Fixing the Silver Fix : the Corruption Continues

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

 

 

 

 

My name is Tommy Flanagan, and I’m a member of Pathological Liars Anonymous. In fact…I’m the president of that organization. Yeah, that’s who I am.

I didn’t always lie. No, I used to tell the truth. Then one day I told a lie, and I got away with it. Yeah, I told my parents that I had a brother that they had never met… 

-Jon-the-Liar Lovitz, The Johnny Carson Show, March 28, 1985

As the character Jon Lovitz explained on The Johnny Carson Show, lying is habit-forming. If perpetuated, it becomes compulsive conduct. Lying is a form of deviant behavior that (in the eyes of the liar) makes problems go away. Of course such problems never disappear permanently, because a lie can never solve anything. At some point the problem resurfaces, and because it never was addressed, often the problem has grown even larger.

The response from the liar is to tell another lie. But, because the problem is now almost inevitably larger, the new lie tends to be bigger or worse than the original. The process repeats. As the lies become larger and more numerous, eventually some of the new lies begin to openly contradict the old lies.

At this point, the proverbial “jig is up” for the liar. At least that is how things are supposed to work, as illustrated by the fable The Boy Who Cried Wolf. Which brings us to the “silver fix.” 

The most obvious starting point is a question: why do we need a “silver fix”? In an era of electronic, instantaneous communication, and with (supposedly) “free and open markets,” why do we need someone to tell us what the price of silver is supposed to be at a particular moment in time? Why can’t market participants simply observe for themselves the current spot-price in our “free and open markets”?

The bankers (playing the role of Jon-the-Liar) have their answer at the ready.

We need an official “fix” of the price of silver, because the settlement of a number of a different types of contracts is based upon the prevailing price of silver, at particular times in the daily trading. If we didn’t have an official “fix,” then traders could attempt to manipulate the price at those particular times, and cheat the system. That’s right, someone else could cheat the system.

How would “fixing” the price of silver (a process which even sounds corrupt) help to prevent corruption in the marketplace? The Liars again have their answer. 

We’ll get some ‘honest people’ to tell us what the price of silver should be. These ‘honest people’ will meet behind closed doors, and then tell us the honest price for silver. Yeah, that’s the ticket! Honest people, meeting behind closed doors.

And thus ‘the silver fix’ was born. Who were these ‘honest people’ who were going to provide us with the honest price for silver via their secret meetings?

As regular readers know, the Big Banks of the West have been convicted of every form of financial crime in the books, most involving fraud (i.e. lying) in one form or another. The only reason that these fraud-factories haven’t been convicted of far more crimes is because our corrupt governments have erased many of our former laws and simply stopped enforcing many others.

The Pathological Liars were handed the responsibility of providing us with the honest price for silver. But wait, it gets better. The silver fix was supposedly created to prevent corruption in the silver market. However, not only are the Pathological Liars allowed to trade in the same market where they are providing this quasi-regulatory function, but they are by far the largest traders in these markets.

The Pathological Liars, who have the largest financial motive to rig the price of silver, are the people to whom we handed the responsibility of providing us with the honest price for silver. This is not merely a matter of “putting the Fox in charge of the henhouse.” Rather, putting the hungriest fox we could possibly find in charge of protecting the hens.

However, we were told for many, many years that this system worked just fine. Then one day the Pathological Liars themselves told us that the silver fix was no longer working. Of course this was far less than a voluntary admission. Instead, it came as a consequence of several of the Pathological Liars being sued for – surprise, surprise – manipulating the silver fix.

The bankers, as always, had their next lie ready.

We’ll fix the silver fix, and make it better than ever. That’s the ticket!

And so, we got the bankers new-and-improved silver fix. How was it “improved”? The particular Pathological Liars who were being sued for manipulating the silver fix would no longer be involved in “fixing the fix.” Instead, only those Pathological Liars who were not being directly sued would be allowed to provide us with the honest price for silver.

