More ECB Bond Holdings Get in Trouble: Infrastructure Giant Atlantia, Infamous for Collapsed Genoa Bridge, Could Lose its Core Business

Amid a slew of problems.

By Nick Corbishley, for WOLF STREET:

Italy could be on the verge of approving rules that would make it much easier and cheaper to revoke highway concessions. And that could be very bad news for Autostrade per l’Italia (ASPI), the private toll road operator that controls more than half of Italy’s aging toll roads and which is blamed for the collapse of the Morandi Bridge in Genoa in 2018 that resulted in 43 fatalities and left 600 people homeless. The regulatory uncertainty sent shares of ASPI’s parent company, Atlantia, down 10% to eleven-month lows this week.

Majority controlled by the Benetton family’s holding company Edizione, Atlantia is currently facing a criminal inquiry for potential negligence in the Morandi Bridge collapse. Atlantia happens to own the inspection company responsible for safety checks on the bridge. And those checks, it seems, were not very thorough.

Italian prosecutors recently widened their inquiry into suspected safety breaches to include more employees and viaducts than previously identified. The suspects include Atlantia subsidiaries APSI and Spea Engineering, Atlantia CEO Giovanni Castellucci and Chairman Fabio Cerchiai. If found guilty of negligence, Atlantia could face massive fines. The company already booked provisions for the disaster in its 2018 accounts, with a negative impact on its EBITDA of €513 million.

Atlantia’s troubles were compounded this week when the roof of a tunnel operated by ASPI collapsed. Thankfully, this time there were no injuries, but the timing, just days before the parliament votes on the government’s proposed measures to revoke highway concessions, could not have been worse.

Deputy Transport Minister Giancarlo Cancelleri, a member of the ruling 5-Star Movement that has spearheaded the charge against Atlantia, said on Friday that the company had “run out of alibis” and that Rome would have to strip ASPI of its contract with the state. “I repeat: we must send a strong signal… what else must collapse to make us understand that these people did not operate with common sense?”

ASPI is a vital income-generating piece of Atlantia’s sprawling business empire, which includes overseas motorways, airports in Rome, Nice, Cannes-Mandelieu and Saint Tropez, as well as large holdings in Getlink, the Paris-based company that controls the Channel Tunnel, and the Spanish telecommunications infrastructure behemoth Cellnex. In the first three quarters of 2019, ASPI provided 35% of Atlantia’s €8.82 billion in revenues and 33% of its Ebitda (earnings before interest, taxes, depreciation, and amortization).

Now, much of that revenue and profit could be under threat. If the government’s proposed measures are introduced and the motorway concession is revoked, compensation due Atlantia could fall from over €20 billion to about €8 billion euros. According to Bloomberg, in such an event, ASPI could face bankruptcy as it would lack the funds necessary to pay back the €10.8 billion of debt it owes.

Revoking Atlantia’s contract would still mean the government would have to take on some of Altantia’s liabilities, potentially swelling Italy’s already bloated public debt (last count: 134.8% of GDP). And that is unlikely to go down well in Brussels. There’s also stiff opposition to over-penalizing Atlantia within some quarters of Italy’s fragile coalition government.

Atlantia has threatened to give back all of its highway concessions if the measures are confirmed. It has also announced that it is considering selling a stake of up to 49% in Rome airport operator Aeroporti di Roma. It might also sell off part of its stake in Spanish toll road operator Abertis and telecommunications infrastructure company Cellnex.

But it could still face funding issues. Since acquiring part of its Spanish rival Abertis in 2018 in a €16.5 billion joint takeover with Spanish construction behemoth, ACS, and ACS’s German subsidiary Hochtief, Atlantia’s total debt pile has increased to €38 billion. A source close to the company said the loss of the motorway concession in Italy without compensation could trigger a default on €16 billion of debt belonging to ASPI and Atlantia.

The holders of that debt include the European Central Bank, which has purchased undisclosed amounts of 11 bonds issued by Autostrade and another three bonds issued by Atlantia. As both firms have, until now, been rated investment grade, their bonds have qualified for the ECB’s corporate sector purchase program, or CSPP.

