WestLB, HSH Nordbank Bail Out $15 Billion of SIVs

Bring on the next state owned bailout.... At least West LB is gettig very close to some kind of bailout. HSH is doing much much better. Both HSH and West LB are in different ways owned through several state or municipal entities. Only 26 percent from HSH was sold last years to J.C. Flowers, a private equity firm. It is getting better. Düsseldorf seems to be the capital of incompetence in Germany. Düsseldorf is the headquarter from West LB & IKB which got a $ 7 billion ( and still counting) bailout earlier this year . I´ll bet that at the next carnival they will have something banking related on their trucks......

Der nächste bitte.......Bei der West LB ist wohl in ganz naher Zukunft in irgendeiner Weise "externe" Hilfe notwendig. Die HSH dürfte das locker wegstecken können. Sowohl die HSH Nordbank als auch die West LB haben mit Ausnahme von 26% der HSH in Weise direkte bzw indirekte ( Sparkassen) staatliche Eigentümer. Sieht ganz so aus als wenn Düsseldorf sich zur Hauptstadt der Inkompetenz in Sachen Banken gemausert hat. Neben der West LB hat auch die IKB ( biher $ 7 Mrd Bailout ...) Ihren Sitz in Düsseldorf. Ich tippe mal das beim nächsten Karnevalsumzug zumindest ein Wagen das Thema aufgreifen wird.....


WestLB, HSH Nordbank Bail Out $15 Billion of SIVs Bloomberg
WestLB AG, Germany's third-largest state-owned bank, and Hamburg-based HSH Nordbank AG provided financing to more than $15 billion of troubled investment funds to prevent a fire sale of their assets.

WestLB provided a credit line for its $11 billion structured investment vehicle called Harrier Finance to repay commercial paper, the Dusseldorf-based bank said in an e-mailed statement today. HSH Nordbank said it will provide backup funding to cover all commercial paper issued by its 3.3 billion- euro ($4.8 billion) Carrera Capital SIV, spokesman Reinhard Schmid said in an interview.

NYT
FRANKFURT, Dec. 3 — In an effort to limit fallout from the subprime lending crisis in the United States, the German bank WestLB said on Monday that it would guarantee full liquidity to several of its investment vehicles that had put money into asset-backed securities.

WestLB, based in Düsseldorf and one of the regional German banks, or Landesbanken, has two major programs, known as Harrier Finance Funding and Kestrel Funding, that borrow money by selling short-term commercial paper to investors. They then invest the proceeds in higher-yielding securities, including ones backed by American mortgages.

WestLB also has three other similar investment vehicles, known as conduits. All five will have the option of drawing up to 25 billion euros, or $36.6 billion, as the short-term paper comes due.

> Put this gigantic figure in comparison with the numbers from the balance sheet...... No wonder Libor rates are surging around the globe.....

> Nun setzt diese Wahnsinnssummen ins Verhältnis zur den Bilanzdaten....... Kein Wunder das sich Bänker untereinander nicht traeun und den Libor in die Stratosphäre schiessen lassen.....

“This will ensure that there is no compelled liquidation of the assets in the SIVs,” said Armin Kloss, a WestLB spokesman, referring to structured investment vehicles. “We are also convinced that the assets that Kestrel and Harrier have could be more highly valued, but that the market is not ready for that.”

WestLB said in August that “less than 5 percent” of its investments was subprime-related, Mr. Kloss said. But trading in asset-backed securities has largely stopped, so a forced sale now would cost the bank dearly.

Like other banks and many politicians, WestLB is betting that the market will recover.

I suggest to read this from FT Alphaville related to the NAVRevenge of the SIV: still going down

Ich empfehle zu diesem Thema Revenge of the SIV: still going down vi FT Alphaville zu lesen.

HSH Nordbank, based in Hamburg, is taking a similar step to that of WestLB, covering all of the 3.3 billion euros that its vehicle, called Carrera Capital, has issued. The step has helped secure its stable credit ratings with Moody’s Investor Service and Standard & Poor’s.

“What we’re trying to do is avoid a write-down,” Reinhard Schmid, an HSH Nordbank spokesman, said. “We can do that with liquidity.”

Two German banks, IKB Deutsche Industriebank and Landesbank Sachsen, needed an outside rescue in August when their speculation in subprime-related securities went awry. But those problems far outstripped what much more stable banks like WestLB and HSH Nordbank are facing. IKB Deutsche and SachsenLB set up funds that were triple or quintuple the size of their capital on hand.

> I wouldn´t call West LB "stable".....

> Mir würde das Wort "stabil" im Zusammenhang mit der West LB nicht über die Lippen kommen.....