Then January 28th, 2016 rolled around, and Bloomberg Media released the following:

A daily silver price used as a benchmark by traders, miners, and jewelers risks losing credibility with investors after it was set beyond levels traded on the market. One said the system seemed “broken” and another that clients had adopted alternatives.

The London Bullion Market Association Silver price was set at $13.58 an ounce Thursday, 3.5 percent less than the intraday low on the Comex in New York.

That came from the mainstream media, meaning that (at most) it contains half the truth. Here is what was left out. The phony “honest price” produced by Pathological Liars Anonymous on January 28 th was not merely 3.5% less than the intra-day low. It was 6% below the current price.

Also conveniently omitted by the mainstream media was the significance of that date, which was the “options expiry day” in the futures market. All of the options trading for that month was settled based on the price set by the silver fix on January 28 sup>th – the “honest price” produced by the Pathological Liars. This means that all of the options traders who would have cashed in if the honest price reflected the actualprice of silver were, instead, blatantly cheated out of their rightful gain.

When Bloomberg and other mainstream propaganda outlets reported that some traders accused the London Bullion Market Association (LBMA) of operating a “broken” system, it was referring to some of those cheated options traders. What was also omitted was that the silver fix tended to conveniently dip below the actual price of silver on most option-expiry days.

Prior to January 28th the Pathological Liars had not engaged in the fraudulent rigging of the silver fix in such blatant terms, not even before the fix was “fixed” the first time. But even more troubling was the latter part of the quote from Bloomberg: “ …clients had adopted alternatives.”

The Pathological Liars lie to us (among other reasons) for profit. If market participants choose to simply tune out the Pathological Liars, then they could “fix” the silver fix at any fraudulent, outrageous price they chose, but there would be no profit in doing so. You can’t cheat the other children if they won’t play in your sandbox.

Alarmed, Pathological Liars Anonymous called another meeting, where the bankers in attendance quickly cobbled together their next lie that would have gone something like this:

We’ll “fix” the silver fix…again, and this time, it will really be better than ever!

Thus, now the Pathological Liars have presented their new new-and-improved silver fix, designed to replace the old new-improved silver fix, which was only put into place last year. What did the Liars do to make the new-new fix better than the old-new fix?

The first of the new measures is the introduction of a blind auction. The aggregate bid and offer volumes will no longer be disclosed during the auction round. This information will only be made available after the end of each round.

The second measure is a “sharing of the imbalance” in the auction. In other words, after the auction is complete, the remaining buy and sell orders will be equally shared among the participants.

Finally, the calculation agent will now be able to increase the imbalance threshold during the auction within an approved range.

In short, today the CME Group and Thomson Reuters (the other Pathological Liar associated with this particular fraud) announced that they are taking action to prevent it from being extraordinarily easy for the Pathological Liars to manipulate the silver fix. They are doing some of the things they should have done when they fixed-the-fix the first time, if they had actually wanted to make the system less corrupt.

Why continue this farce at all? Why would the Pathological Liars risk shredding their near-zero credibility even further? Why not put to death this now thoroughly exposed financial fraud? Why don’t the Pathological Liars content themselves with their 24/7 manipulation of silver trading, in their paper “bullion” markets, which as everyone knows, are already more than 99% paper, and less than 1% bullion?

It’s all about control. Clients had adopted alternatives. These are words which strike fear and hatred into the hearts of the Pathological Liars, such as only a few other words or phrases in the English language are capable of doing. Words like “competition” and “law enforcement.”

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

Fixing the Silver Fix : the Corruption Continues

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

 

via Zero Hedge http://ift.tt/1TkR6Ko Sprott Money

Four months ago, ISIS came to San Bernardino, California. Sort of.

On December 2, Syed Farook and his wife Tashfeen Malik stormed a county holiday party and murdered 14 people with assault rifles in an attack that authorities would later say was inspired by Islamic State and its reclusive leader Bakr al-Baghdadi.

