Google Analytics

Sunday, June 10

10th Jun - Extra: Spanish Bailout

For more on Spain, see my earlier Weekender: Euro Crisis

The Subordination in Spain Will Cause PainBruce Krasting
If the Spanish bank bailout deal ends up subordinating existing bondholders, it will create a whole new wrinkle to worry about. Portfolio managers who hold senior bank bonds of other EU banks will crap in their pants.

No bail-in, Spain?alphaville / FT
The whole reason we’ve got to this point is because of three years of consistent, bipartisan impotence and a culture of denial on the part of Spanish governments towards the cajas. The cajas are intensely political creatures. IMF/ EU oversight of these lenders, including the “horizontal structural reforms of the domestic financial sector” mentioned by the Eurogroup, means that a pretty big patronage system is about to be confronted by outsiders. How many of the cajas are non-viable? Should regional government ties to cajas be monitored?

The paid-in Spainalphaville / FT
So who’s backstopping the eurozone loans in the first place? To a certain extent —
Spain… But surely both this and (possibly) the EFSF guarantee thing show that the lines between banks, sovereign, and bailout fund remain seriously smudged. That ultimately leaves us with the question of how much longer Spain does have market access, even with this operation to separate recap funds for its banks.

Details Emerge About Spain's Cramming Down "Bailout" LoanZH
the ESM/EFSF funded bailout loan, whose use of proceeds will go to fund the FROB, not one which will rank pari passu with the FROB, will have "terms better than market" - always a code word for priming and cramdown of other debt classes.

German Opposition Threatens To Scuttle ESM, And Spanish Bailout, RatificationZH
First, we learned that
Ireland, as speculated, will demand a comparable retroactive bailout renegotiation, an act which also puts the Greek elections a week from today in play. Then, we got definitive confirmation that the Spanish loan, coming at ~3% or half Spanish GGBs, is a priming loan, subordinating existing creditors. Finally, we learn that the ESM - the bailout mechanism at the heart of all current and future European bailout plans, and which still has not been ratified by Germany, is in danger of being scuttled by none other than the German opposition.

Spain finally acts: now can BBVA, Santander manage without help?Saxo Bank
Overall this should be regarded as good news, although it could potentially trigger an even worse scenario, in that Spain might have to come back for more money later on. This can probably only be avoided, at least in the case of the banking sector, if the two Spanish multinational banks - Banco Santander and BBVA - can manage without capital from the Spanish government.

Spanish Bond Subordination: Some Possibilities AnalyzedTF Market Advisors
How much is actually borrowed remains a question. Who will do the lending also remains an open question, as ESM is mentioned yet for any immediate needs it will have to be EFSF. There is a range of possible ways for the deal to be structured, some resulting in significant subordination, and some not having much impact on holders of existing Spanish Government bonds (SPGB’s).

Spain: Nothing and Everything. Details Examined TF Market Advisors
On a standalone basis, the deal announced yesterday does relatively little for Europe… The plan, under the most positive interpretations, is reasonably meaningful to Spain, and under the worst execution, may do virtually nothing even in Spain. The key is whether there has been a shift in attitude in Europe. Is this different than prior plans and is this only the first of many steps?

The EuroTARP ComethKrugman / NYT
So the whole thing at best buys time — just like the ECB’s lending program from last fall. What will
Europe do with that time? If past behavior is any indication, the answer is, nothing.

Rajoy Proclaims "Victory", Says It's Not a Bailout "It's a Credit Line"; Existing Bondholders SubordinatedMish’s
"Holders of the subordinated debt will probably have to accept losses". So who wants to hold that debt given what happened to Greece? It will be interesting to see if there is initial euphoria in the bond markets. Regardless, sooner or later (probably sooner), selling pressure will eventually overtake any initial excitement of this alleged "victory".

The Spanish Bank Bailout: A Complete Walk Thru From Deutsche BankZH

Spanish Bondholders May Rank Behind Official Loans After AidBB

EU's Spain bank rescue may bring only brief respiteReuters
Euro zone finance ministers rushed Spain into an EU-funded rescue for its debt-stricken banks to pre-empt the threat of a bank run if Greece's debt crisis flares again but any respite for Madrid and the euro may be short-lived.

Skeptical Spaniards pour scorn on Rajoy over rescueReuters
Confused and anxious Spaniards heaped scorn on Prime Minister Mariano Rajoy on Sunday for portraying a 100 billion euro European rescue of the country's zombie lenders as a triumph, expressing skepticism about whether the plan will work.