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The Liquidity Endgame Begins: Whiting’s Revolver Cut By $1.2 Billion As Banks Start Slashing Credit Lines

March 15, 2016

The Liquidity Endgame Begins: Whiting’s Revolver Cut By $1.2 Billion As Banks Start Slashing Credit Lines

Earlier today we reminded readers about the circular (and why note fraudulent conveyance) scheme hatched by JPMorgan to reduce its secured loan exposure to Weatherford, when just two weeks ago none other than JPM underwrote an WFT equity offering in which it sold equity in the company, and which proceeds were promptly used by the company to repay the JPMorgan revolver.

We then showed that it wasn’t just Weatherford: most of the “uses of funds” from the recent record surge in oil and gas equity offerings, have been used to repay the secured debt/revolver facilities, thereby eliminating funded and unfunded balance sheet exposure of major US banks.

But while lender banks are all too eager to take advantage of the brief surge in equity prices just so they can “help” their clients dilute their shareholder base so to repay the very same lender banks, they know quite well that the equity offering window is rapidly closing; in fact it will slam shut as soon as the price of oil resumes its downward trajectory.

That does not mean they are out of options to reduce their exposure to US shale, however. Quite the contrary, and in fact the “exposure reduction” is about to begin in earnest. We hinted at what it would look like in early January when we reported that already some 25 of the most distressed shale companies have seen their revolving bases slashed by as much as 50%.

These were just the beginning. As Bloomberg wrote earlier, U.S. exploration and production companies must brace for further cuts to their borrowing-base credit lines this spring, as part of the spring 2016 borrowing base redeterminations.

…click on the above link to read the rest of the article…

China Proposes Unprecedented Nationalization Of Insolvent Companies: Banks Will Equitize Non-Performing Loans

March 10, 2016

China Proposes Unprecedented Nationalization Of Insolvent Companies: Banks Will Equitize Non-Performing Loans

In what may be the biggest news of the day, and certainly with far greater implications than whatever Mario Draghi will announce in a few hours when we will again witness the ECB doing not “whatever it takes” but “whatever it can do”, moments ago Reuters reported that China is preparing for an unprecedented overhaul in how it treats it trillions in non-performing loans.

Recall that as we first wrote last summer, and as subsequently Kyle Bass made it the centerpiece of his “short Yuan” investment thesis, the “neutron bomb” in the heart of China’s impaired financial system is the trillions – officially at $614 billion but realistically anywhere between 8% and 20% of China’s total $35 trillion in bank assets – in non-performing loans. It is the unknown treatment of these NPLs that has been the greatest threat to China’s just as vast deposit base amounting to well over $20 trillion, which has been the fundamental catalyst behind China’s record capital flight as depositors have been eager to move their savings as far from China’s domestic banks as possible.

As a result, conventional thinking such as that proposed by Bass, Ray Dalio, KKR and many others, speculated that China will have to devalue its currency in order to inflate away what is fundamentally an excess debt problem as the alternative is unleashing a massive debt default tsunami and “admitting” to the world just how insolvent China’s state-owned banks truly are, not to mention leading to the layoffs of tens of millions of workers by these zombie companies.

However, China now appears to be taking a surprisingly different track, and according to a Reuters report China’s central bank is preparing regulations that would allow commercial banks to swap non-performing loans of companies for stakes in those firms. Reuters sources said the release of a new document explaining the regulatory change was imminent.

…click on the above link to read the rest of the article…

The Oil Short Squeeze Explained: Why Banks Are Aggressively Propping Up Energy Stocks

March 8, 2016

The Oil Short Squeeze Explained: Why Banks Are Aggressively Propping Up Energy Stocks

Last week, during the peak of the commodity short squeeze, we pointed out how this default cycle is shaping up to be vastly different from previous one: recovery rates for both secured and unsecured debts are at record low levels. More importantly, we noted how this notable variance is impacting lender behavior, explaining that banks – aware that the next leg lower in commodities is imminent – are not only forcing the squeeze in the most trashed stocks (by pulling borrow) but are doing everything in their power to “assist” energy companies to sell equity, and use the proceeds to take out as much of the banks’ balance sheet exposure as possible, so that when the default tsunami finally arrives, banks will be as far away as possible from the carnage. All of this was predicated on prior lender conversations with the Dallas Fed and the OCC, discussions which the Dallas Fed vocally deniedaccusing us of lying, yet which the WSJ confirmed, confirming the Dallas Fed was openly lying.

