Debt Pile Looming Over European Firms

I´ll bet that some will damm their debt financed aquisitions & stock buybacks ( for some "amusing" examples see "I Want My Buyback Back" ) ........ I assume that during the coming at least 2 years it won´t be the earnings that will dominate the stockprice .... It will be all about the balance sheet....... The management will be forced from a shareholder value oriented mood to "serve" their new masters aka the bondholders.......

Kann mir gut vostellen das einige inzwischen Ihre schuldenfinanzierten Übernahmewahn & die Aktienrückkäufe bereuen ( einige "amüsante" Beispiele gibt es hier zu bewundern "I Want My Buyback Back" ) ...... Bin mir ziemlich sicher das zumindest auf Sicht von 2 Jahren weniger die Gewinnsituation als die Bilanzqualität das beherrschende Thema der Aktienmärkte sein werden..... Das Management wird zukünftig nicht mehr die Aktionäre sondern die Bondholder in den Mittelpunkt Ihrer "Bemühungen" stellen......

> The trouble is getting even greater when you combine the graph with the spread charts via Mish

> Wie prekär die momentane Lage ist zeigt mehr als eindrucksvoll wenn man die o.g. Grafik mit den nachvolgenden Charts kombiniert Unternehmensanleihen auf Tauchstation via Zeitenwende/Mish

WSJ European companies, already in the middle of an economic downturn, face another uphill struggle as they seek to refinance $242.6 billion of maturing debt over the coming year, according to credit-ratings firm Standard & Poor's.

"Funding pressures in Europe have escalated sharply since September as stress in the global financial system accelerated," the report said.

According to the report, European companies will be forced to pay back or refinance $586.3 billion through 2011, with more than 40% of that debt coming due over the next year.

French nonfinancial corporate issuers account for the largest portion of debt to be refinanced, with 26%, followed closely by the U.K., Germany, Netherlands and Italy, which have a combined share of 79%.

No company rated below single-A has managed to access the bond market in recent months, offering little hope for companies further down the ratings scale

The report examined all debts rated by S&P including bank loans, notes and bonds.

>The banks will have to pray that the companies manage the refinancing of the debt... Otherwise they are forced to tapp corporate bank lines .....

> Die Banken dürften bereits jetzt anfangen zu beten das es möglich sein wird diese fälligen Anleihen zu refinanzieren...... Ansonsten bleibt den Firmen nichts anderes übrig als die bestehenden Kreditlinien der Banken anzuzapfen...... Sicher nicht der glücklichste Umstand wenn nahezu alle Banken dringend auf Ihre Kapitalstärke achten müssen......

Credit terms increasingly tied to risk FT Alphaville - US and European companies renewing short-term credit facilities are being forced to accept terms that link interest payments to their creditworthiness. In recent months, AT&T, Wal-Mart, Caterpillar, Halliburton, Nokia and Novartis have all renewed their short-term financing arrangements, including revolving credit facilities, and found that “relationship pricing” is no longer available. Instead,

companies are finding that banks - which had offered cheap loans to top corporate clients - now price these facilities based on measures of credit risk. In most cases, credit default swaps are being used.

The first deal for this new type of pricing for revolving loans, totalling an estimated $6,000bn worldwide, was done in April

Since then, such terms have become widely used. Banks hope this will discourage companies from tapping these credit lines unless they absolutely need to. Already, at least 20 such deals for 364-day revolving credit facilities – a type of overdraft for companies to ensure access to funds in case markets shut down – have been completed and at least as many are in the pipeline.

Update via Bloomberg Borse Dubai May Refinance $4.2 Billion of Loans at Higher Costs

Borse Dubai Ltd., the Gulf emirate's state-owned operator of exchanges, is in talks to refinance $4.2 billion of loans at interest rates tied to the price of credit- default swaps, raising the cost of the debt, said three bankers with knowledge of the transaction.

The new debt may pay interest of as much as 6 percentage points over the London interbank offered rate on loans for three years, said the bankers, who declined to be named because the negotiations are private. That compares with a margin of 1.1 percentage points on the existing loans, which were used to buy Sweden's OMX AB last year

How Daimler Wasted € 7 Billion On Buybacks In Just 15 Months......

Just brilliant! I have nothing more to add that i havn´t already said at the time when the buybacks were introduced ( see Want My Buyback Back ..."Daimler Edition" & I Want My Buyback Back.....Daimler Is Doubling Down Again). All this has happened at a time when Dailmers net liquidity position ( in part due to the buybacks ) has worsened € 9 billion to almost € 46 billion ( see page 28 in Daimler Q3 Presentaion )

Das Daimlermanagement steht dem von diversen Banken in nichts nach...... Ich habe meinen Kommentaren zu diesem Thema zum Zeitpunkt der Rückkaufankündigung ( siehe Want My Buyback Back ..."Daimler Edition" & I Want My Buyback Back.....Daimler Is Doubling Down Again nichts mehr hinzuzufügen..... Hätte nur zu gerne Unrecht gehabt...... Das alles in einer Zeit während sich auch dank der Rückkäufe die Nettoliquidität binnen der letzten 9 Monate um satte 9 Mrd € auf nunmehr knapp 46 Mrd € verschlechtert hat ( siehe Seite 28 der letzten Daimler Q3 Präsentaion )


Daimler

Due to the current uncertainty in the markets Daimler temporarily suspends the further execution of its share buyback program as of October 24, 2008. Due to the suspension Daimler might not reach its initial target to buy back 10% of the outstanding shares.

