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Failed Danish Bank Makes History With First Senior Bondholder/Depositor Impairments To The Tune Of 41% Of Total

Tyler Durden's picture


Danish bank Amagerbanken A/S has just made history. The bank (which together with all other Danish, and not to mention Irish banks passed last year's European stress farce test) failed yesterday, this time for good, after its previous near death experience in the summer of 2010, when it only continued to exist in a zombi state courtesy of $2 billion in financial guarantees by the government. That guarantee, which was subject to "Amagerbanken strengthening its
capital base and solvency by 750 million crowns in the form of
equity or subordinated loan capital by Sept. 15" has ultimately been wiped out and on Monday, the Danish equivalent of the FDIC, the
Finansiel Stabilitet A/S, announced that administrators would close the bank. And while the failure itself is not surprising (it was roughly the same size as the
mid-2008 collapse of Roskilde Bank, previously the biggest
Danish bank failure), nor is the reason for the failure, the bank said
fourth-quarter writedowns wiped out its
equity, attributing a large part to failed property investors (but we thought European real estate  was doing so much better?), what is unique about this failure is that it is the first one to proceed according to new
new regulations designed to ensure
senior bondholders suffer losses in a bailout. And suffer they will. According to Bloomberg, bondholders of senior debt, including bonds formerly guaranteed by the government, will face write-offs of about 41%. "The bank estimates its assets
amount to about 59 percent of liabilities." Another loser: depositors, who just happen to be pari passu with senior bondholders. To put this failure in context, recall that every Failure Friday the FDIC bail outs numerous banks, with the tab in most cases running up into the hundreds of millions if not billions. What Europe has done, is instead of getting a deposit insurer to guarantee the loses (at the expense of more taxpayer capital), is it has allowed bond bondholders and depositors to be impaired to the point where pro forma assets equal liabilities. Something, which in bankruptcy is known as Fresh Start, and is the most apt way to make sure that in addition to unlimited upside, bank bondholders actually also incur risk. Which is why this brilliant approach to zombi bank resurrection with NEVER materialize in the US. After all, how can we possibly ask the banksters to dare accept the possibility of loss on even one penny of their investments...

More from Bloomberg on what is truly a beacon of logic in a world that puts bizarro to shame:

Investors in about 2 billion kroner ($360 million) of notes face losing almost half face value after the transfer of 15 billion kroner of the Copenhagen-based bank’s assets to a state- owned company, Bloomberg data show. Liabilities staying at the failed bank total about 13 billion kroner and include subordinated and hybrid debt, about 5.6 billion kroner of bonds backed by the government, as well as senior unsecured bonds.

“The bank hasn’t collapsed and gone into bankruptcy like the Icelandic banks, but has been selectively bailed out with a transfer of assets and a partial transfer of liabilities,” said Simon Adamson, an analyst at CreditSights Inc. in London. “Normally when this happens, senior debt and deposits are protected, such is the sensitivity around them, but this is bank resolution with debt and deposit haircuts, rather than a simple liquidation.”

Only when the FDIC, and the corrupt oligarchs, not to mention bankers who literally rule the US, acquiesce to a comparable form of loss-sharing arrangement (in which the taxpayer does not end up footing the bill in perpetuity for banks' desire to load up their balance sheets with worthless paper, which once upon a time produced yield and now just produces negative cash flow), can we say that America is truly on the way to some form of (fair and equitable) recovery. Everything else is just smoke, mirrors, corruption and lies.

h/t Scrataliano


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Tue, 02/08/2011 - 23:37 | 945280 LostWages
LostWages's picture

Will the JP Morgue have to pay out on CDS which big bondholders probably had?


Wed, 02/09/2011 - 01:10 | 945532 Founders Keeper
Founders Keeper's picture

[Will the JP Morgue have to pay out on CDS which big bondholders probably had?]---LostWages


Hard-hitting first post. Kudos, Wages.