This was the punchline:

[Record low] recovery rate explain what we discussed earlier, namely the desire of banks to force an equity short squeeze in energy stocks, so these distressed names are able to issue equity with which to repay secured loans to banks who are scrambling to get out of the capital structure of distressed E&P names. Or as MatlinPatterson’s Michael Lipsky put it: “we always assume that secured lenders would roll into the bankruptcy become the DIP lenders, emerge from bankruptcy as the new secured debt of the company. But they don’t want to be there, so you are buying the debt behind them and you could find yourself in a situation where you could lose 100% of your money.“

…click on the above link to read the rest of the article…

Which Countries Have The Highest Default Risk: A Global CDS Heatmap

March 8, 2016

Which Countries Have The Highest Default Risk: A Global CDS Heatmap

Sweden beats USA and Germany as the least likely to default on its bonds but at the other end of the global sovereign risk spectrum lie two socialist utopias – Venezuela (CDS just shy of 6000bps) and Greece (CDS around 1800bps) are the nations most likely to default.

Of course, our readers will be well aware of this: back in December, when its CDS was trading at “only” 2300 bps (or whatever points upfront equivalent it was back then) we said Venezuela CDS are going much, much wider. Little did we know that in just about 14 months they would more than double, and as of last check, Venezuela CDS are just shy of 6000bps suggesting a default is virtually guaranteed.

So aside from these two socialist utopias, who else is on the default chopping block? The CDS heatmap below lays out all the countries which according to the market, are most likely to tell their creditors the money is gone… it’s all gone.

Below, in order of declining default risk, are the ten most likely to follow Venezuela and Greece into the great default unknown:

  1. Ukraine
  2. Pakistan
  3. Egypt
  4. Brazil
  5. South Africa
  6. Russia
  7. Portugal
  8. Kazakhstan
  9. Turkey
  10. Vietnam

Sovereign Credit Default Swaps (CDS) are financial contracts that measure the risk of default on sovereign debt: the higher the spread, the greater the risk of default.

Source: BofA

Satyajit Das: This Is Why You Can Expect Another Global Stock Market Meltdown

February 26, 2016

Satyajit Das: This Is Why You Can Expect Another Global Stock Market Meltdown

Authored by Satyajit Das’, author of the new book “The Age Of Stagnation” (via MarketWatch),

The mispricing of assets across world markets has reached epidemic proportions.

Stock prices have made strong advances over the past several years, yet market analysts see further gains, arguing that the selloffs of August 2015 and early 2016 represent a healthy correction.

But this rise in stock values has been underpinned by financial engineering and liquidity — setting the stage for a global financial crisis rivaling 2008 and early 2009.

The conditions for a crisis are now firmly established:overvaluation of financial assets; significant leverage; persistent low-growth and deflation; excessive risk taking reliant on central banks for liquidity, and the suppression of volatility.

Steve Blumenthal, CEO of CMG Capital Management Group, tells Barron’s funds writer Chris Dieterich that his firm has been clinging to ultra-safe bonds and utility stocks during the market storm.

For example, U.S. stock buybacks have reached 2007 levels and are running at around $500 billion annually. When dividends are included, companies are returning around $1 trillion annually to shareholders, close to 90% of earnings. Additional factors affecting share prices are mergers and acquisitions activity and also activist hedge funds, which have forced returns of capital or corporate restructures.

The major driver of stock prices is liquidity, in the form of zero interest rates and quantitative easing.

To be sure, stronger earnings have supported stocks. But on average, 70% to 80% of the improvement has come from cost-cutting, not revenue growth. Since mid-2014, corporate profit margins have stagnated and may even be declining.

A key factor is currency volatility. The strong U.S. dollar is pressuring American corporate earnings. A 10% rise in the value of the dollar equates to a 4%-5% percent decline in earnings. Rallies in European and Japanese stocks have been driven, in part, by the fall in the value of the euro and yen  respectively.

