PrefBlog

More bad news for the BCE buy-out:

The value of high-risk, high-yield loans used to fund leveraged buyouts tumbled amid speculation that more than 1 billion euros ($1.4 billion) of debt is being offered for sale, including assets seized from Iceland’s banks.

Who knows? Somebody’s going to take a huge and immediate mark-to-market loss if the deal goes through. BCE common is trading well below the buy-out price … all I can say is that whatever happens will be interesting!

There are reports that Paulson will adopt the PrefBlog plan of direct capital injections (which, one hopes, will be preferred shares, perhaps convertable, with a punitive dividend):

Treasury Secretary Henry Paulson is weighing plans for the U.S. government to invest in banks as the next step in trying to resolve the deepening credit crisis.

“These capital injections are something that Secretary Paulson is actively considering,” White House Press Secretary Dana Perino said in a briefing in Washington. She also said President George W. Bush will meet with Group of Seven finance ministers at the White House on Oct. 11.

Paulson told reporters in Washington yesterday that legislation Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond just buying mortgage-related assets on banks’ balance sheets. He indicated that an option available may be boosting companies’ capital with cash infusions.

Treasury fails were briefly mentioned on September 29. Bloomberg had an interesting update:

The Treasury began selling $40 billion in additional debt yesterday to relieve the pressure in the $7 trillion-a-day market for borrowing and lending securities. The Fed also cut the minimum fee it charges dealers to borrow securities from its open market account as part of its daily securities lending program. Demand for the relative safety of government securities has surged this month as the seizure in credit markets around the world deepened.

Dealers often let trades in the repurchase, or repo, agreement market go uncompleted when it is difficult to obtain the securities or the cost to get the securities becomes too expensive. Since dealers typically use repurchase agreements to finance their holdings, movements in the rates affect the cost of holding the securities in inventory.

A lockup in the Treasury repo market is indicative of extreme fear. People are not willing to let government paper out of their hands, even when secured by cash collateral.

PerpetualDiscounts enjoyed their thirteenth consecutive trading day of negative total return. The last up-day was September 22; since then, the index has lost 7.74%. Pretty boring, eh? Hell, common equities can lose that before lunch.

Another confused day, but CM issues picked up a little. You want wild? As I sign off, Tokyo’s down 10% … tomorrow could well be fun!

There were twenty other index-included $25-pv-equivalent issues trading over 10,000 shares today

This entry was posted on Friday, October 10th, 2008 at 12:52 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.