Portugal Goes 144A, Is Goldman Underwriter?

Tyler Durden's picture

Reuters reports that Portugal is in the process of making a private placement of bonds, without announcing details on size or the buyer. Our guess: buyer is China, and size is about €1 billion (recall that recently China told Spain it would buy about €6 billion from the three PIIGieS each). We will keep you updated, but this is a revolutionary change in the way bonds are sold to investors as it bypasses the traditional dutch approach entirely. As such, we would not be at all surprised if Goldman is the underwriter. After all this is basically a 144A transaction (although unlike in facebook there is no need for an SPV), and since there is no noise associated with a public offering, the buyer and seller can both pretend things are great until everything collapses in the inevitable post house of cards rubble.

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LeBalance's picture

The big bad wolf is going to buy E6B from each of the three little PIIGS?

Instead of fighting the three little PIIGS are baring their behind and begging for the spanking.

Ohhhh, truth imitating fiction, imitating the Matrix, intimating the need for Thorazine.

Sudden Debt's picture

Yes, 6 billion will save them all.

ForWhomTheTollBuilds's picture

Does China have the financial wherewithal to bail out Europe?  If it does, and if Bernanke can pump the stock market up enough to make public pensions appear solvent again then couldn't this all go on a good while longer than we thought?


One thing us doomers would do well to remember is that the health of the economy is measured by numbers that are rather easy to game and with a monetary unit that can be debased to the detrimant of those who refuse to play along. 


I hereby predict that the collapse of the US economy, however long it takes, will coincide with some of the best GDP numbers and stock market returns in the memory of anyone alive.  It will be impossible to convince the masses that things aren't getting better even as a blight characteristic of Detroit speads to every corner of the nation.





LeBalance's picture

As Rasputin would say: "Wash, rinse, repeat, schroomage!"

DoChenRollingBearing's picture

ForWhom, very interesting prediction.  We go down as the "official numbers" go up.  We will all be watching I'm sure.

In the meantime, we can all prepare more: gold, silver, guns & ammo, food, etc.

The Count's picture

seems to be a good time to stock up on ammo and reloading stuff.  no problem getting supplies at the moment. like with anything... buy low, sell high.

Spalding_Smailes's picture

Victor Shih

Since the publication of my editorial in the Asian Wall Street Journal on local debt, there has been a wave of interest on this issue. Several investment banks have issued reports on local debt, and some of them have disputed my main finding that current local government investment vehicle debt stands at around 11.4 trillion RMB. The World Bank likewise addressed this issue and came up with a much lower estimate on local investment company (LIC) debt. In the discussion below, I outline some reasons why I still adhere to my estimate that existing local investment vehicle debt stands at around 11 trillion RMB. Furthermore, I once again reiterate that local debt is a serious problem which will require decisive actions from the Chinese government.    

                                                                                                                                                                                                                                                Finally, some investment bank reports suggest that the enormous sum of state assets must be considered along side of the debt. If debt ever becomes a problem, the Chinese government can always sell state assets to repay the debt. Here, I am in complete agreement with my colleagues. It will be a great day when the Chinese government decides to privatize trillions in state assets to raise money to repay local debt. The record of the Chinese government in privatization, however, is spotty at best. Even in the late 1990s, when the fiscal shape of the central government was at its weakest, only small SOEs were privatized, often through murky processes to insiders. Since then, both the central and local governments have done their utmost to maintain the dominance of large state-owned corporations through protectionism and subsidies from both the budget and the financial system. Instead of privatizing these firms and allowing them to compete on equal footings with private and foreign firms, they are given every advantage so that they can dominate the domestic and even the global markets. The financial system in particular channels the bulk of its resources to the state sector. Unfortunately, it does not seem privatization is anywhere near on the horizon. Instead, we can expect trillions more being poured into state entities, including local investment companies, in the foreseeable future.

Cash_is_Trash's picture

Yes but the numbers are only nominal.

DoChenRollingBearing's picture

Hmm.  Less transparency, so kick that can even more.

Who, other than China, even buys European (especially the PIIGS) bonds anymore?

Missiondweller's picture

The Bernanke?


Just a little more "off the books" bailouts.

LeBalance's picture

The Candy Colored Clown they call the Squidman,

Tiptoes to your Treasury every night,

Making all your bad debt into happiness,

Go back to bed,

Everything is all right.


