For those interested in this topic, a reader, "michaelandfred", made some interesting points in a comment to this post: Bought 50 PZB at $16.05/Bought 50 PJS at $17.8 in Roth/Case Shiller/Budget Deficits/EC-Permanently Damaged its Banks
Another reader sent me an email that contains a link to his post at the Yahoo Finance message board which contains a link to the Fitch teleconference call from yesterday:
I listened to that call in its entirety this afternoon, which reinforced my increasingly negative view of the European hybrids. Some of my thoughts on that call are contained in my comment to "michaelandfred".
I am even starting to have reservations about the entire hybrid capital security surviving this onslaught from the EC, that is, in the sense of another one ever being floated again as a source of low cost capital for the European financial institutions. You know who may benefit from the deferrals, the most junior of all securities, the common stock holder. After all, it does not cost them a dime, and the firms are stabilized out of the hides of more senior security holders who really only have their dividends, rather than an equity stake in the business.
Added 8:26: The EC Commission claims that it is concerned about state aid to firms creating an imbalance in the common market. I understand that concern. The burden sharing policy, as applied to the state aid given during the near collapse of the world’s financial system in the Fall of 2008, is without question counter productive, asinine, and fails to hit the nail on the head. To the extent the EC has a legitimate concern, it can be dealt with by an examination of the terms and conditions of the state aid under the circumstances. Was the aid given on too generous terms? It is hard to view a 50% premium for a share repurchase as a form of state aid likely to distort competition. It does not seem to me that requiring a deferral of the hybrid dividends advances the purported rational given for that policy. It can not even be fairly described as a tenuous connection. It seems more like a penalty aimed at one class of security holder and nothing more.