The only catalysts Bank of America Corp's (NYSE:BAC), and there is nothing at this time that offers anything to suggest the share price will move up.
Mark Coffelt, head portfolio manager at Austin-based money manager Empiric Advisors, said, "It's on a self-fulfilling downward spiral. I don't know what's going to make Bank of America go up."
Bank of America continues to be used by many analysts as a bellwether for the rest of the banking industry, pulling their share price down with them.
The company plunged to its lowest level since March 2009 on worries over capital raises and probable write-offs. Insuring the debt of the bank against a default has risen to the highest levels ever.
Credit default swap insurance soared 64 basis points to 435 basis points. That brings costs to $435,000 a year over a five-year period for every $10 million in bonds.
Bank of America was trading at $6.21, down $0.21, or 3.27 percent, as of 11:01 AM EDT.
Showing posts with label Credit Default Swaps. Show all posts
Showing posts with label Credit Default Swaps. Show all posts
Tuesday, August 23, 2011
Friday, January 7, 2011
Bank of America (NYSE:BAC) Credit Default Swap Suit Reversed
Bank of America (NYSE:BAC) had a lawsuit reinstated against them in reference to paying out a credit default swap of $18 million.
The case was based upon when Merrill Lynch (before BofA acquired them) sold DKR Soundshore Oasis Holding Fund Ltd credit default protection against Urban Corp. In 2008 Urban restructured debt and Oasis let Merrill know that it had happened, and asked for payment under the swap agreement.
Merrill said at the time the notice was inadequate and a lower court and the judge agreed. A five-judge panel of the New York State Supreme Court, Appellate Division reversed the decision, saying the notice only needed to be "reasonably" precise in detail.
They said, "Even an inaccuracy would not necessarily invalidate a credit event notice as long as it could subsequently be shown that a credit event had in fact occurred."
The case was based upon when Merrill Lynch (before BofA acquired them) sold DKR Soundshore Oasis Holding Fund Ltd credit default protection against Urban Corp. In 2008 Urban restructured debt and Oasis let Merrill know that it had happened, and asked for payment under the swap agreement.
Merrill said at the time the notice was inadequate and a lower court and the judge agreed. A five-judge panel of the New York State Supreme Court, Appellate Division reversed the decision, saying the notice only needed to be "reasonably" precise in detail.
They said, "Even an inaccuracy would not necessarily invalidate a credit event notice as long as it could subsequently be shown that a credit event had in fact occurred."
Thursday, December 9, 2010
BP (NYSE:BP) May Sell Bonds to Chinese to Meet Gulf Liabilities
If BP (NYSE:BP) ends up selling bonds to the Chinese, which they reportedly have been thinking about, it would be a change in direction from the desired route of selling assets to raise the approximate $40 billion to meet expected liabilities from the Gulf oil spill.
That could imply a desire to hold on to some valuable assets they may otherwise have to divest themselves of.
BP has been selling bonds recently, but for the most part that has been for other purposes and not necessarily tied directly to Gulf liabilities.
Taking on more debt has risks and higher costs, which would be reflected in an increase in the cost credit-default swaps, which protect buyers from default. BP is paying about twice for credit default swaps as they had before the oil spill.
BP closed Wednesday at $43.27, up $0.38, or 0.89 percent.
That could imply a desire to hold on to some valuable assets they may otherwise have to divest themselves of.
BP has been selling bonds recently, but for the most part that has been for other purposes and not necessarily tied directly to Gulf liabilities.
Taking on more debt has risks and higher costs, which would be reflected in an increase in the cost credit-default swaps, which protect buyers from default. BP is paying about twice for credit default swaps as they had before the oil spill.
BP closed Wednesday at $43.27, up $0.38, or 0.89 percent.
Friday, October 29, 2010
Halliburton’s (NYSE:HAL) Credit-Default Swaps Soar After Devastating BP (NYSE:BP) Well Report
There is no doubt the report of the oil commission that Halliburton's (NYSE:HAL) choice of cement used on the Macondo well of BP (NYSE:BP) was flawed is devastating to the company, and it showed in their credit-default swaps, which soared in price after the news was released.
Halliburton CDS contracts surged by 27.3 basis points to 87.2 at 4:30 PM EDT in New York, their highest level since June, according to CMA, which provided the data.
The National Commission on the BP Deepwater Horizon Oil Spill found that three of the four tests performed by Halliburton on the cement found it was unstable for use.
Only one test result appears to have reached BP's hands before the Deepwater Horizon disaster.
A credit-default swap pays the buyer face value minus the value of the defaulted debt.
This will no doubt be a huge weight on the share price and liability of Halliburton going forward, as the same uncertainty which has surrounded BP will be, albeit probably to a lesser degree, on Halliburton as well.