But that debt is now being downgraded into junk. On Friday, Moody’s downgraded Atlantia to to Ba2, two notches into junk, after having downgraded it to Ba1 (one notch into junk) in early December, and also downgraded Autostrade to Ba1, on uncertainty surrounding the future of Italy’s road toll business. Moody’s is keeping the ratings on review for further cuts. Both firms are just one notch away from being dealt the same fate by S&P’s, which had downgraded the firms in September to one notch above junk has the firms on “credit watch negative.”

If two of the major ratings agencies — in this case, Moody’s and S&P — downgrade Atlantia to junk, it would trigger, or has already triggered, selling by bondholders that are contractually bound to hold assets of investment grade quality, including many pension funds and sovereign wealth funds. The ECB, while it is not allowed to buy junk-rated debt under its rules, is not obligated to sell debt that has been downgraded to junk.

Atlantia would become the third high-profile company after retail giants Steinhoff and Dia to have issued large amounts of corporate debt that were hoovered up by the ECB only to then be downgraded to junk. In the case of Steinhoff, rather than continue holding those bonds on its balance sheet, the ECB ended up selling its position at a multi-million euro loss. By Nick Corbishley, for WOLF STREET.

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  67 comments for “More ECB Bond Holdings Get in Trouble: Infrastructure Giant Atlantia, Infamous for Collapsed Genoa Bridge, Could Lose its Core Business

  1. Keeper Hill says:

    Parity needed. At a minimum

    • joe saba says:

      converting debt to equity(or non-equity)
      isn’t that a business cycle thing
      but we’re in financial cycle

  2. Old Engineer says:

    Let me get this straight: the company that owned the Morandi Bridge, Atlantia, also owned the company that did the safety checks on the bridge? And as you said “…those checks, it seems, were not very thorough.”?
    Kind of like Boeing self certifying the unsafe at any altitude 737 Max.
    And neither government saw any risks in those facts. Mama mia!

    • WSKJ says:

      Boeing’s AFKA737M came to my mind, too, in reading Nick’s blog re the Morandi Bridge and Atlantia.

      In the case of Boeing, it is apparent that bad design was never compensated for by software genies. It’s so hard to fix bad design. Hard when not downright impossible.

      In the case of the bridge, perhaps the cost-cutting involved buying cheap materials, perhaps not enough rebar in the concrete ?

      In Boeing’s case, and in Atlantia’s case, you just can’t overcome Gravity if you choose apparent profits rather than impeccable design, and strength of materials and construction.

      And then the apparent profits turn out to be short-lived, and perhaps they transform into big losses.

      Gravity…..not just a good idea. It’s the law.

      • Old Engineer says:

        WSKJ, I think you are right. The 737 Max will never be as safe as other planes, regardless of the software “patches”. It is more inherently unstable than most planes and is going to take a lot more pilot attention to integrate a lot of information and decide what to do. If they put it back in service I’ve no doubt we’ll hear from it again.

      • KGC says:

        The problem with the bridge was design and construction. The supporting metal frame was covered in concrete. Concrete is not waterproof, and the metal inside rusted. This is not easy to detect, but it’s a known problem and part of the reason they don’t design certain structures in this manner. Rusted metal swells, swelling cracks concrete, more water is let in; at some point you have structural failure.

        A major problem with the bridge is it became political. The designer was Italian. It was attractive enough to win design awards. Nobody was going to risk career suicide by stating the design was anything less than optimal, and no company with State contracts was going to say it was failing when it was a bright political icon the whole country was proud of.

        Boeing is doing the same thing with it’s aircraft. If it can make the issue political, then taxpayers will have to bail them out. OPM!

      • robt says:

        The first anniversary report of the 737 MAX, May 21, 2018.
        “As of this week, 130 MAX airplanes have been delivered to 28 customers. Total orders for the airplane stand at 4,509.
        The MAX has racked up more than 41,000 flights and 118,000 flight hours—transporting more than 6.5 million passengers in the process.”
        Presumably that could be more than doubled for the next year 2018 to 2019. Too bad things happen, and there’s nothing more dramatic than a plane crash to erase millions of miles of safe travel.
        Rule: You’re only as good as your last mistake. Nothing else matters.

        • Alistair McLaughlin says:

          …there’s nothing more dramatic than a plane crash to erase millions of miles of safe travel.

          Except for 2 plane crashes. That would be twice as dramatic.