Investigators surmised that Malik was likely radicalized when she moved from Pakistan to Saudi Arabia (imagine that) and probably played a role in convincing her husband to take up the jihadi cause.

Both Farook and Malik were killed in a shootout with police, but we now know that the ISIS “presence” in San Bernardino didn’t die with the star-crossed lovers. Police responded on Sunday to multiple reports from campers that more than a dozen men of “Middle Eastern descent” were up all night on Saturday yelling and firing weapons into air.

“San Bernardino County sheriff’s deputies and an FBI agent responded to the area known as Deep Creek Hot Springs after reports of gunshots and chanting in the predawn hours,” The LA Times reports. “According to law enforcement sources, 17 men of Middle Eastern descent were detained.” Here’s a picture taken at the scene:

One of the 911 callers claimed that more than “100 shots” had been fired and that there were men “wearing turbans” in and around the area. With the assistance of a police helicopter, the “jihadist” contingent was located “walking away from a creek carrying backpacks and other items.”

Those “other items” included “several” handguns, a rifle and a shotgun.

Upon further investigation, it was determined that in fact, the men hadn’t done anything wrong at all. “A records check of the subjects, their weapons, and their vehicles was completed,” a statement from the sheriff’s department reads. “The records check revealed none of the subjects had a criminal history or outstanding warrants, the weapons were registered with the Department of Justice except for the rifle, and the vehicles were also registered.”

Right. So apparently, their “crime” was being Arab on a Saturday night.

Still, this one is a bit of a head-scratcher. While it does seem likely that campers saw what they wanted to see here, it’s not everyday that 17 Arab men congregate in Apple Valley and fire guns all night. “If there’s something going on wouldn’t you want your local police or law enforcement to take care of it so that citizens like you or myself don’t have to take it into their own hands?,” one local resident asked.

“None of the persons interviewed yesterday were identified as terrorists,” the sheriff’s department said on Monday, in an effort to assuage the public.

A recording of police scanner chatter that was posted online following the incident did nothing to calm locals’ frayed nerves. “All of the subjects are armed with handguns, that [witnesses] actually see,” an officer says. “Um, they were there all night and uh, they were up all night chanting Allahu akbar-type stuff,” he continues.

We’re not sure what “Allahu akbar-type stuff” means exactly, but between the audio from the police scanner and the 911 calls, the picture one gets is of more than a dozen Arabs donning turbans running around the desert chanting nasheeds while firing off pistols into the night sky. So, something like this we suppose: 

One might fairly ask why these 17 men can’t go on a camping trip without being fingered as terrorists but the dozen or so heavily armed “states’ rights activists” that occupied the Malheur National Wildlife Refuge earlier this year were allowed to close down a federal building for weeks on end with no intervention whatsoever.

“There was no evidence found that a crime had been committed by any of the subjects,” the county would later admit.

Hopefully, none of the men pictured above turn up at LAX with TATP-laden baggage next month.

Below, find a news report from a local CBS affiliate. 

via Zero Hedge http://ift.tt/25ylp58 Tyler Durden

With both ISM Manufacturing and Services employment indices collapsing, endless headlines of layoffs, Challenger-Grey noting Q1 as the worst since 2009, and NFIB small business hiring weak, it is no surprise that initial jobless claims is finally waking up. For the 3rd week in a row – the longest streak since July 2015. The last 3 weeks have seen a 9.1% surge in jobless claims – the biggest such rise since April 2014.

 

 

And finally, as Challenger-Grey notes,

Through the first quarter of 2016, employers announced 184,920 job cuts, up 31.8 percent from the 140,241 cuts tracked the first three months of 2015.

 

The first quarter saw 75.9 percent more job cuts than in the final quarter of 2015, when 105,079 job cuts were recorded.
US companies announced the most 1Q layoffs since 2009 as oil-related cuts continue to inflate numbers, according to data from Challenger Gray.

