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Dexia's Sinister Reality

Tyler Durden's picture


We have long discussed what we suspect will be one of the first European financials to hit the proverbial fan. Given today's anarchic behavior in the US and European markets (credit and equity) and the continued insistence by TPTB (yes you Mr. Greek finance minister) that this is all due to a speculative rumor-mongering attack, we decided to layout some basic facts on one of the banks that was saved by the Fed/FDIC.

Dexia has a Tangible Common Equity Ratio of 0.97% (according to a Bloomberg screen, and we have excluded Canada for our hyperventilating Canadian readers who pull a fainting goat each time they see that which should better remain out of sight and out of mind) which is 2nd lowest among the 848 financial firms globally with Total Assets over $100bn.

Dexia has EUR167.5bn of debt outstanding. EUR5.3bn is due to mature in September and EUR6.3bn more in October alone.

At a current 5Y CDS of 720bps equivalent for seniors (around 29% upfront for sub debt), rolling that debt is going to be expensive. But it gets better, because USD8bn of the September maturing debt is TLGP-backed debt which as can be seen in the far right column in the chart below have ridiculously low yield (yes that is a yield not a spread). This means that DEXGRP needs to roll USD8bn low interest expense debt in the next two weeks into extremely expensive financing OR suckle at the ECB's teat - watch for that jump in liquidity provision.

Of course CDS markets are not unaware of this - as the chart below indicates - but the point being - is a bond manager in his right mind to hedge exposure to this name? Is DEXGRP fundamentally sound and deserving of the market's confidence? If not then reducing exposure seems to make perfect sense to us and furthermore free markets, liquid arbitrage potential between CDS and cash bond markets (as well as equity and volatility markets for this name) mean attacking one leg of the capital structure is simply too risky a proposition (and expensive) unless conviction is high that this firm appears distressed.

Charts: Bloomberg

So whether you view market price action as sinister or simply a reflection of reality, it is time the band aid of TLGP (among every other government-funded crutch) is removed and the market allowed to perceive risk and receive signals upon which to act in order that those that survive can proceed and lead.

And in case you were wondering what the rest of the TLGP-heavy maturities look like - Q3 and Q4 are going to be a busy time for bank refis. For example, MS has USD3.15bn due 9/22, Citi USD3bn by 11/15, and BAC USD3.6bn due 12/2 - all at miraculously low yields/interest expense.


dexter (Latin) - pertaining to the right-hand side

siniter (Latin) - pertaining to the left-hand side


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Fri, 09/09/2011 - 14:37 | 1651893 Mongo
Mongo's picture

Shit meet fan

Fri, 09/09/2011 - 14:39 | 1651900 Tsar Pointless
Tsar Pointless's picture

Brown spots meet wall.

Fri, 09/09/2011 - 14:45 | 1651922 CClarity
CClarity's picture

Ready for Reality.  At last!

Fri, 09/09/2011 - 15:16 | 1652072 redpill
redpill's picture

Self-wielded gun barrel meet banker mouth!

I just hope they remember to put a trashbag over their heads first so the poor maids don't have to clean brains off the hotel room wall.

Fri, 09/09/2011 - 15:20 | 1652085 Long-John-Silver
Long-John-Silver's picture

It's bad luck to walk under Bank Windows.

Fri, 09/09/2011 - 17:30 | 1652580 CompassionateFascist
CompassionateFascist's picture

Still, it's better than Dexy's Midnight Runners.

Fri, 09/09/2011 - 14:46 | 1651932 TimmyM
TimmyM's picture

QE3 finds TLGP

Fri, 09/09/2011 - 14:53 | 1651970 Bananamerican
Bananamerican's picture

"it is time the band aid of TLGP... is removed and the market allowed to perceive risk and receive signals upon which to act in order that those that survive can proceed and lead."

But, that would mean "Free Market Capitalism" might break out!!?!

Fri, 09/09/2011 - 15:44 | 1652200 NotApplicable
NotApplicable's picture

Which cannot be allowed to happen, of course.

Fri, 09/09/2011 - 15:57 | 1652260 andybev01
andybev01's picture

*just out of curiosity, is your avatar supposed to be this guy?*

Fri, 09/09/2011 - 15:53 | 1652245 JackieTreehorn
JackieTreehorn's picture

Which would be the first time in the history of the world.