          Those crashes demonstrate that the millions of miles flown previously were not so much safe as lucky. If regulators do their job, the AirMax 8 will never fly again.

  3. David Hall says:

    Italy has close to 10% unemployment.

    There is also a problem with talented Italians leaving the country to find work elsewhere in the Eurozone. They called it a “brain drain.”

  4. Cold water says:

    Hey Wolff— I understand you don’t want lots of political rants here, so certain comments get flagged for moderation… but I notice several really nasty commenters (unamused) get a free pass… what is up with that?

    • Unamused says:

      Perhaps I should apologise. Just kidding.

      My corrections to deliberately deceptive corporatist propaganda isn’t ‘nasty’. You just resent not getting away with it and misrepresent any challenge as ‘nasty’. In view of the subject matter typical of the articles on this web site you’ve obviously been winning this game for a long time, so what’s your problem?

      Let’s talk about Mr. Corbishley’s excellent post, shall we? Aren’t you pleased that Italian authorities are finally getting a handle on the referenced corporate abuses, despite the extreme difficulties? Or is that a bad question?

      • NBay says:

        Why don’t you respond to the object of your whining? Are you like our leader and have to wait for the Fox team to put together your ideas for you. Pathetic.

        • NBay says:

          That was for water, sorry….but nobody goes more than a couple days back here anyway…..what is this thing about posting your screed here first? Even skipping the article? Don’t any of you want to take some time to think article and comments through?????

          Maybe even LEARN something?

          Pisses me off more than Wolf!

    • Cold water says:

      Wolf — if you choose to moderate your comment section, you have to moderate both sides equally — even when you disagree with one side (which you will by definition).

      You are setting the tone for comments by allowing unamused to post nasty, unsupportable comments. It doesn’t matter what your intentions are — your actions speak much louder.

      You are currently signaling that you support nasty partisan bickering

      • Cas127 says:


        “You are setting the tone for comments by allowing unamused to post nasty, unsupportable comments”

        Hmmm…I find Una to be periodically inflammatory too but in general I think censorship would make things worse.

        The commenting section here is a bit unique in that there are both left wing semi-maximalists and conservatives who are disgusted/very concerned by existing government monetary practices – but who strongly suspect that left-wing maximalism would make things worse.

        What we do have in common is a visceral reaction to the Empire of Bullsh*t that DC has built over decades – that is damn obscene itself and merits occasionally obscene language.

        So long as the venom is accompanied by at least occasional supporting facts and argument, I think increased censorship would make the comment section poorer.

      • NBay says:

        Can’t help but notice your whining choice of adjectives, e.g., “nasty”.
        Don’t think I need to add more.

    • Wolf Richter says:

      Sometimes I notice things too late, and then a whole string of comments would have to be deleted because they’re all attached to the first comment. So at some point I block the new ones without deleting the old ones. You just don’t see these comments when they’re blocked. So yeah, I piss off both sides fairly equally, you just cannot see it.

      Sounds like we’re in political season again, and I have to start cracking down on politickers.

      • Brant Lee says:

        I learn a lot from the comments. I hope they don’t dry up. Isn’t it nice NOT to see the usual four-letter words and senseless attacks back and forth, seen elsewhere? This site is the best on the net.

      • Unamused says:

        His comments that get through are his “nicer” comments?!?!?

        Please, cite an example, if you can.

        I think you’re just whining because I’m so successful at challenging your lying corporate propaganda.

      • John Taylor says:

        I’ve occasionally had comments blocked, but it’s not a big deal to me. I’m fine with Wolf as a moderator so that comment strings don’t turn into partisan frenzies unrelated to the article or subject.

    • Jos Oskam says:

      For what it’s worth, I do not consider Unamused’s comments nasty at all. I actually quite like his acerbic remarks, perhaps because I am an old cynic myself. My great example H.L. Mencken also was in his times widely disliked by certain people, and see how often he is quoted now.

      Dislike should not be a reason for censoring.

      • NBay says:

        100% agree, Jos. The site is great as is, and I know there is plenty of behind the scenes easy and tough decisions made on Wolf’s part.
        “One monkey don’t stop no show”

  5. LetItRainEuros says:

    In today’s Central Bank construct, where the balance sheet can grow and grow without there being concern, why should we care if the ECB made a bad investment? The ECB was never going to sell the debt and they are not being measured as investment managers. The debt has already been monetized and the euros are in the economy.

