Nov 2019
Sultans of Steel
So a housewife walks into the bank with titles to two properties and walks out with 30 million dollars.
Well, her husband’s construction company walks out with the 30 million dollars and uses that to raise another 300 million dollars from other banks to invest in roads that have no probability of earning tolls in their lifetimes. That 300 million earns a credit rating paid for by the construction company and the analyst as politely as possible observes the project is financially “thin.”
The properties, the collateral, are not worth the paper on which the mortgages are written which troubles neither the lender nor the mortgage trustee for the lender both who are happy to take the word of the smiling housewife. This entire song and dance happen in broad daylight in full view of the regulators. The company that received the loan filed the documents with the registrar of companies along with a picture of the smiling housewife. The publicly listed company that received the leveraged investment put together a presentation for investors and analysts claiming their financial duress has been rescued by a white knight or at least a comely princess. The bank that issued the loan tells precisely no one while insiders sell the stock with abandon.
This would not be a problem had the bank in question not taken private equity capital from global limited partners which sold the shares to mutual funds around the world: one in Utah, index ETFs sponsored by the smart money, Blackstone, and Vanguard which took 10 million shares for itself in the UK.
The chief financial officer of the bank sold the highs at 720. Insiders averaged 650 on their exits until the stock went bump in the night on the disclosure that in inspired underwriting the promoter of a coffee retailer borrowed large amounts of money to pay off private equity investors at a 25% internal rate of return. The promoter opted to launch himself off a rural bridge rather than repay the loan.
The insiders at the bank sold first and expressed their condolences later because the jumper was a customer, and a big one. The news of insider selling took six weeks to reach the public domain because the bank did not report in a timely fashion to the regulator.
The stock is down by half and trades at 350.
Sultans of Steel
So a housewife walks into the bank with titles to two properties and walks out with 30 million dollars.
Well, her husband’s construction company walks out with the 30 million dollars and uses that to raise another 300 million dollars from other banks to invest in roads that have no probability of earning tolls in their lifetimes. That 300 million earns a credit rating paid for by the construction company and the analyst as politely as possible observes the project is financially “thin.”
The properties, the collateral, are not worth the paper on which the mortgages are written which troubles neither the lender nor the mortgage trustee for the lender both who are happy to take the word of the smiling housewife. This entire song and dance happen in broad daylight in full view of the regulators. The company that received the loan filed the documents with the registrar of companies along with a picture of the smiling housewife. The publicly listed company that received the leveraged investment put together a presentation for investors and analysts claiming their financial duress has been rescued by a white knight or at least a comely princess. The bank that issued the loan tells precisely no one while insiders sell the stock with abandon.
This would not be a problem had the bank in question not taken private equity capital from global limited partners which sold the shares to mutual funds around the world: one in Utah, index ETFs sponsored by the smart money, Blackstone, and Vanguard which took 10 million shares for itself in the UK.
The chief financial officer of the bank sold the highs at 720. Insiders averaged 650 on their exits until the stock went bump in the night on the disclosure that in inspired underwriting the promoter of a coffee retailer borrowed large amounts of money to pay off private equity investors at a 25% internal rate of return. The promoter opted to launch himself off a rural bridge rather than repay the loan.
The insiders at the bank sold first and expressed their condolences later because the jumper was a customer, and a big one. The news of insider selling took six weeks to reach the public domain because the bank did not report in a timely fashion to the regulator.
The stock is down by half and trades at 350.
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