Posts tagged 'Burden-sharing'

The Co-op Bank: dial B for bondholder

For the Co-operative Group, there is only one plan for fixing its bank’s embarrassing £1.5bn capital shortfall. Plan A.

Plan A is an exchange offer to holders of Co-op Bank’s subordinated bonds for more senior debt, plus shares in a public listing, alongside a stake taken by the Group. Bondholders said they need more detail about the haircut involved. But they’ve already been told to take it or leave it.

Well, increasingly — and therefore interestingly for the bail-in era — they’re doing neither, and preparing their own Plan Bs… Read more

Warning Co-op Bank bondholders, redux

In particular, the recapitalisation plan is subject to finalisation and its implementation is subject to a number of inherent risks. Risks include a failure by bondholders to participate in the Exchange Offer, a legal challenge by affected Bank bondholders to the Exchange Offer and a failure by, or inability of, The Co-operative Group to make its proposed contribution…

Failure to implement the recapitalisation plan may result in regulatory intervention that could reduce or eliminate the value of the equity and modify, reduce or eliminate debt payment obligations.

– ‘Cautionary Statements’, The Co-operative Bank plc Interim financial report 2013

That’s the official version of the Co-op Bank warning to subordinated bondholders to swallow conversion of their debt into equity, in order to ensure its £1.5bn capital rescue. The unofficial version, from the mutual whose model was once lauded by politicians? “There is no plan B”.

Well, the bondholders are starting to think of Plan C. Read more

Warning bondholders, Co-op edition

How’s this for a bank bondholder disclosure? Bear in mind — it’s over 20 years old.

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Reaal resurrection?

You’re Jeroen Dijsselbloem.

You expropriate subordinated bondholders of a Dutch bank, SNS Reaal — insisting that the bonds “entirely lose their value, which would also have happened if SNS had gone bankrupt” rather than receive a €3.7bn bailout. It’s a huge precedent for bail-ins. It’s a new order. No reverse-ferreting.

Months later… Read more

Deposit guarantees and burden-sharing, quote du jour

Not the full-on collision of the two which initially popped up in Cyprus.

Still, we missed this slapdown by the ECB… directed at Spanish plans for the deposit guarantee fund there to buy out retail investors from illiquid preferred shares and subordinated debt in unlisted banks, when those banks are being restructured. Read more

Bank bail-ins, the long and short term of it

Compare (Bloomberg News, 2011):

EU Writedown Plan Puts Banks’ Long-Term Debt in Firing Line Read more

The Netherlands adds ‘slow-motion bank wrecks’ to list of things it’s known for, right after ‘clogs’ and ‘windmills’

Raise your hand if you didn’t first hear about the way in which the Dutch government took over ailing SNS Reaal on February 1st and think ‘oh, really now?’ along with an arched eyebrow.

The mechanics of the takeover are interesting indeed, but given that two of the four largest Dutch banks have been nationalised, we have a bigger picture question:

How much warning was there that SNS Reaal was on the brink? Read more

Dutch-bottomed bank bondholders

Well, we think “Dutch-bottomed” is probably a better metaphor for what’s happened to SNS Reaal’s subordinated bondholders than Bond Vigilantes’ “Going Dutch”. That just means splitting the bill. Dutch-bottomed is empty, or perhaps fallen through the trap door.

The Netherlands government did an unusual thing when it nationalised SNS, a small and struggling mortgage bank on Friday. It expropriated subordinated bonds of the lender. Here’s the decree. It theoretically suggests the holders still have a claim on the value of the bonds, at some point: Read more

FROB and (bail-in) gristle

Just a small thing from Spain’s latest banking legislation, but a telling thing…

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Bail-ins, an exit consent challenge

On this quiet, Olympics Friday — some bank bail-in reading, courtesy of a judgement by the High Court of England and Wales.

It’s come down surprisingly hard on a small, but very important, weapon in the armoury of bailing-in bank bondholders: exit consents. Read more

The bail-in Spain — ECB edition

Banking crisis U-turn of the year?

From the WSJ’s Gabriele Steinhauser and Brian Blackstone: Read more

Eurozone wars, or vigilante vs vigilante

Bond vigilantes — per James Carville — are intimidating things.

And no more so than in Europe. Rising bond yields in the region have managed to force austerity onto places like Greece, and are currently testing political will in Italy. Read more

IMF urges Greek debt burden-sharing

The IMF on Wednesday warned that the Greek sovereign debt burden risked spiralling out of control and that it would be “appropriate” for private bondholders to share in any restructuring, the FT says. The staff report comes as eurozone finance ministers have moved towards forcing private investors to accept a reduction in the value of their assets, a move regarded with great suspicion by the European Central Bank. The WSJ reports the Fund also said a temporary Greek default may be unavoidable if private bondholders voluntarily participate in a new financing program for the beleaguered country.

Feedback loops to give you (credit) nightmares

It’s a changed, changed world.

The introduction of bail-ins and burdensharing means capital markets will never be the same. Read more

Pensioners win their BoI burdensharing battle

Simply amazing.

