Just landed at O’Hare on my way back from Brussels and Geneva. Right before taking off I saw that Gunvor’s bond price tanked at the open. It closed yesterday yielding 10.9 percent, and spiked at the open to 13 percent. I understand it is still tanked.
In other words, the market either totally disbelieves the story that Timchenko sold out, or thinks that the sale is irrelevant in determining the company’s vulnerability to sanctions or investigation.
My suspicion is the latter, because of the Treasury’s deviously, devilishly clever strategy. Recall that UST said that Putin is a part owner of Gunvor. No hedging about that claim, no “may be a part owner”: a flat statement that Putin is an investor. It said that Putin might have access to Gunvor funds.
So regardless of whether Timchenko sold, or commits ritual public suicide tomorrow, Treasury has put the Mark of Cain on the company. Every counterparty, every lender has to have serious, serious concerns that the company may be sanctioned due to the Putin connection.
The tanking bond price makes it clear that the credit markets have serious doubts about the company’s survival prospects. No doubt this reflects bankers’ serious reluctance to continue to finance a company that the US government has publicly tied to Putin.
Yes, most of Gunvor’s lenders are European banks, but ask Swiss banks about the joy of taking on the US government when it has an important policy objective in mind. And think of all the leverage the US has over European banks given the myriad ongoing investigations of Libor, FX, ISDA Fix, and on and on. Even if the Euros don’t sanction Timchenko (or Gunvor) (and they abstained from doing so today, waiting to announce that until I’d left Brussels, the cowards), the US has plenty of leverage over European banks.
The company has the weekend to try to turn things around. But that Treasury statement casts a huge shadow. In the current environment, bankers are afraid of their own shadows, let alone the shadow of a US government with blood in its eyes.
Press coverage of this story has been credulous, especially in the FT. The stories have uncritically repeated Gunvor’s statements that Timchenko sold at fair value, and that there is no option for Timchenko to repurchase. But they would say that, wouldn’t they? And the stories don’t point out that the bond market is basically calling BS on Gunvor.
Speaking of fair value, I know Torbjörn Törnqvist is not an idiot. He can go through the game tree, and realize that there is large probability that his shares, and the ones he purchased from Timchenko, will be worthless. Meaning that he won’t have paid Timchenko book value, or anything even close.
Which raises the interesting question: if Timchenko is really just a front man for Putin, as the US government asserts, any big discount comes right out of Putin’s pocket.
Which is pretty much the point, isn’t it? That’s exactly why UST’s statement is a big flashing neon light arrow pointing right at Putin.