Citing John Challenger, MarketTalk adds that announcements “have increased significantly” in retail and computers, adding, “While it may be too early to sound the alarm bells, the upward trend outside of the energy sector is somewhat worrisome.” Overall announced layoffs by Challenger Gray’s count have been 185K this quarter, versus 140K a year earlier.

It’s the worst start to a year since 2009, when in the wake of the financial crisis companies announced plans that 1Q to cut 562K jobs.

via Zero Hedge http://ift.tt/1MVOf43 Tyler Durden

While the WSJ continues its crusade against the Goldman-assisted embezzlement scandal involving Malaysia’s 1MDB bank, pointing out that the “bank documents show accounts of prime minister paid out $15 million for clothes, jewelry and a car”, we can’t help but laugh.

The reason: stories such as this one according to which Kazakh-born Russian oil and media tycoon, Mikhail Gutseriev who has a net worth of over $6 billion thanks to his ownership of Russneft and numerous other Russian energy companies reportedly spent according to ABC, IBT and the Daily Mail roughly $1 billion dollars on the wedding party of his son Said, 28, to girlfriend Khadija Uzhakhova, 20, during the weekend in a lavish ceremony that took place at Moscow’s upscale Safisa restaurant, and was attended by around 600 guests with Sting, Jennifer Lopez and Enrique Iglesias performing.

The guests were chauffered in by Rolls Royce.

 

The event has been dubbed by Russian media as “the most expensive wedding ever.” According to the Daily Mail, entertainment provided by Jennifer Lopez, Enrique Iglesias, Sting and many local pop stars.

 

Held at the luxury Moscow restaurant and banqueting venue Safisa, “which was dripping with fairy lights and decked with wall-to-wall fresh flowers” the wedding set a new bar for extravagance.

The bride reportedly wore a $374,000 gown, which was bedecked with precious stones, imported from Paris and weighed in at 25kg. Her pricey wedding gown was matched with a handbag, diamond tiara and pendant.  Khadizha’s crown, costing a rumoured €5 million, is about half the cost of the school’s budget in the tiny fiefdom.
 

Gutseriev, who was ranked the 38th richest person in Russia by Forbes in 2015, flew in the who’s who of the music world to perform at his son’s wedding. Gutseriev is estimated to be worth $6.2bn, and his assets include oil company Russneft besides K Neftisa, OAO Russian Coal and others.

JLo performed her hit songs If You Had My Love, Dance Again and Get Right. During her performance the singer apparently told guests that pronouncing the newlyweds’ names was “the hardest thing I had to do today”.

 

According to The Guardian, JLo has commanded up to $1.4m for similar performances in the past. Her skimpy outfit for the Muslim wedding was allegedly criticised by some people on social media. “If you have money you can invite anyone you like, but Vainakhs (another word for Ingush people) should have asked her to get dressed in a more appropriate way,” one person apparently said, according to Daily Mail.

 

Sting also performed his hit songs such as Message In A Bottle, Every Breath You Take and Desert Rose. Other performers at the wedding were French star Patricia Kaas and Russian singer Alla Pugachyova.

Not everyone was happy:  online, the wedding was branded ‘a feast in a time of plague’. Ingushetia is one of the poorest regions of Russia, and commenter Marina Baryshnikova complained: ‘It would have been better if they helped those in need, the country is collapsing, there are no jobs, people are poor. This is a feast at a time of plague.’

‘It is disgusting to see how rich bastards are splashing out because all of their untold wealth was stolen not earned.’ One women’s website also detailed some poignant comments about the wedding.

“The life of this sweet girl will be just like her wedding dress,’ said one. ‘Wealthy, rich, beautiful and impossibly hard. I hope to be wrong.”

via Zero Hedge http://ift.tt/1PHtaKn Tyler Durden

The last time Europe had at least two consecutive months of deflation was in late 2014/early 2015 when the ECB launched its sovereign QE, and when prices staged a modest rebound into the rest of the year. One year later, it’s more of the same, and as Eurostat revealed earlier today, after a headline price drop of -0.2% in February, March prices declined once more, this time by -0.1% in line with expectations, driven by a -8.7% plunge in energy prices.

