Rebirth 2006, creating a super consortium

An Xin took a big sip of the mineral water on the conference table, then looked at Lu Xi and Liang Fan with a smile and said, "Just now when I mentioned that Xu Shixun is the vice chairman of the board of directors of HSBC and a small shareholder of Hang Seng Bank, I suddenly thought of a plan that seems to be somewhat executable. Can you give me some reference?"

Lu Xi and Liang Fan looked at each other, and then they spoke:

"no problem!"

"Okay, Mr. An, please tell me!"

An Xin nodded slightly, and then laid out the plan that suddenly occurred to her: "Didn't we finalize the subsequent funding arrangements for Yuanfang Private Equity before?

It was originally estimated that about $20 billion would flood the market to sweep up CDs issued by major banks.

In this case, I suddenly thought that we could buy more CDs issued by HSBC, and when the subprime mortgage crisis breaks out, we can negotiate with HSBC and use our rights in CDs issued by HSBC to exchange for the equity of Hang Seng Bank. Do you think this is feasible?"

"what?!"

The two looked at each other, then lowered their heads and began to think.

Seeing this, An Xin did not urge them and waited patiently for them to think about it.

After a long while, Lu Xi raised his head and said, "It's theoretically feasible, but there is actually a big problem. Is HSBC willing to accept this deal?

You have to know that HSBC acquired Hang Seng Bank after careful planning. Up to now, Hang Seng Bank has become HSBC's moat!"

An Xin laughed out loud when he heard this, and then said very straightforwardly: "If the cut is ruthless enough, HSBC will not want to cede Hang Seng Bank, then we can pay in cash, and we can use the cash to acquire other banks!

To be honest, as long as most of HSBC's assets are still in Hong Kong, there is no need to worry about HSBC defaulting on its debts!

I can’t do anything to American domestic capital, but I can’t do anything to HSBC? What a joke!

"Hahaha!"

Luxi and Liang Fan were so happy that they laughed out loud!

There is nothing wrong with this statement. No matter how capitalist Hong Kong is, it still belongs to China in the final analysis.

As long as HSBC wants to stay in Hong Kong, it must execute this CDS agreement!

"Mr. An, should we go directly to HSBC headquarters to discuss the purchase of CDs, or should we talk to HSBC's US branch?"

Hearing Liang Fan's question, An Xin shook her head and denied it: "No, no, no, none of them! Doesn't HSBC have a wholly-owned financing company in the United States? Talk to that company!"

Liang Fan thought for a while, then suddenly realized and asked, "Are you talking about householdinternational?"

An Xin nodded slightly and replied, "Yes, but hasn't Household International changed its name to HSBC Financing?"

Liang Fan scratched his head when he heard this, and said with a little embarrassment: "Boss An, I'm sorry, I'm used to calling you householdinternational!"

An Xin waved her hand and said, "It's okay. Household International is indeed a more famous name."

Before HSBC acquired Household International, Household International was already the largest consumer finance company in the United States.

In 2003, HSBC spent US$148 billion to acquire all the shares of Household International.

Guess why HSBC acquired Household International?

People who are not aware of the situation would definitely think that it is to expand the US market.

In fact, they are targeting the US subprime mortgage market!

After acquiring Household International, HSBC immediately increased its investment in the US subprime mortgage market!

Before the subprime mortgage crisis broke out, Household International had already issued a total of $1452 billion to related lenders, becoming one of the largest subprime mortgage providers in the United States!

After the subprime mortgage crisis broke out, HSBC paid US$250 billion to save Household International!

That’s not all. In 2009, HSBC really didn’t want to carry on any longer and announced that it would gradually withdraw from its related investments in Household International and chose to admit defeat and leave!

When An Xin was learning about HSBC's acquisition history in her previous life, she couldn't hold back her excitement after seeing the ins and outs of this acquisition!

"Then Mr. An, if we approach HSBC for financing to purchase CDs, do we need to increase the leverage ratio?"

Hearing Liang Fan's question, An Xin gave a direct answer: "Yes! Adjust it directly to 20 times leverage, and we can pay the relevant premium for 20 times leverage!"

As for CDs, as long as you agree on the relevant triggering conditions with the issuer, you are actually gambling with the issuer!

For example: if you buy CDs with a face value of $200 billion and the leverage ratio is 20 times, the buyer will need to pay $10 billion in premiums each year!

If the default rate in the subprime mortgage market does not explode a year later, the $10 billion will belong to the issuer.

On the contrary, if the default rate in the US subprime mortgage market explodes one year later, the issuer will have to redeem the 200 billion CDs based on the face value!

Do you think the issuer is stupid for being willing to bear a $10 billion payout for a $200 billion premium?

Saying this is actually taking a God’s perspective!

The US housing market in 2006 was so hot that except for a few financial consortiums such as Goldman Sachs, Morgan Stanley and others, almost all other top financial consortiums participated in the issuance of CDs and hybrid CDOs. Their main belief was that the US housing market would never end!

No, Goldman Sachs, Morgan Stanley and JP Morgan actually also participated in the issuance, but they were smart. They packaged the CDs and CDOs they issued into bond investment packages, and then listed them and sold them to other investors. They only earned the issuance and underwriting fees, making other investors the betting parties.

"Mr. An, if the leverage ratio is 20 times, how many CDs issued by HSBC Financing do we need to buy?"

After thinking for a while, An Xin gave a specific amount: "US$15 billion will do. A 20x leverage ratio means a payout value of US$300 billion. That's enough. Use the remaining 5 million to buy CDs issued by AIG!"

"AIG (American International Group)?"

An Xin nodded slightly, and then explained: "That's right, AIG is quite strong, so just buy it, and there's no need to look for other distributors!"

The actual reason is that I feel at ease knowing that AIG finally got the support money from the US government and executed the compensation for all CDS!

Liang Fan immediately assured: "No problem, I will take care of all the investments!"

An Xin nodded with satisfaction, then stood up and said, "Okay, that's it, both of you go and get busy, and let me know if there's any progress!"

"Roger that!"

"no problem!"

Lu Xi and Liang Fan also stood up and left the meeting room with An Xin...