Wed, 02/09/2011 - 04:59 | 945776 StychoKiller
StychoKiller's picture

"It's banking Jim, but not as we know it."

Wed, 02/09/2011 - 11:27 | 946325 tonyw
tonyw's picture

we come in peace

shoot to kill

Tue, 02/08/2011 - 23:37 | 945281 dark pools of soros
dark pools of soros's picture

you speak of the devil!!!

Tue, 02/08/2011 - 23:37 | 945282 traderjoe
traderjoe's picture

How big is the POMO tomorrow?

BTFD ...

in PM's...

Tue, 02/08/2011 - 23:39 | 945291 bugs_
bugs_'s picture

adds "Danish Impairment" to the ZH lexicon :-)

Wed, 02/09/2011 - 02:13 | 945638 ThirdCoastSurfer
ThirdCoastSurfer's picture

"Danish Impairment"! 

Tulips, Don Quixote and now "Danish Impairment with your coffee, sir?"

I also like "deposit haircuts". They sure assume a lot when they so loosely throw a term around like that without explaining to the shake-weight community what that means. 

Tue, 02/08/2011 - 23:42 | 945295 99er
Tue, 02/08/2011 - 23:49 | 945324 max2205
max2205's picture

Guess somebody picked the wrong day to go long DANISH bonds. Burp!

Tue, 02/08/2011 - 23:52 | 945332 Seasmoke
Seasmoke's picture

never liked danishes for breakfast

Wed, 02/09/2011 - 06:54 | 945823 taisen
taisen's picture

You know in Denmark they're called Vienna Bread...just FYI if anyone should care.

And not all depositors lose money. Only deposits above 100.000€
Finansiel stabilitet(financial stability)(who is not entirely like the FDIC),
was insuring unlimited deposits 'till october 31st 2010..everyone knows this, so the people that lost money on this were just downright stupid. If anyone should be surprised the departing CEO, three months ago, who has the sole responsibility for this, as he is the former head of CRE at Amagerbanken, granted himself a leaving bonus of 20mm DKK(approx. 3.6 mm $).....but who even cares about millions anymore

additionally all pensions is secured by the state ass (pun intended) well..

Wed, 02/09/2011 - 08:41 | 945899 Richard Whitney
Richard Whitney's picture

In the 18th century, Danish boys went to Vienna to apprentice to Viennese bakers. Those bakers used a certain technique of layering butter in between layers of dough, which produced a flaky delicious pastry. When those Danes went back to Denmark to ply their new trade, they called the product 'Vienna Bread'. Later, descendants of those Danes emigrated to America and became bakers here. Naturally, people here called that delicious pastry 'Danish', after the practioners. So it is no mistake that Americans call that pastry 'Danish'. Today, visiting Danes wonder why we call it a 'danish', but that is because they don't know their own history. BTW, those same pastries are known in Germany as 'kobenhageners'.

Tue, 02/08/2011 - 23:54 | 945340 lizzy36
lizzy36's picture

No this can't have happened. What about MAD?

The futures are still trading, the stock exchanges will open tomorrow. There will be a POMO tomorrow, a 10 yr auction.........hell the the sun may even come up.

You mean all this time MAD wasn't real? It was just a tool used by the Kleptocrats to extract tax payer money to cover bankers excess risk taking/losses.......shocked i tell you, shocked.

Wed, 02/09/2011 - 04:20 | 945761 M.B. Drapier
M.B. Drapier's picture

To be fair, the effect will be a bit more dramatic if all the insolvent banks in Ireland and then Spain follow suit.

Tue, 02/08/2011 - 23:55 | 945343 moneymutt
moneymutt's picture

this is how it shoudl be done...of course, socialist Denmark does this while center right US passes TARP proposed and promoted by W and continued by Obama.

The other socialist country Sweden dealt with their banking crisis in 90s much better also. Apparently they are socialist but not as corrupt as we are.