Fri, 09/09/2011 - 14:56 | 1651980 Piranhanoia
Piranhanoia's picture

whalescat meet propellor

Fri, 09/09/2011 - 15:16 | 1652071 pods
pods's picture

What was that German phrase that PY said a long time ago?

Die Kack ist am dampfen?

Or something like that.


Fri, 09/09/2011 - 17:32 | 1652572 PY-129-20
PY-129-20's picture

Yes, exactly. :) Die Kacke ist am dampfen.

Now you learn another German phrase:

Wir sitzen knietief in der Scheiße.
(lol:LEO says: to be deep in doo-doo. literally: sitting knee-deep in shit)

And here you have my personal favorite German outburst of fury (Actor Klaus Kinski at the set of 'Fitzcarraldo' - the Indians were so scared of Kinski that they offered to kill him) - like Angry German kid on steroids. And the kicker - the director said that this was rather mild compared to his daily outbursts...

And here in French:

Fri, 09/09/2011 - 20:50 | 1653089 pods
pods's picture

I gotta learn German.  Perfect language to chew someone out!

Danke Sehr!


Fri, 09/09/2011 - 16:18 | 1652352 heyligen
heyligen's picture

Sudden debt disaster

Fri, 09/09/2011 - 14:43 | 1651911 SheepDog-One
SheepDog-One's picture

Excrement, meet rotary oscilator.

Man theres a WHOLE lot of empty air underneath this tattered and frayed net.

Fri, 09/09/2011 - 14:45 | 1651925 Stoploss
Stoploss's picture

Holy shit..

Fri, 09/09/2011 - 14:54 | 1651973 Ahmeexnal
Ahmeexnal's picture Holy fan

Fri, 09/09/2011 - 17:34 | 1652584 Zombie
Zombie's picture Holy brown spots on the Holy wall

Fri, 09/09/2011 - 14:46 | 1651933 Poetic injustice
Poetic injustice's picture

That evil zerohedge spreading more rumours.
Dexia, deny them as soon as possible!

Fri, 09/09/2011 - 15:12 | 1652026 spiral_eyes
spiral_eyes's picture

the faster the denial the higher the cds spread.

Fri, 09/09/2011 - 15:46 | 1652206 NotApplicable
NotApplicable's picture

"We are adequately capitalized."

Fri, 09/09/2011 - 14:47 | 1651935 Global Hunter
Global Hunter's picture

"If the CDS chart was the equity one"...if my aunty had balls...

Fri, 09/09/2011 - 14:50 | 1651951 Cognitive Dissonance
Cognitive Dissonance's picture

Aunty, please turn your head and cough.

Fri, 09/09/2011 - 15:11 | 1652054 GeneMarchbanks
GeneMarchbanks's picture

She'd be your Uncle?

Fri, 09/09/2011 - 14:49 | 1651942 ZeroPower
ZeroPower's picture

A few weeks back i was speaking to a PM who was holding some unfortunately heavy exposure to DEXGRP, but hadn't hedged with CDS. It was 'too expensive' at the time. Well, about +200bp later, i could tell he wasn't smiling last i exchanged an email with him.

Fri, 09/09/2011 - 14:52 | 1651959 Cognitive Dissonance
Cognitive Dissonance's picture


The problem with waiting for something to get cheaper is that it might just get more expensive.

Fri, 09/09/2011 - 15:12 | 1652058 ZeroPower
ZeroPower's picture


Then again, maybe 1yr GRE paper @ 90% is "good enough" finally!

Fri, 09/09/2011 - 15:15 | 1652070 Cognitive Dissonance
Cognitive Dissonance's picture

Good enough often makes for bad marriages......from both points of view. :)

Fri, 09/09/2011 - 16:00 | 1652276 snakeboat
snakeboat's picture

that's what I'm sayin to self when looking at kruggerands lately...   

Fri, 09/09/2011 - 14:53 | 1651964 Irish66
Irish66's picture

Why do you have to figure everything out for them?

I wanted surprise, surpise MISTER PYLE

Fri, 09/09/2011 - 14:55 | 1651972 adr
adr's picture

Don't worry the NFL season is starting and it will save us all. I just read an article about the NFL jump-starting the economy. They used gameday in Cleveland as an example. Trotting out owners of restaurants saying that Gameday is insane and they need 15 servers just to handle the demand. How Gameday makes their year and all that jazz.