I hope you can see the impact of the € 7.5 Billion buyback starting in August 2007.......

Der Effekt des Aktienrpückkaufes von € 7,5 Mrd ist klar zu erkennen, oder?

The company started its first share buyback program at the end of August 2007. By March 28, 2008, 99.8 million shares had been bought back for EUR6.2 billion.

Share Buyback based on the Authorization of the 2007 Annual Meeting
Period	No. of Shares Acquired	Average Price (EUR)	Purchased Volume (EUR)
Total	99,768,314	62.11	6,196,752,952.16
March, 2008	27,622,866	53.62	1,481,249,244.31
February 2008	22,185,448	55.69	1,235,524,406.33
December 2007	4,384,000	69.10	302,953,032.70
November 2007	16,366,000	69.05	1,130,005,849.60
October 2007	13,445,000	74.29	998,821,360.14
September 2007	14,390,000	66.72	960,165,710.94
August 2007	1,375,000	64.02	88,033,348.15

In exercise of the authorization granted by the Annual Meeting of April 9, 2008, the decision of the Board of Management allows for the buyback of 10% or approximately 96.4 million of the outstanding shares for a maximum amount of EUR6 billion

Share Buyback based on the Authorization of the 2008 Annual Meeting
Period	No. of Shares Acquired	Average Price (EUR)	Purchased Volume (EUR)
Total	37,283,831	38.86	1,448,922,311.86
Oct 2008	2,283,831	27.88	63,669,232.59
Sep 2008	7,690,000	39.43	303,203,682.07
Aug 2008	6,910,000	40.19	277,696,796.64
Jul 2008	13,850,000	38.14	528,276,120.47
Jun 2008	6,550,000	42.15	276,076,480.09

Number Of The Day "Stock Buybacks From Financials In 2007"

They really deserve the bailout........Sarcasm off....... At least Lehman has gone gone bust. There is no way i can hide my SCHADENFREUDE when reviewing their buyback orgy ( see I Want My Buyback Back....Lehman Edition )

Wer so sorgsam mit seinen Geldern hausgehalten hat verdient jeden noch so großen Bailout...... Immerhin hat es Lehman erwischt. Die haben sich in den vergangenen Jahren eine Aktienrückkauforgie der ganz besonderenArt geleistet ( siehe I Want My Buyback Back....Lehman Edition ). Ich probiere erst gar nicht meine Schadenfreude und Genugtuung darüber zu verbergen...... Ein aus deutscher Sicht besonders tragisches Beispiel an den Irrglauben des Aktienrückkaufes spielt sich gerade in Real Time bei Daimler ab ( I Want My Buyback Back.....Daimler Is Doubling Down Again ). Es bereitet fast körperliche Schmerzen mitanzusehen wie die einst gesunde Kapitalstruktur im Angesicht einer auf Jahre hinaus furchtbaren Automobilkonjunktur ohne Not durch den Schredder gedreht wird......


Marketbeat WSJ

Stock buybacks peaked in the third quarter of 2007, according to Howard Silverblatt, senior index analyst at Standard & Poor’s. Nearly $172 billion in shares were repurchased in the third quarter of 2007, right around when the market peaked, contributing to the one-year record of $589 billion in shares repurchased in 2007. The biggest contributor? Financials, which accounted for 20% of the buybacks in 2007.

I Want My Buyback Back ..."Daimler Edition"

Look at the chart what $ 3.5 billion have done for the stock.... They bought at an average price close to € 70...... This adds up to a loss of € 750.000.0000 in just 6 month..... Needless to say that they bought close to historic highs for the stock and the "return to sharholders" is a whopping negative 21 percent....... With the next € 4 billion now ready to "maximize share holder value" the averaging down can begin.......

Seht Euch den Chart an was satte 3,5 Mrd € zur Performance beigetragen haben....... Daimler hat zum Durchschnittskurs von 70 € zugekauft...... Das ganze sumiert sich binnen 6 Monaten mal eben zu einer Wertvernichtung von 750.0000.000 €...... Überflüssig zu erwähnen das ein Großteil der Käufe nahe der historischen Höchststände der Aktie praktiziert worden ist und die anvisierte Optimierung zugunsten der Aktionäre hat mit minus 21 Prozent nicht ganz die Erwartungen erfüllt....Mit den nächsten 4 Mrd € kann das Verbilligen jetzt ja losgehen........

Share buyback program Daimler

In order to optimize its capital structure, the Group initiated a share buyback program in August 2007. In this context, it was announced that up to €7.5 billion would be applied to buy back nearly 10% of the company’s own shares. By the middle of December 2007, 50 million shares had been acquired for €3.5 billion. These shares were canceled by the end of the year. The share buyback program will be continued today.

At least they hadn´t to issue new debt to finance this "smart" move.....

Immerhin muß Daimler im Gegensatz zu anderen diese Transaktion nicht mit neuen Schulden finanzieren....

Multiple Fire Sales At UBS After $ 10 Billion Write Down

Looks like the UBS comment from just a few weeks ago in UBS Write Down Estimates "Best Case $ 6 Billion, Worst Case.... that the write down´won´t be big was quite an understatement..... Will be fun to watch how long the term "maximum clarity" will be up to date this time ;-) . I´m pretty sure that the same survey about bonuses for the UBS will bring less "euphoric" results..... It´s about time to learn the new version of the Investment banking lexicon: The post-credit squeeze edition. HILARIOUS!