Shares of Halliburton were punished Thursday, plummeting to $31.68, dropping $2.74, or 7.96 percent. After hours they were continuing to drop.
Halliburton CDS contracts surged by 27.3 basis points to 87.2 at 4:30 PM EDT in New York, their highest level since June, according to CMA, which provided the data.
The National Commission on the BP Deepwater Horizon Oil Spill found that three of the four tests performed by Halliburton on the cement found it was unstable for use.
Only one test result appears to have reached BP's hands before the Deepwater Horizon disaster.
A credit-default swap pays the buyer face value minus the value of the defaulted debt.
This will no doubt be a huge weight on the share price and liability of Halliburton going forward, as the same uncertainty which has surrounded BP will be, albeit probably to a lesser degree, on Halliburton as well.
Shares of Halliburton were punished Thursday, plummeting to $31.68, dropping $2.74, or 7.96 percent. After hours they were continuing to drop.
Monday, September 27, 2010
Moody's (NYSE:MCO) Says BP (NYSE:BP) Credit Swaps Trading at Investment Grade
According to the market research arm of Moody’s Investors Service (NYSE:MCO), BP (NYSE:BP) credit default swaps are trading at investment-grade levels.
BP debt protected by credit default for a five year period dropped 3.4 basis points to 188.5 shortly after 11:00 AM EDT in New York, according to CMA, a provider of data for the industry. CMA data reveal the CDS contracts have dropped 681 basis points since June 16.
Trading levels imply the company is trading at a rating of Baa3, while Moody's has a rating of A2 on the debt, four levels about the implied rating.
Baa3 is the lowest rung of the investment-grade rating system of Moody's.
BP debt protected by credit default for a five year period dropped 3.4 basis points to 188.5 shortly after 11:00 AM EDT in New York, according to CMA, a provider of data for the industry. CMA data reveal the CDS contracts have dropped 681 basis points since June 16.
Trading levels imply the company is trading at a rating of Baa3, while Moody's has a rating of A2 on the debt, four levels about the implied rating.
Baa3 is the lowest rung of the investment-grade rating system of Moody's.
Friday, August 27, 2010
BP (NYSE:BP) Being Shorted by Bill Ackman
Bill Ackman, manager of the Pershing Square Capital Management fund, said he's shorting the debt of BP (NYSE:BP) using credit default swaps.
According to Ackman, he believes the damage BP has done to its reputation in the U.S. keeps them from being able to "operate effectively" in the U.S., where they have their largest presence.
Ackman also said acquiring the credit default swaps was cheap, especially because of the huge legal liabilities they face, and the uncertainty as to how much they'll end up costing the oil giant.
Credit default swaps are a type of insurance used to protect a company against defaulting on its debt.
According to Ackman, he believes the damage BP has done to its reputation in the U.S. keeps them from being able to "operate effectively" in the U.S., where they have their largest presence.
Ackman also said acquiring the credit default swaps was cheap, especially because of the huge legal liabilities they face, and the uncertainty as to how much they'll end up costing the oil giant.
Credit default swaps are a type of insurance used to protect a company against defaulting on its debt.
Monday, June 21, 2010
Anadarko (NYSE:APC) Debt Costs Rise on Liability Concerns
The battle between Anadarko Petroleum Corp. (NYSE:APC) and BP (NYSE:BP) (LON:BP) over whether or not Anadarko should pay a portion of the costs related to the explosion of the Deepwater Horizon which caused the enormous oil spill in the region, has brought attention to Anadarko concerning the cost of protecting their debt.
Concerns over their debt has increased the upfront costs of Anadarko by $100,000 since Friday, increasing to $400,000 overall for credit default swaps. That's in addition to the $500,000 it cost to ensure $10 million annually.
BP has been pushing their partners, Anadarko and Mitsui over sharing the financial burden, especially Anadarko, who is a 25 percent partner in the venture.
Anadarko claims they're relieved of responsibility because their agreement to share costs was broken because of the "gross negligence" of BP.
BP has sent a bill to Anadarko, which will probably take litigation to collect, assuming BP would win the case.
Concerns over their debt has increased the upfront costs of Anadarko by $100,000 since Friday, increasing to $400,000 overall for credit default swaps. That's in addition to the $500,000 it cost to ensure $10 million annually.
BP has been pushing their partners, Anadarko and Mitsui over sharing the financial burden, especially Anadarko, who is a 25 percent partner in the venture.
Anadarko claims they're relieved of responsibility because their agreement to share costs was broken because of the "gross negligence" of BP.
BP has sent a bill to Anadarko, which will probably take litigation to collect, assuming BP would win the case.
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