Once more in this new normal in which we 'live', the necessary creative destruction of capitalism is eschewed in favor of saving a zombie company that the CEO admitted was "overwhelmed." The good news for American taxpayers is that it is Canadian taxpayers - via a generous $1.3 billion 'investment' by the Quebec government - that are bailing out private-jet-maker Bombardier. Following aircraft projects plagued by overruns, missed deadlines, and scant interest from airlines, Bombardier posted a $4.9billion loss in Q3. Well never mind that, Quebec taxpayers now own 49.5% of the challenged CSeries program.
Venezuela has two immediate bond payments due this and next week amounting to $3.5 billion. Where did the near-insolvent country obtain the funds needed to make these debt payments? The answer: it has been dumping its gold, which its former ruler Chavez worked hard in 2011 to repatriate from London, and which its current president Maduro, just four short years later, is busy sending back to its creditors.
Who holds the majority of the debt that would be at risk in a Russian default? Not China. Not Iran. Not Syria. No, it’s the exact same nations, and banks and funds within those nations, that are applying the sanctions against Russia. So, if Russia does default, what does it mean in terms of its political relationship with the West? Nothing. But what does it mean to its creditors? Everything... Simply put, if Putin believes that the benefits of a default outweigh the consequences to his country, he won’t hesitate to do it, no matter the international ruckus it might raise.
Moments ago, the BB- rated Valeant debt "story" went from bad to worse, when S&P just revised its outlook to negative citing "Risks To Growth" adding that its "negative rating outlook reflects risks to our base case expectation that Valeant can sustainably grow revenue and EBITDA, given the potential reputational, legal, and regulatory risks the company is facing."
CEO Of Europe's Largest Zinc Producer Hints At Default: Bonds Hit Record Lows, Stock Plunges Most EverSubmitted by Tyler Durden on 10/22/2015 11:19 -0500
Complacency seemed ready to set back in, with Glencore stock recently rising as high as its recent equity offering price of 125p. And then today we noticed that not only is Glencore's CDS back above 700 bps, the widest it has been in three weeks, but that another mining company has fallen into the market's crosshairs, this time Belgium-based (with Zurich HQ) Nyrstar NV, Europe's largest refined-zinc producer, whose stock crashed the most since its initial public offering in 2007, while it bonds tumbled to a yield of 19%, suggesting a default may be imminent.
The Morning After: Valeant Default Risk Soars After Called Next "Tyco", Sellside "Analysts" HumiliatedSubmitted by Tyler Durden on 10/22/2015 09:08 -0500
As always happens after shocking events like yesterday which "nobody could have possibly predicted", watching the Penguin gallery reel in its humiliation is absolutely worth the price of admission.
The arms race of devaluation is not free and has come at the cost of massive global debt expansion. The world has simply shifted private debt to the public balance sheet. The next major global crash will likely be driven by unhealthy sovereign credit rather than corporate credit. The next Lehman moment will be the financial collapse of a major developed country instead of a bank.
Are you a yield-starved investor? Joshua Siegel has a deal he wants to sell you and it involves subordinated loans originated by "35 community banks, some of them so small they don’t have credit ratings."
Following Valeant's confirmation that it had received a Federal subpoena, most eyes are on the stock's inexorable decline. However, it is the bond market that not only started showing concerns earlier but is now spiking to record credit risk highs. At a cost of 515bps to protect against a Valeant default, based on market-standard recovery rates, the CDS market implies a 36% chance of default for the former Biotech darling.
Back on September 28, when the specialty biotech drug scandal was just getting started and leading to a biotech bear market, Valeant stock suddenly plunged $50 leading to massive losses for its top holder Bill Ackman when it was revealed that House democrats had requested a Valeant subpoena. To be sure, the company promptly made it clear that an official subpoena had not actually been sent, just that some politicians were demanding one. That changed overnight when Valeant issued a press release providing an "update regarding government inquiries", in which we learn that the subpoena is now official.
If we, and Bloomberg, are correct, and if the CFD unwind has only just started impacting the true supply/demand dynamics, and thus price, of copper, then we are only 30% of the way through the unwind of China's copper "carry trade" and thus the 'over-capacity' concerns are massively under-appreciated.
The following table attempts to provide a simple composite measure of which commodities are most exposed to China demand, and which stand to lose (or gain) the most in case of a Chinese economic collapse (recovery).
Biggest Weekly Stock Rally Since 2012 Continues Driven By Tumbling Dollar, Dovish Fed; Commodities SurgeSubmitted by Tyler Durden on 10/09/2015 05:53 -0500
The global risk on mood (which is really anything but, and is merely an unprecedented short covering squeeze as we will report momentarily) launched by an abysmal jobs report one week ago and "validated" yesterday by the surprisingly dovish FOMC minutes, which said nothing new but merely confirmed what most knew, namely that a rate hike is almost certain to not occur until mid-2016 if ever, and accelerated by a Fed-driven collapse in the dollar which overnight has led to a historic 3.4% move in the Indonesian Rupiah the most since 2008, has pushed global stocks even higher in their biggest weekly rally since 2012, despite the start of an earnings season where virtually every single company reporting so far has stumbled on earnings reports that were far worse than even gloomy consensus had expected.
And now the real shocker: there is over US$100bn in gross financial exposure to Glencore. From BofA: "We estimate the financial system's exposure to Glencore at over US$100bn, and believe a significant majority is unsecured. The group's strong reputation meant that the buildup of these exposures went largely without comment. However, the recent widening in GLEN debt spreads indicates the exposure is now coming into investor focus."