Wednesday, May 21, 2008
Beyond farce
BBC: UBS's real loss
Swiss bank UBS is selling $22billion of its sub-prime mortgage assets to the private group Black Rock for a knockdown price of $15billion - a 32% loss.
Not only that, but UBS is actually financing the deal themselves, lending Black Rock the money to buy the assets from itself.
Huh?
Posted by little professor @ 08:48 AM (565 views) Add Comment
7 Comments
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1. shipbuilder said...
That's a pretty smart way of getting rid of them, you have to admit.
2. shipbuilder said...
Err...perhaps not so smart..that'll teach me to read the actual article before posting....
3. European-bear said...
"It shows you how much international investors fear the prospects for the British housing market if they are only prepared to lend money to HBOS at more than 6.5%, even when the collateral is worth between 30 and 40 per cent more than the loan."
Sums it up
4. Crutchley said...
They're just crystalising a $7bn loss rather than let it sit on the books and get worse.... They've probably got insurance against Black Rock defaulting against the loan they've given them...
If we're at the end of the credit crunch - this is a crazy move
If it's going to get worse - this is a very smart thing to do
I know where my money is
5. Dark_horse said...
Reminds me of the HSBC deal whereby they lent a company £1bn to buy the HSBC offices in Canary Wharf on a leaseback arrangement. This meant that HSBC got out of the commercial property market at the peak whilst keeping their offices and, if the leasing company defaulted, HSBC could repossess the tower back again!
The difference here is that UBS's deal isn't a stroke of genius.
6. inbreda said...
"the question of how we shut the stable door now that the horse has bolted and taken up tax residence in Monaco."
LOL
Channel Islands actually. The local home of tax dodging.
7. plato said...
This 'real loss of hard cash' is probably a good deal in the circumstances for UBS. They obviously estimate a future loss far in excess of 32%. Basically they are saying this mortgage debt isn't worth a light. Firstly because it's pretty high risk debt and secondly they are certain of a significant and long lasting decline in property value. So we are at the beginning of serious problems with worse to come.
Interesting to keep an eye on (Bad Day At) Black Rock.
Still it's all really a big game with winners,suckers and lazy days in the Channel Islands.