…click on the above link to read the rest of the article…

Auto loan delinquency spikes in Alberta, Saskatchewan

February 17, 2016

Auto loan delinquency spikes in Alberta, Saskatchewan

Credit agency TransUnion points to non-mortgage debt defaults in oil-producing provinces

Pickup truck sales have grown rapidly in the past five years, but with job losses in Alberta and Saskatchewan, the debt from auto loans is hanging over some consumers.

Pickup truck sales have grown rapidly in the past five years, but with job losses in Alberta and Saskatchewan, the debt from auto loans is hanging over some consumers.

There has been enormous sales growth of pickup trucks and crossover SUVs  in the last five years, but the costs of these larger vehicles are weighing heavily on consumers in some oil-producing provinces.

Auto loan delinquency rates in Canada were at their highest level in four years in the fourth quarter of 2015, driven by spikes of 35 per cent in Alberta and 19 per cent in Saskatchewan.

According to the credit trends reporting agency TransUnion, Saskatchewan has the highest auto loan delinquency rate in the country, at 2.7  per cent, followed by Alberta at 2.4 per cent.

Delinquency on auto loans occurs when payments are 60 or more days past due.

“Falling oil prices have led to rising unemployment rates in oil-rich regions,” said Jason Wang, TransUnion’s director of research and analysis.

“We are now seeing the increase in unemployment in these areas manifest as rising delinquencies across the board, though the greatest impact has been on auto loans.”

For Canada as a whole, auto loan delinquencies rose to 1.3 per cent.

Moody’s has warned some Canadian banks over auto loans, which have been getting larger as buyers opt for large vehicles and is now spread over longer terms of up to seven years.

There were also shifts in delinquency rates on other non-mortgage debt, with more people in British Columbia and Ontario able to keep up with their bills, while delinquencies climbed in Quebec, Alberta and Saskatchewan.

TransUnion said Canadians’ average non-mortgage debt edged up slightly to $21,512 at the end of 2015, from $21,248 in 2014.

Canadians used their credit cards more heavily during holiday shopping in 2015, and there was 4.1 per cent more debt on credit cards, Wang said.

…click on the above link to read the rest of the article…

The Banking Turmoil Spreads—-Massive Banking Crisis Brewing In Singapore

February 17, 2016

The Banking Turmoil Spreads—-Massive Banking Crisis Brewing In Singapore

By Singapore Business Review

The three biggest banks are losing capital.

A crisis of staggering proportions is looming in China, and tiny Singapore will be caught right in the middle of the storm once the disaster finally erupts.

Speaking at the annual Barron’s roundtable, Swiss billionaire investor Felix Zulauf warned that Singapore’s largest banks are at risk of massive capital outflows if the Chinese economy experiences a hard landing, which he expects will happen this year.

“We are in a down cycle that will end with crisis and calamity. China in today’s cycle is what US housing was during the financial crisis in 2008,” Zulauf warned.

Zulauf warned that capital outflows in China will continue, prompting regulators to devalue the yuan by as much as 15% to 20% within the year. When this happens, Asian economies which are heavily dependent on China—particularly Singapore—will suffer because Chinese corporates will cut their imports even more, while indebted Chinese companies will be placed at greater risk of default.

“I expect the situation the deteriorate to a point where we will witness a banking crisis in Asia that will hit Singapore and Hong Kong particularly hard,” Zulauf said.

“It is conceivable that Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China. Singapore’s banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits,” Zulauf said.

He said that such a situation will cause carry trades to go awry, which will result in steep losses for heavily-leveraged traders.

…click on the above link to read the rest of the article…

Sudden Death? Junk-Rated Companies Headed for Biggest “Refinancing Cliff” Ever: Moody’s

February 17, 2016

Sudden Death? Junk-Rated Companies Headed for Biggest “Refinancing Cliff” Ever: Moody’s

At the worst possible time.

Most of the defaults, debt restructurings, and bankruptcies so far this year and last year were triggered when over-indebted cash-flow negative companies could not make interest payments on their debts.

During the crazy days of the peak of the credit bubble two years ago, they would have been able to borrow even more money at 8% or 9% and go on as if nothing happened. But those days are gone. Now the riskiest companies face interest costs of 20% or higher – if they’re able to get new money at all. Hence, the wave of debt restructurings and bankruptcies.

But that’s small fry. Now comes the wave of companies whose debts mature. They will have to borrow new money not only to fund their interest payments, cash-flow-negative operations, and capital expenditures, but also to pay off maturing debt.

