Here Are the Multinationals whose Bonds the ECB is Discreetly Buying

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The ECB’s new role as “debt-buyer of first resort” raises a whole litany of concerns.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

In June 2016, the ECB activated its corporate bond buying program, ostensibly to revive the Eurozone’s stalled economy. The program has been shrouded in secrecy, as the ECB has refused to reveal the identity of most of the companies, divulging only the International Securities Identification Number (ISIN) of the bonds, but not the amounts.

The ECB coordinates the overall effort, but the actual buying is done by the national central banks. Now the non-profit Corporate Europe Observatory (CEO) has cracked the code, so to speak:

Finding the names via the ISIN code is a simple job. CEO has looked them all up to see what investments the ECB has found worthy of public money.

Unfortunately, a lack of transparency at the ECB means the amounts held in bonds of individual corporations are not revealed. While many pension funds do release this information, it seems that the common national bank for hundreds of millions of European citizens is unable to! Nevertheless, a lot can be learned from the lists…

For instance, the fact that Europe’s oil majors have been particularly spoiled, with the ECB splurging on bonds issued by Shell no less than 11 times. The central bank bought bonds from Italian oil company Eni 16 times, Spain’s Repsol six times, Austrian OMV six times, and Total 7 times. Gas companies have also fared remarkably well. When counting the purchase of bonds in Spain, for example, 53% are from companies involved in the natural gas sector. The corresponding number in Italy is an astounding 68%.

Also well favored are Europe’s biggest car companies, in particular those from Germany, with Daimler and BMW tied in top spot with 15 purchases apiece. The ECB also bought seven times bonds issued by Volkswagen, despite the reputational and financial fallout from its emissions scandal. And it bought Renault bonds three times.

Other companies on CEO’s list of coddled giants include Thales, a French producer of missiles, rifles, armored vehicles, and military drones, which has been engulfed in a spate of corruption scandals in recent years; France’s three major water corporations, Suèz, Vivendi, and Veolia; Novomatic, an Austrian-based gambling company owned by billionaire Johan Graf; and luxury goods companies like LVMH, producer of Moët & Chandon champagne, Hennessy cognac, and Louis Vuitton women’s handbags.




These are just some of the corporations benefiting handsomely from a bond-buying binge that has already reached some €46 billion (as of Nov. 25, 2016). When the ECB buys these bonds, it inflates the bond prices and pushes their yields down, which is the purpose, and it thus lowers the cost of capital for this companies even further. By the end of the program, which is “scheduled” to finish in September, 2017, the ECB is expected to have lavished around €125 billion on them.

But that’s not the worst of it. As we reported in August, the ECB has admitted that it is not only buying already-issued bonds trading in secondary markets, as the public was initially led to believe; it is also buying bonds from companies via so-called “private placements.” These debt sales are not open to the broader market, so there’s no need for a prospectus. Only a small number of institutional investors participate.

Private placements are not unusual. What’s new is that the ECB is using them to buy bonds. This was done discreetly, but it was leaked – and the ECB had some explaining to do.

The central bank’s new role as “debt-buyer of first resort” raises a whole litany of concerns. It grants the ECB an almost god-like grip over Europe’s financial markets. And according to The Wall Street Journal, Citigroup figured “that bonds eligible for ECB purchases have already outperformed ineligible bonds by roughly 30% since the bond-buying program was announced in March.”

When the ECB initially launched its program, much was made about the financing opportunities it would provide for companies of all shapes and sizes. Goldman Sachs even forecast that the program would “provide a healthy boost to the equity prices of the continent’s small and medium-sized companies.” It was a joke, of course. Most small firms do not even have the means to issue corporate bonds, especially in Europe where the debt capital markets are far less developed than in the US

Now, six months into the program, total corporate debt in Europe remains dominated by bank loans despite corporate bond issuance being on track for an all-time record this year. As the U.S. rating agency Fitch reported in November, bonds account for only 12% of total funding for Eurozone corporates and they are the almost exclusive preserve of large multinationals. The comparable share in the UK, at 28%, is more than twice that figure. In the US, with its broad, deep-rooted capital markets, bonds account for 44% of corporate debt.

In Spain, only 2.5% of corporate funding is covered by bonds. Most of the remaining 97.5% of funding is provided by bank loans, which have declined sharply since 2011, “partly reflecting the scale of deleveraging, especially in the property sector,” notes Fitch.

In other words, the ECB’s corporate bond buying is having zero positive impact lower down the corporate food chain. Those companies that are still able to get financing invariably end up paying an arm and a leg in interest and commissions. Meanwhile, giant Spanish corporations like Repsol, Telefónica and Iberdrola are gaining access to funds more quickly, more easily, and at cheaper rates than anyone else in the market.

