Blackstone & Codere amantha Bee investigates the shady, totally legal business dealings of a private equity firm called Blackstone.

Here is the original article: Blackstone Unit Wins in No-Lose Codere Trade: Corporate Finance

(07:00)

Category: Derivatives, Humor, Regulation, Video

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “TDS: Blackstone & Codere”

  1. DeltaV says:

    The transaction here was that Blackstone was paid $15M in CDS in order to make a $100M loan to the firm. This was all done in cooperation with the other side of the CDS (the writer), or the CDS writer could appeal this to the ISDA. Note that the ISDA has ruled some honest-to-god-no-doubt-about-it defaults as non-defaults if it is politically expedient. This leads me to conclude that the entire arrangement was done with cooperation of all parties. This was likely just an expedient way for Blackstone to pick up an additional $15M on their $100M loan. The CDS writer may have additional CDS on Codere, or other financial motivations.

    The real story, not mentioned, is that companies can take out insurance on other companies without an inherent financial interest in them. This was the case for personal life insurance, until it was obvious to EVERYBODY that this was a situation built for organized crime (e.g., banksters) to leverage by taking out insurance on victims and then killing them. So the real question is why CDS are even allowed when the CDS buyer has no equal financial interest in the CDS underlying.

  2. Non Sequor says:

    I betcha, a nickel
    I bet you I win
    I betcha, a nickel
    That you will give in

    What’sa matter honey?
    ‘Fraid you’ll lose?
    Do what you wanna
    And say what you choose

    I still betcha, a nickel
    That you will be mine
    I betcha, a nickel
    Even raise it a dime

    I always win my money
    You can bet on that
    I always take a tip
    And keep it under my hat

    You’ve got yourself to yourself
    Come on, get off that shelf
    You can fool some of the people some of the time
    But you can’t fool all the people all of the time

    That’s why I betcha, a nickel
    That you will be mine
    I betcha, you’ll sign on, the dotted line
    I don’t see no sense in wasting all this time
    Cause whatever you bet, your bet is gonna be mine

    You’ve got yourself to yourself
    Come on, get off that shelf
    You can fool some of the people some of the time
    But you can’t fool all the people all of the time

    (we betcha, a penny, we ain’t got a dime)
    Say that ain’t no money, you’re wastin’ my time
    I don’t see no sense in all this rhythm and rhyme
    Cause whatever you bet, your bet is gonna be mine

  3. Francois says:

    What Blackstone did here is: “We’ll buy insurance against a certain event, then pay someone to trigger said event and we shall collect the insurance money.”

    How is this different than plain vanilla insurance fraud? It is not, save the fact that Wall Street successfully blitzkrieged regulators in the fight to prevent the logical labeling of CDSes as “insurance”.

    O’bysmal was right: Those Wall Street types, they’re “savvy businessmen”.

    On a larger point, when serious news are only delivered by comedians, while “Very Serious People” in the “Very Serious” media wank around the Temple of Power in search of the lamest possible thing to write, you know the society you live in is very close to total clusterf*ck.

    Mix in the TPP and TTIP negotiated in quasi-absolute secrecy right now and soon enough, corporations will have the right to engage in outright insurance fraud on everything.

  4. RW says:

    This was hilarious but, while appreciative, Felix Salmon disagrees with most of the premise and the conclusion almost entirely viz

    1. Blackstone’s profit as cited by Bloomberg is actually gross revenue; profit remains unknown.
    2. Blackstone remains a major creditor of Codere so the trade is a long way from unwound; Codere could still go under with a a net loss to Blackstone
    3. In the meantime Codere is still operating rather than bankrupt and this saved jobs as well as preventing losses to suppliers and other creditors.
    4. We do not know anything about who took the other side of the CDS trade; writing single-name CDS for troubled companies is not a particularly common practice so it isn’t unreasonable to assume they were running their own relative-value trade too.

  5. Non Sequor says:

    @RW

    The outrage is over Blackstone precipitating a payout by means that wild be regarded as fraud under the sort of regulations applied to insurance products.

    Insurance fraud isn’t excusable when you burn down a failing restaurant so the rest of the deal isn’t especially relevant for reducing the outrage.

  6. ger says:

    it’s frustrating to listen to. mainly because if people accept a false bogey man – the problems will never get solved.

    if someone is upset about how banks/investment managers/insurers work then don’t participate
    don’t borrow money from anyone and don’t invest money in anything
    save and keep your savings in something safe
    if people want their pension assets kept in cash, they will need to make larger contributions to provide for retirement
    rent, don’t get a mortgage – or save up to buy a house
    if people want to drive a car without insurance, maybe change the law and let them prove they have sufficient cash on hand to absorb potential loss
    that might be tough to manage – so maybe make government responsible for all kinds of downside risk – fire, flood, medical, disability, hurricanes, terrorism, fraud, loss of income, credit default etc.
    if companies are trying to raise money for expansion, they can simply rely on reinvesting profits
    government can pay for services though tax revenue (no borrowing for investment)

    or we can have banking and capital markets, but

    if you borrow money – understand that you might lose your collateral and the person taking credit risk will want to get paid
    if you invest money – understand that you might lose your equity and the person managing the investment will want to get paid
    if you buy insurance – understand that someone wants to get paid for taking that risk
    if you don’t like the person lending you money or investing your money – pick someone else – there are lots of choices

    the system for lending and investing is decentralized for good reason, some people are great at it and some people are useless at it – the useless ones usually don’t survive long – which is a good thing. good lending and good investing are amazingly positive for creating wealth for the investor and borrower. poor people stay poor in part because they don’t get much participation in this investment gain. we need to find ways to help them accumulate wealth and manage their risks.

    people should invest and lend money within the law
    if the law is broken, fix the law
    there is no big lobbying effort that is pro or anti credit default swaps – this is low hanging fruit for any lawmaker if there is a problem
    the law for investing/lending/insurance is very complicated – it needs to be – it touches every aspect of society and capital moves between assets & jurisdictions quickly – the laws need to constantly be updated to keep up with financial innovation – gaps in the law will be exploited until they are plugged. the same way telecommunication laws keep up with phone innovation (texting while driving, phones on planes, batteries going on fire, radiation levels etc). People don’t seem to get upset with phone companies for innovating.

    people aren’t poor because of the financial industry, in the aggregate people are far better off because of lending/investing/insurance
    people are poor and stay poor mainly because of terrible social policy – social policy is the job of politicians – politicians point to the bankers to misdirect

    traders at different firms taking an opposite view on the credit risk of a company is not the reason for anyone’s problems. someone lost money, someone made money. it was just a trade with a winner and a loser.