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88Crash

Foxtons And Countrywide

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After Subprime, CDO's and SIV's looks like the term PIK's could soon become a bit more familiar in the mainstream press

http://www.telegraph.co.uk/money/main.jhtm...cccrisis106.xml

No wonder our economy has been doing so well

Raising money like this is like going to a loan shark

wow

They're a ticking time-bomb - no wonder Foxtons have been "business as usual" they're just deferring D-Day in the hopes that the market improves.

Can they just keep rolling up the interest indefinitely? If not it sounds like one day they will just go POP - that'd certainly be dramatic

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"PIK notes were largely issued to help investors get to buyout multiples other people couldn't match, so the majority were in overpriced deals where other forms of debt weren't available," says Mr Moulton.

Ooh, there's an echo in this forum....

"Even on those PIKs which aren't due very soon there's a problem, because falling sale values for companies have completely eroded the equity. Investors in the PIKs will therefore be out of the money," says one senior City lawyer.

Advisers say PIK debt is widely held by financial institutions.

Err, all sounds a bit familiar doesn't it?! So the spiv economy has it's own Sub-Prime as well - and no doubt we'll be expected to bail this bunch of tossers out as well, while they sit bank and drink in their big bonuses.

This place really has gone to hell in a handcart, hasn't it? :angry: :angry:

B

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Err, all sounds a bit familiar doesn't it?! So the spiv economy has it's own Sub-Prime as well - and no doubt we'll be expected to bail this bunch of tossers out as well, while they sit bank and drink in their big bonuses.

It does make me wonder what else will be coming out of the woodwork soon

Roughly an extra trillion of consumer debt racked up in 10 years, thats one hell of a spend up

Exactly where did all that money come from again???

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John Moulton as usual is spot on in saying that the management is demotivated by excessive debt, which then feeds the spiral down.

It goes to a theme of mine that the carrot and stick approach fails if the stick gets too big.

Rolling up debt at 14% is suicide for the share value unless your business is making way more than 14% p.a. - in a recession, good luck.

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PIK notes have their uses but they are designed to be "taken out" by repayment or refinancing within a couple of years of issuance. It is disastrous for them to stay out in the market long term and also bad for investors in PIK notes, who buy them to get a big return for a short period. If investors held PIKs to maturity the return would be theoretically enormous but few companies could afford to repay them.

We are approaching a number of major corporate failures and Four Seasons is on the verge. The capital structures of these companies are now so complex, with so many different debt-holders at different levels of seniority that it is highly unlikely any restructuring agreement can be successfully brokered and we will return to traditional insolvency/liquidation, meaning holders of the more junior instruments will get nothing.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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