Using Veritas to Construct the "Per…

29-04-2017 Hits:87256 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:81168 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:81016 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:85486 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:81984 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:84166 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:55229 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:83432 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:83170 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:83062 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:89320 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:87034 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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 From Bloomberg, we have a case where Lehman has quickly degrading assets that are producing significant losses which it is selling to a shell entity type that has caused tens of billions of losses for other banks - all in an order to get this trash off of their balance sheets (althouth the risk is still with the company). Follow closely:

Lehman Creates CLO to Get Buyout Loans Off Its Books

Lehman Brothers Holdings Inc., seeking to get high-risk, high-yield loans off its books, created a $2.8 billion collateralized loan obligation. Oh no, here we go again!

Freedom CLO contains 66 loans, including debt the fourth- largest U.S. securities firm underwrote for buyouts, according to the indenture filed last week. New York-based Lehman will hold a piece of the $565 million subordinated note, the riskiest portion, according to the term sheet. Here come those losses that no 1one saw coming, again... The bank sold $2.2 billion of bonds with investment-grade ratings. Oh No, here we go again. Doesn't anybody learn there lessons. Investment grade ratings on junk bond debt. Lawyers, you guys are not on the ball. There has to be some litigation in here somewhere.

Lehman joins Deutsche Bank AG and Credit Suisse Group in creating CLOs to reduce loans on their books without selling them in the open market. But wait a minute. How do you reduce loans on your books without selling them to the market. Oh! Silly me. Just take them off of your books. Duhhh!!!Whose gonna know except for a couple of nosy investors and bloggers. Hey, the highly accomodative government has been letting us get away with this nonsense for years, despite the fact it's blowing up the economy. Banks have $200 billion of buyout debt they can't easily sell after the price of leveraged loans tumbled to 88.8 cents on the dollar from 100 cents on the dollar last June, according to Standard & Poor's.

``Banks are focused on managing their exposure,'' said J. Paul Forrester, the Chicago-based head of the collateralized debt obligation practice at law firm Mayer Brown LLP. ``Balance sheet CLOs allow them to reduce the risk to the size of the subordinated tranche they are holding.'' And exactly how is that risk reduced. I mean, it has to go somewhere, doesn't it. Did they sell the assets to the CLO above market value? If so, then the CLO is starting out underwater. Are they selling tranches out of the CLO to investors? If so, who would be stupid enough to buy tranches of cashlow from assets that nobody wanted in the first place and were purchased by the trust at inflated prices? Oh, who indeed... I am sure the "equity" tranche held by Lehman will be eaten up nigh immediately once the corporate defaults start coming down the pike - and they will start coming as soon as the inability to refinance junk comes home to roost amid our current recession/economic hard landing/productivity and growth pullback/credit crisis/housing bust or whatever the hell you want to call it. Then again, I guess Lehman says once we take our 100%, $565 million subordinated note loss, we can wash our hands of this stuff - except for the fact that the risk had to go somewhere. Did they actually find somebody dumb enough to take on that much risk after all that has happened in the CDO market, knowing leveraged loas are next? Did Lehman offer the financing to this CLO in order for it to buy these assets? Did Lehman provide a backstop credit line? If so, then isn't the economic risk still inherent in Lehman's stock despite the charade of "moving" it off of the balance sheet? Hey, I'm just a neophyte asking simpleton questions in a quest of elucidation and clarification.

A Lehman spokesman in New York, Randall Whitestone, declined to comment.Oh, but of course!

Deutsche Bank created two balance sheet CLOs, both named Genesis, in September and November, according to Bloomberg data. Credit Suisse formed the $1.7 billion Integral Funding in September.

First Data, TXU

Freedom contains loans to buyouts including KKR's First Data Corp., the Greenwood Village, Colorado-based payment processor, and power producer TXU Corp. of Dallas, purchased by KKR and TPG Inc. TXU was renamed Energy Future Holdings Corp.