  6. A says:

    In other news: NYC property bubble looks primed to implode

    “People don’t realize this is already as bad as it was after Lehman, purely from a supply standpoint,” Mark Chin, the CEO of Keller Williams, told the Times.

    • Unamused says:

      In other news: NYC property bubble looks primed to implode

      The Fed’s got it covered. I wouldn’t be surprised if Chin is just fearmongering and has a bet going. After having watched so many truly inventive corporate chicaneries for so many long years it would take rather a lot to surprise me. I could be wrong, but I doubt it.

    • Petunia says:

      NYC looks like it is losing a congressional seat in the next census redistricting. Now the numbers are starting to matter. Investors may prop up the real estate markets but investors don’t generally vote where they invest. All this “wealth creation” is adding up to a loss of political power. Globalism, who knew?

  7. CreditGB says:

    The paid manager of these assets has a company it owns inspect and certify them for safety?? Really? Nothing political here, just criminal fraud.

  8. 2banana says:

    When fraud and GAAP laws are enforced.

    And bankers and CEOs go to jail.

    With perp walks in front of the press.

    With years of bonuses clawed back.

    This crap will stop.

    Without these steps, it is just the cost of doing business.

    • Unamused says:

      This crap will stop.

      Boy, that’s hopeful.

      I think slowing down corporate abuse is about the best that can be done. But I don’t think they can stopped. It’s what they do, too many of them, and they have money. And they’re relentless.

      People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public . . .

      Smith, Adam. An Inquiry Into the Nature and Causes of the Wealth of Nations. Chicago, Illinois: University of Chicago Press, p. 55

      • michael earussi says:

        What’s the purpose of being a “leader” if you can’t steal from those you lead?

        It takes a lot of time, money and energy to get elected, so you have to have a strong motivation to do so. What better motivation than greed.

    • GotCollateral says:

      Breakdown’s in the rule of law, isn’t usually solved by more law…

      Same could be said of markets… currencies… liquidity…

      But there are some who will say “well it will go on longer than you expect” which will make assumptions of ones expectations (or that everyone shares the same expectation) in an environment where insurance is sold to provide income and payout probabilities rounded to zero…

  9. Javert Chip says:

    Quis custodiet ipsos custodes?

    In the 75 years since the end of WWII, Italy has had 61 governments; you can imagine how effective government oversight of any importance is conducted.

  10. stan6565 says:

    The theft of public resources by those supposed to guard those resources continues unabated. One strain is crapification and outright sellout of any statutory controls, like the Boeing 737max or Genoa Bridges, which sellouts led to deaths of hundreds of people.

    Tamiami Bridge in Miami, collapse in 2018, anyone? A crazy and structurally totally unsuitable system was built and open to traffic over a public roadway, without anyone even checking the basic structural principles.

    The spiel is very simple, people like Atlantia win contracts because they say they are cheap and efficient. They come across as such because they say they will do 100 things but in real life they only plan to do 60. And the friendly government minister who awards them access to taxpayer filled state kitty then shares the 40 surplus with the capos of the firm.

    When mass murder occurs, like with Boeing or Atlantia or indeed Tamiami, sternly worded letters are all that is allowed to happen.

    • 2banana says:

      It was also an affirmation action feel good contract award to the engineering company that was in way over its head.

      “Tamiami Bridge in Miami, collapse in 2018, anyone? A crazy and structurally totally unsuitable system was built and open to traffic over a public roadway, without anyone even checking the basic structural principles.”

    • stan6565 says:

      Apologies for the link, but please note mentions of “abnormal profits” and “taxpayers being shorn like sheep”.

      • NBay says:

        All I previously knew about was the F-1 team.

        Thank you Nick and thank you Stan, I learned more than I ever imagined, and have yet to read the comments on the article.

        • NBay says:

          I saw a documentary on the bridge, but it was strictly from an engineering nuts and bolts viewpoint.

  11. Mean Chicken says:

    Obviously the central bureaucracy of Europe played no part in the decision making process and blame lies squarely at the feet of underclass irredeemables.

    • Cold water says:

      The unelected bureaucracy of Europe ignored the opinions of the people paying for both the bureaucracy and for its decisions.

