bnbg - what the?, page-8

BNB ordinary holders have one real asset - investment in BBIPL. Looks like the banks are going to play hardball here to try to force BBIPL into a reorganisation that crystalises a complete loss for the BNB ordinary holder.

BNBG holders enjoy a guarantee, from BBIPL, for BNB's payment of interest and eventual capital repayment. Upon certain events happening, BNBG holders can force an obligation for repayment of the face capital which would become a BBIPL unsubordinated debt obligation.

The banks are now saying, to BNBG holders, that this obligation is worthless because BBIPL is unable to come up with the money. The resolution of this would occur in a receivership.

What the banks may be trying to do is pressure BNBG holders to behave like ordinary BNB holders and repudiate the unsubordinated debt guarantee in return for a few crumbs.

What I can't understand is this:

- why they think this plan will work; and

- why are BNB directors playing along with this charade?

BNBG holders have their hands on the receivership "button". Why would you back crazed retail holders into a corner - where they have nothing to lose in pressing this button? This would throw the senior bank debt into a giant black hole with liberal dashes of litigation and a decade long liquidation nightmare.

Maybe the banks are no longer afraid of receivership? Maybe they think they can control the process based on what they now know?

Consider this example: You have a building with a 1st and a 2nd mortgage. The value of the building collapses and can only cover the value of the 1st mortgage. The bank causes the building to sold, via receivership, and recovers the 1st mortgage. The 2nd mortgage holder and original owner are out of luck.

The only path for the 2nd mortgage holder is to make the quick sale, through receivership, as difficult as possible. Forcing a debt for equity deal would be the best outcome. The bank negotiates with the original owner, takes an equity position, reduces debt ... and everyone, eventually, gets a return.

Our friendly bank BNB debt for equity deal is looking more like a classical bank "screw everyone" scenario. Time to threaten a full and nasty receivership!!