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Wall Street banks prepare to sell up to $3B in X loans next week

reuters.com

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Re: Wall Street banks prepare to sell up to $3B in X loans next week

#41

Post by xvector »

bdangubic wrote: post #28
jgalt212 wrote: post #17

Earlier quoted context omitted.

Maybe so, but I think the loans being sold have extra levels of credit protection and the banks are keeping subordinated tranches.

can you explain this in with little more detail for us not familiar with this? :)

They’re saying that the debt is structured with layers (tranches), where the top layers have added protections and get paid back first if there’s trouble, while the “subordinated” layers sit below them in priority.

“Extra levels of credit protection” means the tranches being sold to investors have features (e.g., senior ranking, collateral, covenants) that reduce default risk. Banks typically retain the subordinated (riskier) portion, which absorbs losses first, allowing the sold tranche to appear safer.

(o1)

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#42

Post by exe34 »

bloopernova wrote: post #36
exe34 wrote: post #16

Earlier quoted context omitted.

> it feels like an all-round bad decision. Eh, he bought the White House for $40bn. I say that's a very good purchase, given how he can now leverage it to get better deals for his business. E.g. Greenland for resources to make batteries.

I had read* that his interest in Ukraine and putin was to gain a share of Ukrainian mineral wealth. If that rumour was true, then yeah I could see him advocating for an invasion of Greenland. Although, didn't the Greenland SNAFU start with trump? * And don't have a link to whatever it was, so take with a cyber truck full of salt!

They're not going to invade Greenland, they can already control it. they'll start an economic war with Europe over it first.

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#43

Post by glompers »

pipo234 wrote: post #37
hn_throwaway_99 wrote: post #33

Earlier quoted context omitted.

There is a need - Twitter is now an excellent platform for propaganda and manufacturing consent. If Twitter defaults on the loans, my assumption is the creditors take control, and Musk gets a ton of value from being in control of Twitter.

Wait. Are you saying he's not in control currently ?

Read: "...the creditors take control, whereas Musk gets a ton of value from being in control of Twitter, so he won't want that to occur."

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#44

Post by mamonster »

bdangubic wrote: post #28
jgalt212 wrote: post #17

Earlier quoted context omitted.

Maybe so, but I think the loans being sold have extra levels of credit protection and the banks are keeping subordinated tranches.

can you explain this in with little more detail for us not familiar with this? :)

Slight simplification: Bonds aren't like stocks. For a given company, there is typically 1 common stock issue(perhaps multiple share classes FAANG-style for voting or maybe issued on different exchanges), maybe a preferred issue and then like 10+ different types of bonds, which are very different(typically, the shittier the company's financial position the bigger the difference between the senior/secured and the junior/subordinated debt).

Senior debt is basically either directly secured by specific assets/collateral or is the first to get paid out in case of a default. Junior debt is typically unsecured(no specific collateral) and goes after other, senior unsecured debt has been paid off.

When you hear about a company's credit rating, its usually the rating of the senior unsecured(so the "safest" bonds that aren't secured by specific assets).

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#45

Post by btilly »

bdangubic wrote: post #28
jgalt212 wrote: post #17

Earlier quoted context omitted.

Maybe so, but I think the loans being sold have extra levels of credit protection and the banks are keeping subordinated tranches.

can you explain this in with little more detail for us not familiar with this? :)

It's part of breaking a loan into bonds, which is called securitization.

Suppose we divide the repayments into 5 bonds. If 20% of the money comes in, it goes to the first bond. Then the next 20% to the next, and so on. The later bonds are called subordinate - they only pay if the other ones already were paid off. Because they are riskier, the later ones aren't worth as much.

The actual rules are more complex than this toy example. But that's the basic idea. And this is how a risky loan is sold to different investors at different prices with different tolerances for risk/return.

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#46

Post by hinkley »

xvector wrote: post #41
bdangubic wrote: post #28

Earlier quoted context omitted.

can you explain this in with little more detail for us not familiar with this? :)

They’re saying that the debt is structured with layers (tranches), where the top layers have added protections and get paid back first if there’s trouble, while the “subordinated” layers sit below them in priority. “Extra levels of credit protection” means the tranches being sold to investors have features (e.g., senior ranking, collateral, covenants) that reduce default risk. Banks typically retain the subordinated…

Having flashbacks of The Big Short.

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#47

Post by Fezzik »

bloopernova wrote: post #39
covercash wrote: post #29

Earlier quoted context omitted.

Why does he do a lot of the things he does? Ketamine.

I've wondered about that. Like, what are the practicalities? Do billionaires have dealers, or do they use shell companies to buy in bulk? I'm assuming wherever he flies, he avoids customs and immigration, and his plane/person never gets searched.

If he’s using it he probably just has a prescription or a doctor that provides it to him. Ketamine isn’t all that hard to get prescribed and it is, frankly, a pretty mellow drug.

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#48

Post by Ekaros »

badgersnake wrote: post #22
paulproteus wrote: post #11

I wonder if Musk will buy the loans.

Why would he toss even more money onto the Twitter bonfire when there’s no need?

To not lose all of it. Musk is shareholders and while shareholders make the decisions(or at least decide who do) they are also last to get any value when things go to receivership.

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#49

Post by teractiveodular »

bloopernova wrote: post #39
covercash wrote: post #29

Earlier quoted context omitted.

Why does he do a lot of the things he does? Ketamine.

I've wondered about that. Like, what are the practicalities? Do billionaires have dealers, or do they use shell companies to buy in bulk? I'm assuming wherever he flies, he avoids customs and immigration, and his plane/person never gets searched.

In developed countries it's not quite that straightforward, but "his" plane will be owned by Totally Not Musk LLC, not Musk himself, so any putative drugs on it are not his problem.

In developing countries, anything goes. I've paid $15 for "VIP" clearance in Indonesia, which means I sit in a lounge sipping tea and my passport comes back to me stamped without me ever seeing an immigration official.

Re: Wall Street banks prepare to sell up to $3B in X loans next week

#50

Post by [deleted] »

BJones12 wrote: post #5

Bonds selling below par is common, so this article with very few details doesn't say much. IIRC Twitter LBO bonds were getting an average of 9.6% YTM when raised, and had maturities from 2027 to 2030. Selling at 90-95 means an increase in the yield of about 2% (napkin math says 1%-5%).

[deleted]
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