[lbo-talk] more on ADIA-C

[Willy Greenfields]

Hi, Doug:

>>> C will be
>>> bringing the last $80BB of their SIVs onto the
books
>>
>In which case they have a big problem, no?

>From a Tier 1 capital perspective, it would not.
They've since sold some assets off, bringing SIV
assets down to $66BB. They'd need only $4.95BB to
bring  those onto their B/S at their 7.5% target, with
the residual AIDA investment still putting total Tier
1 capital just over their target. The numbers will be
different as Citi has said that they will continue
selling assets to deleverage the things 

i.e., they're continuing to say they will not
consolidate them. 

Which means that actually, yes, they may have a big
problem. The chicken-egg problem of refinancing
maturing debt in the face of declining NAV endures,
and every time a ratings agency notes the continued
dislocation the tempo speeds up further. 

The guy I work with understands all this stuff better
than most (certainly way better than my dumb self).
It's his opinion that in the long run these things
have significant value in the long run, and that it
will be cheaper in the medium run to consolidate them
- which also has the nice effect of calming the larger
hall-of-mirrors market in problem mortgage securities.


Really remarkable to watch all this. Several crises of
confidence playing out, not all of them deserved. 


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