That “refinancing cliff” is going to be the biggest, steepest ever, after the greatest credit bubble in US history when companies took on record amounts of debt, and it comes at the worst possible time, warned Moody’s in its annual report.

In its report a year ago, Moody’s had already warned that the refinancing cliff for junk-rated US companies over the next five years – at the time, from 2015 through 2019 – would hit $791 billion. Of that, $349 billion would mature in 2019, the largest amount ever to mature in a single year.

But Moody’s pointed out that “near term risk remains low as only $18 billion, or 2% of total speculative-grade issuance comes due in 2015.” And that’s how it played out last year.

Since then, the refinancing cliff has gotten a lot bigger, according to Moody’s new annual report. The amount in junk-rated debt to be refinanced over the next five years, from 2016 through 2020, has surged nearly 20% to a record of $947 billion.

…click on the above link to read the rest of the article…

Where Deflation Comes From

February 15, 2016

Where Deflation Comes From

Financial bubbles blown on the back of massive amounts of debt, of necessity lead to debt deflation (it’s just entropy, really). Fighting this is futile, and grossly costly to boot. The only sensible thing to do is to guide the process as best you can and try to minimize the damage, especially at the bottom rungs of society, because that’s where the deflation first takes hold, and where it spreads out from.

Attempting to boost inflation, or boost demand, before letting the debt deflation run its course through restructuring and defaults (perhaps even a -partial- jubilee) leads only to -further- distortion, and -further- impoverishes society’s poorer (at some point to a large extent the former middle classes). Whose lower spending, as nary a soul seems to comprehend, is the origin of the deflation to begin with.

All the attempts by central bankers to boost inflation that we’ve seen so far squarely ignore this, and operate on the false assumption that if only prices for financial assets and real estate can be raised even higher -artificially-, deflation can be warded off.

Thing is, deflation starts not at the top, it starts at the bottom. It’s not the banks or the bankers or the well-off who are maxed out and stop spending, but the people in the street.

They are responsible for most of the spending in an economy, and therefore for the velocity with which money moves in a society. And if the velocity of money falls below a critical point, no increase in the other side of the inflation/deflation equation -the money/credit supply- can make up for the difference. There is a point where all of the King’s horses and all of the King’s central bankers can’t put Humpty Dumpty together again.

…click on the above link to read the rest of the article…

In Venezuela, “Savage Suffering” Takes Hold Amid Frightening “Food Emergency”

February 13, 2016

In Venezuela, “Savage Suffering” Takes Hold Amid Frightening “Food Emergency”

Venezuelan President Nicolas Maduro has been working on some “measures.”

“Now that the economic emergency decree has validity, in the next few days I will activate a series of measures I had been working on,” he said Thursday, in a televised statement meant to address a “food emergency” declared by Congress.

The “validity” Maduro references comes from a high court ruling that gives the President expanded powers to tackle a deepening economic crisis that’s left hospitals without medicine and grocery stores bereft of food.

“The controversial move by the Supreme Court, which critics say is packed with supporters of Mr Maduro’s socialist government, potentially sets the scene for a bitter institutional crisis amid claims that the national assembly is being undermined,” FT notes, underscoring the extent to which opposition lawmakers – who in December won 99 of 167 seats that were up for grabs in what amounted to the worst defeat in history for Hugo Chavez’s leftist movement – feel as though last year’s election victory may have been a ruse designed to lend legitimacy to a system that is, and likely always will be, deeply undemocratic.

“This is a tyranny, which has been very successful in disguising as a democracy, and has even allowed itself to lose an election,” Moisés Naím, a former Venezuelan minister and fellow at the Carnegie Endowment for International Peace said.

Thanks to the Supreme Court decision, Maduro doesn’t need the assembly’s permission to intervene further in business, to allocate funds for imports, and to introduce new capital controls. The opposition is furious and says it will speed up efforts to usurp Maduro once and for all. “In the next few days we will have to present a concrete proposal for the departure of that national disgrace that is the government,” opposition leader Henry Ramos told reporters on Friday.

