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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Mongo's picture

Shit meet fan

CClarity's picture

Ready for Reality.  At last!

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.

Long-John-Silver's picture

It's bad luck to walk under Bank Windows.

CompassionateFascist's picture

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

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!!?!

NotApplicable's picture

Which cannot be allowed to happen, of course.

JackieTreehorn's picture

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

Piranhanoia's picture

whalescat meet propellor

pods's picture

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

Die Kack ist am dampfen?

Or something like that.


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:

pods's picture

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

Danke Sehr!


heyligen's picture

Sudden debt disaster

SheepDog-One's picture

Excrement, meet rotary oscilator.

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

Poetic injustice's picture

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

spiral_eyes's picture

the faster the denial the higher the cds spread.

NotApplicable's picture

"We are adequately capitalized."

Global Hunter's picture

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

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.

Cognitive Dissonance's picture


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

ZeroPower's picture


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

Cognitive Dissonance's picture

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

snakeboat's picture

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

Irish66's picture

Why do you have to figure everything out for them?

I wanted surprise, surpise MISTER PYLE

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.

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.

Clorox Cowboy's picture

"I work in downtown Cleveland"

My condolences, sir.

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

Motorhead's picture

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

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...

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

Oxytan's picture

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

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.

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?

Lord Welligton's picture

Have you tried phoning Goldman Sachs?



ruby's picture

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

Pegasus Muse's picture
Scheiße!   Merde!!   Stront!!!
bob_dabolina's picture

I noticed that earlier. 

That looks like shit.

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?

Yen Cross's picture

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

TradingJoe's picture

Algos not willing to give up on 1150 yet!

JW n FL's picture



But! BUT! BUT!!

Germany are SAVERS!! LOL!!