.
Indeed as Mr Evans-Pritchard quotes: “Mr Lopez said Spain’s Achilles Heel is private debt of 211pc of GDP. This is much like Britain (213pc), but takes places in the very different context of deflation. Spain cannot easly grow its way out of the crisis because it is structurally overvalued within the EMU.” These are terrific levels of debt; debt deflation is the way of the future; debt deflation means bank asset deflation to the point where there is no lending and where there is as Timothy Geithner prophecied in the Finanical Times James Politi and Gillian Tett Financial Times article entitled NY Fed Chief In Push For Global Bank Framework: unified regulation of banking globally. Yes, you have it right, an investment banker with responsibility for seigniorage is coming to rule the world!
Interesting EURO chart :
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1