The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Wednesday August 15 – Skin in the game

"It was PIKs and toggles," he rolls his eyes, as if someone else had forced him to do this deal or cheekily agreed it in his name. "It was covenant lite and even what covenants there were were rubbish ones." After weeks of wrangling over how to bring the senior secured portion of the financing to market, his own banks' team and that of the LBO sponsor were barely on speaking terms.

The week Wall Street went into meltdown


rag-4.gif

The day starts unhappily with the news that a Merrill Lynch analyst has put out a sell recommendation on Countrywide, the biggest source of mortgage loans in America, which even discusses the circumstances – the evaporation from a panic-stricken capital market of the liquidity Countrywide needs to fund its holdings of mortgages and the difficulty of selling on any of those assets not eligible for guarantee by Fannie Mae and Freddie Mac – in which it might go bankrupt. The stock loses 13% in a day, taking it down 50% for the year.

Even though problems in the mortgage sector are hardly news, even though something about Countrywide’s perma-tanned CEO has never gained Wall Street’s unqualified respect, even though any financial company could go bankrupt in the circumstances Merrill describes, this company provides more than one in six American mortgages. Simply writing down the theoretical path to bankruptcy makes the idea somehow both real and appalling.

Countrywide shares become a one-way bet

Seeking a little light relief, Euromoney lunches with a senior investment banker in the leveraged finance business at an elegant, if rather quiet, midtown restaurant.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree