default

Yesterday CCU surprised the bond world by upsizing its $750 million bond offering, which Zero Hedge highlighted previously as an indication of the top-tick exuberance in the bond market, to $2.5 billion. And according to preliminary rumors it may very well have been the top, with Thomson Reuters' IFR service saying that "counsel for certain lenders has delivered a letter asserting that the transaction and the UOP was an event of default under the CCU Credit Agreement." This is not good for CCU, which had hoped it had sufficiently placated dissident bondholders when it dramatically changed the use of proceeds of the upsized transaction.

Greece 5 Year CDS up 28 to 269 bps. The all time high for the country was on January 20 at 292 bps, which was before Bernanke decided to have US taxpayers bailout the world.

Update: S&P just slashed the banks which Citigroup Crameresquely tells its clients to Buy, Buy, Buy.

Just because every credit collapse mushroom cloud has a silver lining. The Obama miracle recovery captured in one simple, easy to remember song.

Oh great ...

The "CRE-fail" news of the day comes from Chicago where Crains reports that Tishman Speyer has just defaulted on a major mezzanine loan, part of a $1.4 billion package of loans, in which the Federal Reserve is the the main lender via its Maiden Lane I program. Tishman-Speyer, whose 11 Chicago CRE holdings can be seen here, has allegedly defaulted on a mezz loan supporting 6 major commercial properties. The properties, 5.7 million sq. feet in total, represent roughly half of the CRE company's 12.2 million sq. feet of Chicago real estate. And while Tishman has enough of a real estate empire that this won't make a huge impact in the near term, what is notable about the portfolio is that the Fed itself is the holder of the mortgages, which it acquired as part of the Bear Stearns bailout and currently are part of the $26.4 billion in Maiden Lane I Assets. Even as this portfolio has been impaired by over $3.5 billion since inception, we fully expect the fully transparent Fed to have a public announcement as to just how much more value in ML 1 will be lost as a result of this default.

"We would not be surprised to see more sovereign debtors make unilateral announcement of debt moratoriums and/or restructurings, perhaps including even oil rich Venezuela. We notice in that regard that Venezuela’s lider maximo, Hugo Chavez, is preparing to nationalize the few remaining private banks of that nation, usually a good indicator of an approaching sovereign debt default."

This year's Thanksgiving turkey has arrived as a dud. While the U.S. markets were closed over the holiday, Dubai managed to pull the rug from under the global risk trade by announcing a 6 month moratorium on the debt of Dubai World. The state-sponsored Dubai World is an umbrella company that houses a portfolio of businesses, including Nakheel - the famous real estate developer of the Palm Islands.

The chickens are (just) starting to come home to roost...

A brutal risk selloff as Dubai seems to have sparked the "sudden" realization that, you know, stimulus just ain't going to do it all.

Sovereign CDS spreads have been widening since the news, rescheduled conference calls did little for investor confidence and U.S. equity futures have crashed (midnight ET was exciting!) on the order of 4% with crude futures are down 5%. Treasury futures have spiked in inverted sympathy (flight to safety). Spot gold, which was as high as $1191 hours ago has sunk to ~$1140. Japan has intervened following the Yen's 14 year high mark. The Swiss National Bank is rumored to be intervening continually to un-defend the Swiss Franc. Quite a morning so far, and it's just beginning.

Far be it from us to be so cynical as to suggest that financial disclosures might be delayed to fall on the deaf ears of absent markets (Dubai related evidence notwithstanding) but who else might we expect dire tidings from this long weekend? Whither Failure Friday?

The bank that got its ass kicked first in the subprime collapse in 2007 may be the first one again to get the KY treatment from the Dubai implosion.

Are the dominoes about to start falling? From Morgan Stanley's London desk:

Ukrainian Railway defaulted on a Barclays bond. They have another, government guaranteed obligation with DB. If DB accelerates the payment & IF it is then not paid, it will count as a government default.

We are closely following the releases out of S&P and Moody's analysts to see if they have gotten into the office after their leisurely orgy at the nearest Turkish bath insider info leak session. Potentially nothing actionable just yet, but that a government-backed bond can't make its payments, should prompt the IMF apparatchiks to promptly take the next Textron Cessna straight into Kiev (after they get 20 Goldman flu shots each) and spend a few more billions in US taxpayer money and/or sell more gold to quickly stuff even more corpses under the carpet.

Saber rattling about seceding from the Union for this reason or that (we are looking at you, Texas) has heretofore been a cheap political maneuver often motivated by the desire to shine the dim witted light of the mainstream media on some states' rights issue long since stripped away by the Supreme Court. This fact has permitted us to mostly ignore these sorts of pronouncements as casual. That might be a luxury of the past given the emergence of a new and severe phenomenon: crushing state deficits and an already beleaguered lender of last resort. (Read: The Federal Government).

The base case number one takes the view that high yield default rates are peaking and will start to drop from this level now. The rate of unemployment ranges from 10% to 11.5% with this given scenario. In the base case number two, I am using a composite of both peaks in 1991 and 2002 to suggest that default rates may carry upward one percent more. The resulting effect on unemployment targets will range from 11% to 13.5%. In our final analysis base case number three will use the peak at 13% in default rates established in 1991. Unemployment rates in this scenario show a range of 12.5% and 15% before possibly peaking.

Look for the next batch of CRE numbers to be the worst ever as Tishman and BlackRock move the loan backing Stuyvesant Town to special servicing, in essence throwing in the towel, and pushing the affordable home complex into default. According to Fitch the property's worth has plunged from $3 to $1.8 billion. This means that not only Tishman and BlackRock have lost all their value, but Fortress and SL Green who own a $1.4 billion mezz loan in the property are also wiped out. Also, as Fannie and Freddie are the largest holders of the securitized mortgage, look for another set of requests for governmental bailouts out of the nationalized GSE's.