After a very vocal campaign highlighting the unfairness of Bank of Ireland’s proposed exchange offer for subordinated debt — which included £75m worth of so-called Pibs that the Irish bank inhereited from Bristol & West held that are mostly held by pensioners– it looks like a victory has been declared. Read more

Another Danish bank falls into a fjord of failure

Finansiel Stabilitet har indgået overdragelsesaftale med Fjordbank Mors A/S

Som det fremgår af Selskabsmeddelelse nr. 12 af d.d. fra Fjordbank Mors A/S, har banken indgået aftale om, at bankens aktiver og en del af passiverne overføres til en ny bank under Finansiel Stabilitet A/S. Read more

FSA says ‘no’ on Bank of Ireland

A swift response from the UK’s Financial Services Authority for once.

Holders of Bristol & West permanent interest-bearing shares (Pibs), a type of subordinated debt, last week asked the FSA to look into Bank of Ireland’s debt restructuring. Read more

The popping of Southsea

This piece of news slipped most of the world by…

A court order has been made to place Southsea Mortgage and Investment Company into the Bank Insolvency Procedure and appoint BDO LLP as the bank liquidator. Find out what this means for Southsea’s customers. Read more

Europe calibrates its bailouts, comforts markets

Well, you can’t say the European Union isn’t flexible.

Eurozone authorities have been busy tweaking their bailout programmes this week. Read more

Hedge funds vs Bank of Ireland

More hedge funds than pensioners in the lawsuit filed against Bank of Ireland over the weekend:

Fitch on a brave new (bank funding) world

Here it comes. The first rumbling from a rating agency on secured funding.

We’ve been harping on about it for months now — but what the heck. Here’s some more. And specifically, extracts from Fitch Ratings in their special report on trends in bank funding profiles: Read more

The lesser-spotted variegated burdensharing for senior bondholders

So Ireland has been busy threatening to throw senior bank debt investors under a bus. Again.

Earlier this week, Irish finance minister Michael Noonan announced plans to force “substantial” burdensharing for investors in the senior debt of Anglo Irish Bank and Irish Nationwide . As a reminder, senior debt investors have traditionally ranked above sub-debt and pari passu (the same) with depositors in a bankruptcy. Forcing losses on them has therefore been a very rare event. Read more

UK pensioners 1 Irish bank 0

Irish taxpayers… 0?

For your perusal — a letter sent on Monday by Brown Rudnick to Bank of Ireland, challenging some (coercive) terms in its debt buyback. Read more

An Allied Irish credit event query, redux

Readers are at this point excused a slight sense of déjà vu

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Will the last Irish bank to leave the market please turn out the lights

Quite a bombshell in Bank of Ireland’s latest, after-hours update on its bid to raise €4.35bn in capital to plug crisis losses:

If stockholders approve the proposals, the combination of the proceeds of the Rights Issue, together with any Core Tier 1 capital raised through the [Liability Management Exercise], the exercise of the call options under any amended terms of the existing securities, the further burden sharing with subordinated bondholders anticipated by the Minister in his statement on 31 May 2011 and the issue of the Contingent Capital Instrument will be sufficient for the Group to meet the regulatory requirements established by the Central Bank under the March 2011 PCAR. Read more

Whoops! Ring-fencing retail banks could backfire

Regulatory snafu anyone?

The UK’s Independent Banking Commission (IBC) recommended in April that banks start ‘ring-fencing’ their retail operations so that large banks are able to fail without endangering depositors. That is, so-called ‘universal banks’ that provide both investment banking and retail operations will have to have retail subsidiaries, with separate and sufficient ‘ring-fenced’ capital to cover their own liabilities. Read more

Bis the burdensharing – new Greek exposure numbers

Something new from the Bank for International Settlements to mull over this Monday morning.

The BIS has released its Quarterly Review — and with it those infamous foreign claims numbers. Read more

Why Irish burden-sharing is talking out its backside

First, it was Allied Irish Banks, and a capital structure which had egregiously flipped to favour equity over credit.

Now, as of Tuesday, it’s spread to Bank of IrelandRead more

Moody’s on Her Majesty’s bail-in

No fewer than fourteen UK banks and building societies placed on review for downgrade by Moody’s on Tuesday — plus negative outlooks for Barclays and HSBC:

Bank of Ireland (UK) plc (Baa3/P-3); Co-Operative Bank plc (A2/P-1); Coventry Building Society (A3); Lloyds TSB Bank plc (Aa3); Nationwide Building Society (Aa3/P-1); Newcastle Building Society (Baa2/P-2); Norwich & Peterborough Building Society (Baa2/ P-2); Nottingham Building Society (A3); Principality Building Society (Baa2/P-2); Royal Bank of Scotland plc (Aa3); Santander UK plc (Aa3); Skipton Building Society (Baa1/P-2); West Bromwich Building Society (Baa3/P-3); Yorkshire Building Society (Baa1/P-2). Read more

ESM seniority, from haircuts to scalpings

So the European Stability Mechanism will rank senior to other bondholders, but not explicitly so:

May 18 (Bloomberg) –The euro area’s planned permanent debt-crisis mechanism will probably refrain from detailing its seniority status in lending contracts, following the practice of the International Monetary Fund, said the head of Europe’s temporary rescue facility. Klaus Regling said a political commitment exists in Europe to let the future entity, the European Stability Mechanism, “claim seniority just below the level of the IMF seniority but above everybody else.” Read more