Sieht ganz so aus als wenn der Kommentar der UBS in UBS Write Down Estimates "Best Case $ 6 Billion, Worst Case.... das die Abschreibungen nicht "wesentlich" sein werden ein wenig untertrieben gewesen ist. Welch Überraschung..... Wird spannend zu sehen sein wie lange die Haltwertzeit der "maximum clarity" in diesem Falle vorhalten wird ;-) . Ich bin mir ziemlich sicher das die gleiche Umfrage zu Bonuszahlungen" für die UBS weniger "euphorische" Vorhersagen hergeben würde..... Höchste Zeit die für die neueste Version des Investment Banking Lexicon: The post-credit squeeze edition. Köstlich!

UBS to Sell Stakes After $10 Billion in Subprime Writedowns
UBS AG, Europe's largest bank by assets, said it will write down U.S. subprime investments by $10 billion and raise 13 billion francs ($11.5 billion) by selling stakes to investors in Singapore and the Middle East.

UBS expects a loss in the fourth quarter, and may have a loss for 2007, the Zurich-based company said in an e-mailed statement today.

Securities firms and banks had announced about $66 billion of losses and markdowns linked to the collapse of the U.S. subprime mortgage market this year. UBS reported its first loss in almost five years in the third quarter after the subprime contagion led to about $4.66 billion in markdowns on fixed-income securities and leveraged loans.

Besten Dank an Zeitenwende

UBS Press Release & Deutsche Version
UBS strengthens capital base and adjusts valuations
UBS has introduced measures to substantially strengthen its capital position, adding CHF 19.4 billion of BIS Tier 1 capital. These include an issue of CHF 13 billion of new capital. This has been placed with two strategic investors: Government of Singapore Investment Corporation Pte. Ltd. (GIC) ( see GIC Website) with CHF 11 billion, and an undisclosed strategic investor in the Middle East with CHF 2 billion.


> To be honest i´m surprised that Singapore has two vehicles and that GIC has assets over $ 300 billion. I´ve heard so for only from Temasek HoldingsUnocal) in relation with Singapore. It´s very impressive that such a small country with an estimated GDP of $ 140 billion, a population under 5 million and especially without a resource base has managed to accumulate close to $ 500 billion in Assets Singapore/Wikipedia. Chapeau!

> Ich bin ehrlich erstaunt das Singapur zwei staatlich kontrollierte Fonds zur Verfügung hat und das GIC mit über 300 Mrd $ so groß ist. Ich habe bisher im Zusammenhang mit Singapur immer nur den Namen Temasek Holdings gehört. Es ist beeindruckend wie es ein kleines Land mit unter 5 Mio Einwohnern, einen BSP von knappen 140 Mrd $ und vor allem ohne Rohstoffbasis schafft fast 500 Mrd $ in Staatsfonds zu pumpen Singapur/Wikipedia . Chapeau!

At the same time, UBS has revised key input parameters of the models that are used to estimate lifetime default and resulting losses for sub-prime mortgage pools. As a result of these revisions, UBS will write down its US sub-prime holdings by approximately a further USD 10 billion.

After these actions, UBS projects a strong BIS Tier 1 ratio of above 12%. ...

In response to continued deterioration in the US sub-prime mortgage securities market, partly driven by increased homeowner delinquencies but mainly fuelled by worsening market expectations of future developments, UBS has revised the assumptions and inputs used to value US sub-prime mortgage related positions. This will result in further writedowns of around USD 10 billion, primarily on CDO and "super senior"1 holdings. In light of continued deterioration in the sub-prime market, valuations of UBS's remaining sub-prime positions reflect the extreme loss projections implied by the prices achieved in the very limited number of observable market transactions in US sub-prime related securities and indices up to the end of November.

As the basis for its wealth and asset management business, UBS wishes to maintain a very strong capital base under all circumstances. Growth in net new money continues, with inflows in Global Wealth Management & Business Banking totalling about CHF 30 billion in October and November. It will therefore strengthen its capital position by issuing new capital in transactions with strategic investors, by selling treasury shares, and by replacing its 2007 cash dividend with a stock dividend.

> Must hurt to sell shares at fire sale prices that they have bought back for a better use of their capital. In Q2 the stock price was in a range of 70-80 Swiss Francs, today close to 50 Swiss Francs. And in total they are selling 36.4 million shares......... Well done!

> Muß sehr schmerzen die teuer zurückgekauften Aktien jetzt zu Schleuderpreisen zu verscherbeln. Ironischerweise sollten die Rückkäufe seinerzeit ja die effektivere Nutzung des Kapitals ermöglichen. Im 2. Quartal lag der Preis zwischen 70 und 80 Schweizer Franken, heute nahe 50...... Und insgesamt werden knapp über 36 Mio zuvor erworbene Aktien nahe Tiefstkursen vertickert...... Gut gemacht!

Strategic investors subscribe to issue of CHF 13 billion of new capital
UBS has reached agreements with two strategic investors – GIC and one other – to subscribe to an issue of CHF 13 billion of mandatory convertible notes. This is subject to the approval of UBS shareholders at an extraordinary general meeting (EGM) which will take place in mid-February 2008. GIC has committed to subscribe to CHF 11 billion and the other investor to CHF 2 billion. The notes will pay a coupon of 9% until conversion into ordinary shares, which must take place on or before a date approximately two years after issuance. The proceeds of the issue will count as Tier 1 capital for BIS capital adequacy purposes after EGM approval.

Sale of treasury shares
The Board of Directors of UBS has further approved the re-sale of 36.4 million treasury shares previously intended to be cancelled. UBS has received indications of interest in a share issue, is considering these and will place these shares over time. This will increase BIS Tier 1 capital by approximately CHF 2 billion.

