default

... the 'fixed period drop-off effect,' the differences between moving average methodologies, the true nature of the term “fractal” as applied to the structural composition of trading systems, the 'four basic qualities of great technical indicators' and a practical nuance within stochastic calculus that can help you anticipate what others are about to think.

"Credit performance for CMBS worsened at an accelerated pace this month versus the recent trend. Thirty-plus day delinquencies across the fixed rate universe increased by 41bp, to 5.50%, partly owing to the deterioration of loans that were current but transferred to the special servicer last month. This compares with the trailing three month average of 34bp. The trend of accelerating delinquencies is expected to continue throughout 2009 and early 2010, given the long lag times associated with commercial real estate." - Barclays

Beneath all of the rhetoric, here is the REAL reason by big boys are fighting to keep CDS from being regulated.

Bottom line is that deflation is still the chief threat to the US economy, driven by a relentless contraction in bank and nonbank credit. Until we see a restoration of the market for nonbank finance and a sustained turn in the EAD of the large bank peer group, which accounts for almost 70% of the entire US industry balance sheet, we do not believe that any economic recovery will be meaningful in terms of jobs or asset prices. Indeed, we have to wonder whether the FDIC should even try to impose another assessment on the banking industry to fund failed bank resolutions when the effect of this action is to remove capital from the system and thereby accelerate the shrinkage of the collective balance sheet of US banks.

Stuy Town, which as Zero Hedge wrote about several days ago is in dire straits and a few months away from default, has claimed its first casualty in the face of the Florida pension fund, aka State Board Administration which has disclosed a full loss on its $250 million investment. Next question: is Blackrock still carrying Stuy Town at 100 cents on the dollar for its own LP appeasement purposes (PEs heart FASB looseness)? This piece of information will likely get as much coverage on GE's propaganda central subsidiary as Chrysler missing August sales estimates by almost 20%.

Tishman Speyer's 2006 acquisition of Stuyvesant Town for $5.4 billion apparently is about to turn terminally sour. The "biggest deal for a single American property in modern times" which never managed to be profitable from day one, is on the verge of completely exhausting reserve accounts tied to $3 billion of securitized accounts.The premise - take the 11,227 rent-stabilized units apartment complex and convert them to market-rate. Alas, the timing could not have been worse due to an implosion in the NY rent market, coupled with legal difficulties - to date only 4,350 of the units have been converted to market rate, while the remaining rent-controlled units will likely increase in number due to a recent court ruling.

The blind leading the blind.

The Zero Hedge Contributor Guide
July 2009

Textron private-jet competitor Hawker Beechcraft was the latest casualty of S&P's ongoing foray into subjective default proclamations, when the rating agency decided to monkeyhammer the company from a B- to a CC rating as a result of Hawker's recent tender offer for its own debt at distressed prices.

Egan Jones calling it like it is:

Some useful legal background from Sidley Austin to prepare readers for the key issues once the insurance dominoes start falling.

According to a research report by Jim Reid of Deutsche Bank, the 5 year cumulative default rate for US High Yield names will hit 53% assuming 0 recovery rates, and 69% assuming average recoveries. In Europe things are even worse: 65% and 81% respectively.

A little noticed document Moody's released on March 24 entitled "Moody's Approach to Evaluating Distressed Exchanges", could mean accelerated defaults for troubled companies pursuing debt buybacks in the open market, and the end of this practice, as companies will have no idea if Moody's will decide they merit the unenviable designation of "Limited Default."

Even as the company scrambles to arrange a forbearance before its 5pm deadline tomorrow, rumors swirled earlier today that BoNY, the trustee on GGP's 3.625% 2009 which were supposed to mature this Monday, has served the company with a default notice. According to the notice, the company is obligated to pay past due amounts, and makes a full blown bankruptcy that much more likely.

Not really news, but at least reflects that the rating agency has a pulse and still tracks companies. The reasons for the D rating (from C) is none other than yesterday's bond default by GGP and cross-default provisions which that event triggered.