In flooding the upper reaches of Europe’s corporate bond markets with virtually free money, the only thing the ECB has achieved so far is to skew market forces even more in favor of the biggest, the strongest, and the already most coddled corporations, while in the process becoming a major silent partner and investor in corporate Europe. By Don Quijones, Raging Bull-Shit.

“There is not and there will not be a banking crisis in Italy, nor will there be a European financial crisis coming from Italy,” proclaimed EU Commissioner Moscovici. Read…  So Who Gets to Pay for Italy’s Banking Crisis?




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  27 comments for “Here Are the Multinationals whose Bonds the ECB is Discreetly Buying

  1. Greatful again
    Dec 15, 2016 at 9:29 pm

    QE for the connected corporations of Europe? Must be good to be the king. The ECB just gets better and better.

  2. BoyfromTottenham
    Dec 15, 2016 at 9:33 pm

    Typo alert: The article headline should say ‘discreetly buying’ I think.

    • Dec 16, 2016 at 12:44 am

      Oops. Thanks! DQ is an innocent bystander in this. My booboo.

  3. Sidera
    Dec 15, 2016 at 11:39 pm

    Sounds like they should drain the swamp!

    Too bad there wasn’t a populous leader that appealed to the common man who is so disenfranchised today.

    Trump, Trudeau, Obama. Only one more election and they might get it right….

    • walter map
      Dec 16, 2016 at 1:57 pm

      “Too bad there wasn’t a populous leader that appealed to the common man who is so disenfranchised today. ”

      The last time Europe elected a couple of those they wrecked the continent. Time for somebody else to take their turn at it.

      • nhz
        Dec 17, 2016 at 5:49 am

        it depends … in some cases it might produce nothing more than an ungovernable country; which could be a lot better than what we have now. Belgium did pretty good in the long time when they didn’t have a government ;-) And while the country is ungovernable, maybe the establishment power weakens and better alternatives have a chance.

        The problem with most populist leaders in Europe is that they often have valid criticism and sometimes a good analysis of where the problems come from (although most of them ignore issues like central banking), but not a solid and realistic plan to turn the ship around. People who vote for these populist politicians differ strongly on how the current mess has to be solved, the time for easy and painless solutions has passed.

        Just look at Greece … the only ‘solution’ they (e.g. Syriza) have is to kick the can down the road and keep living the good life (for those who still have a goodlife) on the pockets of North European taxpayers; for sure the Greeks themselves are not going to make any voluntary sacrifices to turn things around.

  4. Frederick
    Dec 16, 2016 at 12:42 am

    I generally dont agree with govt bailouts but the VW thing is nothing but a witch hunt by the US so they should be helped I own one and love it nd Im not looking for a handout from them Payback is a female dog you know

    • nhz
      Dec 16, 2016 at 11:03 am

      Even if you call it a ‘witch hunt’ (to some extent I agree), reality is that buyers of these dirty VW diesel cars profited handsomely: their cars where thousands of euros cheaper (and probably cheaper running too) than they should have been based on real environmental performance, compared to some of the competition. Most of these cars shouldn’t even have been on the market.

      The taxpayers were cheated and now some of these VW owners even dare to go to the courts and file damage claims against VW; the only ones who were cheated are the taxpayers and the citizens who get to enjoy the extra pollution caused by these cars.

      • Maximus Minimus
        Dec 16, 2016 at 1:08 pm

        The problem I have with this so called scandal is that there are no real data about the testing method. For instance, my VW has an RPM gauge with maximum of about 6000 rpm, but I only ever drive it at about 2000 rpm (as the car advises me to change gears). During emission testing, I noticed that the testers are pushing the engine to the limit. It makes me wonder if the “scandal” was discovered because the car was spilling its guts, hence the firmware was reacting to it.

        • walter map
          Dec 16, 2016 at 2:05 pm

          “The problem I have with this so called scandal is that there are no real data about the testing method.”

          At least, none that you’ll admit to.

          Nobody does emissions testing the way you describe, and you failed to mention that VW has admitted to being deliberately and systematically dishonest, deceptive, and criminal.

          As usual, corporatists never go to prison for their crimes.

        • nhz
          Dec 17, 2016 at 5:56 am

          There can be no doubt about it that there is deliberate cheating. Also, in several EU countries it has been found that pollution in cities and near roads – especially from the dirty stuff that comes out of diesel engines – is now much worse than was projected some years ago.

          It is obvious that the cheating with emission standards is a major factor for this, this cheating kills (only statistically though, so most people don’t care). Many consumers and company fleet managers switched to artificially cheap, ‘clean’ diesels and as a result the pollution is much worse than it could and should have been.

          Of course it depends on how the car is used (e.g. temperatures and rpm, driving style) but without a reliable way to measure individual pollution these vehicles should be taxed based on their average (statistical) use. With realistic pollution estimates most of these cars would not be on the market. It’s a really sad story, also if you consider that many EU authorities knew about it for years but decided to remain silent. Clearly the financial interest of a few big car companies is far more important than the environment and public health.

