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Just How Bad Is Europe's Banking System? ESI Bonds Bid At Just 2% Of Face
Just three months ago, everyone was a believer: bonds traded well above par, Europe's recovery was on track, and Portugal's banking system was a shining example of how Europe's bailout program worked (and Goldman was pitching SPVs full of this crap to any and all greater fools). Today - the ugly truth is exposed as Bloomberg reports, Espirito Santo International debt attracted potential buyers at just 2% of face value. Of course, the words "contained" are trotted out to explain how this is a one-off and not at all representative of the rest of the European banking system. But... Howard Marks' Oaktree Capital seems to disagree - "We continue to think Europe will provide a substantial quantum of attractive investment opportunities for all of our strategies and in particular distressed debt," as a record amount of bad loans are being offloaded by European banks ahead of the stress tests.
From 120-plus to 2 for ESI bonds in 4 months...
Espirito Santo International debt attracting potential buyers at 2% of face value, Reuters reporters, citing a person familiar to report Banque Privee Espirito Santo had told clients of potential buyers via letter.
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We think this is a great example of the reality in which every trader/investors finds themselves now:
Either everything trades at par when the truth is hidden...or
Trades at 2 cents on the dollar once the veil falls;
There is no inbetween
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And it seems firms like Oaktree are building funds to take advantage of the 'lifting of the veil'...
John Frank, the managing principal of the world’s largest distressed-debt investor Oaktree Capital Group LLC, says he’s underwhelmed by the record amount of bad loans being off-loaded by European banks.
While disposals accelerated this year, the flow of new assets into the market is more of a “trickle” than the flood the Los Angeles-based firm initially expected, Frank said in a phone interview.
Europe’s lenders will sell 100 billion euros ($131 billion) of loans including non-performing debt this year, according to PricewaterhouseCoopers LLP, up from 64 billion euros in 2013 and the most since they started shedding problem assets in 2010.
“A lot of folks, particularly a lot of American investment managers, raised a lot of money to take advantage of what was anticipated to be a very substantial flow of loans from those banks,” said Frank. “The avalanche anticipated didn’t materialize.”
Oaktree, which manages $91 billion, is among international investors including Lone Star Funds and Cerberus Capital Management LP that have piled into Europe in search of bargains. Banks are tidying balance sheets before stress tests that will determine their ability to withstand another crisis while the European Central Bank reviews the quality of their assets before taking over as the region’s banking supervisor in November.
A rise in the price of some soured loans is also encouraging banks to sell off the debt, according to Richard Thompson, a partner at PwC in London.
Competition for the assets is increasing, according to Frank, encouraging the firm to look for additional areas in which to invest the $10.2 billion it set aside for European purchases. Areas of focus include shipping and real estate, he said.
“We continue to think Europe will provide a substantial quantum of attractive investment opportunities for all of our strategies and in particular real estate, private equity and distressed debt,” said Frank
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So are you a "believer" greater fool, 'knowing' you can exit before the veil is lfited... or preferring like Oaktree to keep powder dry for the inevitable collapse?
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Somebody is overpaying.
If I could buy it, I'd buy for about 1000 euro's just in case another miracle happens.
I mean, just make a list with 2 sides.
Side 1: All the banks that went belly up after 2009
Side 2: All the banks that got bailled out
I mean, banks are the overloards so in a way, there's a very good chance that 1000 would turn to 50000 overnight.
Remember how the March 2008 headline
Some Subprime Debt Valued at 5 Cents on the Dollar
really started to get the ball rolling?
probably the fed since there is ZERO accountability for those fucks.
They are banks. If they need money they can print it. Everybody prints money today. What's the big deal.
Ignore that man bank behind the curtin, I am the mighty OZ Draghi.
"Hi Janet. Yes, sorry it's Mario again. OK, so I've found the HP-FED-PRT1 on the network, so it says to install drivers?..."
"You don't have automatic updates? Sorry to here that."
Silver Tongue? Is there to distract. Doing a Great Job of it. Wait until The Great Cleanup of the German Landesbanken starts. Scheduled for a November start, as far as I can see
The euro is getting hammered.
Why?
Germany is running a 300 billion euro trade surplus. Don't tell me they're incapable of bailing out their own banks.
Incapable of bailing out the French Banks maybe...
"just" Hot Money Sloshing Around. did you read this ZH article from David Stockman?
his take (sorry for the long post):
"The truth of the matter is therefore quite simply. Draghi ignited a short-term buying stampede with his mid-2012 pronouncement. This caused a hot money inflow—especially from dollar based Wall Street speculators and hedge funds. It certainly helped that the latter were drowning in liquidity owing to the Fed’s $85 billion per month of QE purchases and the ready availability of essentially zero cost repo financing. Indeed, the combination of QE3 and Draghi’s “whatever it takes” amounted to a bugle call to the financial hounds.