I work in downtown Cleveland and yes game day is insane and the bars are packed. BUT ONLY FOR 8 DAYS OUT OF THE YEAR!!!! When the team is out of town nobody goes downtown to watch a game at the bar. A few good days aren't going to make up for the 350 days the place is a ghost town. The bar owner they trotted out has a place that is lucky to see about 8 people on an average day. The food sucks and the prices are crazy. It only stays in business because it is owned by a former Brown with a lot of money and he is willing to lose money to have his name up in lights.

The other places are owned by Russian and Albanian mobsters. The corner steakhouse is where politicians go to hand payoffs to construction boss bag men. The best Friday night may see ten patrons.

The MSM is always good for a laugh.

Fri, 09/09/2011 - 15:49 | 1652224 NotApplicable
NotApplicable's picture

Just look at how "crowded" any baseball stadium is these days. For most people, their disposable income is disposed before they even get it.

Fri, 09/09/2011 - 15:56 | 1652259 Clorox Cowboy
Clorox Cowboy's picture

"I work in downtown Cleveland"

My condolences, sir.

Fri, 09/09/2011 - 16:12 | 1652327 Financial_Guard...
Financial_Guardian_Angel's picture

Him:         "I work in downtown Cleveland"

Me:           "I'm sorry?"

Him:         "I said I work in downtown Cleveland"

Me:           "I heard you, I'm just sorry you work in downtown cleveland!"


That joke never gets old

Fri, 09/09/2011 - 17:23 | 1652562 Motorhead
Motorhead's picture

Aw, give the guy a break.  He is proof that there is at least ONE job in downtown Cleveland.

Fri, 09/09/2011 - 14:55 | 1651977 hambone
hambone's picture

OT but important -

Mortgage rates aren't coming down nearly as much as T's would indicate...they look to be decoupling (at least in the short term) from 10y T rates for a slew of reasons...really gotta make you question Operation Twist goals...

Fri, 09/09/2011 - 14:55 | 1651979 La Belle Vie
La Belle Vie's picture

No worries , Mr. Mariani and Jean-Luc are on top of this . How long will retail customers in Belgium and Turkey support this game ? Good thing Wilbur Ross bought their crap insurance portfolio

Fri, 09/09/2011 - 14:56 | 1651982 Oxytan
Oxytan's picture

Given all of this, it sems estrange that the markets are so under control, relatively speaking naturlich.

Fri, 09/09/2011 - 15:21 | 1652083 topcallingtroll
topcallingtroll's picture

I will bet they jawbone it up a little for a few weeks, but eventually there won't be enough stupid people in the market.

People are really stupid.  The ECB buys about twenty billion Euros in bonds and everybody is happy.  How many billions are there in soon to be distressed bank and sovereign debt?

People will eventually look at the numbers and quit getting excited about a new drop of piss in the shithole.

Fri, 09/09/2011 - 14:56 | 1651984 ruby
ruby's picture

i'm new to this collapse stuff, how can i buy puts on these dogs? can't seem to figure it out with my regular brokerage can you buy options on foreign exchanges?

Fri, 09/09/2011 - 15:38 | 1652173 Lord Welligton
Lord Welligton's picture

Have you tried phoning Goldman Sachs?



Fri, 09/09/2011 - 16:34 | 1652409 ruby
ruby's picture

yeah but they can only help me buy calls......

Fri, 09/09/2011 - 14:57 | 1651988 Pegasus Muse
Pegasus Muse's picture
Scheiße!   Merde!!   Stront!!!
Fri, 09/09/2011 - 14:59 | 1651993 bob_dabolina
bob_dabolina's picture

I noticed that earlier. 

That looks like shit.

Fri, 09/09/2011 - 15:04 | 1652006 Bold Eagle
Bold Eagle's picture

Tyler, my friends at the Greek finance ministry are trying to get an explanation regarding the charts, but nothing happens when they click on "HELP" button. What gives?

Fri, 09/09/2011 - 15:05 | 1652015 Yen Cross
Yen Cross's picture

   God bless Bloomberg;. Reutersbis catching the gaff.  MNI is as well!

Fri, 09/09/2011 - 15:09 | 1652035 TradingJoe
TradingJoe's picture

Algos not willing to give up on 1150 yet!

