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BCA on Bank Worries Replies |
HenryTo
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Joined: 06 Aug 2004
Posts: 7642
Location: Houston, Texas & Los Angeles, California
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 Posted: Wed Dec 05, 2007 6:33 pm Post subject: |
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Just shifted from a negative to a neutral rating on the banking sector:
http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20071205.GIF
| Quote: | | The road will remain bumpy, especially ahead of fourth quarter earnings reports, but the bulk of the benefit of holding an underweight position has already accrued. |
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 7642
Location: Houston, Texas & Los Angeles, California
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| Posted: Thu Nov 22, 2007 10:54 pm Post subject: |
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The concept of the "liquidity put":
http://ftalphaville.ft.com/blog/2007/11/21/9075/the-25bn-citi-cdo-liquidity-put-and-who-else-has-one/
| Quote: | Several CDOs were created by Citi in 2005 that borrowed from technology used in designing SIVs- another market in which Citi was a leader. The rationale was that a CDO which could issue short-term commercial debt (alongside its traditional issuance) would have access to a broader funding market and would be able to more dynamically manage its funding portfolio. To mitigate any CP rollover risk, Citi entered into a series of “agreements” which forced it to buy the CDO CP if no one else would. As Mr Rubin calls them, “liquidity puts”.
And those CDO commercial paper “liquidity puts” forced a staggering $25bn increase in Citi’s CDO exposure - at a time when the market was falling apart. Like Salmon, we’re bemused as to why that notion hasn’t been more widely reported.
And it may not just be a Citi problem.
It seems that Bank of America had similarly structured CDO deals in place. In their 10Q, viewable here, there’s an admission that:
The Corporation is obligated under the written put options to provide funding to the CDOs by purchasing the commercial paper at predetermined contractual yields…
And as we understand things, those obligations forced BofA to buy $12bn of CDO CP from off balance sheet CDOs. |
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HenryTo
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Posts: 7642
Location: Houston, Texas & Los Angeles, California
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HenryTo
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Joined: 06 Aug 2004
Posts: 7642
Location: Houston, Texas & Los Angeles, California
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rffrydr
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Joined: 30 Oct 2005
Posts: 7530
Location: Sunny California
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| Posted: Sat Jun 23, 2007 7:20 am Post subject: |
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On Friday, S&P took action on 133 subordinate classes downgrading 45. The adjustment in risk profile was a function of poor performance of the collateral backing the transactions. Fitch also downgraded for CDOs. The rating agencies seem to be moving in line with heavy pricing in the market. As the issues are downgraded, there will be pressure on investors to mark the assets down. This may cause more margin calls. Like the underlying assets, Real Estate, change comes slowly.
Cantor priced some CDOs on Friday got bids at 10cents/dollar.
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