Gloomy's picture


Updated: Thu., Jan. 6, 2011, 8:10 AM NY Fed's 'Mr. Inside' Dudley flapping his gums

Last Updated: 8:10 AM, January 6, 2011

Posted: 11:57 PM, January 5, 2011

The president of the Federal Re serve Bank of New York doesn't know when to keep his mouth shut.

The entire Fed regularly observes what it calls a "blackout period" starting one week before Federal Open Market Committee meetings and lasts until the Friday after those meetings.

In case you don't know, FOMC meetings are where the Fed decides whether to change interest-rate policy.

But there is also a communiqué released just hours after the meeting concludes in which the Fed gives its view of what the economy is doing. It might also hint at unusual moves like quantitative easing in this communiqué.

Once it is released, that communiqué goes through a word-for-word analysis by everyone who follows the markets. Even a whiff of something changing could send markets soaring or collapsing.

That's why the Fed muzzles its members. The form on which outside organizations can request a Fed speaker says "please be advised that there are timing restrictions -- including FOMC blackout periods -- for certain types of speeches."

William Dudley, the head of the New York Fed, seems to have his own rules about talking to people during the blackout period.

Dudley's office recently released his daily work schedule for the past two years. That schedule shows Dudley isn't shy about talking during those blackout periods with people on Wall Street who might benefit from his knowledge.

Take March 11, 2009, for example. The blackout period ran from March 10-18. I know this because those dates are written in capital letters -- PRE-FOMC BLACKOUT PERIOD -- right at the top of Dudley's calendar for that day, a reminder, I guess, from his assistant.

Remember, the financial markets were in disarray back then and the FOMC was meeting on March 17 and 18 to figure out what to do. No speeches were allowed.

Still, Dudley decided to have an "informal meeting" from 6 p.m. to 7 p.m. on March 11 with Goldman Sachs chief economist Jan Hatzius at the Pound and Pence restaurant near the New York Fed's headquarters.

I have to give you some factoids here. Before he joined the Fed, Dudley was an executive with Goldman. So he and Hatzius could very well be friends who were talking about their kids' summer plans or their wives' spending habits.

But, still, there was a blackout period in effect. And a slip of the tongue by Dudley could have given Hatzius and Goldman valuable information. Even a pained expression on Dudley's face could have told Hatzius too much.

I called the New York Fed and asked for a clarification of the blackout rules. What I wanted to know: was the rule only for speeches? Could it be possible that private meetings that could benefit small groups are allowed but not public speeches that might help all investors? And what is the penalty for violations?

The Fed never called me back.

There was another blackout period from April 21-28, 2009. On April 22, one day into the blackout period, Dudley held a conference call at 9 a.m. with Jamie Dimon, the head of JPMorgan Chase. At 11:30 a.m. there was a meeting with Jeffrey Carp, executive vice president and chief legal officer of State Street Capital.

There were apparently others at that meeting because there was a notation "et al" accompanying that meeting. At 1:15 p.m. Stuart Bohart, the co-head of Morgan Stanley's asset management unit, had lunch with Dudley in the New York Fed's Washington Room. And at 3 p.m. John Mack, head of Morgan Stanley, met with Dudley for 45 minutes in Dudley's office.

I looked through some 460 pages of Dudley's schedule and he didn't always have such interesting meetings during the blackout periods. During the blackout period from Sept 15-23, 2009, for instance, there were no meetings or phone calls with Wall Street types -- or, at least, none noted on Dudley's schedule.

But there were enough at other times to make me wonder if Dudley was sensitive to the fact that his brain contained valuable information desired by the guys he was meeting. On Dec. 11, 2009, for instance, Dudley had a breakfast meeting with Goldman Chief Executive Lloyd Blankfein and that company's chief financial officer, David Viniar. The Fed's blackout period had begun three days earlier and lasted until Dec. 16.

Goldman is a primary dealer in government securities, so lower level discussions with the Fed probably occur frequently. But a breakfast meeting? At the Fed? At a time when Dudley was preparing for an FOMC meeting and wasn't supposed to be tipping his hand in public?

Meredith Whitney, the influential bank analyst, was on Dudley's schedule on April 20, 2010 -- the day another blackout period started. During this past September's blackout period, Dudley met with a principal of Woodbine Capital, a hedge fund.

A source of mine who used to work at the Fed says private meetings like these during blackout pe riods have always been a mat ter of contention inside the Fed. And, quite frankly, I can't blame the folks who attended these meetings. If an influential member of the Fed like Dudley might have an indiscreet moment, why not listen?

