I reckon that the following factors will cause the banks to tread lightly with BNBG's:
- BNBG debt is about 5% of the total BNB debt load - the BNBG debt is insignificant in the scheme of things
- BNBG holders are typically small retail holders - there is "moral hazard" in trying to squeeze these holders
I reckon that BNB ordinary holders will "pay the piper":
- I have a target of about 40cents per BNB ordinary - which means the existing BNB capitalisation will be reduced to 10% of the new capitalisation with the banks positioning to take 90%
- Given the 10:1 reduction - it is hardly worth it to position the bank equity as some kind of preferred share ranking over the existing ordinary shares. However, I fully expect that the banks will pursue this strategy; with the goal being to allow viable parts of BNB infrastructure to be floated out of BNB in satisfaction of the preferred share terms.
If the BNBG's are effectively ignored during the restructure:
- expect about $2billion of superior ranking debt to disappear and some kind of complex equity structure to appear which allows the banks to convert and take the 90% position.
The following are speculative, optimistic, but likely, developments:
- BNBG's will resume interest payments earlier than people expect
- Over time, the banks will carve out operating chunks of BNB in SIV-like vehicles, ranked as tier-2 capital, allowing capture of a very profitable recover in infrastructure asset prices.
If the banks put some pressure on the BNBG holders - expect a fight. At this point our interests will be aligned with the ordinary holders:
- expect to write, en-mass "please explain" letters to the trustee
- expect to complain to the regulatory authorities, banking ombudsman, etc.
I would have thought our trustee was being proactive, on our behalf. However, I am not holding my breath in this regard.
If I were an ordinary holder - I would be writing to my directors reminding them of exactly who's interests they are supposed to be serving.
If you stand, staring into the oncoming lights - you will end up as road kill.
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