Fri, 09/09/2011 - 15:09 | 1652036 JW n FL
JW n FL's picture



But! BUT! BUT!!

Germany are SAVERS!! LOL!!

Fri, 09/09/2011 - 17:29 | 1652577 Mitzibitzi
Mitzibitzi's picture

Savers, yes. Save us... no

Fri, 09/09/2011 - 15:09 | 1652037 Cdad
Cdad's picture

Sinister is a yield on the ten year at a 60 year low.  Did I hear that right?

Fri, 09/09/2011 - 15:13 | 1652063 mrholty
mrholty's picture

Pardon my ignorance but how in the first paragraph and Bloomberg chart it states that they have 5.262 B Eur of debt maturing in September but in the second chart I see $8B US debt due. 

Using a 1.40 EUR/USD exchange that that only puts the total debt due at $7.42B USD for September. 

I must be missing something obvious but help please.


Fri, 09/09/2011 - 17:32 | 1652583 Mitzibitzi
Mitzibitzi's picture

Slip of the tongue from TPTB. The figure is correct once you add in the Greek default. But you're not supposed to know that yet.

Please ignore the man behind the curtain.

Fri, 09/09/2011 - 15:15 | 1652068 Calculo Ergo Sum
Calculo Ergo Sum's picture

And I don't think they can sell it off to Paribas like Fortis Bank last time around.

Fri, 09/09/2011 - 15:18 | 1652075 topcallingtroll
topcallingtroll's picture

Fear is very hard to time.  However I made all my money in bear markets.  I just didn't realize it at the time.

Fri, 09/09/2011 - 15:18 | 1652076 jdelano
jdelano's picture

tylers awfully quiet all of a sudden.  must have cashed out some puts and went to scores.  

Fri, 09/09/2011 - 15:26 | 1652109 topcallingtroll
topcallingtroll's picture

I hope so.

Cuz the great philosopher Tom Petty said that even the losers get lucky some time.

One of the Tyler's is a misfit, but only misfits can be bold, courageous, and blaze a new trail, having few other options after the inevitable career setback.

I love you Tyler(s) as one misfit to another!

Ok I don't love the populist rabble rouser Tyler who doesn't seem to know much macroeconomic theory, Austrian or other wise, but I love the main one!

Fri, 09/09/2011 - 15:32 | 1652140 jdelano
jdelano's picture

I'd like to be better versed in macroeconomic theory.  But BFCS (Basic F Common Sense) seems to be working pretty well too.  If I had to choose one to keep...  Don't listen to him Ty2--books are for eating now anyway!

Fri, 09/09/2011 - 15:33 | 1652144 lizzy36
lizzy36's picture

My thoughts exactly. :)

Fri, 09/09/2011 - 15:22 | 1652096 Seasmoke
Seasmoke's picture

Obama, Europe, Greece, 9/11, NFL opening day.........could be an interesting and long 48 hours !

Fri, 09/09/2011 - 15:29 | 1652128 buzzsaw99
buzzsaw99's picture

if dexia is tbtf then no problemo.

Fri, 09/09/2011 - 17:17 | 1652542 unky
unky's picture

Lets buy options on those CDS, should make a great profit ;- )

Fri, 09/09/2011 - 17:24 | 1652563 koeleköpke
koeleköpke's picture

Belgium has since more than 450 days no central government, although there is no lack at regional governments.

For sure, Dexia will solve the problem of 'Belgium' and accelarate the split.

Fri, 09/09/2011 - 20:05 | 1652992 pappyhlace
pappyhlace's picture

SP 1150 is a joke

compared to the rest of the world we have at least 10% of a drop left...

which would be around ~1050...which is the number being thrown around

Fri, 09/09/2011 - 21:18 | 1653152 Hephasteus
Hephasteus's picture

Oh man. I'm getting a sneaking suspcion that those french frog rebels couldn't get their hands on gaddaffi's gold. The gold sale is fake and france is the one fucked this weekend. I think all the rebels got was a gold scepter. LOL

Fri, 09/09/2011 - 23:56 | 1653595 apartofthings
apartofthings's picture

Aww Tyler, don't leave out Canada. All the swollen heads north of the border need a good reality check as much as anyone else, maybe moreso.

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