Centerbridge Calls Default on Valeant Pharmaceuticals

This is smoky filled room horseshit, a scheme by a very large Valeant bond holder–former Blackstone guys trying to get concessions.

Centerbridge has called default in a very crowded room filled with bond holders, who have leant Valeant upwards of $30 billion.

The move starts a 60-day window, through June 11, during which the embattled company would have to file its annual report or potentially be forced to repay the bonds early. That could trigger default notices in other pieces of Valeant’s roughly $30 billion in debt, analysts have said, and become a major additional headache.

Valeant reiterated Tuesday that it is on track to file the annual report, which was due earlier this year, by April 29. That would enable it to avoid a default.

After the 10-k is filed, these menaces will go away. Until then, expect assholes like at Centerbridge to harangue the company to sweeten the pot.

Shares of VRX are slightly lower in the after hours.

Fed’s Lacker is out with strong comments this afternoon, following the Dow’s 164 point melt up.

Here are some of his comments.

He sees a ‘less leisurely, but gradual’ pace to hike henceforth.

The case for hikes is clear.

He backs FOUR rate hikes in 2016.

Two percent inflation occurring faster than expected.

Well anchored inflation expectations enough reason to hike.

Strong dollar days are behind us.

Wonderful companies like ORIG, BBEP, sex with REXX led the market higher today, on news that Russia and the Kingdom of Saudi Arabia agreed to freeze oil production at all-time highs. As noted late last week, the only country that is truly cutting back on oil production is the United States. The House of Saud has never drilled more. Putin’s Russia has never been so prolific in the production of crude.

But they’re going to freeze at these levels, which should provide succor to an otherwise greatly oversupplied market–one that forces companies to store crude in tankers indefinitely.

Italy announced their $5.7 bill bad bank scheme, which was greeted with creme pies to the face.

Today was all about oil and energy stocks. The oil and exploration sector trounced higher by 9% today. Nothing else was impressive, aside from the 1% bounce in the finnies.

I’ll leave you boozehounds with one last item of curiosity. It should come as no surprise to any of you that oil is flagging overbought by Exodus. Inside of the platform, one is able to view said levels through a proprietary oscillator. Here is it is, spread eagle, for all to bemuse themselves with.

This is fuckery of the first magnitude.

The Federal Reserve has become a perverse part of pop culture. Plus, they seem to rule the world. They control the money supply, after all. Now they’re going to compete with one another for making GDP predictions.

Talk about smoke and mirrors and obfuscation.

The NY Fed launched ‘NOWCast’ today to compete with the popular Atlanta Fed GDPNow.

The New York Fed’s model — the “Nowcast” — pegged growth at 1.1 percent for the first quarter, according to its latest update on April 8. Growth in the final three months of 2015 came in at 1.4 percent.

That’s a lot rosier than the Atlanta Fed’s read, which has first-quarter growth at 0.1 percent.

Really, a 1% differential in GDP forecast?

I need this like I need a fucking hole in my head.

This is why investing in biotech stocks is the equivalent to gambling. HZNP enjoys stupendous growth for its products; but they warned, ever so slightly–causing its head to be summarily chopped off.

Via Briefing.com

Co reaffirms guidance for FY16 (Dec), sees FY16 (Dec) revs of $1.025-1.05 bln vs. $1.03 bln Capital IQ Consensus Estimate; sees adjusted EBITDA of $505-520 mln5

First-quarter 2016 net sales guidance would represent 79 percent YoY growth at the midpoint (Capital IQ consensus 101% growth); second-quarter 2016 net sales guidance would represent 35 percent year-over-year growth at the midpoint. First-quarter 2016 adjusted EBITDA guidance would represent 114 percent year-over-year growth at the midpoint and 34 percent of projected first-quarter 2016 net sales at the midpoint versus 29 percent of net sales in the first quarter of 2015.

Long Term Guidance: $2 bln in net sales in 2020.

It’s worth noting this company has been called a ‘little Valeant’ and has been tied into the whole corrupt system of hiking drug prices for profligate profiteering. Also, this is what happens when you warn, whilst trading north of 70x earnings.