 

The good news for the ECB, which earlier this month unleashed the first instance of corporate bond QE, is that if stripping out “volatile food and energy prices”, core inflation accelerated in what Reuters dubbed mildly positive news for the European Central Bank as it struggles to revive anemic price growth.

As shown below, core inflation, a figure closely watched to gauge underlying trends, picked up to 0.9% from 0.8%, also in line with its recent trend and with expectations, alleviating some fears that low energy prices are feeding into the cost of other goods and services.

 

According to Reuters, the core inflation tick-up, presaged by surprisingly high German figures on Wednesday, is the latest in a string of slightly positive data for the 19-nation currency bloc, indicating that the euro zone’s tepid domestic recovery remains on track despite headwinds from abroad.

The ECB especially fears these so-called second-round deflationary effects from falling crude prices as they could lead to low price growth becoming entrenched.

Still, inflation remains far below the ECB’s target of nearly 2 percent and is not expected to return to target over the next three years. This indicates the central bank will have to keep rates exceptionally low and keep the door open to even more stimulus.

Indeed, according to its most recent drastically lowered forecast, the ECB expects inflation to average just 0.1 percent this year before a pickup in 2017.

In the end, it will all depend on what oil prices do from here: crude oil prices have fallen by two-thirds over the past two years and futures point to a slow rise for the rest of the decade, keeping a lid on price growth.

What is curious is that in recent months euro zone lending has picked up, at least according to ECB data, and last month it grew at its fastest pace since late 2011, while M2 has been surging: this has yet to translate into substantially higher prices.

via Zero Hedge http://ift.tt/1V9F86m Tyler Durden

• Roller-coaster first quarter ends with shares, dollar under pressure (Reuters)
• Oil prices slide as U.S. crude stocks hit record (Reuters)
• GE Files to End Fed Oversight After Shrinking GE Capital (WSJ)
• FDA Eases Rules for Abortion Pill, Making Access Simpler (BBG)
• Kremlin denies report of Russia-U.S. deal on Assad’s future (Reuters)
• Thirst for Gasoline Fuels Oil Rally (WSJ)
• Landlords in last-minute rush to beat stamp duty rises (BBG)
• CEO of SunEdison’s Spinoffs Leaves (WSJ)
• Zuma Counts on ANC Protection After Court Says He Violated Law (BBG)
• Hong Kong Retail Sales Plunge the Most in 17 Years (BBG)
• U.K. Economy Shows More Momentum; Current-Account Gap Widens (BBG)
• Hong Kong Appeal Tribunal Fines Moody’s $1.4 Million for Report (BBG)
• Bank of Japan runs groupthink risk as board dissenters depart  (Reuters)
• Distorted Markets: Why Banks Are Better Off Than You Think, And Real Estate Isn’t (WSJ)
• Twitter Insiders Pitched Standalone Messaging App Idea (ReCode)
• Why a Chatbot Creeped Out Microsoft’s AI-Focused CEO (BBG)
• Students clash with police at protests against French labour reform (AFP)
• U.S. May Let Govts, Banks Use USD for Business With Iran (AFP)
• German Unemployment Unchanged as Refugees Bolster Labor Force (BBG)
• China set to deploy world’s longest-range nuclear missile (FT)
• BlackRock Is Said to Plan About 400 Job Cuts as Growth Slows (BBG)
• The Investor Who’s Betting on Brazil’s Corruption Scandal (BBG)
• Wage Surge in Hot U.S. Labor Markets Sending Hopeful Sign to Fed (BBG)
• Deutsche Bank Says CIB Head Urwin May Be Worth More Than Cryan (BBG)

 

Overnight Media Digest

WSJ

– Argentina’s Senate early Thursday approved a plan to end a long-running legal dispute with U.S. hedge funds, handing President Mauricio Macri his first big victory in a Congress dominated by the opposition.(http://goo.gl/1iXUTa)