The British bank HSBC said last week that it would spend $35 billion to bring two vehicles it ran directly onto its books, effectively turning the bank into their guarantor of liquidity.

A similar principle underlies the so-"Superfund"— formally known as the Master Liquidity Enhancement Conduit — proposed by Citigroup, the largest sponsor of such vehicles in the world. Together with Bank of America and JPMorgan Chase, Citigroup is proposing that up to $80 billion be devoted to buying up mortgage-backed securities and holding them until the market relaxes.

Moody's Takes Ratings Action on Six of Citigroup's Seven SIVs

It will be interesting to see if the fire sale to Abu Dhabi will be enough. With all capital ratios plunging and downgrades coming fast and furious i have some serious doubts.... But as long they can pay their dividend and they remain their creativity as shown in No Kidding.... More Off Balance Sheet Vehicles For Citigroup everything is fine....Lets hope for them that this kind of deal won´t backfire like the famous "Liquidity Puts" .... I highly recommend to see this video with the analyst Meredith Whitney and hear her latest thoughts on Citigroup!

Es wird interessant zu sehen sein ob die Notoperation mit Hilfe von Abu Dhabi ausreichen wird. Da momentan alle Kapitalparameter im freien Fall sind und die Downgrades praktisch täglich eintreffen habe ich da so meine leichten Zweifel....Immerhin wollen sie weiter fleißig eine Dividende ausschütten und sind kreativ wie gewohnt wenn es darum geht die Bilanzen zu frisieren ( sieheNo Kidding.... More Off Balance Sheet Vehicles For Citigroup ) . Bleibt zu hoffen das diese Art an Konstruktion nicht wie die "Liquidity Puts" übelst zurückschlägt...... Zudem empfehle ich dringend sich das Video von der Analystin Meredith Whitney die vor einer Woche die große Krise bei Citi ausgelöst hat anzusehen. Es gibt doch noch Hoffnung das nicht alle Analysten vollkommen verblöded sind.

Dec. 1 (Bloomberg) -- Moody's Investors Service may cut the top ratings on six of Citigroup Inc.'s seven structured investment vehicles as part of a review of $130 billion in SIV debt.

The net asset value of the $64.9 billion in Citigroup SIVs dropped to below or near 60 percent, prompting the ratings action, Moody's said in a statement yesterday. The junior notes of three of the funds have been downgraded to below investment grade.

> What a difference afew weeks made....Compare this action with the Fact Sheet Citi-Advised Structured Investment Vehicles (SIVs) from mid October

> Was für ein Unterschied doch ein paar Wochen ausmachen.....Vergleicht das mit den Aussagen von Mitte Oktober Fact Sheet Citi-Advised Structured Investment Vehicles (SIVs)

• The assets are of very high quality.
  


• The SIVs have no direct exposure to U.S. sub-prime assets.
  


• The SIVs have approximately $70 million of indirect exposure to sub-prime assets through securities such as collateralized debt obligations. Those securities are AAA-rated and carry credit enhancements.
  


• All assets are rated "A" or above; 80% - 90% are rated "AA" or
  above; approximately 50% are rated "AAA"

SIVs, which sell short-term debt to buy longer-term, higher-yielding assets, were shut out of the short-term market as losses on subprime mortgage securities prompted investors to retreat from all but the safest of securities. Unable to finance themselves, three SIVs have defaulted and others are being bailed out by their sponsors. The world's 30 SIVs have more than $300 billion of assets.

``In recent weeks, Moody's has observed material declines in market value across most asset classes in SIV portfolios,'' the ratings company said in the statement.

Moody's said it surveyed 20 SIVs since Nov. 7 and expanded its review after noticing ``significant additional deterioration'' in asset values.

Moody's cut $14 billion in debt in all, mostly capital notes that rank below commercial paper and medium-term notes and are usually the first to absorb losses, Henry Tabe, managing director in charge of structured finance, said in a telephone interview. The ratings company placed $105 billion of debt on review for a downgrade and confirmed the ratings on $11 billion, Tabe said.

Links Finance Corp., a SIV sponsored by Bank of Montreal with $19.1 billion of debt, also had its junior notes cut and may have the remainder downgraded, Moody's said.

`Continued Deterioration'
SIV assets on average are 38 percent financial institution debt, 16 percent asset-backed securities and 12 percent collateralized debt obligations, Moody's said.

The downgrades are ``a reflection of the continued deterioration in market value of SIV portfolios combined with the sector's inability to refinance maturing liabilities,'' Moody's said. Net asset values have slumped to 55 percent from 102 percent in June, Moody's said, including the NAVs of the three defaulted SIVs.