  5. Patrick
    Dec 16, 2016 at 3:36 am

    Steal wealth from the poor and give to the rich sounds about right from the unelected ECB. And taxation w/o representation on a mass scale but it’s Europe so those sorts of liberties don’t apply.

    • nhz
      Dec 16, 2016 at 11:08 am

      Also, isn’t it funny how the ECB favors the most evil companies, those that destroy the climate and the weapons industry?

      Clearly shows that all the climate change talk from their EU friends has nothing to do with climate, it is only meant for extortion of EU citizens and helping their friends in the multinationals to eliminate the competition.

    • walter map
      Dec 16, 2016 at 2:09 pm

      “And taxation w/o representation on a mass scale but it’s Europe so those sorts of liberties don’t apply.”

      Taxes are for little people all over. It’s accepted practice in the U.S., for example, that billionaires don’t pay taxes.

  6. Dan Romig
    Dec 16, 2016 at 7:22 am

    As Lord Acton so accurately warned, “Power tends to corrupts and absolute power corrupts absolutely.”

    • walter map
      Dec 16, 2016 at 2:12 pm

      Acton said many interesting things.

      The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.

      – John Emerich Edward Dalberg-Acton, 1st Baron Acton

      That fight has been over for a hundred years. Most people are unaware it ever occurred.

  7. Hank
    Dec 16, 2016 at 9:03 am

    Free money from European Governments to big corporations can be used to justify import tariffs on imports to the US. Seems like this would be a good idea.

  8. Quadra
    Dec 16, 2016 at 1:15 pm

    Wolf In general I dont disagree that this favors the large corps.
    Draghi got the question two meeting ago and claimed that they could clearly see that the funding cost for med/smaller had come down.
    Dont know how they can see that but thats what he claimed.
    My guess would be, since the banks are looking for a return and the margin on large caps has become even lower. Just look at some of the bond issues the last six months. EDF did a 15 year on zero percent a few months ago. Thats a company that runs nuclear power plants. No credit risk hahah

    • Quadra
      Dec 16, 2016 at 1:17 pm

      I missed to wright competition for the med/small is larger so margins down on those loans

      • nhz
        Dec 17, 2016 at 6:06 am

        from what I hear it is even more difficult to get a loan for small companies in my country now than a few years ago, before QE and NIRP. One of the reasons is that with the extremely low rates, it is totally unattractive for a bank to do loans lower than a couple million euro – which is a lot of money for small companies. So most loans go to established big companies or ‘new’ internet startups with lots of big money behind them.

        If you ask Dutch banks for loans of e.g. 100.000 euro you are automatically directed to some government agency that doles out free loans for some specific types of activity, similar to the $5000 or so loans that are doled out in third world countries. Being a government agency most of these loans are totally useless (for connected individuals or idiot ideas that nobody in their right mind would fund but that cater to ideals like LGBT, minorities and all kinds of other political favorites) or contra-productive activity e.g. 100.000 euros for a new company website (have your friend charge 100.000 for the site, pay him 1000 for the work and share the remains and then go out of business so you can keep the 100.000).

        • dagny taggart
          Dec 18, 2016 at 5:35 am

          Happens every single day on a massive scale. And not only for 100k Euro’s but for many millions. That’s why I am very much in favour to abolish EVERY form of government based subsidies. If an idea or a technology really works, one will always find an investor. If not, forget it – it just doesn’t work or has no payout.

  9. Tom kauser
    Dec 16, 2016 at 2:08 pm

    Milken is back?

  10. Chicken
    Dec 17, 2016 at 12:29 pm

    Privatize gains and socialize losses, selective socialism is a lucrative boon for elites.

  11. Chicken
    Dec 17, 2016 at 12:54 pm

    Rescue big bankers so they can continue making large loans to multinational monopolies with pricing power. Doesn’t matter they contribute nothing to the tax base and are moving to automation to avoid contributing to tax base.

  12. Rico
    Dec 17, 2016 at 11:09 pm

    If the ECB does not loan money to big oil (and other key industries) the big oil companies will cease to exist.

    The reality is that big oil is losing billions month after month so something has to be done to keep them alive.

    Obviously this is a very grim situation.

  13. Trumanshow
    Dec 19, 2016 at 1:56 am

    Large companies are more favourable to the EU construct, more favourable to globalization, more favourable to mass uncontrolled immigration. Smaller companies are generally not. Give free dough to the big companies they buy out the small companies thereby centralizing control and grip of the EU.

  14. Smitty
    Dec 23, 2016 at 2:53 pm

    “Private placements” I smell a discrete Abengoa bailout with public funds.

Comments are closed.