A ‘diplomatic source’ is citing an agreement has been reached between the two giant oil producing nations, both duplicitous liars, cheats, and scam artists in nature.

Ten thousand apologies for missing this news item that was tucked away on the internets. Apparently, this is the reason why WTI volume and price spiked.

The Dow is up 150 now. Off to the races.

I turn around for 10 mins to eat a sandwich and next thing I see is the Dow up triple digits and everything is fucking roaring higher again. Didn’t everyone read my last bloggery?

Look at that volume spike in WTI and subsequent move higher in crude. Crude up, stocks up.

Yen is lower for this first time in April. This is another reason for wanton celebration, apparently.

To see prices rise is normal. It’s human nature to build and progress and improve standard of living. Well, at least these things are true in civil societies. It’s never a ‘scam’ or ‘fuckery largess’ when stocks rise. When you’re selling short markets, you’re betting against the evolutionary spirit of mankind.

Having said that, I remain short XLE. Indeud.

Ah, the old negative feedback loop has finally made it back into the narrative. The IMF is out with a note today warming of ‘widespread secular stagflation’ as well as the negative feedback loop. You think the analyst who concocted this report reads Zerohedge much?

This is all part of my thesis. As the year wanes on and growth proves to be lackluster, confidence with whither, then flag, then capitulate.

Prices will sharply drop and bonds will rise.

The world economy will grow 3.2 percent this year, down from a projected 3.4 percent in January, the IMF said Tuesday in a quarterly update to its World Economic Outlook.
“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said in remarks prepared for a press briefing. “There is no longer much room for error.”

“But by clearly recognizing the risks they jointly face and acting together to prepare for them, national policy makers can bolster confidence, support growth, and guard more effectively against the risk of a derailed recovery,” he said.

The IMF cited among the biggest risks as a “return of financial turmoil itself, impairing confidence and demand in a self-confirming negative feedback loop.”

“Another threat is that persistent slow growth has scarring effects that themselves reduce potential output and with it, consumption and investment,” the IMF said. “Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation.”

In other words, the IMF is blaming confidence, of a lack thereof, for the systemic problems that are plaguing the global economy. Has it ever occurred to them that the lack of structural fiscal reform is at the root of these issues and the incessant papering over them with central bank over planning is only exasperating the core problems?

Maye these nuts should just prescribe heavy doses of psychotropics to everyone to make us feel happier again. That’ll fix everything and make all the debt, and the waste, and the corruption go away.

Back in January, following a very modest 3% move lower by the Yuan v the Dollar, all pandemonium broke loose. World markets plunged and the evil Chinese made a sundry of errors with their stock market that shook global markets to their core. Since then, the yuan has been firm v the dollar; but plunging lower, in a very suspicious manner v the yen.

Hmm, I wonder why?

Over the past 9 months, the yuan is down an astounding 15% v the yen. This move alone is likely to push the Japanese economy back into recession, yet no one is talking about it. The Chinese are still manipulating their currency. But instead of doing it against the dollar, they found an easier path to accomplish their needs v the yen.

The sages at WFC, the one with a chuck wagon as their company logo, proudly boasted about their growth initiatives in energy back in 2014, when oil was north of $100. It was the very worst time to load up on petrol-loans. But hindsight is 20/20 and bubbles are hard to predict. I do not fault them for miscalling the sector or even having too much exposure to it. A great man once said ‘no balls, no babies.’

My beef lies with the banking industries insistence to value these loans based on collateral, instead of what regulators want–the fucking cash flow.

Moody’s is projecting the banksters will need an additional $9 billion to cover losses. But that number is woefully fucked if the rules change. It’s also worth noting, the so called collateral is virtually worthless if the banks can’t sell it because there isn’t a profit to be had from it, with oil down at depressed levels.

Just yesterday, CHK pledged its entire company to keep their $4 billion credit line intact. Again, this is a Morton’s Fork moment for the banks. If they do not extend these lines of credit in their reevaluations, losses, big fucking losses, will need to be taken. If they kick the can down the road, like they did with CHK, God willing something good can come from it. If that $4 billion is drawn and the company goes belly up anyway, it could take years for WFC and others to recover the money through collateral.