Wed, 02/09/2011 - 00:10 | 945394 dark pools of soros
dark pools of soros's picture

no no - we didn't just pass TARP blindly..  12 smart conservatives saw a huge bribe coming and did the Rahm crisis=jackpot math for an extra $130bil

Wed, 02/09/2011 - 04:16 | 945758 EscapeKey
EscapeKey's picture

Indeed. Scandinavian countries are always described as socialist (on Fox News, usually in a really derogatory fashion), yet they actually deal with banks the way they should.

The US isn't capitalist. It's an oligarchy, controlled by the bankers. And the Federal Reserve's real aim has nothing to do with the average consumer, it's a bailout machine for the wealthy.

/Biding my time before some naive, goalpost-moving moron comes sputtering about the Fed's mandate, and how they can print indefinitely, without repercussions. Oh, they seem to be preoccupied in the Peak Oil thread.

Wed, 02/09/2011 - 08:16 | 945872 RollOver
RollOver's picture

Definitions about what is socialism or not depends on the purpose of the arguments :-)

When the Swedish finance minister got the question about what he would do if a "too big to fail" bank went bust and asked for help he answered "of course I would help out, but they would have to hand over all equity in the bank to me while handing in the application for help". Basically, all shareholders would get a wipe and the taxpayers would get the possible proceeds from a future IPO.

Minor banks would not be able to apply for help at all, they would simply be put in bankruptcy like in this article. If there are anything of value in the bank left, help yourselves out, if not, tough luck.

Tue, 02/08/2011 - 23:56 | 945347 buzzsaw99
buzzsaw99's picture

At least the Danes know how a capitalist system is supposed to work.

Wed, 02/09/2011 - 00:48 | 945496 99er
99er's picture

Hey buzzsaw99...remember your comment earlier today about my ES chart being the most stupid thing you've ever seen (or something to that effect)? Check this out:

The target for this Wolfe Wave is 1300. Perhaps you could provide us with your analysis of the market before you start spewing your shit all over other people's efforts.

Wed, 02/09/2011 - 00:21 | 945429 Cursive
Cursive's picture

Another loser: depositors, who just happen to be pari passu with senior bondholders.

TD, are you implying that bank depositors somewhere will lose money at their bank?  That's impossible, right?  In the USSSA, all bank deposits are 100% safe and your pension/401(k) will be there when you need it.  Don't you go yelling fire in a crowded theater.

Wed, 02/09/2011 - 00:22 | 945435 digalert
digalert's picture

Can I interest you in some good bonds? real good ones?

Wed, 02/09/2011 - 00:34 | 945470 jmc8888
jmc8888's picture

Great Dane!

It's about fucking time.

Hopefully this gets outsourced.

Wed, 02/09/2011 - 01:02 | 945514 I Am The Unknow...
I Am The Unknown Comic's picture

There's fire in the theatre!  Everyone (especially senior debt holders) run for the exits!  It's the end of the financial system!  Tomorrow will see runs on banks worldwide, followed by massive bank bankruptcies, 99% unemployment, people starving and panic in the streets of London!  There will be martial law!  We better save the rest of the banks now before it's too late!

Oh, wait, but then there is Iceland.....

...and for the USA, there are local, regional and state banks....all of which would be flourishing right now had the TBTF RICO/Grand Larceny devils been allowed to fail and/or brought to justice.

Wed, 02/09/2011 - 04:58 | 945775 StychoKiller
StychoKiller's picture

Dogs living with cats! It's TEOTWAWKI!! :>D

Wed, 02/09/2011 - 09:03 | 945927 Henry Chinaski
Henry Chinaski's picture


Wed, 02/09/2011 - 01:25 | 945561 Founders Keeper
Founders Keeper's picture

Bondholders and depositors taking a 41% haircut? That's really...unusual. Hmmmm. 

Great article TD, but I expect we'll hear more "details" before long.


Wed, 02/09/2011 - 01:28 | 945568 tellsometruth
tellsometruth's picture

Q: What does Vallejo CA and Denmark have in common?