Proposed replacement of 2007 cash dividend by stock dividend
The Board of Directors proposes to replace the 2007 cash dividend with a stock dividend, i.e. a bonus issue of new shares. This will boost Tier 1 capital by CHF 4.4 billion, of which approximately CHF 3.3 billion is a reversal of accrued dividend for the first nine months of the year and the balance is dividend that will now not accrue. This is subject to EGM approval.

In total, these three actions, when completed and approved, will strengthen UBS's regulatory Tier 1 capital by approximately CHF 19.4 billion. After completion, and taking into account the expected fourth quarter loss, the firm's BIS Tier 1 capital ratio will improve to above 12% from 10.6% at 30 September 2007.

Marcel Rohner, Group Chief Executive Officer, UBS, said: "Conditions in the US mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities. In the last several months, continued speculation about the ultimate value of our sub-prime holdings – which remains unknowable – has been distracting. In our judgement these writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation. Together with the strengthening of our capital base this will allow us to concentrate on sustaining and developing our client businesses.

Information on GIC
GIC is a global investment management company established in 1981 to manage Singapore's foreign reserves. With a network of eight offices in key financial capitals around the world, GIC manages a broad diversified portfolio across countries and asset classes that includes equities, fixed income, foreign exchange, commodities, money markets, alternative investments, private equity, real estate and infrastructure investments.

More insights via FT Alphaville UBS boggles - $10bn of writedowns, $17bn in emergency capital

Deutsche Bank Buybacks & Foreclosures

I just couldn´t resist. Every time we hear the phrase "buyback" the stock jumps. It doesn´t matter if these buybacks will occur or not. I have been stumbling on a review of what the buybacks have done for the shareholders of Deutsche Bank. Taking todays share price they buybacks have resulted in a loss of over $ 350 mio. So far....... I assume that their focus now that the shares are trading around 85 and 30 percent of the peak is to preserve their core capital ...... Nice timing!

Da konnte ich einfach nicht wiederstehen. Jedesmal wenn der Begriff "Aktienrückkauf" in den Mund genimmen wird steigen in der Regel die Aktien. Und das unanhängig davon ob diese Käufe auch jemals durchgeführt werden. Ich bin in den letzten Tagen auf diese Betrachtung der Rückkäufe durch die Deutsche Bank gestolpert. Und basierend auf dem aktuellen Preis sieht es ganz so aus als wenn hier mal eben 250 Mio € " nicht optimal and die Aktionäre zurückgegeben worden sind. Bisher....... Und ich kann mir sehr gut vorstellen das da der Aktienkurs knappe 20% vom Durchschnittskurs und ca. 30 % from Hoch zurückgekommen ist der Focus jetzt eher auf die Stärkung des Kernkapitals liegt...... Tolles Timing!

And when looking at the following graphs and other charts from their analyst presentation i think they already regret some of the buybacks .....

Und wenn man sich die nachfolgenden Grafiken und die Chart der Analystenpräsentationansieht bin ich mir ziemlich sicher das Sie einige der Aktienrückkäufe schon bereuen....

Foreclosure wave sweeps America / BBC
Cleveland, Ohio, is an industrial city on the banks of Lake Erie in the US "rust belt".

It is the sub-prime capital of the United States. One in ten homes in the city is now vacant, and whole neighbourhoods have been blighted by foreclosed, vandalized and boarded-up homes.

THE SUB-PRIME CRISIS IN CLEVELAND / Interactive Map

Many of these homes are now owned by the banks and investment pools owning the mortgages, and the company making the most foreclosures in Cleveland is Deutsche Bank Trust, which acts on behalf of such investment

Next comes a raher grim view from Citi via the FT

Nachfolgend ein recht kritischer Bericht von der Citigroup via der FT

Beware the “uber leveraged” trio — Barclays, RBS and Deutsche

Research by Citi’s Simon Samuels suggests that, depending on the measure used, Europe’s banks need to fix capital deficits that run as high as 20 per cent - on average!

Most strikingly, however, are Europe’s “uber leveraged” trio — Barclays, RBS and Deutsche Bank — where capital deficits range from 60% to 80% of market cap.

To put this graph into perspective you have to click here .... The graph above shows the enlarged version of the right scale....

Um diese Grafik ins Verhältnis zu setzen ist ein Blick auf diesen Chart empfehlenswert....Mein vergrößerter Ausschnitt zeigt den rechten Teil der Skala.....

Home Depot Hit As Credit Crunch Squeezes Deals

60 Days were enough to reduce the price by roughly 20 percent, force Home Depot to take an equity stake, guarantee some of the debt and eliminates lots of convenants that were given to the private equity buyer..... Look like the famous "private equity put" is still there but at a 30% lower pricelevel...... This deal looks similar to the Daimler/Ceberus/chrylser deal where Daimer was forced to step in to unload Chrylser.

60 Tage haben genügt um den Preis um 20% zu drücken, Home Deopt zu nötigen das sie entgegen dem ursprünglichen Plan eine Beteiligung behalten & noch zusätzlich für Schulden geradestehen müssen, die Kreditbestimmungen der Private Equity Käufer fast alle "lockeren Kreditbestimmungen" gestrichen worden sind usw......Sieht ganz so aus als wenn der sog. "Private Equity Put" der angeblich die Märkte nach unten absichert jetzt den Markt 30% tiefer absichert....... Dieser Deal ist fast ne 1:1 Kopie vom modifizierten Daimler/Ceberus/Chrylser Abschluß der Daimler ebenfalls zu ähnlichen Zugeständnissen genötigt hat um endlich Chrysler loszuwerden.