“We’re all being as appropriately tough to make sure that we protect the interests of the bank,” John Shrewsberry, Wells Fargo’s chief financial officer, said on a January call with analysts. “We were working with each customer to help them work through this. It doesn’t do us any good to accelerate an issue, or to end up as the holder of a number of oil leases as a bank.”

Bullshit.

Wells Fargo has been the top dealer of high-yield oil and gas debt, according to data compiled by Bloomberg, selling slices of junk-rated loans to regional banks throughout the U.S. as well as to financial institutions in Canada, Europe, Asia and the U.K.

One example: Breitburn Energy Partners LP. Wells Fargo devoted a page of its 2014 presentation to the Los Angeles-based oil and gas producer, which had a market value of almost $2.7 billion at the time. Now it’s worth less than $120 million. The company has drawn down $1.2 billion of a $1.4 billion credit line, filings show. Wells Fargo, the lead bank, sold participation to lenders including Credit Agricole SA, ING Groep NV and Mizuho Bank Ltd.

At the height of the boom in April 2014, after a rapid expansion of reserves-based lending, the U.S. Office of the Comptroller of the Currency, which oversees 1,600 banks and thrifts, published new underwriting guidelines. They were based largely on how such loans performed in previous downturns, and the regulator almost immediately began updating the guidelines, according to a person familiar with the matter.

Last year, after bank examiners marked many energy loans with tougher ratings than lenders thought necessary, the OCC was flooded with appeals, the person said. In September, regulators from the OCC, the Federal Reserve and the Federal Deposit Insurance Corp. met with dozens of energy bankers at Wells Fargo’s office in Houston.

How can you both be ‘tough’ on protecting the bank and at the same time argue with regulators to soften their stance on rating the loans? You simply cannot have it both ways.

By the way, I’d love to see who is assessing the worth of said collateral. This is very reminiscent of the games that were played during the housing bust.

The disagreement centered on how to rate the risk of reserves-based loans. Banks insisted that, in a worst-case scenario, they’d be made whole by liquidating the properties. Regulators pushed lenders to focus instead on a borrower’s ability to make enough money to repay the loan, according to the person familiar with the discussions. The agency reinforced its position with new guidelines published last month that instructed banks to consider a company’s total debt and its ability to pay it back when gauging a loan’s risk. Bill Grassano, an OCC spokesman, declined to comment.

“The regulators are taking a stronger stance on cash-flow protection rather than collateral coverage,” said Julie Solar, a senior director of financial institution ratings at Fitch Ratings Ltd. “There were a lot of disagreements and a lot of appeals. There’s a difference between the banks’ view of the ultimate risk of loss and the regulators’ view.”

Who in their right mind would want collateral to be the determining factor in rating loans, when the underlying commodity by which the collateral is valued has plummeted by 60%? It makes no sense, unless of course you have something to hide.

The new guidelines mean banks will have to downgrade loans and set aside more cash to cover losses. Oil and gas producers owed Wells Fargo $9.6 billion at the end of 2015, about 55 percent of the bank’s outstanding energy loans, company filings show. Most of that debt is backed by reserves, the bank has said. “The tougher standard makes it more expensive for the banks to make loans to the energy business,” said Buddy Clark, a partner with law firm Haynes & Boone in Houston. “But if the banks foreclosed now and tried to sell the properties, they’d have to take a loss. If it happens all at once, it’ll be a disaster where all of these properties come on the market at the same time.”

Bingo and presto!

Wells Fargo will need to wipe the egg from their collective faces and simply take the hits. All of those offices, designated for new energy loans, will be closed and eventually they will be forced to write down the loans to reflect the current market environment.

The greater threat here is the long term effects the economy will face, after these banks get burned from yet another central bank overplanned induced bubble. After the financial crisis had ended, banks opted to go with energy, seeing it was hot and backed by real cash flow. Little did they know, they were being duped into being bagholders, once again. The next time America has a great idea, Well Fargo and friends will be less eager to finance it.