leggete attentamente il parere di knight capital ... (per chi non ha voglia di leggere tutto, basterebbe anche l'ultimo trafiletto ! )
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vielleicht interessant, aktueller Kommentar von knight capital:
· SNS nationalisation expropriates sub debt holders at the Holding and Bank entity · Insurance sub debt was left intact, but there is a risk of temporary coupon deferrals, which could be imposed by the EU Competition Commission · Zero value of HoldCo sub debt seems to be an excessively harsh assessment given the insurance group was left outside the scope of the expropriation and some compensation might therefore be due. However – this is a preliminary assessment and might involve a protracted legal battle!
· Compensation claim at the bank may be harder to make, resting on the question who is legally responsible for property finance losses.
In a somewhat surprising and drastic action SNS REAAL was nationalised by the Dutch government on 1 February 2013. This followed months of attempts to find fresh capital for the group to allow it to deal with the high and growing loss content of its ill-fated property finance portfolio. Once private initiatives failed or were found inadequate the government decided to take over the group in order to avoid a collapse and prevent greater damage for the Dutch financial system and economy.
The takeover was effected by a decree by the Minister of Finance, which expropriated the capital and all subordinated debt instruments of the group holding SNS REAAL NV as well as the OpCo bank SNS Bank NV. Subordinated debt instruments of the group insurance companies (REAAL / SRLEV) on the other hand were left untouched and continue to trade in the market.
The transfer of the nationalised instruments to the state took place as of 8.30am on 1 February 2013 and since then trading in these securities is no longer possible. However, there will be a determination of compensation for these instruments (proposed by the government to be zero – see further comments below). It should be possible to trade the resulting claims on a bilateral contract basis. Nationalised equity and debt instruments include the following:
Instrument Amount ISIN
Ordinary shares of SNS REAAL NV 287.6m shares NL0000390706
6 B-shares
Other share capital of SNS REAAL NV
Other share capital of SNS Bank NV
Stichting Core Tier 1 securities 4.35m securities
SNS Reaal 6.258 perp €250m XS0310904155
SNS Reaal 8.45 dated sub $100mn XS0382843802
SNS Bank 11.25 perp (Tier 1) €320mn XS0468954523
SNS Bank 5.75 perp (Tier 1) €10.95mn XS0172565482
SNS Bank 6.25 dated sub (LT2) €262.342mn XS0552743048
SNS Bank 6.625 dated sub (LT2) €40.7mn XS0363514893
Various other instruments Small
Source: Decree by the Minister of Finance, 1 Feb 2013
The insurance franchise (REAAL NV and subsidiaries such as SRLEV) on the other hand was left unaffected. While ownership was transferred to the government as well (indirectly through the nationalisation of the group HoldCo SNS REAAL NV), the nationalisation decree and explanatory letter does not mention any significant impairment of the insurance group and it left the insurance sub debt instruments outside the scope of the nationalisation.
Having said that, coupon payments of the SRLEV sub bonds can be deferred at the discretion of management. Even though both bonds (the 9% and the 7% perp) have cumulative deferral language which limits the economic loss of any deferral, the government or indeed the EU Commission in its review of the group takeover might nevertheless demand a deferral of coupons at least for some time. Bond prices could fall considerably if such a coupon deferral was implemented, suggesting that the bonds might not be quite as “cheap” as they appear under the assumption that coupons continue to get paid.
COMPENSATION COULD BE DUE FOR HOLDCO DEBT Legally the nationalisation of SNS Reaal was enforced under the Dutch Intervention Act with the decision taken by the Minister of Finance in agreement with the Prime Minister and in consultation with De Nederlandsche Bank. This, together with the stated systemic importance of SNS Reaal for the Dutch financial system seems to meet the legal requirements for the nationalisation under the law. The explanatory letter of the Dutch Ministry of Finance indicates that without additional capital SNS would have been unable to publish accounts on a going concern basis and that indeed SNS was facing bankruptcy.
The direct costs of the rescue to the Dutch government are €3.7bn, broken down as follows:
· €1.9bn new capital for SNS Bank NV
· €0.3bn new capital for SNS Reaal NV
· €0.7bn to capitalise and isolate the real estate portfolio · €0.8bn to write off earlier aid (although the €0.8bn seems to include the 50% mark-up at repayment, while the nominal amount of this was €565mn at the last reporting date; in any case these were deeply subordinated core tier 1 securities) · Additionally the government will guarantee €5bn of funding for the real estate portfolio of SNS, which is to be separated from the group (initially this funding will be provided by SNS Bank).
· Lastly the government will provide the holding company a bridging loan of €1.1bn to enable the holding to repay senior debt as well as inter-group loans. The bridging loan is meant to be repaid after the sale of the insurance companies or from independently raised finds of SNS Reaal NV.
To help pay for the rescue of SNS the government believes that the value of all sub debt of the group is zero and it will make an official offer to this effect through the Enterprise Division of the Amsterdam Court of Appeal. Investors who object to the offer also need to seek recourse to the same Court.