      Who is giving odds on the next anchor country to abandon the EU? Italy seemed to be most likely a couple years ago, but Germany and France have caught up and its now a three way tie.

      Irredeemables for the win, because power of the purse always wins.

      • fajensen says:

        What do you mean “Next”?

        The UK is still faffing around with no Withdrawal Agreement.

        The Tories are back on track to overplay their hand and faff around some more because of their election success which they believe has ‘strengthened their position’ (in the same way that getting a new dining room set obviously increased the value of my home :).

        Seen from the UK side Everything will now be up in the cloud again just for grasping, while somewhat duller EU side will stick to what is already written. Brexit will drone on and on and on again – until stopped by the EU side.

        When the UK finally leaves, the EU will reconfigure and that is the opportunity for someone like Italy to get something that it wants trough negotiation rather than work.

        I.O.W. Nobody will seriously consider leaving the EU until they see what happens to the UK experiment and with the EU for some years after.

        ‘Putin’ or ‘Langley, WA’ will of course agitate for someone volatile like Italy to leave before, IMO, the UK clown cart smashes itself on the rocks of Dover, but, this is just noise.

        • panatomic says:

          brexit will happen on time because Johnson isn’t bluffing. and yes, the eu will have their come to jesus moment. they either truly federalize including sovereign debt or it’s over. macron knows this but he hasn’t convinced the germans to go along.

  12. stan6565 says:

    For any affirmative action or white elephant contract there is always price to pay. By the taxpayers of course, not the criminal perpetrators behind it.

    Here in U.K. we have a HS2 Con show simmering. Or, in plain English, how to spend £ billions to shave 5 or 10 minutes off a 2.5 hr train ride from London to Birmingham.

    There is a massive train line capacity shortfall across Liverpool-Manchester-Leeds-Hull transverse, yet the lobbyists and their government employed providers, still push for the easy treasury fleecing option.

    Until such time that people willingly engaging in robbing their taxpayers countrymen, are stripped off their personal assets for such endeavours, this will never stop.

  13. Unamused says:

    Atlantia has threatened to give back all of its highway concessions if the measures are confirmed.

    They’re not about to do that because they’re still making money on the other concessions. They’re just annoyed because the Italian government is standing up to bad corporate behavior after having gotten away with it for so long.

    You’d think the proper thing for Italy to do is to call their bluff and pick off their concessions one by one, but that’s not going to happen either because Atlantia has been careful to arrange for the Italian people and the Italian economy to be their hostages. Retaliation should be expected.

    The present article summarises only some of Atlantia’s corporate abuses, but those summarised are malicious in the extreme. It will be interesting to see if any commenters here stand up for them and if so how the rationalisations are formulated.

    • Cashboy says:

      “The holders of that debt include the European Central Bank”.

      More dodgy bonds that the ECB hold.

      It doesn’t look good for the future of the EU and the Euro in the longer term.

      Brexit, if succesful for the UK, is going to be a disaster for the EU, the Euro and the whole EU plan.

  14. nick kelly says:

    My impression on seeing ‘before’ pictures of the Morandi bridge was of a very long unsupported span.
    The ancient Romans would undoubtedly have had several arches. Even with modern materials, why not have one in the center? I know there were houses underneath but surely it was worth making room for two footings.

    Re: materials. I have read that before the crack down on the Italian mafia, it was heavily involved in concrete and that there is a lot of substandard concrete (low cement?) sitting like time bombs. No idea if that has anything to do with the bridge.

    • Jos Oskam says:

      The Italian mafia was heavily involved in concrete to put shoes on persons they wanted to get rid of.

      Rumours also exist that concrete workers sometimes made unruly colleagues trip and fall into the concrete being poured. These embedded corpses could also negatively influence the strength of the construction.

      No concrete evidence, however.

    • stan6565 says:

      Yes, one way to fleece the building contract is don’t put cement into the concrete you have been hired to build. Take cement home and build a strong concrete frame and a big pool.

      I have seen numerous disintegrating abandoned concrete frames in Sicily. Devoid of cement, “concrete” is spalling easily, exposing the reinforcement to salt enriched air, which then accelerates the process.

      They even had building blocks manufactured with a thin cemented crust to the external surfaces, so once the sea air worked through that, the sand from within would just seep out.