– Google has been repeatedly ordered to help federal agents open cellphones, according to court records in seven states that show Apple Inc isn’t the only company facing government demands at the center of a fierce debate over privacy and security. (http://goo.gl/DWQDCN)

– Cara Operations Ltd is in the final stages of negotiations to acquire Quebec-based restaurant chain Groupe St-Hubert for about 500 million Canadian dollars ($384.59 million), according to a person familiar with the deal. (http://goo.gl/TXtRil)

– A jury found a General Motors Co ignition switch installed in a car “unreasonably dangerous” but stopped short of awarding damages in a case arising from litigation consolidated in a New York federal court. (http://goo.gl/07Dsu6)

– Telecom Italia SpA said Wednesday it has appointed Flavio Cattaneo, currently chief executive of train operator NTV SpA-Nuovo Trasporto Viaggiatori, as the new CEO of Italy’s largest telecommunications operator. (http://goo.gl/TKW9tj)

 

FT

* Britain’s biggest lenders are set to replace passwords, pin numbers and lengthy branch visits by new technology in the manner of video meetings and voice-recognition to meet demand for faster banking services. (http://bit.ly/1Rz04PB)

* David Cameron has flown home from the Canary Islands after his Easter holiday to find himself in the midst of the critical steel industrial crisis that threatens up to 40,000 British workers’ livelihoods. (http://bit.ly/1Rz0BB9)

*Tata Steel Ltd’s board signalled that after nine years, several billion pounds of investment and consistent heavy losses, it was putting up its British steel operations for sale.(http://bit.ly/1Rz0Tru)

*In the past decade, burial costs have risen sharply while state subsidies have failed to keep up – making Britain risk a fall back into a system of “miserable pauper’s funerals”. (http://bit.ly/1RyZGka)

 

NYT

– Opponents of the Dodd-Frank financial overhaul won an important battle on Wednesday as a federal judge here stripped the “too big to fail” label from the insurance company MetLife Ltd. (http://nyti.ms/1onsjrY)

– General Motors Co won a second consecutive case in litigation over its defective ignition switches, when a New York jury found that a faulty switch was not responsible for a 2014 accident that injured two people. (http://nyti.ms/22QBJ2g)

– Foxconn Technology Co Ltd said it had struck a deal to acquire control of the Japanese screen maker Sharp Corp for $3.5 billion, after weeks of negotiations. (http://nyti.ms/1MCTdaQ)

– Prime Minister David Cameron faced a new economic and political challenge on Wednesday after Tata Steel Ltd said it could no longer swallow the large losses being generated by its plants and would try to sell them. (http://nyti.ms/1ont1Wo)

– Offering a billion-dollar tax cut and assurances that New York City would not be stuck with a $250 million Medicaid bill, Governor Andrew Cuomo inched closer on Wednesday to presenting an on-time budget with one major issue seemingly standing in his way – an increase in the minimum wage. (http://nyti.ms/1MCTP0i)

 

Canada

THE GLOBE AND MAIL

** The aftershocks of the commodities price collapse, already plucking C$1,800 a year out of Canadians’ pockets, could persist for more than two years and permanently impair the economy, according to the Bank of Canada. (http://bit.ly/1PHh6J2)

** As Dollarama Inc prepares to raise its top prices to C$4 from C$3 amid steeper purchasing costs, the retailer has found new meaning in the lowly toothpick. (http://bit.ly/1SAGYL8)

NATIONAL POST

** Five oil-producing economies are on the verge of collapse if oil prices do not stabilize soon, according to RBC Capital Markets. (http://bit.ly/1RLZd0h)

** Kinross Gold Corp finally has a workable development plan for its long-troubled Tasiast mine. The Toronto-based miner greenlighted the first phase of a two-step expansion plan at Tasiast on Wednesday. (http://bit.ly/1ZMMv4c)