Wed, 02/09/2011 - 02:28 | 945656 topcallingtroll
topcallingtroll's picture

Goldman Sachs?
Synthetic cdo cubed?
Interest rate swaps with number one above?

Tell me. The suspense is killing me!

Wed, 02/09/2011 - 08:23 | 945875 BlackSea
BlackSea's picture

Is it the over-ripe herring smell?

Wed, 02/09/2011 - 09:43 | 946003 Hephasteus
Hephasteus's picture


Wed, 02/09/2011 - 02:10 | 945632 Ahmeexnal
Ahmeexnal's picture

OK, time for some Dan Quayle grammar lessons.


Tomatoe, not tomato

Potatoe, not potato

Zombie, not zombi

Wed, 02/09/2011 - 02:11 | 945635 Ahmeexnal
Ahmeexnal's picture

Oh....forgot one thing.

Did I mention....GLOBAL BANK RUN!!!!!!!!!

Wed, 02/09/2011 - 02:12 | 945637 Caviar Emptor
Caviar Emptor's picture

The international brotherhood of banksters decided to toss a member's entrails to the sharks in hope of appeasing the rabble. Better to do it in lil ole Denmark where the squawk factor will be negligible. 

Wed, 02/09/2011 - 02:45 | 945680 robertocarlos
robertocarlos's picture

Some of my Danish relatives are pretty well off. Oh well, at least we still have Tuborg.

Wed, 02/09/2011 - 03:01 | 945704 anonnn
anonnn's picture

Is pari passu * contagious?

*  1. at an equal pace. 2. in equal or like way, 3.Law without preference or priority.


Wed, 02/09/2011 - 03:08 | 945711 ak_khanna
ak_khanna's picture

Goldman Sachs, J.P.Morgan, Wells Fargo, Bank of America must not be on the list of bondholders .


Wed, 02/09/2011 - 03:47 | 945743 ebworthen
ebworthen's picture


Bondholders lose 41%?

Is that like maybe municipal bond holders having to eat some losses in order to be "saved" by the federal government?

"They'd never do it" you say.

Well, I bet a lot of GM and WaMu senior bondholders never thought they would get pennies on the dollar while the UAW and GM management got golden parachutes.


Wed, 02/09/2011 - 03:52 | 945746 The Axe
The Axe's picture

finally some reality

Wed, 02/09/2011 - 05:26 | 945779 virgilcaine
virgilcaine's picture

short haircuts are coming back in style..beards and long hair era over and his use of psychedelics, the only way to comprehend the Mkts lately.

Wed, 02/09/2011 - 05:59 | 945796 savagegoose
savagegoose's picture

you wanna see a run on USD, try making something like that law in usa.,

Wed, 02/09/2011 - 06:32 | 945810 Zero Govt
Zero Govt's picture

"Danish bank Amagerbanken .. just made history... The bank ...passed last year's European stress farce test... failed yesterday,"

Seriously who needs to blog or add any comment: this self-validating political-banking clown show says it all !!!

Wed, 02/09/2011 - 06:34 | 945814 EscapeKey
EscapeKey's picture

More like 'Amagergeddonbanken', am I right or am I right. ThanksIllBeHereAllNightTryTheFish.

Wed, 02/09/2011 - 07:02 | 945829 taisen
taisen's picture


btw its pronounced "Amar" if anyone is annoyed as I am when reading something i can't pronounce...

guess not

Wed, 02/09/2011 - 07:23 | 945847 EscapeKey
EscapeKey's picture

Det kommer an paa hvorfra i Danmark du er.

Wed, 02/09/2011 - 07:34 | 945858 uranian
uranian's picture

he's exaggerating the number of letters anyway, it's more of a guttural swallowing sound combined with a glottal stop. i used to teach english in copenhagen and even local children had trouble spelling danish, it's such a weird dialect. phonetic language teaching and danish, not a happy combination.

Wed, 02/09/2011 - 07:56 | 945863 taisen
taisen's picture

haha tænkte jo egentlig nok at amagergeddon måtte være udtænkt af en dansker.

