Posted by: John Gilmore | September 16, 2006

Debt Pile Looming Over European Firms

I mentioned in my first article on the world’s monetary system that exponential debt creation is required for the world’s economy to function. I used the game of musical chairs as an analogy to show that this debt creation must continue indefinitely – or a worldwide economic collapse will result. The article below shows us what happens when the music stops and someone has removed all the chairs. Most of the large companies in the world (not just European firms) rely on short term debt to fund their operations. What happens when this short term debt financing disappears? Everyone searches the world over for a chair – but there are none. This excerpt from the article below sums it up.

“According to the report, European companies will be forced to pay back or refinance $586.3 billion through 2011, with more than 40% of that debt coming due over the next year.”

So, over the next year, European companies must refinance approximately $235 billion dollars – with no way to refinance. Sound familiar? It should – because the exact same thing is happening in the world’s housing markets. Many people have purchased homes with adjustable rate mortgages or some type of ARM – and now there is no way to refinance. Many more are losing their jobs and simply cannot pay their mortgages – regardless of the terms.

This wonderful game of musical chairs is ending – so the question becomes – who wins the game? Certainly not the players. We’ve all been playing a game that has been setup so that we can’t win. You now know who the winners are – the Central Banks. They created this mess for a reason – so when a systematic failure eventually happens – they own/control everything. This is a simple analogy – but it sums up what’s being done to us. All of the ‘bailouts’, interest rate cuts and liquidity/capital ‘injections’ in the world will not prevent this system from failing. This cartel of international bankers is probably feeling pretty proud of itself. I would tell them the same thing I would tell Bush, Bernanke, Pelosi, Greenspan, the Rothschilds and everyone else involved in this – is it worth it to gain the world and lose your soul? Because that’s exactly what’s going to happen. This ‘beast’ will gain the world – and spend eternity in ‘a lake of fire’. I cannot believe we (humanity) could be so blind – but the sad truth is that we are blind – and these people who must be celebrating that their conquest is almost here – are the most blind of us all. Maybe – when they’re staring at the gates of hell – maybe then they will realize how deceived they truly were. I’ll never know.

I’ll end this with something for you to think about. You really don’t need to know anything about economic theory, exponential growth or higher math to realize that this current banking system is stacked against us. Just think about how you pay your mortgage and how the system manages your debt. As an example, let’s say you buy a home for $200,000 and take out a 30 year fixed rate loan. With interest, you actually owe $400,000. You’ll be making one payment a month for 360 months (one payment a month for 30 years). So, your monthly payment will be $1,111. Let’s say that you always pay on time for 20 years. After 20 years, you lose your job and have some unexpected medical bills that force you to burn through your savings – and you now don’t have the money to pay your mortgage. After 20 years, you’ve made a total of 240 payments of $1,111 or $267,000. When the bank forecloses, do you get any of this money back? Do you at least get what you paid on the principal? No – you get exactly nothing. The banks says thanks for all your money – and up until the housing market began to decline – would then sell your house on the open market and reap the added benefit of the appreciation of your home. So, we really haven’t owned our homes at all – we’ve simply been renting them from banks. Obviously, as long as the housing market was good and the economy was good – this system didn’t really bother us too much because we could always sell our home or refinance. Until now, we never really thought too much about this system – because most of us had jobs and a mortgage we could afford. Now – things are a little different and they’re going to get a lot different. Now – the system is exposed for what it is. It ultimately favors only one group of people (not the private banks – they’re now failing too) – the people behind it all – the people who control the Central banking system.

jg

___________

November 12, 2008

Debt Pile Looming Over European Firms
Companies Are Facing Tougher Terms in a Push to Refinance Their Obligations, Says S&P
By AINSLEY THOMSON, MICHAEL WILSON and CAROL DEAN

LONDON — European companies, already in the middle of an economic downturn, face another uphill struggle as they seek to refinance $242.6 billion of maturing debt over the coming year, according to credit-ratings firm Standard & Poor’s.

With credit still scarce and expensive, Europe’s large corporate-debt pile poses an unwelcome challenge to companies, which are having to pay dearly to roll over existing debt and insure against default risk, S&P said in a report published Tuesday.

“Funding pressures in Europe have escalated sharply since September as stress in the global financial system accelerated,” the report said.

According to the report, European companies will be forced to pay back or refinance $586.3 billion through 2011, with more than 40% of that debt coming due over the next year.
Many companies are resorting to stop-gap measures such as negotiating the extension of maturities on existing loans, also at hefty mark-ups. Even healthy companies are feeling the added pressure on their books as revenue and cash flow shrink.

The few corporate borrowers able to access medium-term funding in the bond market in recent months have had to sweeten their deals with considerable risk premiums to attract investors, driving up the interest rates they have to pay.

France Telecom had to double the spread over the risk-free mid-swaps benchmark rate when it added a €300 million ($382.2 million) to its existing €1.25 billion 10-year bonds on Nov. 4. The new spread was 2.4 percentage points, from 1.1 points in May, according to the terms of the deal.

No company rated below single-A has managed to access the bond market in recent months, offering little hope for companies further down the ratings scale.

The cost of insuring €10 million of corporate debt against default for five years was €135,000 per year on Monday, up from €23,000 at the beginning of 2007.

Telecommunications is the sector with the largest needs, with $113 billion to refinance by 2011, the S&P report said. That is followed by utilities companies, which are set to repay $79 billion.
In a report published at the start of October, analysts at Unicredit estimated that Deutsche Telekom has the biggest requirement of the telecom companies, with about €4.5 billion expiring before the end of 2009. France Telecom follows closely with €3.9 billion and Telecom Italia with €3.8 billion.

French nonfinancial corporate issuers account for the largest portion of debt to be refinanced, with 26%, followed closely by the U.K., Germany, Netherlands and Italy, which have a combined share of 79%. The report examined all debts rated by S&P including bank loans, notes and bonds.

Companies with refinancing needs are entering into discussions with lenders early to try and secure funding at reasonable costs.

U.K. betting group William Hill PLC confirms it has begun discussion with its lenders to refinance its £1 billion ($1.56 billion) of debt, even though it isn’t due to pay the debt back until March 2010.

French construction materials group Compagnie de Saint-Gobain SA said last week that it has agreed with lenders to extend the maturity of its €2.125 billion loan by a year to October 2010.
Saint Gobain didn’t reveal pricing details, but people familiar with the matter said it had to accept costlier terms to make the deal. The company agreed to pay 1 percentage point over the Euribor benchmark rate for interbank lending, compared with 0.2 percentage point under the existing loan terms, plus a flat fee of 0.4 percentage point, these people said.

U.K. cable TV and broadband provider Virgin Media Inc. also resorted to restructuring its debt, with its creditors agreeing last week to delay repayments on its £4.3 billion debt for three years. Virgin agreed to a one-time payoff to each lender and added as much as 1.5 percentage points to the interest rate. The changes added an estimated one-off payment of £70 million and an extra £50 million to Virgin Media’s annual debt-servicing bill.

Write to Michael Wilson at michael.wilson@dowjones.com and Carol Dean at carol.dean@dowjones.com

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