      • Cashboy says:

        In Italy it is normally a shortage to the specification of the raw bar and steel in structures that makes buildings collapse in Italy.
        The lack of cement in the concrete is also a contributor.

        I did a lot of business in Italy in the late 80’s and early 90’s and after getting used to the brown envelopes, never got what I was promised, always excuses.

        Don’t forget; Pinochio came from Italy.

        Today when I drive from Bergamo to Milan, I see so many closed derelict factories.
        I laugh to myself as I think; serves them right.

        And when it all collapses; the Italiand just say:
        What-a do-a you-a expect-a ?

        • NBay says:

          When I was helping Canadian friends build at Baja Asuncion, MX, I discovered the popularity of 1/8″ rebar!!! down there. I never saw it before. But they even built concrete headers with the stuff.

      • NBay says:

        In addition to shorting on the cement, (I mixed so many bags of ready mix I could tell by feel when the factory ran low on cement and had to make it’s bag quota…in Quickcrete more often than Kaiser. Anyway, I just picked up a bag of Portland cement and added some out of a coffee can to each wheelbarrow load until the aggregate rock was no longer visible) sand right off the beach also produces bad concrete. Too high of a mineral content, especially NaCl I’ve been told. Many Craftsman bungalows in LA suffer this fate, and it is an expensive fix.

  15. timbers says:

    “Revoking Atlantia’s contract would still mean the government would have to take on some of Altantia’s liabilities, potentially swelling Italy’s already bloated public debt (last count: 134.8% of GDP). And that is unlikely to go down well in Brussels.” Haven’t you ever watched RoboCop 2? The solution is obvious: “We don’t expect you to pay. We’re taking Italy private.”

  16. MC01 says:

    Before the first downgrade into junk territory, Atlantia bonds coming due May 2025 traded at 103 cents to the euro. Now after two degrades into junk they trade at 95 cents. These bonds carry a coupon of 1.6%.
    I don’t think we need to look any further to see how nuts security markets still are: this is stuff that should be trading in the 80-85 cents range right now, with more losses to come as the rating sinks even further into junk. And I am still being generous.

    But I honestly think the most revolting thing is how these same bonds are being aggressively pushed unto retail investors by the snake oil salesmen in the financial “media”. The basic assumption is that Atlantia will have the cake and eat it too, meaning they’ll keep their license and get away with murder. With the present government is well possible, but the present government is bleeding votes all over the place: who will come next may prove to be far less amenable.
    And there’s the issue of all the civil lawsuits Atlantia is being hit with: there’s very little the government can do to shield them from those bar perhaps try to negotiate out of court settlements. The amount of money Atlantia will end up owing to transport companies alone (remember the railway underneath the bridge led to the busiest container port in Italy and is still causing mayhem with logistic chains) is staggering.
    With financial markets in Europe skyrocketing in face of a dead in the water manufacturing sector it won’t be long before reality kicks in, and then these retail investors will discover it’s them who have been left holding the bag.
    I expect a whole lot of people to take to the streets to beat on their pans: it seems to be the new global pastime.

    • Xabier says:

      People have been whacking their pots and pans for centuries in Spain, too: somehow, it never clears up anything.

      Corruption seems to have magical properties: it drowns out any unpleasant environmental pollution.

      On with the Masquerade! Which mask will you choose?

    • Cashboy says:

      Very few individuals own shares in the EC so will have little affect on your average people.

      Maybe pension funds will be effected but that issue can probably be delayed.

      I actually think that the western governments will be promoting euthansia in the future to get rid of the pension deficit and obviously the young will vote for that if they would have to take the cost burden.

      I think that old retirees will be content to take the euthansia way when you actually looking at how fast the EU and UK is going down hill with regard to morals, immigration, aggression etc.

  17. Prof. Emeritus says:

    Damn those ethical Italian politicans. In Germany companies like Siemens, Volkswagen or Bayer usually get a pat on the back from the local member of the Bundesregierung for enriching the nation’s wealth and increasing GDP through corporate criminal acts and mass killing of people, not get frowned upon!
    And no, this is not a political comment, because I actually had an estimation on the amount of corporate bonds owned by the ECB in early 2018 and it totalled to about 30% of the eligible corporate bond domain. Since then the QE had slowed down and then fired up again, so that may no longer be accurate, but shows the scale of the scheme. It is unlikely they have higher ratio owned of one bond than others as then the ECB would then be guilty of cherry-picking favourite companies which is yet another crime with public money. However Unicredit’s Credit Research and Rating’s arm had a rather high-quality material on it – not sure if it’s public – but the whole CSPP is rather secretive, so it proves difficult to get reliable data on it.