Citigroup, the largest U.S. bank by assets, provided $7.6 billion of emergency financing to the seven SIVs it runs earlier this month after they were unable to repay maturing debt.

Citigroup, based in New York, created the first SIV in 1988 and is the largest manager.

The SIVs' struggle for survival, and the threat of having their assets dumped on the market, prompted Treasury Secretary Henry Paulson to broker talks with Citigroup, JPMorgan Chase & Co. and Bank of America Corp. to form an $80 billion "Superfund" to help bail them out.
Centauri, Beta
HSBC this week said it will take on $45 billion of assets from the two SIVs it manages after they were unable to finance themselves. SIVs set up by Dusseldorf- based lenderIKB and London-based Cheyne Capital Management Ltd. defaulted last month after investors stopped buying their asset-backed commercial paper.

Citigroup said in a Nov. 5 regulatory filing that it ``will not take actions that will require the company to consolidate the SIVs.'' The strategy ``remains unchanged from the disclosures in the third quarter'' filing, spokesman Jon Diat said yesterday in an e-mail statement. ``We continue to focus on liquidity and reducing leverage,'' Diat said. Citigroup's SIV assets have dropped to $66 billion from $83 billion on Sept. 30, Diat said.


Centauri Corp., the largest SIV run by Citigroup with $16.9 billion of debt, had its P1 commercial paper rating placed on review for downgrade as well as its AAA medium-term note program, Moody's said. Centauri's net asset value dropped to 60 percent from 85 percent since Sept. 5, Moody's said.

Beta Finance Corp., the second-largest Citigroup SIV with $16 billion of debt, had its senior debt ratings placed on review for downgrade after its net asset value declined to 60 percent from 87 percent, Moody's said.

Sedna, Dorada
Four other Citigroup SIVs, Sedna Finance Corp., with $10.7 billion of debt, Five Finance Corp., with $10.3 billion, Dorada Corp. with $8.5 billion, and Zela Finance Corp., with $2.5 billion, had their P1 commercial paper rating and AAA medium- term note programs placed on review, Moody's said.

Sedna's net asset value dropped to 56 percent, Five's declined to 63 percent, Dorada dropped to 62 percent and Zela's fell to 61 percent. A seventh Citigroup SIV, Vetra Finance Corp., wasn't part of the review.

The capital notes of Dorada, Beta and Centauri were reduced 11 levels to Caa3 from Baa1.

Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

When you have to increase your capital with your share price at multi year lows you know that they don´t do it for charity reasons...... Nice dilution but probably the only way to stay solvent..... Now it should be clear why they are still pushing for the "Superfund" . They are simply not able to follow HSBC. I assume this time there will be no congressional hearing related to sovereign wealth funds.......Nice to see that some "experts" still focusses on the dividend.... ;-). I assume this time even FOX Business News will get it right...... :-)

Kein gutes Zeichen wenn man sichn neues Geld zu Zeiten besorgen muß wenn die Aktien auf Mehrjahrestiefs notiert. Auf gut deutsch "Denen steht das Wasser bis zum Hals". Schöne Verwässerung für die Altaktionäre aber wohl die einzige Möglichkeit solvent zu bleiben. Nun sollte auch dem letzten klar werden warum Citigroup auf Biegen und Brechen den "Superfund" pusht und nicht wie HSBC diese Gesellschaften wieder in die Bilanz aufnimmt. Ich denke das es diesesmal kein Störfeuer von der US Politik geben wird....Besonders lustig zu sehen das einige der Experten sich immer noch mit der Dividende befassen..... Ich denke diesesmal wird sogar FOX Business News richtig berichten.... :-)

Nov. 26 (Bloomberg) -- Citigroup Inc., the U.S. bank searching for a new chief executive as it faces at least $8 billion of writedowns, agreed to sell as much as 4.9 percent of the company to the government of Abu Dhabi for $7.5 billion.


Citigroup will sell equity units to the Abu Dhabi Investment Authority that convert into common shares, the New York-based lender said today in a press release.

``This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business,'' Win Bischoff, Citigroup's acting CEO, said in the statement. It helps ``strengthen our capital base,'' he said.

> It´s about time..... Wird aber auch dringend Zeit.......

Charles O. Prince III ( deaf & ingorant CEO Prince ) was forced to step down as Citigroup's chief executive officer Nov. 4 after the biggest U.S. bank said losses on subprime mortgages and related securities may cut fourth-quarter net income by $5 billion to $7 billion. The lender said at the time that it planned to shore up capital. The company's shares, which have fallen about 44 percent this year, sank to $30.70 in New York Stock Exchange composite trading today, the lowest price in five years.

