Thursday, June 05, 2014

It's leverage all the way down

There was euphoria a couple of weeks ago when the bad old 2008 days of Irish, British and Icelandic banks rushing to the Gulf in a desperate search for capital had given way to ... German banks rushing to the Gulf in a desperate search for capital.

At the time we wondered whether the new Qatari investor in Deutsche Bank -- Sheikh Hamad bin Jassim -- was being lent the money by Deutsche Bank to buy his stake.

It turns out that everyone has learned enough from the Barclays, Kaupthing and Anglo affairs to know that the bank shouldn't lend money to a share buyer.

But Sheikh Hamad still needed to round up around US$3 billion in cash. So (via Bloomberg News) --

The man who is providing Deutsche Bank AG with a 2.1 billion-euro ($2.9 billion) cash infusion, and a vote of confidence, held talks with banks about getting a loan to finance the investment and to hedge it. Former Qatari Prime Minister Sheikh Hamad Bin Jassim Bin Jabr Al Thani was approached by banks offering loans to fund the purchase as well as derivatives to protect him from losses on the shares he purchased, said four market participants who asked not to be identified because they weren’t authorized to speak publicly. Two of the participants said they were told Qatar National Bank agreed to provide a $2 billion margin loan. An official at Sheikh Hamad’s office in Doha declined to comment on the talks, as did representatives for Qatar National Bank and Frankfurt-based Deutsche Bank. If Sheikh Hamad’s investment turns out to have been structured to limit his financial risk in the stock, that would be a red flag, according to Peter Hahn, a finance lecturer at London’s Cass Business School. “That should be a concern for all Deutsche Bank shareholders,” Hahn said. “What sounded like a vote of confidence may be a hedged bet.”

But at least Sheikh Hamad is not involved in any of that dodgy World Cup 2022 business, right?