THE FOLLOWING ARE SOME PRELIMIRARY CONSIDERATIONS OF THE EXPROPRIATION AND POTENTIAL FOR COMPENSATION CLAIMS. ACTION WOULD REQUIRE GETTING INVOLVED IN A PROTRACTED LEGAL BATTLE IN THE NETHERLANDS
While fighting the government will likely be an uphill battle, the government’s actions seem unduly harsh and there may be reasons why its claim of zero value of all sub debt in the HoldCo and Bank entities is exaggerated. While the government clearly has an interest to restore the financial position of the entities to a situation where they once again meet regulatory capital requirements, the expropriation of instruments which are backed by a positive net asset value would suggest that some positive compensation should be due. In particular the situation at the HoldCo may warrant closer inspection:
The last published financial figures for the Holding company SNS REAAL NV show the following situation:
Total assets were 7,124mn, breaking down into the following:
€1,879mn equity investment SNS Bank NV
€4,356mn equity investment REAAL NV
€655mn receivables from subsidiaries
€234mn other assets
Stress testing the assets would mean the value of the Bank investment is zero, while on the other hand the government’s actions give no indication that the investment in the insurance group is impaired (indeed capital and sub debt at the insurance companies were left untouched). It is not clear if the receivables from subsidiaries are impaired, but one could very conservatively assume that they are all subordinated loans to the bank and therefore worthless. Other assets could be stress tested as well and e.g. a two-thirds haircut applied. On this basis, despite a complete loss of investments in the bank the Holding would still have assets of €4.434mn and a loss of €2,690mn.
On the liability side of the balance sheet were the following main items:
€4,448mn shareholders’ equity
€979mn equity attributable to securityholders (loss absorbing core tier 1 securities issued to Stichting and core tier 1 securities held by the Dutch government) €604mn subordinated debt (€200mn of this matured during 2012) €302mn debt certificates (probably senior) €522mn amounts due to customers (€492mn of this is due to subsidiaries) €269mn other liabilities
The loss from a complete write-off of the bank equity and all receivables from subsidiaries would be covered by the equity of the Holding and it is not immediately clear why a writedown to zero of the sub debt is necessary or justified. Rather it seems like all the sub debt is fully covered by assets. One argument for additional haircuts is that the government will provide a bridging loan of €1.1bn to repay other debt, but this is replacing other debt and any reasonably applied costs for this would need to be compared to the cost of existing debt.
Additionally, and potentially more importantly however, SNS Reaal NV guarantees various subsidiaries, including the bank as well as the property finance portfolio, on the basis of Book 2, section 403 of the Dutch Civil Code, which requires that it is jointly and severally liable for debts of these subsidiaries. Losses of the subsidiaries, including the property finance portfolio, are basically reflected in the negative NAV of the bank, so this loss could arguably also accrue to the holding. Adding therefore this entity’s €1.84bn stated capital shortfall adds up to a loss of €4,530mn for the HoldCo, which uses up shareholders’ equity and would start to eat into the hybrid instruments (presumably the Stichting’s loss absorbing core tier 1 securities). However, even adding the negative bank NAV still would still not impair the HoldCo sub debt. This view also seems consistent with the government’s own assessment of a necessary capital injection at the HoldCo of only €300mn to restore its regulatory capital position.
Maybe the Court deciding or reviewing compensation will apply different valuation parameters – e.g. a gone concern / fire sale valuation or valuation based on some (so far unspecified) parameters based on government support almost certainly would result in higher losses (as it would probably in any bank on the planet). However, based on the last available accounting information and the explanatory letter from the Dutch government it seems there could be a case for at least some compensation for the HoldCo sub debt, based on the outline above.
While economically there seems to be a case why the HoldCo might even have been left outside the nationalisation scope, the government provides another reason for its nationalisation, which is that the HoldCo and bank are so closely intertwined that SNS Bank would be unable to function properly without the holding. Group functions of crucial importance to the continuity of the bank (risk management, treasury, IT, and personnel) were fulfilled by the holding.
However, it seems to be a comparatively weak argument to conclude that this interconnectedness justifies the expropriation of bondholders at the HoldCo. One would expect that the services provided to the bank by the holding were covered by arms’ length compensation arrangements and even if these were missing they probably could be put in place without too much trouble. Justifying the expropriation of bondholders on this basis, however, could be a stretch.
A further argument given by the government for the HoldCo nationalisation is that a potential failure of the Holding might cause a shock effect that would cause confidence in other Dutch institutions to be compromised. While that may be so, this argument would normally justify state aid for the struggling entity (economically this is an external effect of SNS’s struggles), not the expropriation of its investors.
COMPENSATION FOR DABNK DEBT HARDER TO JUSTIFY At the bank the case for compensation is harder to make and it looks plausible that investors might indeed not have any reasonable claim. The Dutch government reports that based on a DNB review the bank was found to have negative equity of €1.84 billion, due to losses from the real estate portfolio (and potentially further losses in the SME and retail operations). Therefore, the equity capital can be seen to be worthless and additionally €1.84bn of negative net worth needs to be apportioned to debt, easily exceeding the sub debt at the bank and therefore leaving it worthless.
However, it is not entirely clear why the losses of the property finance portfolio, legally a subsidiary of the bank but benefiting from a HoldCo guarantee (see above) are entirely allocated to the economic situation of the bank. A positive NAV would potentially argue for sub debt compensation if the losses are legally the responsibility of SNS Reaal NV rather than the bank.
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