The global credit crunch has begun to put a squeeze on the buyout boom, with banks and private-equity firms forcing Home Depot Inc. to sell its struggling wholesale supply unit for much less than what had been agreed to just two months ago.

Home Depot's board yesterday agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June when the buyout boom was at its peak.

In addition, Home Depot itself will hold about 12.5% of the unit's equity, people familiar with the matter said, and guarantee some of the debt issued by the banks to finance the acquisition. That's significant because if the banks can't sell the debt in bond markets, and it sits on their balance sheet, they have to mark down its value, which some can ill-afford to do.

Just weeks ago, the buyout boom was a hugely profitable collaboration between private-equity firms and the Wall Street bankers who financed them. Now, amid the credit crunch, some private-equity firms and their bankers are at loggerheads as each camp tries to protect its bottom line, turning previously close allies against each other.

There are an estimated $400 billion in buyout deals working their way through the banking system. Wall Street committed to lend money for these deals as part of its plan to be in the "moving business," of packaging loans and equity stakes in the companies and selling them to investors, spreading out the risk of those transactions. With credit markets largely shut to big transactions, the banks have found themselves back in the old-fashioned "storage business," forced to keep the debt on their balance sheets and mark down its value.
Absorbing Write-Downs
In the process, the nation's banks might have to absorb tens of billions of dollars of write-downs. Such a toll would add to the pain of the far larger losses they are already toting up from the downturn in real estate and the meltdown in the market for mortgage securities.

That set the stage for the nasty squabble over HD Supply. The banks' argument: If the buyout firms could get a reduction in the price they were paying for the business -- Home Depot previously agreed to cut the price tag for the unit by about $1.3 billion to around $9 billion -- the banks should be able to change the terms of their financing for it and other deals. The buyout firms objected, saying a deal was a deal.

"This is what we pay them for," said one top buyout executive. "This is what underwriting is."

Caught in the middle are the companies that have agreed to be sold to buyout firms. Atlanta-based Home Depot, for instance, is suffering in part because of the downturn in the housing market and had planned to use the proceeds of the HD Supply sale to partially fund a $22.5 billion stock buyback plan. The $8.5 billion price tag will allow the retailer to go ahead with its buyback, a person familiar with the matter said, but it means that Home Depot will have sold the unit for little more than what it had spent to acquire the more than 40 wholesale contracting supply companies that make up the supply unit.

> More on the Home Depot buybacks / Mehr zu den Aktienrückkäufen von Home Depot

How Long Can Home Depot And Others Masked Poor Results With Buybacks?

Reviewing The Home Depot Buyback History.......

Among the features of the original HD Supply deal were many of the innovations private-equity firms have introduced in recent years in their pursuit of maximum flexibility. Those innovations denied the lenders many of the protections traditionally written into loan agreements. For example, there were almost no performance requirements set for HD Supply. If it chose not to use its cash to pay interest, the lenders would have no choice but to accept more debt instead of money.

> Here more on this issue that didn´t matter just 60 days ago....Convenant Lite Loans & Toggle Bonds

> Hier mehr zu diesem Thema das bis vor 60 Tagen noch überhaupt kein Problem gewesen ist....Convenant Lite Loans & Toggle Bonds

Unfortunately for the banks, investors have been on a buyers' strike recently and have refused to buy debt that gives them few rights.

Need for Flexibility
The banks argued that if the target company was so weak that the buyers needed all that flexibility, and refused to put in any terms and conditions, they shouldn't be buying the company in the first place. The lenders initially asked the private-equity firms to guarantee the debt involved in the deal -- which the private-equity firms say they refused to do.

A recent report from Citigroup's banking analyst estimated that J.P. Morgan was holding $40.8 billion of leveraged buyout financing, some of which may wind up on the bank's balance sheet if it can't syndicate the deals.

'Market Out' Provision
The banks had been on uncertain legal ground in pushing for changes in their commitments, according to lawyers who were involved in the deal and many who weren't. Rushing to establish market share in the buyout business, they largely dropped many standard financing conditions in deals struck for private-equity clients in the past few years. For instance, few recent deals have carried an arcane provision known as the "market out" that previously had allowed banks to pull out of commitment if the general financing market deteriorated. Even conditions for declaring an "out" for a specific target company's performance had been tightly drawn for the banks -- in contrast to the strengthened flexibility of private-equity firms when it comes to the ability to renegotiate or walk away.

> Goldman, JPMorgan Stuck With Debt They Can't Sell to Investors

Just three of the 40 biggest pending LBOs have an escape clause that lets the buyer back out if funding can't be arranged,

The revised deal reduces the amount of debt the banks provided to about $6 billion. As part of the deal, the private-equity firms agreed to accept higher interest rates on portions of the debt, which offset some of the firms' other concessions. The buyout firms will write checks for almost $2.5 billion. The banks, in turn, will try to raise the $6 billion in debt from investors so they don't have to provide the entire sum themselves.

Most in the market still expect the bulk of the remaining private-equity deals to be completed. They point to HD Supply and the controversy around it as unusual for two reasons. It is one of the few deals in which the value of the equity as well as the debt involved in the deal was underwater, given the original $10.3 billion price tag, and is unlikely to be resold at anything near the current price anytime in the next few years.

Still, investors are warily trying to determine if other buyout deals might fall victim to similar problems. They have been scrutinizing real-estate-intensive deals, such as the pending buyout of Hilton Hotels Corp. and Harrah's Entertainment Inc., as well as radio broadcaster Clear Channel Communications Inc., whose sector has been hurt in recent weeks.

