AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

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AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

Post by Strawberry on Tue Feb 08, 2011 8:32 pm

It may turn out to be the most important bank you've never heard of.

Amagerbanken was taken over by the Danish government today. As with the Irish banks, Amagerbanken suffered huge losses on loans to property developers and investors in commercial real estate. But the rescue comes under new regulations which stipulate steep losses for bondholders. According to Bloomberg, senior bondholders and depositors over the insured limit will face losses of approximately 41%.

Some bondholders, however, still fall under a government guarantee, but expect Amagerbanken to be held up as an example by those who favor haircuts for bondholders rather than bailouts. In particular, we can expect Ireland's Fine Gael party (pronounced feena gail) to point to Denmark when they make their own case for unilaterally restructuring Ireland's bank debt. And when they do, the cat will be out of the bag.

For two years, central bankers and government finance ministers (who know next to nothing) have been claiming that the sky will fall and there will be tanks in the streets if bondholders are forced to take losses. Clearly that is not the case. First Iceland, then Denmark, then Ireland. After that, the race is on.

Read more at this link:

http://dailybail.com/home/amagerbanken-28-billion-bank-failure-in-denmark-senior-bondh.html
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Re: AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

Post by DoomFinch on Wed Feb 09, 2011 8:22 am

Ah...that cheered me up...thanks for posting that!

It's nice to see the bondholders at the receiving end of the bloodletting for a change. I really hope the Irish end up "doing an Iceland" and letting the bastards fall over and go "boom".

It's WAY too much to hope for here in the states though.
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Re: AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

Post by Strawberry on Wed Feb 09, 2011 5:56 pm

DoomFinch wrote:Ah...that cheered me up...thanks for posting that!

It's nice to see the bondholders at the receiving end of the bloodletting for a change. I really hope the Irish end up "doing an Iceland" and letting the bastards fall over and go "boom".

It's WAY too much to hope for here in the states though.

Go Ireland cheers

and where there is hope there is opportunity Basketball
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Re: AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

Post by Aetius Romulous on Wed Feb 09, 2011 6:52 pm

All this hinges on who the bondholders are.

In many instances they are pension funds, municipalities, common funds and other widely held investment groups. In these instances, a haircut is not taken so much by billionaire suits as much as the savings of millions of little people.

In addition there is the common practice of leveraging against these bonds - bondholders pledge their security against loans that have been as high as 40 to 1. In these cases there is a cascade of obligations where each one is a domino that pushes over another. These are the "holy hell breaks loose" type of effects where credit dries up and massive institutions face the specter of failure, with thousands of jobs lost as a result.

This is a very complex ball of yarn with effects few can understand or predict.

Thanks for putting that one up, I'm sure it won't be the last headline from this ongoing fiasco.

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Re: AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

Post by oniongrass on Wed Feb 09, 2011 11:00 pm

Aetius Romulous wrote:All this hinges on who the bondholders are.

In many instances they are pension funds, municipalities, common funds and other widely held investment groups. In these instances, a haircut is not taken so much by billionaire suits as much as the savings of millions of little people.

In addition there is the common practice of leveraging against these bonds - bondholders pledge their security against loans that have been as high as 40 to 1. In these cases there is a cascade of obligations where each one is a domino that pushes over another. These are the "holy hell breaks loose" type of effects where credit dries up and massive institutions face the specter of failure, with thousands of jobs lost as a result.

This is a very complex ball of yarn with effects few can understand or predict.

Thanks for putting that one up, I'm sure it won't be the last headline from this ongoing fiasco.

Yeah, there are a lot of jobs lost, but usually they are banker jobs, so it isn't so bad.

If an industrial company can't get credit but still has a viable business, it can restructure under Chapter 11 and continue operations. But if the flow of credit dries up or receivables go away in bankruptcy, a bank's business really can collapse -- and should.

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