If land used to collateralise much of their borrowing falls in value or is laid claim to by several lenders, that would probably prompt at least some financial entities to fail.To some extent, this shuffling of debt is a bit of an accounting shell game, says Michael Kurtz, head of China research for Macquarie Securities, an investment bank.
Virgin, whose credit rating is lower than Qantas, calculates a government debt guarantee would raise Qantas's credit rating by at least two notches – saving the airline $60m a year in direct debt repayments and even more on the forward credit card sales that Qantas is required to collateralise.
THIS crisis has tested many schemes and wheezes (some to destruction), from securitised mortgages to collateralised-debt obligations, from light-touch regulation to inflation targeting.
KBC, a bailed-out Belgian firm, still has some €25 billion ($36 billion) of notional exposure to collateralised-debt obligations, although it says these are largely written off or covered by a specific state guarantee.
Most early reports of banks' year-end results include further write-downs on the toxic assets, such as exposure to collateralised-debt obligations (CDOs) or the monoline insurance companies, which supposedly insured them.
The write-down stems mainly from a deal to sell collateralised-debt obligations (CDOs) with a face value of $30.6 billion to Lone Star, a vulture investor with a track record of buying distressed financial assets (see article), for a mere 22 cents on the dollar.
Conduits were issuing short-term paper, with an average maturity of 45 days, to buy collateralised-debt products with a maturity of several years.
That seems more likely today when the complexities of securitisation have left "toxic assets" that range from pools of car loans to fiendishly complex collateralised-debt obligations, which are much harder to unravel, value and manage.What is worse, today's bust is not just about banking.
Of all the financial instruments to have failed, newfangled collateralised-debt obligations (CDOs) have turned out to be among the most devastating.
Closer to the mesenteric root, the SMA and IMA variably collateralise via the arc of Riolan, which connects the middle colic artery to a left colic artery branch.
Or perhaps it was the high-level disappointment at her decision to front a series of advertisements for debt-consolidation company FirstPlus (collateralise your loans - lower interest rates now for possible homelessness later!), which she was urged by money-education charity Credit Action and others to stop endorsing.