My view? If the Fed doesn't want its people tipping information to the public in speeches, why wouldn't it crack down on private conversations that can be used for huge profits by small Wall Street groups that just happen to have the right connections? How is this fair to the investing public?

And how is this fair to every other investment firm that competes with the guys who lunched and breakfasted with Dudley during these periods when he is supposed to keep his mouth shut and his thoughts to himself? jcrudele@nypost.com

NEW YORK POST is a registered trademark of NYP Holdings, Inc.

Arius's picture

"PIIGieS" - noted.  One way the banksters have played this game of Euro/Dolar has been to use the PIGS accronym as a tool.

it is disrespectful of a whole group of people...

nonclaim's picture

it is disrespectful of a whole group of people...

Don't confuse a failed national government with the people that live in the country. A failed government deserves all the disrespect it gets, specially from its own people.

goldmiddelfinger's picture

What is Ronaldo's opinion on the matter?

francismarion's picture

The dragon's nose in the PIIGS tent.

the not so mighty maximiza's picture

Portugal is now a satellite state of the Republic of China...groovy.

Non Passaran's picture

Yeah, right.

More luck in getting country names right next time around.

Savonarola's picture


No need for the Portugals to register with the SEC, but "if" they are using the 144a exemption then they are casting a wide net, just in case some US insto's want to nibble. If it is just China, then maybe the 144a language will help them unload the bonds at some point.

Foreign govts have done this type of corporate bond offering before, most notably the Latam's when they were spending the money of anybody dumb enough to lend it to them.

99er's picture

Haircuts in Europe

Brussels has called for sweeping powers for EU regulators to seize failing banks, sack board members and impose haircuts on senior bank debt, to ensure that taxpayers are never again held hostage by high finance.


snowball777's picture

And now you know why the SNB is turning up their noses w.r.t pledging them.

New Revolution's picture

They are all RICO violations and it is through the diligent efforts of Mr Durden and other blog writers and reader comments that this is all being documented.   The point being is the Revolution is coming, and when it does it will be conducted legally, by popular vote.   And when the power transfer is complete then and only then can these criminals be brought before the court.   And if we have to impeach judges in order to start making them honest that will be done also, but according to the law.

The battle is at the ballot box in 2012.   Be there.

NotApplicable's picture

You forgot to add the <sarcasm> tag!

Let me remind you that RICO is a tool of the elite. To think that it will be succesfully used against them by the little people is an absurdity.

walküre's picture

China activated their own SWAP lines with Europe.

They buy Euro debt, Europe buys Chinese crap.

Hey, it worked so well with the US!

Watch for Euro real estate to explode to the upside next!

delivered's picture

What you're seeing here is very simple. DIP financing (debtor in possession) which is used by failed businesses (and now countries) in a pre-packaged BK deal. Since its a private deal, nobody really knows what terms have been structured and what "role" (and I use this term loosely) the financing source will play. But with normal DIP deals, the financing source stepping in at this stage would most likely have very favorable terms (including collateral positioning) so it looks like China continues to pursue their expansion plan but not with a military but rather "financial capital". While the US is attempting to surround Iran with military assets, China will be surrounding the strongest economies in Europe with financial assets (as why stop with Portugal as Italy, Spain, Ireland, Greece, etc. could all use some fresh capital).

After you shift through all of the chatter, noise, and BS being shoveled to the masses about the US economy (as all is well), the real story continues to be Europe and the enourmous amount of worthless paper being passed around like a joint (no doubt a big old fat Bob Marley variety) at a frat party. In the words of Dire Straits, I wouldn't bank on Portugal getting the "Money for Nothing and the Chicks for Free". China will no doubt be getting something very nice in these deals.

Matto's picture

And why not? I've been reading up on china's banks being state run and the initial currency coming from the government itself, ie. not a central bank that exchanges it for bonds and their continual interest payments. The chinese are so far ahead of the game on this, they can lend money and not even worry if it doesnt come back. All interest goes back to the state, if they need it and the currency is pegged so speculators can't kick the shit out of it and cause a crisis no matter how overinflated the domestic market gets.


I wish china all the best, so maybe they can become a model for the rest of us and we develop our own debt free currencies.

papaswamp's picture

Ah sold the soul to China. Why invade when you can simply own? Print up a bunch of renminbi that the world perceives to have value. 

NotApplicable's picture

This little PIIGie avoided the market...