    • MC01 says:

      The companies that benefited the most from the ECB corporate assets purchase program are Daimler, EDF, Enel, Inbev and Telefónica, but the intriguing thing is the European subsidiaries of US corporations have been enormously blessed. Coca-Cola, Caterpillar and John Deere have all seen their bonds scooped up by the ECB. I won’t even get into how the ECB helps the Turkish economy avoid a well deserved catastrophe, something that is completely outside their mandate but that our conglomerates love, as they are outsourcing to Turkey like there’s no tomorrow.

      Regardless, both the ECB and the BNS (Banque Nationale Suisse) do not disclose what criteria they use when it comes to purchasing corporate assets. The BNS doesn’t even disclose exactly what they hold: the reason we know the entity of their US stock holdings is because as a large foreign institutional investor they must report them to the SEC each quarter and the filings are made public.
      If there are no rules, no rules can be broken: that’s as simple as that.

      • Prof. Emeritus says:

        Actually it’s true, but those American companies have very little issuances in EUR-zone bonds. The whole scheme relies on market efficiency so it doesn’t even matter: they could buy Mongolian corporate bonds denominated in Thai bhat, since in theory the market will aim to keep the spreads aligned with what they think of risk. And – while I’m always eager to bash ECB’s QE – this theory works well in practice too. Everyone else benefits, not just the giants.
        The problem is that some of these major companies started harassing the CSPP and are issuing bonds they otherwise wouldn’t, leading to a corporate loan-glut. The french luxury-sector (Kering and Louis Vuitton) are surely doing this.

  18. Old-school says:

    It seems like the US is the cleanest dirty shirt right now with only about 1/2% financial repression for savers at the moment. Europe looks like it is in deep trouble with financial repression so high. If you are repressing people 2% per year on savings, before long they are poor. I don’t see a solution, but I am too far removed to really know what’s going on.

    • Xabier says:

      As has been rightly said, the US is currently the best looking horse in the Knacker’s yard.

      Be grateful, you are in Limbo when you could be in Hell….. :)

    • Wolf Richter says:

      Yes, a filthy shirt, but quite a bit less filthy than the others :-]

    • nick kelly says:

      A lot of folks have predicted the collapse of the euro and the return to national currencies. The idea that this would help Italy and Greece has little support inside those countries and zero with their bloated public sectors who do not want to be paid in nonconvertible scrip.

      If this were to happen and Germany returned to the D-Mark, it would be a spotless shirt compared to the US$. German industry would howl but they’ve been there before and survived.

      But isn’t Germany in or near recession? Yes, from a very high baseline. To put this in context, the country runs a substantial budget SURPLUS.

      • Cashboy says:

        I think that Germany is already in recession. I think they “adjusted” the figures last quarter otherwise there would have been a technical recession.
        The German recession will definately come in 2020.

        I am also hoping that the UK does a No Deal Brexit.
        If the UK does well after Brexit and doesn’t give the EC money, then countries that were receivers from the EC will be asked to pay in.
        With these countries also being told to take immigrants by the EC will lead to other countries having referendums and leaving the EC.

        I have my suspision (and hope) that then the UK does more business with the US and wouldn’t be surprised if Donald Trump then starts trade tariff talks with the EC as I do get the impression that he doesn’t particularly like German Merkel or French Macron.

  19. unit472 says:

    Curious how the ECB accounts for underwater bonds on its balance sheet. Are they marked to market or do they just sit on the balance sheet at par until a default makes it impossible to hide the loss.

    Either way the ECB will likely have to be recapitalized at some point which will put further strain on EU unity.

    • fajensen says:

      Either way the ECB will likely have to be recapitalized at some point which will put further strain on EU unity.

      How so? The ECB, being the issuer of the EUR, can print as many EUR as is needed.

      Germany might wrinkle their noses at it, but, if some of those EUR goes to buy Siemens, Miehle and Mercedes with …. they will pretend that nothing improper happened. Even the German Ordoliberalists will bend their rules when convenient.

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