And they are already toting up losses that the banks will have to put on their books. In the $27 billion deal for First Data, for instance, some investors are figuring that the debt issued in connection with the deal is already worth 10% to 13% less than envisioned. That could mean seven banks sharing paper losses of more than $2 billion. The last-minute accord on the Home Depot's unit, with a reduction in the amount of debt, offers a potential road map for other deals that would avoid drastic write-downs.

If Leveraged Buybacks, Why Not Leveraged Dividends? / Kasriel

Kasriel from Northern Trust asks the right question. The management will be forced to do more "bondholder value" management. I recommend to read the Expedia story to see how the sentiment has collapsed within 3 weeks.

Kasriel stellt hier eindeutig die richtige Frage. Das Management wird sich zukünftig wohl immer mehr um die Belange der Anleihebesitzer kümmern müssen. Ein gutes Beispiel wie schnell die Stimmung gekippt kann man am Beispiel von Expedia sehen.

The equity investing community seems to get giddy when it hears the words "stock buyback." And why not if the stock is being bought back out of current profits? But what if the corporation is increasing its debt to fund its stock buybacks?

The chart below suggests that is what is occurring now and what occurred in the late 1980s and late 1990s. The red bars in the chart represent the dollar amount of the net issuance of equities of nonfinancial corporations. Readings below zero, which predominate, signify the net "retirement" of equities. As the chart shows, record amounts of nonfinancial corporate equities are being retired in this cycle. The blue line in the chart represents nonfinancial corporate borrowing as a percent of their nominal capital spending. If the percentage is rising, as it is now, then this indicates corporations are borrowing for purposes other than to fund their capital spending. If corporate borrowing is rising relative to capital spending and corporations are retiring equity, then it is likely that they are borrowing to fund their share buybacks.

Equity investors do not seem alarmed that corporations are leveraging themselves to fund stock buybacks. Would corporate borrowing to increase dividend payments be greeted equally as gleefully?

As an aside, with some risk starting to be priced into the credit market, funding stock buybacks via borrowing is getting more expensive. Ask Expedia . It recently had plans to buyback 42% of its shares, predominantly with borrowed funds. But with the credit markets having turned more discriminating in recent weeks, Expedia has scaled back its repurchase plan to only 8% of its shares.

Countrywide .... Genius At Work......

Why took it so long for anybody to adjust to reality ? I wonder what the buyers of these Bonds are thinking right now...

Warum es solange gedauert hat bis jemand die Realität anerkennt ist mit ein Rätsel. Das filt im besonderen für die Käufer dieser Bonds......

Countrywide conference call review october 2006
"Additionally, as previously announced, management is executing a capital optimization plan and the Board of Directors has authorized a share repurchase program of up to $2.5 billion. In connection with this program, the Company intends to repurchase $1 billion to $2 billion of its common stock in the fourth quarter financed through the issuance of high equity-content debt securities."

from May 2007!
Countrywide Financial Corporation Announces Agreement to Sell $2 Billion of Series A Floating Rate Convertible Senior Debentures Due 2037 and $2 Billion of Series B Floating Rate Convertible Senior Debentures Due 2037
Countrywide Financial will use a portion of the net proceeds from this offering to fund repurchases of up to 23 million shares of its common stock simultaneously with this offering and expects to use the remainder for general corporate purposes.

But as long the rating agency´s (taken from end of 2006) are either dumb or/and blind..... In 2007 no press release that the ratings have changed

Aber solange die Grahlshüter des Rating weiter auf beiden Augen blind sind...Die Daten sind von Ende 2006 (bisher hat es in 2007 keine Pressemitteilung über eine Änderung gegeben)

Needless to say that the management has unloaded "gazillions" of shares in the meantime.....

Überflüssig zu sagen das während der selben Zeit das Management Tonnen von Aktien auf den Marktgeschmissen hat.....



Transcript conference call via Seeking Alpha
Slide presentation conference call pdf
Countrywide Foreclosures Blog
Countrywide CEO with Cramer on Mad Money (both) prasing the stock at 38-40$

Stock just closed over 30$....

> I recommend to watch the slide show with lots of good charts

> Kann jedem die Slide Präsentation inklusiver netter Charts empfehlen

Example from the call/presentation
Let's turn to page 3. The graphs on page 3 show delinquency over a range of cumulative home price appreciation rates. For each graph, the x or horizontal axis represents the amount of cumulative home price appreciation for the first 24 months of the loan's life. The y or vertical axis for each of these charts represents the serious delinquency rate for each bucket or range of cumulative home price appreciation on the x-axis. The serious delinquency measure used here is an over-90-day delinquency using the MBA standard and expressed as a percentage of the starting count of loans.The higher the appreciation rate, the lower the serious delinquency.

> Really? They are very smart....

> Wirklich? Die haben echt was auf dem Kasten.....

The ones with more leverage, tend to have high serious delinquency rates across the spectrum of home price appreciation rates

> As i said, experts at work......

> Wie bereits gesagt, echte Experten bei der Arbeit

Odds ratio, which can be thought of as a risk multiplier.

Let's use the FICO chart on the top left of page 4 as an example. We use a FICO of 800 as a base; so we will set that FICO to a value of 1. If we look at the blue line, which represents prime first liens, we can see how the odds ratio increases as the FICO declines. A prime loan with FICOs in the low 500s is going to be over 30 times more likely to be seriously delinquent than a prime loan with an 800 FICO, holding all other variables constant.