…click on the above link to read the rest of the article…

Horror Stories Emerge After A Cursory Look At Chinese Corporate Leverage

February 8, 2016

Horror Stories Emerge After A Cursory Look At Chinese Corporate Leverage

By now it is common knowledge that China has a major debt problem at the macro level, one which may be even bigger than expected because according to at least one analysis by Rabobank, China’s most recent debt has soared from the infamous McKinsey level of 282% as of mid 2014, to an unprecedented 346% currently.

Far less has been discussed about China’s corporate debt at the micro level. Back in October we were shocked when we looked at the inverse of corporate leverage, namely interest coverage within the heavily indebted commodity sector where we found that as of the end of 2014, just one half of Chinese companies could cover their annual interest expense, implying that according to a Macquarie analysis, some CNY2 trillion in debt was in danger of default.

This was over a year ago: since then both industry pricing and cash flow dynamics have deteriorated substantially and some estimate that more than three-quarters of leveraged commodity companies are dead zombies walking, suggesting a massive default wave is about to be unleashed.

And while we are keeping a close eye on this very troublesome development, last week the FT revealed something even more disturbing: Chinese corporate leverage, represented by the traditional debt/EBITDA ratio is, in some cases, absolutely ludicrous, especially among companies which in recent weeks have tried to mask their balance sheet devastation through global M&A activity, such as ChemChina’s recent record for a Chinese company $44 billion purchase of Syngenta, or Zoomlion’s $3.3 bid for US rival Terex last month.

In fact, as the otherwise demure FT notes, “so high are the debt levels at ChemChina and several other companies behind some of the country’s biggest overseas investments that financing for the deals would have been difficult or prohibitively expensive were it not for the backing of the Chinese state, analysts said.”

…click on the above link to read the rest of the article…

Meet China’s Latest $1.8 Trillion “Problem”

February 1, 2016

Meet China’s Latest $1.8 Trillion “Problem”

Last summer we outlined how Chinese banks obscure trillions in credit risk.

The powers that be in Beijing aren’t particularly keen on allowing the banking sector to report “real” data on souring loans – especially given the fragile state of the country’s economy. In some cases, the Politburo will pressure banks to simply roll over bad debt, effectively kicking the can.

In addition, banks carry around 40% of their credit risk outside of “official loans.” Here’s what Fitch had to say last year:

“Off-balance-sheet financing (I.e. trust loans, entrusted loans, acceptances and bills) accounted for 18% of official TSF stock at end-2014, up from less than 2% just over a decade ago,” Fitch wrote. “Of the off-balance-sheet exposure reported at individual banks, this is equivalent to 15% of total assets for state commercial banks and 25% for mid-tier commercial banks, on a weighted average basis. These ratios would be even higher if we included entrusted loans (see Figure 2), although this information is not disclosed at all banks. Fitch estimates that around 38% of credit is outside bank loans.”

In many cases, channel loans (so credit extended by banks via non-bank intermediaries) are carried as “investments classified as receivables” on the balance sheet.

Now, as more Chinese firms lose access to traditional financing amid rising defaults and increasing economic turmoil, banks are increasingly turning to channel loans as a way of extending credit.

In turn, the amount of “investment receivables” on many mid-tier banks’ books is soaring to dizzying levels. “Mid-tier Chinese banks are increasingly using complex instruments to make new loans and restructure existing loans that are then shown as low-risk investments on their balance sheets, masking the scale and risks of their lending to China’s slowing economy,” Reuters reports. “The size of this ‘shadow loan’ book rose by a third in the first half of 2015 to an estimated $1.8 trillion, equivalent to 16.5 percent of all commercial loans in China.”

…click on the above link to read the rest of the article…

Puerto Rico “Generously” Offers To Repay 54 Cents On The Dollar To Creditors Owed $70 Billion

February 1, 2016

Puerto Rico “Generously” Offers To Repay 54 Cents On The Dollar To Creditors Owed $70 Billion

Height Securities’ Daniel Hanson is “deeply skeptical” about the viability of Puerto Rico’s proposal for restructuring the island’s $70 billion in debt.

Hanson, in a note out late last week, said Governor Alejandro Padilla was “significantly unlikely” to present a “credible” plan and that the commonwealth’s offer to creditors may be “laughably low.”

As a reminder, Puerto Rico defaulted on some of its non-GO debt last month, presaging more missed payments this year as creditors come calling in May and July.

