Greek bank bailout fund picks Fairfax as anchor investor for Eurobank

[Nnejad]

"The group of investors, including Fairfax, Capital Research and Management, Wilbur Ross, Fidelity, Mackenzie and Brookfield, committed to subscribe for 47 percent or 1.33 billion euros of the share offering at 0.30 euros a share."

 

http://finance.yahoo.com/news/greek-bank-bailout-fund-picks-150756728.html

[JEast]

I guess Roger Lace and company were finally comfortable with their DD, or a least enough for FFH's largest single equity investment to date (at least from my memory).  Roadshow pitch attached.

 

Cheers

JEast

Roadshow_Presentation.pdf

[Grenville]

I guess Roger Lace and company were finally comfortable with their DD, or a least enough for FFH's largest single equity investment to date (at least from my memory).  Roadshow pitch attached.

 

Cheers

JEast

 

JEast, do you mean the largest investment this year or ever? Or is your comment in reference to them investing that much this year given their current macro outlook?

 

[JEast]

Largest single one-time investment ever at roughly $550 million.  FFH has added to positions to eventually be larger investments (e.g. Blackberry), but not this large of an investment in one step to my knowledge.  $550m is a huge investment and no one on the board seems to have blinked.

[Grenville]

Largest single one-time investment ever at roughly $550 million.  FFH has added to positions to eventually be larger investments (e.g. Blackberry), but not this large of an investment in one step to my knowledge.  $550m is a huge investment and no one on the board seems to have blinked.

 

Ahh…that makes sense, I was thinking in terms of overall investment. I didn't realize this was their largest initial investment, thank you for pointing that out!

[gary17]

This is what puzzles me - and sorry I am not as up to date on all the stuff Prem has said -- on the one hand he sees deflation in europe, china, and a recession for 10 years....... and on the other hand he pumps in $500M into a Greek Bank & also a few years ago in Bank of Ireland....   

 

If he is 100% convinced there will be a massive correction - why bother investing in the sector in the region that will most likely be affected negatively when his dooms day prediction comes true?  :o

[phil_Buffett]

This is what puzzles me - and sorry I am not as up to date on all the stuff Prem has said -- on the one hand he sees deflation in europe, china, and a recession for 10 years....... and on the other hand he pumps in $500M into a Greek Bank & also a few years ago in Bank of Ireland....   

 

If he is 100% convinced there will be a massive correction - why bother investing in the sector in the region that will most likely be affected negatively when his dooms day prediction comes true?  :o

 

+1

 

thats the Point i also dont get. and thats the Point i will not invest in fairfax. he sells j&j, wells Fargo and prem says that the ultimative Crash will come (because of his big hedges) and then buys a greek bank  ;D ;D ;D the safest Thing on earth. if a Depression will come in europe, greece is the first Thing with this high debt load who will Crash. makes no sense.

 

btw iam thinking that this not will happen so iam optismtic for europe and us. and would invest in Eurobank here.

in fairfax not!

[SharperDingaan]

"This is what puzzles me - and sorry I am not as up to date on all the stuff Prem has said -- on the one hand he sees deflation in europe, china, and a recession for 10 years....... and on the other hand he pumps in $500M into a Greek Bank & also a few years ago in Bank of Ireland.... "

 

Look a little closer. We would put it to you that they have a repo on part of their Bank of Ireland position, which has released some of their gain as cash, & raised their cost base. That cash gain is what is being reinvested in NBG, & hence their original $ investment remains largely the same as it was. They are doing a bar-bell with Bank of Ireland & NBG; & lowering the cost base of their NBG.

 

Most would anticipate that NBG will fall further in the coming weeks as the extent of the dilution becomes fully recognized, & they take write-downs reducing their capital ratio. We would also expect a systemic quarterly recapitalization to maintain the capital ratio, via a SAN type cash/scrip dividend, starting sometime later in the year.

 

NBG is never going to be a Royal Bank (comparable capital ratios), but it is a lot cheaper, not as risky as it was .... & not in NA. Hard to knock from a diversification POV.

 

SD

 

   

 

[gary17]

"This is what puzzles me - and sorry I am not as up to date on all the stuff Prem has said -- on the one hand he sees deflation in europe, china, and a recession for 10 years....... and on the other hand he pumps in $500M into a Greek Bank & also a few years ago in Bank of Ireland.... "

 

Look a little closer. We would put it to you that they have a repo on part of their Bank of Ireland position, which has released some of their gain as cash, & raised their cost base. That cash gain is what is being reinvested in NBG, & hence their original $ investment remains largely the same as it was. They are doing a bar-bell with Bank of Ireland & NBG; & lowering the cost base of their NBG.

 

Most would anticipate that NBG will fall further in the coming weeks as the extent of the dilution becomes fully recognized, & they take write-downs reducing their capital ratio. We would also expect a systemic quarterly recapitalization to maintain the capital ratio, via a SAN type cash/scrip dividend, starting sometime later in the year.

 

NBG is never going to be a Royal Bank (comparable capital ratios), but it is a lot cheaper, not as risky as it was .... & not in NA. Hard to knock from a diversification POV.

 

SD

 

 

Yes I get that they are just using the same pot of money they started with - but I tend to look at it as the current state: money today is money today; doesn't matter where it came from.  If I have X amount of money today, I should be making the best decision based on the info available.... today. So if he's even more convinced today than he was 4 years ago that the crash is so close, then he shouldn't be wasting a dime on a Greek Bank -- that's just my way of thinking. 

 

Perhaps the alternative could have been less hedge, keep the quality companies and have a bit more cash.  But I see there's already been a ton of discussion on this topic.....

 

All I'm really after is why the seemingly contradicting investments that'd seem to cancel each other out ... 

 

Personally I do think Europe has ways to go and agree it is probably a very good investment in the long run.  Eurobank also has quite a bit going on in Eastern Europe (so is NBC and Alapha I believe) - perhaps that's where he is seeing growth in the "long term".

 

Gary

 

 

 

[Sportgamma]

I beg to differ. The way I see it, the hedges are based on their conviction that equity market multiples in NA are too rich and will correct. The CPI trade reflects their view on Europe too a larger extent and they are a bet on a dragged out deflationary environment. Perhaps that scenario is already priced in the eurobank investment. IMO the cpi trade does not imply that they are betting on a crash.

[SharperDingaan]

To us - it looks like they are just shifting portfolio allocation from Bank of Ireland, to NBG, for no net change. Higher potential return, lower net risk, & a bump in the Sharp Ratio. Were they adding/removing $ from the table, we would have a different view.

 

They are also buying NBG for just .30 Euro/share. At todays price, NBG would have to fall 90%+ in a mother of all collapses - & even HW is not that pessimistic

 

SD

[stevevri]

They purchased Eurobank for .30 euro per share not National Bank of Greece.