On the bottom of page 4, we show odds ratios for documentation types with full doc being the baseline of 1. Let me explain the various doc types that we are showing here. A streamline is a streamlined refinance. Preferred is a low documentation approach offered by a number of institutions; Countrywide's is called Fast & Easy, where borrowers who meet certain criteria are allowed documentation waivers. A SIVA is a stated income verified asset program; it's sometimes called reduced doc. A NIVA is a no income verified asset program. The primary difference between SIVA and NIVA is that the borrower states but does not document their income for a SIVA loan, but neither states nor documents their income for a NIVA loan. Assets are verified for both SIVA and NIVA.

A SISA loan is a stated income stated asset; the borrower is stating but not documenting their income and assets. A NINA is a no income no asset loan; the borrower is neither stating nor documenting their income or assets. The takeaway from this chart is that documentation matters.

The less documentation, the higher the serious delinquency, all else equal.

> Shocking news......
Let's turn to page 8. Page 8 shows total delinquency for our servicing portfolio using both the MBA and OTS standards. We introduced in this topic on the last call and I wanted to spend a little more time this morning on it again. While we normally use the MBA standard for corporate purposes, many other institutions use the OTS standard. Because most mortgage loans are due on the first day of the month, there can be a large difference between the two delinquency measures; and you can see that here on this page.

Just so I can reflect on this as you people think of your questions. The other is that the Fed knowing that well over 50, 60, 70% of the loans made in 2003, '04, '05, and '06 were indexed variable-rate loans, indexed one way or another to the Fed funds rate, increased the Fed funds rate 17 times. 17 consecutive times, with most of the product out there being variable-rate product

> Translation " Fed bail us out...."

> Peinlich! So hört sich ein bitten und flehen um Hilfe der Fed an.....

Disclosure: Short KBW Mortgage Finance Index (including Countrywide)

Expedia cuts planned buy-back size due to lack of financing

I´m shocked.... :-)

Looks like overnight nobody wants to finance a multi billion $ buyback with junk debt...... S&P cuts Expedia's rating to junk

Harte Zeiten für (junk) schuldenfinanzierte Aktienrückkäufe...... :-)
Expedia, Inc announced today that it is amending its tender offer to purchase shares of the Company's common stock to reduce the maximum number of shares that the Company is offering to purchase to 25,000,000 shares, due to the lack of available financing, on terms satisfactory to the Company, as a result of current conditions in the credit markets

Bloomberg
Expedia Inc., the Internet travel agency run by Barry Diller, slashed the number of shares it plans to buy back by 79 percent because it can't get enough financing with acceptable terms.

Its original plan called for buying back as many as 116.7 million shares, or 42 percent of common stock

The company's debt would have climbed to $4.07 billion from $500 million if it repurchased all 116.7 million shares at the maximum proposed price of $30 each, according to a regulatory filing June 29.

Expedia spent $660 million buying back 30 million shares in January.

Tribune Debt Default Risk Tops 50 Percent, Swaps Show

WOW! No wonder spreads are spiking across the board.... SCHADENFREUDE!

Kein Wunder das einige in heller Aufregung sind....... SCHADENFREUDE!

July 20 (Bloomberg) -- Tribune Co. has a 50-50 chance of missing interest payments on some of the $13 billion in debt it will have after real estate investor Sam Zell buys the company, trading in the company's credit-default swaps shows.

Prices of the swaps, financial contracts used to speculate on a company's ability to repay debt, have jumped $331,000 since the first step in the sale was completed in May. It costs $770,000 to protect $10 million of Tribune bonds for five years, according to CMA Datavision, indicating a more than 50 percent risk of default. That's up from 32 percent on May 24, based on a JPMorgan Chase & Co. pricing model.

Investor unease is being fed by a deepening advertising slump at Tribune, owner of 11 metropolitan newspapers including the Los Angeles Times. That newspaper had ``one of the worst quarters ever experienced,'' in the second quarter and Tribune publishing results generally were ``worse than the industry,'' Publisher David Hiller wrote in a July 13 memo.

``If you were unsure about a deal before, it's much worse now,'' said Dave Novosel, an analyst at Gimme Credit Publications Inc. in Chicago who rates Tribune bonds ``sell.''

Tribune revenue fell 11 percent in May, the company said June 20, and was down 5.6 percent for the year to $2.02 billion. The company reports second-quarter results on July 25.

Tribune swaps prices imply investors consider the company the fourth-riskiest debt issuer among the almost 1,200 worldwide whose credit-default swaps were quoted this week by London-based CMA.

`At Risk'
``Their capacity to service their obligations could certainly be at risk,'' said Mike Simonton, a credit analyst at Fitch Ratings in Chicago

Tribune has said in filings it will slash capital spending, eliminate dividends and use an employee-ownership structure to avoid taxes, conserving cash to make interest payments that New York-based Benchmark Co. analyst Edward Atorino estimated at $1.08 billion.

The company will earn $1.09 billion to $1.18 billion before interest, taxes, depreciation and amortization this year, estimates Deutsche Bank newspaper analyst Paul Ginocchio in New York. While the deal is ``more likely than not'' to be completed, ``there may be some unhappy lenders in the end,'' he wrote in a July 1 report. .... On May 24, Tribune bought back 126 million shares, using more than $4 billion borrowed from four banks, including Citigroup Inc. and JPMorgan Chase. Tribune plans to borrow another $4.2 billion by year-end to buy its remaining stock.

> I would like to hear what the bondholders are saying to the buybacks.......