Time for a review of the buybacks in 2006 Financial Highlights 2006 pdf

....our return of cash to shareholders through our $7 billion stock buyback in 2006 ( Stock was between $ 45 and $ 55....)

> Well done! Eine Meisterleistung!

ADIA, the sovereign wealth fund of the government of Abu Dhabi, is buying equity units that convert into Citigroup shares at prices ranging from $31.83 to $37.24 per share, on dates ranging from March 15, 2010, to Sept. 15, 2011, the U.S. bank said. The units will pay 11 percent annual interest.

> Here is a more detailed look via the FT Junk Citi

Citi is paying a higher interest rate than companies that borrow on the high-yield, or junk-bond, market; currently they pay roughly 9% for straight bonds. Typically, convertible bonds pay lower interest rates than straight bonds, although a particular bond’s structure could affect the interest rate paid......

Even after the spurious tax argument, it is difficult to see how this funding can be costing much less than 9 per cent.

Abu Dhabi, one of the United Arab Emirates, will have ``no role in the management or governance of Citi, including no right to designate a member'' of the company's board, according to the statement.

FT Alphaville has some more thought on The stealthy rise of the sovereign wealth fund

Von FT Alphaville gibt es ein paar mehr Gedanken zum The stealthy rise of the sovereign wealth fund

More insights from Mish , Naked Capitalism and the "Peter Schiff" of bank analysts Meredith Whitney

HSBC Will Take on $45 Billion of Assets From Two SIVs

Finally .......If you take this event one step further you might ask why Citi & Co are not able to do the same and Paulson & Co is tring desperately to help and create the "Superfund"...... Maybe it has something to do with the strenth of their balance sheets...... UPDATE: Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

Endlich...... Im Umkehrschluß sollte man sich sehr wohl fragen warum Citi & Co es der HSBC nicht gleichtun und warum Paulson & Co so verzweifelt versucht den "Superfund" ins leben zu rufen....... Das liegt sicher nicht an den "starken" Bilanzstrukturen....... UPDATE: Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

Nov. 26 (Bloomberg) -- HSBC Holdings Plc, Europe's largest bank, will add $45 billion of assets to its balance sheet by consolidating two structured investment vehicles it manages.

The bank doesn't expect any ``material impact'' on its earnings or capital strength, it said today in a Regulatory News Service statement.

HSBC's decision comes as U.S. lenders led by Bank of America Corp. seek to persuade competitors to help finance an $80 billion bailout of other SIVs, companies that borrow short-term to invest in higher-yielding assets. HSBC will give investors in Cullinan Finance Ltd. and Asscher Finance Ltd. the chance to swap their holdings for securities issued by a new company, backed by loans from the London-based bank.

``HSBC's actions will set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher,'' Stuart Gulliver, HSBC's chief executive officer of corporate and investment banking in London, said in the statement.

SIVs borrow in the $836 billion asset-backed commercial paper market to buy longer-dated debt including bank bonds, mortgage-backed securities and collateralized debt obligations. Investors are shunning SIVs because the holdings are difficult to value now that trading has collapsed in some mortgage debt markets. That's stoking concern SIVs will sell assets at distressed prices, adding to turmoil in credit markets.

FT Alphaville The other problem is that declines in asset values have left these vehicles facing NAV or market value triggers that would put them into a restricted state of operation.

The latter seems to be the more immediate problem for HSBC. The bank says that both its SIVs are funded beyond the end of the year, with Asscher funded to April 2008.

In terms of their asset value, Asscher, back at launch in January, was intended to have about about 10 percent of its portfolio invested in triple-A cash CDOs, with about 40 percent in residential mortgage-backed securities. Not a great place to be.

Other SIVs have been hamstrung by declining NAVs. But, as we noted earlier this month, HSBC has kept its portfolio tests under wraps

Bank of America Takes Lead in Backing `SuperSIV' Fund The ``SuperSIV'' fund, backed by U.S. Treasury Secretary Henry Paulson, would buy assets from so-called structured investment vehicles, whose $300 billion of holdings include corporate and mortgage debt in danger of default.

Bank of America, Citigroup and JPMorgan, the three largest U.S. banks, want SuperSIV in place by year-end because some SIVs haven't been able to trade, people familiar with the fund said. BlackRock Inc., the biggest publicly traded U.S. money manager, probably will manage the fund, said a person with knowledge of the plan.

Loomis Sayles & Co. declined to invest after receiving one of 16 invitations for a personal meeting last week with current Fed Chairman Ben Bernanke, said Daniel Fuss, who oversees $22 billion as chief investment officer at the Boston-based firm.

``It's so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,'' said Fuss, who decided participating wasn't worth the risk to his firm. ``Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.''

BRAVO :-)

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.....