** Jeff Melanson, CEO of the Toronto Symphony Orchestra, has resigned – mired in a messy courtroom battle with his estranged wife, Eleanor McCain, that involves sordid allegations of deception and sexual improprieties. (http://bit.ly/1UV8573)

 

Britain

The Times

– The failure of HSBC Holdings Plc to clean up its act after an anti-money-laundering deal with America’s Justice Department has raised the possibility that U.S. authorities may continue to monitor Britain’s biggest bank. (http://thetim.es/1MUcpvw)

– The Dutch headquarters of Royal Dutch Shell Plc have been raided as part of a corruption investigation into the company’s acquisition of a vast oilfield in Nigeria. (http://thetim.es/1MUcCis)

The Guardian

– Prime Minister David Cameron has flown back to Britain for emergency talks with ministers over the financial crisis engulfing Tata Steel Ltd’s British operation amid warnings that the firm has just weeks to secure a rescue deal on which up to 40,000 jobs could depend. (http://bit.ly/1MUcO12)

– The number of London city financiers who took home more than 1 million euros ($1.13 million) per year jumped to nearly 3,000 in 2014, with one earning up to 25 million euros. The European Banking Authority said the UK, with London home to Europe’s biggest financial centre, had more than three times as many high-earning bankers as the rest of the EU combined. (http://bit.ly/1MUcQ9p)

The Telegraph

– The backers of an independent proposal to lengthen one of Heathrow’s existing runways have become the latest group to warn that the government risks a legal challenge if it backs rival plans to build a third landing strip. (http://bit.ly/1MUd8wR)

– An alliance of taxi drivers in London have abandoned a bid to have Uber’s licence in London declared illegal, in a blow for the black cab industry’s attempts to stamp out the ride-hailing app. (http://bit.ly/1MUdl3c)

Sky News

– Stephen Jones, who stepped down as Santander UK’s chief financial officer several months ago, has been tapped by the Co-operative Bank Plc’s board as a potential successor to Niall Booker. (http://bit.ly/1MUeiIK)

– Ofcom says there were 32 complaints about Vodafone Group Plc made per 100,000 customers in the last three months of 2015 – an increase from the 20 in the previous three months. (http://bit.ly/1MUenfD)

The Independent

– U.S. spice company McCormick & Company Inc raised its takeover proposal for Premier Foods Plc on Wednesday for the second time, calling on the British company’s board to engage in talks that could lead to a deal. (http://ind.pn/1MUeFTx)

– Aldi biscuits, including cheese thins, ginger nuts and Oddbites, are being recalled by the manufacturer after they were found to have been made in dirty factories. (http://ind.pn/1MUeRSX)

 

via Zero Hedge http://ift.tt/1TkFHu0 Tyler Durden

“[It] contains exaggerations.”

That’s what Guosen Securities (China’s eighth-largest investment bank) had to say when asked about FT’s assertion that the investment bank’s Hong Kong affiliate has defaulted on a dim sum bond. Apparently, an affiliated SPV issued the debt back in 2014 and according to Bank of New York Mellon (the offering’s trustee), Guosen HK is in violation of some part of the bond’s keepwell agreement.

One of the provisions “is not in full force and effect, which constitutes an Event of Default”, reads a document seen by FT, who notes that this would mark “the first debt breach by a state-owned enterprise in China’s offshore market in nearly two decades.”

“The technical default by Guosen’s Hong Kong affiliate puts at risk a Rmb38m ($5.9m) coupon payment due April 24 on Rmb1.2bn in dim sum bonds sold in 2014,” FT continues. “Missing that payment would set a precedent for the offshore units of Chinese SOEs, whose creditors widely assume the onshore parent will always stand behind its affiliates.”

Needless to say, this comes at a particularly sensitive time. Defaults in China have been mounting over the past 12 months as the decelerating economy conspires with the country’s massive debt burden to push all but the healthiest companies towards the precipice. SOEs are especially problematic and how Beijing handles a sweeping effort to restructure insolvent state-owned firms will ultimately determine whether investors’ previously unshakable faith in China’s unwillingness to allow SOE defaults was misplaced.

