Those UBS asset sale rumours

Discussion in 'Wall St. News' started by ASusilovic, Mar 5, 2008.

  1. Specifically, $20bn of Alt-A mortgage securities to be sold to bond giant PIMCO.

    Such is the talk going around London dealing rooms anyway. Shares in UBS are up 1.6 per cent on the speculation. Both PIMCO and UBS have declined to comment.

    The Alt-A MBS have reportedly been sold at 70c on the dollar, which would be a massive loss, since UBS valued what looks to be the same instruments at 96c on the $1 just three weeks ago in their 2007 results:

    UBS’s Alt-A position can be divided into two categories. The first consists of AAA-rated RMBSs, backed by first lien mortgages, which amounted to USD 21.2 billion at 31 December 2007. These positions lost USD 0.8 billion (CHF 0.9 billion) in value in the quarter, most of it in the last few trading days in December.

    The second category consists of the higher risk RMBSs, either non-AAA or RMBSs backed by second lien mortgages, and a small CDO exposure. These positions amounted to USD 5.4 billion at year-end and incurred losses of USD 1.2 billion (CHF 1.4 billion).

    In fact, the bank’s previously undisclosed and massive Alt-A exposure was something of a shock at the time.

    If rumours of the sale prove to be accurate, a $4bn + writedown notwithstanding, then UBS shareholders should be pleased. The bank narrowly escaped having its emergency recapitalisation plans voted down at the recent EGM. An asset sale raising $20bn should keep further SWF incursions at bay for a while.
    All that, of course, assuming this story stands. Pimco officials have been cold towards mortgage securities for some time.

    Asset fire sale or "reorganization" of the balance sheet ? ....:confused: