2Pack
December 9, 2007, 12:44pm
#1
nytimes.com/reuters/business … ec-uk.html
Kensington owns Start . Peter Sutherland would therefore become Irelands biggest sub prime lender, he is chairman of Goldman Sachs.
JOHANNESBURG (Reuters) - South African investment banking and asset management group Investec is preparing to sell its British sub-prime mortgage lender Kensington to U.S. investment bank Goldman Sachs , a South African newspaper reported on Sunday.
Discussions over Investec’s disposal of Kensington are at an early stage, but could pick up steam early in 2008, according to the Sunday Times. The newspaper said the amount that Goldman would pay for the asset had not been disclosed.
Investec launched a successful 273 million pounds purchase of Kensington in May in a bid to gain a foothold in the British sub-prime mortgage market. It said at the time it planned to inject money into the asset.
But the wisdom of the deal was soon questioned as banks and other financial institutions were buffeted by a global credit crunch spurred by the virtual collapse of sub-prime lending in the United States and Britain.
Leading banks have taken massive write-offs due to their exposure to sub-prime loans, which are typically made to borrowers with lower credit ratings and at higher risk of default.
But some companies, such as Goldman Sachs, have been left largely unscathed by the chaos and are now taking advantage of what some investors see as attractive valuations for certain assets in the specialty lending sector.
To be honest, that article sounds like it could be an awful lot of hot hair. I simply cannot see Goldman wanting to buy a risky sub-prime lender unless they can snap it up for a song.
chalice
December 9, 2007, 1:24pm
#3
Start Mortgages is for sale separately from Kensington
thepropertypin.com/viewtopic … gages+sale
Goldman Sachs is not as immune from the Credit Crunch as is generally believed. They have accumulated quiet a bellyful of Level 3 assets.
I would guess that they are scouring the world for bargains to be had from the present credit fallout. Yes, they will pick up the likes of Kinsington for a song. In case we need reminding Level 3 Assets
By way of background, investment banks and other financial firms are subject to new accounting rules that require them to specify how they value their assets. Level 1 assets are ones whose prices can be readily obtained (i.e., they trade actively); Level 2 assets may not trade often, but they are very similar to assets that can be readily priced, so a Level 2 asset can be priced in relation to a similar (or several comparable) Level 1 instruments. Level 3 assets cannot be priced in relationship to actively traded assets. Many observers treat these values with considerable skepticism, calling them “mark to make believe.”
The Fortune article takes a dim view of the increasing amount of Level 3 assets that investment banks are carrying. It shows how, per the chart below, how the amount of Level 3 assets grew in the third quarter at all major firms. What it fails to mention is that in a sharply deteriorating market like last quarter, the last thing you want to be doing is taking on more risk, which is what an increase in difficult-to-trade assets entails.
The story also picks up on an argument pressed by Goldman: not all Level 3 assets are equally dubious. The firm claims, as Morgan Stanley does, that a fair amount of their Level 3 positions are real estate and private equity deals. That is comforting, but only up to a point. Even if their value is less subject to sudden decay than, say, collateralized debt obligations or exotic derivatives, they can seldom be sold for anything approaching “fair” value on a quick turnaround basis. nakedcapitalism.com/2007/11/ … treet.html
https://i.l.cnn.net/money/2007/11/12/magazines/fortune/eavis_level3.fortune/level_3_assets_rising2.gif