So far, the island has been able to avoid a messy default on its GO debt by utilizing a revenue “clawback” mechanism that effectively allows the commonwealth to divert money earmarked for non-GO debt, a move decried by the monolines.

In December, the market thought there might be a light at the end of the tunnel when creditors and the island’s power utility managed to get the bond insurers to go along with a $8 billion restructuring for PREPA, but that fell apart a week ago when lawmakers failed to vote on a new tax. Ultimately, the deadline to pass the bill was extended to February 16, but the fraugh negotiations underscore how precarious the situation has become.

On Monday, we got our first look at Puerto Rico’s opening salvo in what’s likely to be protracted battle to tackle the entire debt burden.

“Puerto Rico on Monday announced a major exchange offer to creditors that could reduce its debt by about $23 billion, the opening salvo in efforts to resolve the island’s crippling $70 billion debt crisis,” Reuters reports, adding that “the new plan would reduce a $49.2 billion chunk of Puerto Rico’s debt by about 46 percent, to $26.5 billion, by offering creditors payout reductions under a new, so-called “base bond” with better legal protections.”

…click on the above link to read the rest of the article…

Dallas Fed “Responds” To Zero Hedge FOIA Request

January 29, 2016

Dallas Fed “Responds” To Zero Hedge FOIA Request

Two weeks ago, Zero Hedge reported an exclusive story corroborated by at least two independent sources, in which we informed our readers that members of the Dallas Federal Reserve had met with bank lenders with distressed loan exposure to the US oil and gas sector and, after parsing through the complete bank books, had advised banks to i) not urge creditor counterparties into default, ii) urge asset sales instead, and iii) ultimately suspend mark to market in various instances.

The Dallas Fed took the opportunity to respond (on Twitter), when in a tersely worded statement it said the following:

Dallas Fed ✔@DallasFed

No truth to this @zerohedge story. The Dallas Fed does not issue such guidance to banks. https://twitter.com/zerohedge/status/688441021986959361 …

12:07 PM – 18 Jan 2016

We thanked the Fed for answering even if its response was in itself a lie, and further since we fully stood by our story, we asked the Federal Reserve chaired by Goldman Sachs veteran, Robert Kaplan, to answer several follow up questions regarding this matter which is of significant public interest.  To wit:

  • Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, met with U.S. bank and other lender management teams in recent weeks/months and if so what was the purpose of such meetings?
  • Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, requested that banks and other lenders present their internal energy loan books and loan marks for Fed inspection in recent weeks/months?
  • Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, discussed options facing financial lenders, and other creditors, who have distressed credit exposure including but not limited to:

…click on the above link to read the rest of the article…

Italian Banks Sink As “Bad Bank” Plan Underwhelms

January 27, 2016

Italian Banks Sink As “Bad Bank” Plan Underwhelms

Last week, we noted that Italy is rushing to defuse a €200 billion time bomb in the country’s banking sector as investors fret over banks’ exposure to souring loans.

“Italian banks’ share prices have been volatile YTD, given the market’s renewed fears over asset quality and potential developments on a possible bad bank creation,” Citi wrote, in a note analyzing which Italian banks are most exposed. “Total gross NPLs in Italy have increased by c160% since 2009 and now represents c18% of loans (vs c8% in 2009).”

Essentially, Italy was slow to tackle its NPL problem relative to other countries and the chickens have now come home to roost.

The idea was to create a “bad bank” for the “assets” (because that’s worked so well in other countries), but the plan was stalled by the European Commission due to concerns about whether Italy was set to run afoul of restrictions around when countries can provide state aid to the financial sector.

In short, creditors at Italy’s banks would need to take a hit before PM Matteo Renzi’s government would be allowed to extend state aid. That is unless Italy could devise some kind of end-around, which is precisely what Renzi was attempting to do last week.

As a reminder, this would have been easier had it been negotiated last year before new rules on bank resolutions came into effect in 2016. That’s why Portugal pushed through the Novo Banco bail-in and the Banif rescue in December.

In any event, Italy has indeed managed to strike a deal with Brussels to help alleviate banks’ NPL burden.

Essentially, Italian banks will securitize their souring loans, sell them to investors, and the government will guarantee the senior tranches of the new paper.

…click on the above link to read the rest of the article…

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