1. KBC (never owned): KBC is a Belgium bank that has been under EC pressure to defer payments on its hybrid securities. In a previous news release, KBC made a distinction between coupon deemed mandatory and those considered non-mandatory. KBC stated then that it intended to defer at the EC's request the ones deemed non-mandatory. CNBC.com Last week, KBC determined that all of the coupon payments were mandatory. The EC request to defer only covered the hybrids with "non-mandatory" coupon payments until the end of the year, and KBC now believes that those payments are all mandatory. The intent to pay all hybrid coupons until the end of 2009 caused the common stock to fall 6%. Reuters This establishes the connection, noted in prior posts, that it is the most junior security, common stock, that benefits from the EC burden shouldering penalty policy for the owners of the more senior hybrids. I am not familiar with the mandatory payment events in the KBC prospectuses but I have engaged in extensive discussions about the events which could trigger mandatory payments on both the Aegon and ING hybrids.
Generally, if you are trying to block an EC request to defer payments, you need to examine the prospectuses and unique facts for each institution to ascertain whether any mandatory payment event has been triggered by a payment on a junior security or the purchase of a junior security, as the two main areas of your inquiry. For Aegon and ING, payments were made on junior securities in May 2009 that were issued in connection with the Dutch government's bailout. And, Aegon has announced an intention to buy back junior securities before 12/31/2009 with the proceeds of a recent stock issuance. ING would have to buy junior securities issued to the Dutch government to pay it back. Some of the arguments are better than others, but it is up to the institutional investors with a lot at stake to make their presence known on these issues before any decision is announced by one of these Dutch companies.
The debate on the payments in May 2009 is not whether that payment triggered a mandatory payments on the Aegon and ING hybrids, but instead whether those payments triggered four or two quarterly mandatory payments. If I was a large holder of these securities, and I am not, I would simply take the position that four mandatory payment events are required after the payments made in 5/09, and four more after any purchase of a junior (or parity) security. Then, I would take all appropriate steps, along with other like minded institutional investors, in the event that there was a deferral in violation of those rules, or a failure to follow any applicable Alternate Payment Mechanism. I have always believed that it is best to make this intent known before a public announcement, communicated by someone who is known to be a straight shooter and who is further known to always carry through and to never back down.
Added: This board from Motley Fool in the U.K. has some interesting discussion about RBS, and how other factors can come into play other than payments on, or purchases of, a Junior Security. TMF I am not familiar with the RBS prospectuses. See also subsequent post: Payment on Parity Security & Mandatory Payment Events/
2. Must be Something in the Water in Westport, Connecticut: RB has a theory that the legal profession holds much allure to those who are naturally prone to being jerks. RB wanted to start a nationwide movement that would classify about 90% of attorneys as persona non grata to civilized society, relegating them to live in small leper type colonies with their brethren, sort of like those youngsters at Emory University with the Swine Flu.
I am always willing to spend some time reading stories about how the rich pass the time of day by suing one another over the most mundane matters. I suspect that there are more than a few lawyers who make a nice living in Westport handling real estate lawsuits among neighbors in that community. One of them might starve waiting for similar type clients to emerge in the entire middle Tennessee region. I thought that the stone fence pictured in the NYT column from Saturday's paper, which largely replaced an older one and nonetheless sparked a legal battle by a disgruntled neighbor, to be a nice job. NYTimes.com
Another story that I recently read recently was a four year legal battle over who would be named the administrator of a 2 million dollar estate in a modern day version of Dicken's Jamdyce and Jarndyce. Bleak House
3. GREAT BRITAIN'S DISGUSTING DEAL WITH LIBYA: Notwithstanding the British government's protestations, it seems clear now, with the release of more documents, that the British government exchanged the release of the convicted mass murderer of civilians for a Libyan oil concession for British Petroleum. Times Online Times Online
4. Phoenix Insurance (own senior bond PFX only): I own just the exchange traded senior bond issued by Phoenix Insurance (PFX) which matures in 2032: www.sec.gov This is a speculative bond position. A story in the weekend edition of the WSJ summarized the problems of this insurance company, one of the oldest in the U.S. These problems include S & P downgrading Phoenix's main insurance unit to junk, and the loss of two key distributors of its products after eliminating its own sales force. It is almost a weekly decision whether or not to keep the 100 of PFX. The only positives noted by the WSJ is that no debt comes due before 2032, which is PFX, and there is "stable block" of traditional life insurance. Some prior discussions of this bond are the following posts: PHOENIX SENIOR BOND: PFX / Bought 100 PFK /PNX & State Farm Phoenix Senior Bond: To Wild for LB/ I can only add to the WSJ's observations with the following comment. If PNX fails to pay the interest on the senior bond, it will cease being one of the oldest insurance companies in the U.S. Though, one thing to keep in mind is that PFX is an obligation of the insurance holding company and not the individual operating companies (page 27).
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