Wed, 02/09/2011 - 08:44 | 945903 uranian
Wed, 02/09/2011 - 07:05 | 945832 Cash_is_Trash
Cash_is_Trash's picture

Nordic countries bitchezzz

Rule of law

Wed, 02/09/2011 - 07:30 | 945855 uranian
uranian's picture

At the peak of Danish housing prices, a typical (100m2) house in Copenhagen cost approaching $600,000. I remember reading at the time that Denmark had the biggest housing bubble of all; prices are down around a third now:

What is noteworthy about the collapse of Denmark’s Roskilde Bank is that it did not fail because of subprime losses (it had almost none) or lack of liquidity (the bank had unlimited access to central bank funds), but due to dud real estate loans kept on its books.

The collapse of Roskilde Bank preceded the general crisis of 2008 by a month (it collapsed August 2008, Lehman went down September). Be interesting to see if recent history rhymes.

guld, tæver!

Wed, 02/09/2011 - 08:01 | 945868 Confucious 222
Confucious 222's picture

Oh those crazy zany Danes...don't they know real estate only goes up? They should have simply marked their REO to the 2006 market, like we do here in USSSA. See? Fixed. No Problemo. Recovery is just around the Baltic. Try one of our red herring green shoots - they're SO satisfying.  

Wed, 02/09/2011 - 16:08 | 947358 Zero Govt
Zero Govt's picture

this could cause outright collapse in Germany as they own a lot of holiday homes on the Danish shorelines... "German holiday home values collapse causes Eurozone industrial meltdown" ...well everything is SO interconnected now it's possible!!!

Wed, 02/09/2011 - 08:32 | 945888 Judge Fedd
Judge Fedd's picture

I thought this was because of their failed tourism sector.

Wed, 02/09/2011 - 08:52 | 945910 ZeroPoint
ZeroPoint's picture

Are the Danish depositors going to demand blood in the streets?

Wed, 02/09/2011 - 09:03 | 945923 oogs66
oogs66's picture

They were 'investment grade' until september :)        I like the drop from Ba2 to Ca.  Any chance this spurs some actions from the rating agencies on other banks?  Seems this one was only rated by Moody's.                            



            Foreign LT Bank Deposits    -MOODY'S
 Ca                    2/ 9/11
 Ba2                   9/28/10
 Baa3          *-      6/ 2/10
 Baa3                  9/ 8/09
 Baa2          *-      7/22/09
 Baa2                  2/26/09
 A3                   11/ 4/08
 A1                    7/ 9/08


Wed, 02/09/2011 - 09:15 | 945956 neutrinoman
neutrinoman's picture

Interesting, these Scandalnavians.  Like the Icelanders, the Danish didn't bail out their banks.  And in the early 90s, the Scandinavian banks were put through receivership, cleaned up, then spun off into new, solvent forms.  Our S&Ls were put through something similar.  What's changed in 20 years?

BTW, in the US, deposit insurance is *not* a bailout.  I wish people would stop using that term for, say, the S&L cleanup.  A bailout was exactly what it wasn't.  What happened in 2008 with TARP -- that was a bailout.  The banks weren't put through bankruptcy, and deposit insurance wasn't invoked.  The stockowners, the bondholders, and the managements were rescued from their own recklessness. No one went to jail, unlike the S&L case.

Compare with the auto companies.  While the government rescue was a bad idea in general, the auto companies are better for having gone through bankruptcy or had near-death experiences.

Wed, 02/09/2011 - 09:51 | 946026 Ancona
Ancona's picture

And so, the first true domino falls....

Wed, 02/09/2011 - 11:31 | 946333 luigi
luigi's picture

They let a bank to fail? They even allow bankers to take some loss? WOW! In the old days of red terrorism in Europe there was a slogan which went like this: "Hit one to educate a hundred". I wonder if there is no need to export some democracy to Danemark...

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