How Much Has Angelo Moskov's QVT Lost In Dubai; Another Year, Another DB Prop Casualty?
Is another Deutsche Bank (ex) prop group about to blow up on Dubai World? First, of course, we had Boaz Weinstein who lost so much money on the basis trade implosion last year, the DB accountants are still unsure how to quantify the P (not so much) & L, and now QVT Financial, originally also a prop trading group at DB until 2003, seems to have lost a boatload on the Dubai fiasco. The WSJ reports that QVT, headed by one Angelo Moskov, is "spearheading efforts to rally holders in bonds in Dubai World subsidiary Nakheel, including hedge funds and other money managers in New York and London... About 15 or 20 investors in bonds of Dubai World's real-estate subsidiary have come together in an effort to explore their options, after suffering huge losses."
As traditionally those most exposed within any given committee are presented the privilege to "head" such ad hoc initiatives, we are fairly certain that the QVT gentlemen have absorbed the lion's share of said "huge losses." And as the bonds have dropped from 110 to 40 in two days, and are trading below such liquidating names as Nortel, with other credits fully on the government's bailout/subsidiary payroll, this could easily be the single worst performing issue of 2009. Thus not one year seem to pass without what seemingly is yet another major Deutsche Bank legacy blow up.
To be fair, it is still not clear how many other funds could have been impacted by the Dubai Thanksgiving massacre, as well as what is the full exposure of the QVT-led group:
It is unclear what percentage of all bondholders the group represents, with at least some funds choosing not to join because they don't believe legal action will be successful. Some market specialists estimate that as many as half of bondholders were international buyers, with the rest owned by United Arab Emirates banks.
Among options bondholders are exploring is the possibility of seizing Dubai land that is being used to secure the bonds [good luck there]. But Julian Lim, a London-based bond analyst at Nomura, says there are question marks about the value of the land backing the bonds. In addition, it is unclear whether bondholders would even be able to seize the property given that local courts may consider those assets sovereign entities of Dubai, he added.
So while Goldman (as of yet) does not appear to have been impacted by the Persian Gulf debacle, it is poetic justice that the entity likely to suffer the greatest losses absent another Fed or UAE backstopped bailout of Dubai, will be a former Goldman employee: below is Mr. Moskov's professional career via Bloomberg:
Having worked at the triumvirate of Wall Street banks for several brief 2 year stints before opening QVT in 2003 as a Deutsche Bank prop trading spin off, Mr. Moskov, then 35, must have certainly learned from the best, not only in how to impress people courtesy of brief 2 year stints at several trading position, but that selling 3 year CDS can easily be the most profitable trade ever (sorry, CDS humor) if you know you won't have to be there to pick up the pieces when the shit hits the fan. We have inquired with insiders as to what QVT's total exposure in Nakheel is and will bring such information as we get it.