“After years in which investors reliably assumed that China’s government would not permit any corporate default, missed payments have become more common in both the onshore and offshore bond markets, but SOE defaults remain rare,” FT goes on to note, before adding that “neither an SOE nor any Chinese financial institution has defaulted since the collapse of Guangdong International Trust and Investment in 1999.”

On a technical level at least, that appears to have changed this month.

“The keepwell deed says that the onshore parent company and the unit will undertake to have a consolidated net worth of at least $1 at all times and ‘have sufficient liquidity to ensure timely payment’ on any amounts payable on the securities, according to the offering circular,” Bloomberg wrote today.

Although keepwells on dim sum bonds were a notoriously shaky setup from the very beginning, investors still viewed the agreements as tantamount to guarantees – that, frankly, was “dim” dumb (if you will). “Given the strategic importance of the guarantor to the parent, we believe Guosen Securities (onshore) will try its best to ensure the guarantor’s (offshore) liquidity to service its outstanding bond and compliance to the bond’s terms and conditions,” Ross Lee, credit analyst at Bank of China Hong Kong Ltd., said in a report out earlier this week.

In any event, Guosen has released a statement that reads like any other denial you’d expect out of China when something bad happens. “Guosen Securities (Overseas) says the keepwell deed attached to the 1.2b yuan 6.4% bonds due 2017 continues to be in full force and effect.”

Or, as the CSRC said in January when asked about reports that then-chief Xiao Gang tried to resign:”this information does not conform to the facts.”

We’ll see, on April 24 when the coupon comes due, what the “facts” here really are. “As trustee, BNY Mellon has received a clarification notice from Guosen which has been distributed to bondholders,” BNY Mellon would later say. “That notice seeks to correct statements set out in earlier communications from Guosen.”

We can only hope that no one at Guosen decides to go the way of Dongbei Special Steel Group Chairman Yang Hua who hung himself just days before the company was set to miss a principal and interest payment.

*  *  *

Bonus: Moody’s on dim sum keepwells, ca. 2014

Moody’s Investors Service says that the over $12 billion of bonds issued by the offshore subsidiaries of China-incorporated companies and supported by keepwell deeds require careful consideration on a case-by-case basis.

“Bonds with keepwell agreements used to enhance their credit quality carry different risks that need to be individually assessed because of their considerable structural complexity,” says Gary Lau, a Managing Director for Moody’s Corporate Finance Group.

“Keepwell deeds are not guarantees and are subject to much greater legal and regulatory uncertainty than compared to guarantees. In particular, capital control laws in China heighten the risk that timely payments will not be made, even if keepwell deeds exist,” adds Lau.

“As a result, a one-size-fits-all approach to analyzing such structures does not offer sufficient insights to risk.”

Moody’s analysis of keepwell agreements in China is contained in its just-released report titled “Chinese Corporates: FAQs on Credit-Support Structures in China Using Keepwell Agreements: An Update”.

“Treating all keepwell structures as having similar effect, for example, by automatically rating debt at or near the support provider’s rating is certainly a simpler approach than our careful analysis of each transaction,” says Lau.

“However, such an approach does not properly reflect the structural and other risks involved and therefore does not provide adequate insights to investors,” adds Lau.

“Consequently, our analysis focuses on understanding the standalone credit profile of the debt issuer, the benefits of the credit-support structure and the economic and other incentives of the support provider to ensure full and timely payment to bondholders if required.”

Nonetheless, Moody’s report says because keepwell agreements are an important signal of a parent’s willingness to provide support to its offshore subsidiary, the debt issuer’s rating is likely to be higher than it would be if its parent company did not provide a keepwell deed.

Moody’s has provided ratings to bonds supported by keepwell deeds from 11 China-related issuers, totaling $12.5 billion. Of the 11, 10 have been rated one notch below the ultimate parent and support provider .

via Zero Hedge http://ift.tt/1SASRAI Tyler Durden