In short order, the impact was to drive both Euro bond prices and the Euro/USD exchange rate dramatically higher. In fact, between July 2012 and spring 2014, the euro rocketed from 120 to 140 or by nearly 17 percent. Not only did the resulting combo of a rising euro and soaring peripheral bond prices result in a tsunami of hot money into the euro markets, but it also laid the planking for today’s pathetic excuse that Europe is suffering from an economic affliction that can only be solved with an even more fantastic increase in ECB monetary intervention—-even beyond the financial repression it has in place today including negative deposit rates.
But there is no structural deflation in Europe—just the short-term impact on the rate of price change owing to a spike in the exchange rate that, ironically, resulted from Draghi’s pledge that he would run the printing press at some future date at whatever speed might be necessary to “save” the euro and prop up the sovereign debt of the EC periphery.
In truth, the current “deflationary” scare will soon abate as the euro moves through the 130 mark, and dollar-based speculators are forced to sell their peripheral bonds in order to avoid losses. The trend level of euro area inflation has been, and will remain, in the order of 2.2% per annum since 2000 as shown below. Other than the short-run exchange rate effects on the rate of price change, the idea that Europe is suffering a deflationary crisis is absurd."
mostly why they don't want to pay for others in europ and why som said months/years ago that a long shit storm would lead germany to get the fuck out of euro zone.
Everyone knows that the paper promises are all bullshit, they have no real collateral behind them and they aren't worth shit. Yet, no one wants to knock over that first domino.
Truly fucking amazing.
Regardless of the fact the lifeboat is sinking, who exactly wants to be the first into the water by abandoning the sinking lifeboat when each occupant's entire viability is based upon the lifeboat floating?
As long as the music plays everyone dances.
They have a plan CD.
They are going to reclassify the lifeboat as a submarine.
We're gonna need a bigger bong.
WOAR Cowbell
"each occupant's entire viability is based upon the lifeboat floating"-
please, you know this statement isn't true. It's either that or all the mental masterbation you publish is in fact, just that.
I was speaking from the point of view of those in the lifeboat. "They" believe it is true......or at least they believe they can't admit it isn't true. In a world of fake and fraud no one can speak the 'truth' but everyone can know the truth.
The emperor has no clothes. Who exactly is willing to point that out? I suspect you read that story as a child.
Keep talking in circles CD, it suits you and prevents any significant changes from occuring. Don't take everything so personally, life is hard, same as it ever fucking was. I always encourage and reward those in my life and in my employment to get the fuck out and insure their own futures. How you read shit is irrelevant, what you actually accomplish is not.
You really do need to do something about all that anger you hold. You must be a real sweetheart to work for. What exactly are you accomplishing by pointing out everyone but you is an asshole?
Who said you are an asshole? All I said was you keep stating the obvious.
is what it is, and it isn't the anger of a single individual that you should be concerned about.
"you keep stating the obvious."
Ha.
That's pretty rich coming from you, Mr. Water is wet. At the very least, Cog brings ideas to the table, some fearlessly intimate, about the way we see the nature of things. You bring:
"That which can't be sustained won't be."
"Same as it ever was."
"Infinite growth with finite resources."
At least you gave up on "Hedge accordingly."
No offense, but repeating this tripe ad nauseum does not make you sound like a sage.
Just a friendly pointer.
As for myself, I find anything I can say has been said better by others so I generally limit myself to drollery and drive by assassinations.
And what are you doing to cause significant change?
P.S. Life does not have to be hard. Attitude is everything. Don't take it personally.
They're all waiting on somebody else jumping in the water first, too, so they can go through the suitcase he leaves in the boat, looking for anything valuable.
It seems so. Because in a world of central bank omnipotence rescue always comes just before the boat sinks.
/sarc
Bank stress test, now there is an in your face oxymoron for you!
That's funny. You see that as bad for a totally different reason. I see insiders buying this debt for 2% and then through magic, pixie dust and criminal activity, these bonds will be soon worth 75% and a new shit ton of money will be "made" by "smart people risking money."
seems fine. flesh wound.
Who wrote the CDS's on all this crap??
Does it matter if they never pay out, or when they finally do the fiat they pay out has no purchasing power?
Oh stop it. The banking system is just fine..(relatively speaking that is.) You worry warts.
The Swiss regulator FINMA said its investigation would focus on the role of the Swiss bank, which is undergoing voluntary liquidation, in distributing securities and financial products for the wider group.
After SWIFTING Russia, there will be a lot of fun in Austria and Italy. Austria's bank exposure in Russia is 30Bn, system relevant banks, mostly Raiffeisen and dieErste. This is 8% of Austria's GDP, 330Bn and 40% of the annual state budget. If the government decides, that the banks have to be bailed out or bailed in, it will be a disaster not only for Austria, but also for the EU. I do not have a quick overview about Italy. My first feeling is, that the competition will consolidate, destroy the austrian/italian banks and take their market share - Russia. Again, jewish-american sanctions will heavily hurt Europeans, to a small extent Russia.