Spain requesting EU bailout.

[PyratePrincess]

From zero hedge:

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EU Commission Confirms ESM Loan Will Have Senior Preferred Creditor Status

Submitted by Tyler Durden on 06/11/2012 - 08:55 Eurozone International Monetary Fund Market Conditions "Any aid that might come from the European Stability Mechanism, which is expected to start work next month, would enjoy a preferred creditor status second-only to the IMF, the spokesman confirmed."


In other words....Those that formerly held 1st position liens now don't.


Shades of General Motors, Greece, and those in the future. Blatant-Abusive Bond holder fraud. These people should be strung high.

[Godwit]

In other words....Those that formerly held 1st position liens now don't.


Shades of General Motors, Greece, and those in the future. Blatant-Abusive Bond holder fraud. These people should be strung high.

In any bankruptcy or similar situation, there will be no new money forthcoming unless the providers of the new money get a senior position. Existing stockholders and creditors always get subordinated to the new money.

[PyratePrincess]

In any bankruptcy or similar situation, there will be no new money forthcoming unless the providers of the new money get a senior position. Existing stockholders and creditors always get subordinated to the new money.

Nopedy, nope, nope. Bondholders and stockholders are NOT the same horse. Stocks and bonds, remember? Stocks for potential increase-bonds for safety.

That may be the bologna you're hearing now....

but-

In a financially distressed situation BONDHOLDERS are (used to be) sacrosanct. "Financially guaranteed" "Little old ladies, clipping their bond coupons....any of this ring a bell??? This is NWO bull crappage that they are trying to peddle. Death knell is what it is. There will be no more "flight to bonds" because bonds are now becoming as risky as stocks-with less payout potential.

The law gives bondholders a right superior to that of shareholders or unsecured creditors and even superior to that of secured creditors who hope for recovery beyond the value of their collateral. In a bankruptcy proceeding the bondholders could sue for possession of an entity. But this isn't exactly a BK is it? Hence tptb have created a new "window" of opportunity for themselves-at the expense of what has been traditionally held as the "MOST SECURE" of investment.

Again...shades of GM. And please don't start down that path of "the color of the law" rubbish. I've been working with those bond clipping old ladies since '77. What they're doing now is robbery. Period.

[rondaben]

Nopedy, nope, nope. Bondholders and stockholders are NOT the same horse. Stocks and bonds, remember? Stocks for potential increase-bonds for safety.

That may be the bologna you're hearing now....

but-

In a financially distressed situation BONDHOLDERS are (used to be) sacrosanct. "Financially guaranteed" "Little old ladies, clipping their bond coupons....any of this ring a bell??? This is NWO bull crappage that they are trying to peddle. Death knell is what it is. There will be no more "flight to bonds" because bonds are now becoming as risky as stocks-with less payout potential.

The law gives bondholders a right superior to that of shareholders or unsecured creditors and even superior to that of secured creditors who hope for recovery beyond the value of their collateral. In a bankruptcy proceeding the bondholders could sue for possession of an entity. But this isn't exactly a BK is it? Hence tptb have created a new "window" of opportunity for themselves-at the expense of what has been traditionally held as the "MOST SECURE" of investment.

Again...shades of GM. And please don't start down that path of "the color of the law" rubbish. I've been working with those bond clipping old ladies since '77. What they're doing now is robbery. Period.

Correct. Bondholders are in first place in the event of a bankruptcy. at least they used to be. Equity holders always get liquidated.

It works like this for those that don't know:

1) Company A declares bankruptcy. They have outstanding stock and bonds.

2) If the company cannot get bridging (DIP---Debtor in Posession) funding its assets will be liquidated. Proceeds go to pay off the debts first--including the bondholders. Anything that is left (there never is) is spread out to the equity holders.

3) A DIP lender will get a priority for repayment. In the case of spain, the $125 billion loan is essentially a DIP payment and Spain is, technically, in default but I seriously doubt that a ruling for the purpose of activating CDS will occur.

[Godwit]

Nopedy, nope, nope. Bondholders and stockholders are NOT the same horse. Stocks and bonds, remember? Stocks for potential increase-bonds for safety.

That may be the bologna you're hearing now....

but-

In a financially distressed situation BONDHOLDERS are (used to be) sacrosanct. "Financially guaranteed" "Little old ladies, clipping their bond coupons....any of this ring a bell??? This is NWO bull crappage that they are trying to peddle. Death knell is what it is. There will be no more "flight to bonds" because bonds are now becoming as risky as stocks-with less payout potential.

The law gives bondholders a right superior to that of shareholders or unsecured creditors and even superior to that of secured creditors who hope for recovery beyond the value of their collateral. In a bankruptcy proceeding the bondholders could sue for possession of an entity. But this isn't exactly a BK is it? Hence tptb have created a new "window" of opportunity for themselves-at the expense of what has been traditionally held as the "MOST SECURE" of investment.

Again...shades of GM. And please don't start down that path of "the color of the law" rubbish. I've been working with those bond clipping old ladies since '77. What they're doing now is robbery. Period.

Bondholders are just one flavor of creditor. When a company goes bankrupt, the bondholders suffer -- sometimes a little, sometimes a lot. At worst, they can get $0.

Anyway, when a company is facing bankruptcy, or even is just looking sick, it would love to raise new money and put the new money behind rather than ahead of the existing bondholders. But will the suppliers of new money agree to that? Never has happened to my knowledge. The bondholders might have the power to veto a deal, but they will seldom if ever succeed in getting the new money to take the subordinate position.

[Godwit]

Princess, here is an article expressing what I think was your concern about Spanish banks issuing new senior debt as part of the bailout -- http://www.businessinsider.com/subor...se-pain-2012-6

[PyratePrincess]

Yep, Godwit-the author touches on my concerns.

#1 from the article:

The IMF published a lengthy report on the topic of Senior bank bonds on April 24 (convenient timing). The bottom line conclusion of the IMF? It recommended a “bail-in”, where the senior bondholders of banks get crushed. I found this startling:

Read more: http://brucekrasting.blogspot.com/20...#ixzz1xVz51wSJ

Glad to see I'm not the only one startled.

#2 from the article:

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.

Read more: http://brucekrasting.blogspot.com/20...#ixzz1xVzg07Ck

Again...the Bond market has always been the "Safe" haven. If they get thrown under the bus, investors seeking a neutral investment might as well stick it under their mattress.

Again-this is nothing less than theft. Ask any GM bond holder how they felt after they were left hanging in the wind.

[Godwit]

Yep, Godwit-the author touches on my concerns.

#1 from the article:


Glad to see I'm not the only one startled.

#2 from the article:

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.

Read more: http://brucekrasting.blogspot.com/20...#ixzz1xVzg07Ck

Again...the Bond market has always been the "Safe" haven. If they get thrown under the bus, investors seeking a neutral investment might as well stick it under their mattress.

Again-this is nothing less than theft. Ask any GM bond holder how they felt after they were left hanging in the wind.

I guess my point is that these bondholders are already under the bus. I wish them luck.