30th October 2011, 10:04 AM
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Sachin Asher
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Join Date: Sep 2006
Location: Vadodara
Posts: 8,636
Rep Power: 383
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Quote:
Originally Posted by Alchemist
The company has stated that it has "net long position of $6.3 billion in a short-duration European sovereign portfolio financed to maturity (repo-to-maturity), including Belgium, Italy, Spain, Portugal and Ireland."
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I found the explanation of the above in this article:
MF Global Holdings' CEO Discusses F2Q 2012 Results - Earnings Call Transcript - Seeking Alpha
The $6.3 billion exposure is fully financed by a debt of exactly the same maturity.
If none of the above 5 countries default till the end of 2012, then MF Global Holdings will not incur any losses. (At least that is the management's explanation).
Of course, the company has other things to worry about as it's operations are not doing well.
Quote:
As we have pointed out over the past year in our disclosures and quarterly calls, we have taken advantage of the dislocations in the European sovereign debt market by buying short dated debt in European peripherals, and financing those securities to their exact maturity date, therefore, the term repo-to-maturity.
The spread between interest earned and the financing costs of the underlying repurchase agreement has often been attractive, even as the structure of the transaction themselves essentially eliminates market and financing risk. At the inception of these positions, we made the judgment that the securities we financed to maturity would repay given their high credit rating and short-duration, that is, all securities mature before 12/31/2012.
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Details of MF Global Holdings' exposure to the 5 counties are as follows:
Italy $ 3,213 million.
Spain $ 1,111 million.
Belgium $ 603 million.
Portugal $ 997 million.
Ireland $ 368 million.
Net Total $ 6,292 million.
The company has also stated that the Italy and Spain figures include France short positions of $ 1,300 million as proxy hedges, split equally between Italy and Spain. |
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