> Würde gerne wissen was die Gläubiger zu diesen Rückkäufen sagen.......

How Long Can Home Depot And Others Masked Poor Results With Buybacks?

Here we go agian....... A warning that is masked by a huge cash infusion that is fueled with almost $ 12 billion of new debt! The rating agencies have already said that they will downgrade the rating from A to the third lowest investment grade rating. Please make sure you read this post Reviewing The Home Depot Buyback History to see what the former $13 billion buyback during the greatest housing bull market has done for the stock.....

Hier ein typisches Beispiel wie sehr momentan maue Ergebnisse mehr und mehr durch gewaltige schuldenfinanzierte Aktienrückkäufe geschönt werden. Im Falle von Home Depot sollen insgesamt 12 mrd $ neu aufgenommen werden. Die Ratingagenturen haben bereits angekündigt das Rating von A auf das drittniedrigste Investment-Grade- Rating herabzusenken. Um zu sehen wie das bisherige Aktienrückkaufprogramm von über 13 mrd $ verpufft ist, solltet ihr Euch den o.g. Link zu Gemüte führen ....

The Home Depot®, the world's largest home improvement retailer, today announced the launch of a tender offer for 250 million shares of its common stock at a price range of $39.00 to $44.00 per share. In addition, the Company updated its fiscal 2007 sales and earnings per share guidance.

On June 19, 2007, the Company announced a recapitalization plan whereby its board of directors authorized a $22.5 billion increase in its share repurchase program. It is the Company's intention to repurchase up to $22.5 billion in shares as soon as practicable. As part of its plan, the Company's board of directors authorized a self-tender offer for the purchase of up to 250 million shares of the Company's common stock. The tender price range is $39.00 to $44.00 per share
The Home Depot may purchase up to an additional 39.5 million shares in the tender offer without extending the tender offer.

..based on weaker conditions in the housing market, the Company said that it now expects its earnings per share to decline by 15-18% for fiscal 2007, with total retail sales down 1-2% and comparable store sales down mid-single digit

> This is now the third warning since February......They risk their strong financial position just when the housing market is facing a long year bear market and shares are close to 5 year highs......That sounds clever......This management could be forced to do some "bondholder" value management insteadt of their excessive shareholder management after this buyback is completed...This could also be a good entry point to open a short position :-)

> Dieses ist bereits die dritte Warnung seit Februar........HD riskiert die bisher starke finanzielle Position im Angesicht eines jahrelangen Abschwungs im Immobiliensektor.....Das Timing die Aktien gerade nahe dem 5 Jahreshoch zurückzukaufen ist ebenfalls eigentümlich....Alles in allem gut durchdacht.......Diese Aktie könnte in naher Zukunft dazu gezwungen werden sich nach den Anleihebesitzern zu richten und anstelle eines Sharholder eine Bondholder Value orientierte Politik zu betreiben.... Dann könnte ebenfalls der Punkt gekommen sein um eine Shortposition zu eröffnen :-)

Reviewing The Home Depot Buyback History.......

time for a reality check and a look what the last gigantic buyback has done for the stock....what it has done for management is another question.......

Zeit sich mal anzusehen was im Falle von Home Deopot der letzte Aktienrückkauf gebracht hat...... es sollte klar sein was die Rückkäufe für das Management gebracht haben.....

NOVEMBER 2006 http://tinyurl.com/yocqoj

Since its share repurchase program began in 2002, the Company has repurchased 372 million, or approximately 16 percent, of its utstanding shares and spent $13.3 billion under its $17.5 billion authorization

>yes, this chart shows the period in which Home Depot has spend $13 billion in stock buybacks.......

> so sieht der Chart in der Zeitachse aus als Home Depot mal eben 13 billion $ in Aktienrückkäufe gesteckt hat.....

>that is the reward for the blockbuster performance from the former CEO.....

>hier nun die Belohnung für den ausserordentlich erfolglosen gefeuerten CEO.....

The Home Depot board has awarded him $245 million in his five years there. Yet during that time, the company's stock has slid 12 percent while shares of its archrival, Lowe's, have climbed 173 percent.

http://tinyurl.com/g6yn8

maybe they should have listen to family Ritholtz

"Home Depot has Money for Buybacks, but not Service?"

http://tinyurl.com/2hgkg3

NEW YORK, June 20 (Reuters) - Fitch Ratings on Wednesday cut Home Depot's debt rating by two notches, the third rating action against the home improvement retailer after it announced a $22.5 billion boost in share repurchases late on Tuesday.

Moody's Investors Service and Standard & Poor's on Tuesday said they expect to cut Home Depot's debt rating by several notches as a result of the massive buyback.

Home Depot said it plans to use proceeds from a sale of its supply division, cash on hand and $12 billion of additional debt to pay for the share repurchases. The company said it has agreed to sell its supply division to three private equity firms for about $10.3 billion....

Fitch cut Home Depot's rating to "A-minus," the seventh-highest investment-grade rating, from "A-plus." The outlook is negative, meaning another rating downgrade is expected over the next one to two years.

Standard & Poor's said it expects to lower Home Depot's corporate credit rating by three notches to "BBB-plus," the third-lowest investment-grade rating, from "A-plus."

Moody's Investors Service said it expects to cut Home Depot's rating by four notches to "Baa1," its third-lowest investment-grade rating, from "Aa3."

>nice timing to risk a junk rating just when a long downturn is in the bag......

>geniales Timing. Mit einem jahrelangen Abschwung vor Ausgen nochmal kurz Gefahr laufen ein Junk Rating zu bekommen......