The portfolio also has loans that couldn't be sold to investors (so they sell them to the CLO with Lehman  financing and attempt to sell the cash flow tranches to some sucker, or maybe not - exactly how are they offsetting that risk and those bad assets again???), including Sequa Corp., purchased in December by the Carlyle Group, and bank lines for companies such as Countrywide Financial Corp. (Hey, where's the prospectus, now that's a deal I want to get a piece of. For any creative bankers out there, email me - I want to know if you can short the Freedom CLO tranches), the largest U.S. mortgage lender, and Imperial Tobacco Group Plc, the maker of Davidoff and West cigarettes, according to the prospectus.

Loans for First Data trade below 90 cents on the dollar. The Countrywide five-year revolving bank line is priced at 79.5 cents on the dollar, according to the prospectus. Like I stated earlier, this sounds like one hell of a deal!

Freedom CLO sold the bonds in a private placement. The $2.2 billion in notes will pay interest of 2.25 percentage points above the three-month London interbank offered rate. That debt is rated A2 by Moody's Investors Service, the sixth level of investment grade, and an equivalent A from Standard & Poor's. Oh yeah, investment grade junk. Is that how you spell oxymoron? Moody's and S&P are very good at rating this stuff. Look what they did for the MBS CDOs. Here's an interesting excerpt from Financialweek : "None of the 80 AAA securities in ABX indexes that track subprime bonds meet the criteria S&P had even before it toughened ratings standards in February, according to data compiled by Bloomberg. A bond sold by Deutsche Bank in May 2006 is AAA at both companies even though 43% of the underlying mortgages are delinquent.
Sticking to the rules would strip at least $120 billion in bonds of their AAA status, extending the pain of a mortgage crisis that's triggered $188 billion in write-downs for the world's largest financial firms. AAA debt fell as low as 61 cents on the dollar after record home foreclosures and a decline to AA may push the value of the debt to 26 cents, according to Credit Suisse Group.
“The fact that they’ve kept those ratings where they are is laughable,” said Kyle Bass, CEO of Hayman Capital Partners, a hedge fund that made $500 million last year betting lower-rated subprime-mortgage bonds would decline in value. “Downgrades of AAA and AA bonds are imminent, and they’re going to be significant.

Private Equity

The unrated subordinated note pays interest generated by investments in the loans after the rated debt has been repaid. The loans pay an average coupon of 3.5 percentage points above three-month Libor, currently 2.73 percent.

Blackstone Group, Apollo Management LP and Kohlberg, Kravis Roberts & Co., all based in New York, were among the private equity firms that negotiated more than $370 billion in financing to back acquisitions before losses on subprime-related mortgage securities spread to loans, bonds and CDOs.

CDOs, which have helped fuel $232 billion in bank writedowns since the beginning of 2007, repackage assets into new securities with varying risks. CLOs, a type of CDO, repackage buyout loans into new securities.

CLOs bought 60 percent of buyout loans before credit markets froze last year, said Mark Shafir, the global co-head of mergers and acquisitions at Lehman, in an interview last week on Bloomberg Television.

Debt Backlog

Unable to sell primarily to CLOs, banks have reduced the buyout debt backlog by selling loans at discounts to face value to hedge funds and private-equity firms. Several transactions have also failed, such as J.C. Flowers & Co.'s $25.3 billion acquisition of SLM Corp., also known as Sallie Mae. An acquisition of San Antonio-based Clear Channel Communications Inc. may be canceled over a dispute about bank financing.

This year, banks have sold $28.5 billion of CDOs backed by high-yield, high-risk loans, versus $62 billion for the first quarter of last year, according to JPMorgan Chase & Co. data. Lehman's CLO accounted for 40 percent of total March volume, according to an April 2 report from Wachovia Corp. analysts led by Brian McManus.Wow, would you want to buy into a vehicle that almost cornered the market in junk debt that nobody wanted?

Lehman reduced its LBO backlog by $6.1 billion to $17.8 billion since the beginning of the year, Chief Financial Officer Erin Callan said on a conference call with investors on March 18. The bank booked losses of $500 million on leveraged loans during the quarter, she said.

Lehman this week sold $4 billion of convertible preferred shares to shore up capital depleted by the U.S. housing slump.