Matto's picture

Why not, they've got plenty of debt based USD fiascos to burn. Their own base currency isn't derived from debt so there's plenty of that to go around.

omer10's picture

WTF are u talking about? does china have funds to save europe? europe (eans) have trillions $ or euros of wealth, they can and should use to help themselves. This little portugal, I remember hosted Bush onan island in atlantic somewhere for a summit on iraq war! WTF, why dont they just sell this, the Greeks have 300 islands most of them uninhibited, because they cant populate it (other then with sheep!). the british now sell residences, not even passports for 5million punds, 7.5 mil $ !, if spanish gave residencey permits to investors, latamericans, middle easterns would gobble up all overbuilt shit-not to mention chinese, in their coasts. 

This is just another game thats being played at you perma bears expense, what hapened in spring Europe was gonna go down, greece was toast, and all markets will tank. -when sp was at 1050!:) Then what happened Chinese said we will but your debt. Euro jumped over 1.3, Bernake said we will print dolars, EVERYBODY saw $ s end, now Euro is back below 1.3, SP at 1260s all shorters, not participants in the rally is screwed with 0 rates, and if the other shoe., PM drops, you will will, just wonder what the fuck happened. I did this summer..Stop doing this, you are just feeding yourselves, this bear shit, while Pigmen party at your expense.

Stop worring 

sheep92's picture

And you of course have known every step of the way how this has and will pan out.

Can you tell us your current positioning so we can watch in real time how its done?


squexx's picture

What can you say?!? China is just buying the fucking dip!

knukles's picture

Sweet way to....

Diversify reserves out of US dollars.  Use dollars to pay for bonds denominated in other currencies....  FX translation between payment for interest and coupon plus principle receipts becomes in this case Portugal's problem.

Gain financial leverage over another group of countries, adding their subservience in the Chinese portfolio beside the US.


PS....  Anybody else notice that the new Chinese J-20 Stealth looks amazingly similar to the F-35?  Dontcha remember several years ago, there was a big brooh-hah about somebody (the Chinese) penetrating Boeing's defense design systems?  

Them enhanced pat downs sure work good....

Matto's picture

'Gain financial leverage over another group of countries, adding their subservience in the Chinese portfolio beside the US.'


Is that china or the world bank?

Non Passaran's picture

That doesn't make any sense. It's not clear what's this issuance denominated in, whether China is really involved and in any case there's no need for China to "diversify" that way - they can simply sell US-T's and convert USD into whatever.

If China indeed was the buyer, that was probably one of their worst investments in recent months and a sign of just how concerned about their export markets they are. 

P.S. Yes, your theory is the universally accepted truth. Thanks for sharing your precious insights about this off-topic crap with us. BTW, from a Telegraph article on the topic:


Douglas Barrie, an aerospace expert at the International Institute of Strategic Studies, noted that the J20's airframe resembled that of an abandoned Russian prototype, the MiG 1.42.

"I'm not sure that its even much of an impressive airframe," said Richard Aboulafia, another analyst. "It looks like something that might have been designed in 1985."


The Count's picture

when did the world go over the deep end? My guess is it started about 25 years ago. We handed over our manufacturing industry to china. Then we handed over a part of our service industry to india. Were the guys in congress back then and now on crack? What did the foreign lobbyists give them for selling out their country. Candy coating this nonsense as 'trade agreement' like NAFTA could only fool a total idiot. We bailed out Mexico so fast nobody outside of the beltway ever learned the details. I am beginning to think that I was caught in some weird dimensional shift that took me to a parallel universe where down is up and bad is good. I want my mommy!

The Count's picture

Could be that was the catalyst. But since around the mid 80's I noticed a slow but steady deterioration in plain old common sense. If you would tell anybody back in 1970 what is happening now there is no way they would ever believe that such terminal insanity would be possible. 

omer10's picture

i tell u, $ may get stronger, spx will correct, but when the selling routs(s) are done, look to buying, and only look at the price of what you will buy. Dont look at eurodolar, or shangai exhange or whatever, there is always a bounce, even if it is just, that u can make money/get out. but things trn like in 2004, or 05, you will not have missed it listening to all this bear shit. Dont underestimate listening!, it gets to u..

This is honest advice, I got on at 1185 in November, after losing tons shoting and stopping. I even got gold at 1400, luckily sold at break even. Remember people writing here are also pundits, Rosy etc...  

sheep92's picture

So your entire investment thesis is based on what happened in the last 6 weeks?

And your advice is not to look at other markets cause they are irrelevant?

At the risk of giving advice, I strongly suggest you buy some diversified fund and hope to hell that the manager gets lucky cause no offense, you ain't go the slightest clue.