When footballers become collateral | FT Alphaville

When footballers become collateral

Can someone please stop the world? We want to get off.

Things are seemingly moving quickly from the ridiculous to the absurd, in sovereign debt crises.

Gary Jenkins, head of fixed income over at Evolution Securities, for one, is running away:

I am no longer sure if this is reality or I am watching a Hollywood summer blockbuster. With no resolution with regard to the US debt ceiling and with continuing contagion in the European government debt market it is clearly time for the safe haven trade. Or in my case, the Milford Haven trade. Yes I will be away for a few days watching the markets from a safe distance and no doubt by the time I return Captain America will have sorted the debt ceiling and the EU will be making plans for “Mamma Mia 2 – back to Greece”.

Moody’s have this morning placed the Aa2 rating of Spain on review for downgrade, currently rated AA outlook negative with S&P and AA+ outlook negative with Fitch. They note that any downgrade will most likely be limited to one notch. The review was triggered by the agency’s concerns over the sovereigns rising funding cost, but also concerns over the precedent which has been set by involving private sector creditors in the latest Greek bailout package, which they say has “signalled a clear shift in risk for bondholders of countries with high debt burdens or large budget deficits”.

Meanwhile, it turns out the Spanish have already been making collateral contingencies.

According to Süddeutsche Zeitung, and as reported by PressEurop, Spain’s Bankia group of savings banks — which financed Real Madrid’s acquisition of the world’s most expensive football player Ronaldo — is now seeking to borrow funds from the European Central Bank. In exchange for ECB liquidity,

Bankia has “pledged” Ronaldo as well as Brazilian footballer, Kaka. (Technically it’s pledged a Collateralised Loan Obligation which includes loans to Real Madrid for the acquisition of players.)

Here’s a snippet from the PressEurop report:

“Could we see a situation in which the ECB seizes one of the players?“ wonders the Munich daily. “In theory, it is possible. Bankia would first have to become insolvent. Thereafter, Real would have to default on its loans, which are secured by advertising and television revenues. It goes without saying that Real Madrid is in debt to the tune of several million euros. However, in Spain football clubs have a history of obtaining publicly funded bailouts — just like the country’s banks.”

In case you still can’t believe it — we present page 180 of the prospectus for Madrid Activos Corporativos V, FTA:

Full document (in Spanish) in the usual place.

Moody’s rated notes from the securitisation Aaa(sf), naturally.

Now we understand why Business Insider ran this story.

By Izabella Kaminska and Joseph Cotterill.

Related links:
The Swiss franc’s safe-haven status, a visual interpretation
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Dick Bove says – the search for a new safe haven is on
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Alternatives to the USAAA – there’s not much
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