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Thursday, October 18, 2007

IKB Rhinebridge SIV

Article:
Rhinebridge Plc, the IKB Deutsche Industriebank AG structured investment vehicle that has lost about half its value, is unlikely to repay all its debt.

Rhinebridge suffered a ``mandatory acceleration event'' after IKB's asset management arm determined the SIV may be unable to pay back debt coming due, the Dublin-based fund said in a Regulatory News Service release. Rhinebridge had $1.2 billion in commercial paper outstanding as of Oct. 5, according to Fitch Ratings.
...
In August, Rhinebridge had to sell $176 million of its assets to cover obligations, and as much $320 billion of holdings by SIVs worldwide may be dumped if the market doesn't improve.

Rhinebridge said Oct. 12 that it breached a ``major capital loss test'' because its net assets fell to less than half the amount it owes holders of its subordinated capital notes after repaying senior debt.
So it looks like some won't be getting their $$ back. IKB was the German bank that was bailed out this summer because of its losses. According to the article, over 80 percent of its holdings in this vehicle were AAA rated in August, meaning they probably disposed of the good stuff and are left with a bag of toxic paper.

Update:
Treasury yields show a major move:
1 mo:
10/15/07: 4.25
10/16/07: 4.14
10/17/07: 3.74
10/18/07: 3.21 (-1.04)

3 mo:
10/15/07: 4.30
10/16/07: 4.25
10/17/07: 4.01
10/18/07: 3.76 (-.54)
The last time the 1 month got this low was in August, although it got close at the end of September. This is not an indicator of stabilizing commercial paper. Now take a look at this:


Nobody wants long AA financial, in fact long ABCP and AA financial are converging. This is the return of risk with a vengeance. It's been trending this way, and the trend is accelerating. A2/P2 nonfinancial is the worst, providing no comfort whatsoever to overextended LBO bondholders and holders of pier loans. From looking at this graph, one could advance the theory that the market is correlating the CP risk and the pier loan risk with AA financial risk and predicting increasing risk as this wears on. It would be hard to refute that argument.

I think this is the end of an era for the large banks and the larger nonbank financials. What is the purpose of a nonfinancial using a financial to raise cheaper money? It really looks like it would cost one money. If this holds, these large financial corporations will lose major fee income. LBO cash is going to be much restrained. The Glory of ABCP is overthrown.

It's getting cheaper to raise money the old-fashioned way, in which someone would take money and pay interest for it. Not a good sign if you are a financial engineer by trade.

Comments:
ot, mom, but it's on a subject wihich used to interest you: bird flu:

ANOTHER HUMAN DIES OF BIRD FLU IN INDONESIA - THIS ONE HAD NO DIRECT CONTACT WITH BIRDS...


JAKARTA POST:

Tangerang regency in Banten province has recorded five deaths from bird flu after the latest victim, a 12-year-old boy, died from the virus on Oct. 13.

The regency health agency's head of communicable disease prevention, Yuliah Iskandar, told The Jakarta Post on Tuesday the boy, a resident of Ceger village in Sepatan district, had suffered high fever from Sept. 30 but was only admitted to Tangerang General Hospital on Oct. 8.

... Yuliah said the victim and his family had not had direct contact with live poultry and birds near the house in the village, but there was a poultry-breeding business some 500 meters away from the victim's house.

... In August, a Tangerang maid died from bird flu two days after being treated for a high fever and acute pneumonia at Tangerang's Sari Asih Hospital.

Her employers, Wahyu Proyato and Winda Amalia, residents of Perumnas II complex in Tangerang regency, said they had no idea how their maid contracted the virus because there were no chickens at their home or in the neighborhood.

Banten province has recorded 19 human cases of bird flu, 15 of which have been fatal.

* THIS NEWS SEEMS TO CORROBORATE AN EARLIER REPORT WE POSTED AT T.A.B. (OCTOBER 4TH, 2007) - THAT THE BIRD FLU VIRUS HAS IN FACT MUTATED AND IS NOW MORE COMMUNICABLE TO HUMANS FROM BIRDS.

[LINK: http://astuteblogger.blogspot.com/2007/10/bird-flu-has-mutated-now-more.html ]


* ALL THAT'S LEFT FOR THIS TO BECOME A DEADLY PANDEMIC IS FOR THE VIRUS TO MUTATE INTO ONE MORE READILY COMMUNICABLE FROM HUMAN TO HUMAN (H2H).


* THIS IS LIKELY TO HAPPEN, SOMEDAY... AND SOONER THAN WE'D LIKE...


STAY TUNED...

http://astuteblogger.blogspot.com/2007/10/another-human-dies-of-bird-flu-in.html
 
It still does interest me. Although the press has not been reporting it, there have been multiple bird flu deaths in Indonesia that have had no contact with birds. There are clear human to human transmission deaths in Indonesia. The very first deaths in Indonesia could not be traced to birds and appeared to be human to human transmission. That was a cluster of three.

Genetic analysis of Indonesian strains of H5N1 appear to show a difference from the strains detected in birds. They have verified cat and pig infection.

So this in no way is a divergence from the Indonesian history and cannot be seen as evidence of mutation.
 
How are SIVs like SIV?

They are both contracted by having sex with monkeys.
 
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