Search
 

One New Solution For Europe

By forming a REIT made up of government occupied assets equity cash can be generated for governments

By Joel Ross | Updated on June 25, 2012

Europe continues to bumble from one band aid to the next, and continues to just add more and more debt on already weak countries and weak banks. Whether it is loans to sovereigns, or the ECB loaning liquidity lines to banks, it is still debt which must eventually be serviced and potentially reduced, if not repaid. That debt service drains available capital from the banking system which could otherwise be available for lending. It strains fiscal initiatives that might come from governments to prime the pump. Combine that with some higher taxes and there is no way Europe is ever going to grow its way out of the mess. The banks have been forced to compound the problem by using the ECB liquidity lines to buy the sovereign debt of the mother countries in order to try to keep the cost of capital somewhat manageable for the sovereign. This cannot continue much longer. It is purely a cycle of debt on debt which can only end in collapse.

In a bankruptcy the solutions are a cram down of the debt, a stretching out of the payments, and more equity. It is not adding debt to debt and nothing more. DIP financing is purely a stop gap to the above steps. Often the other major step is a change in management and a shrinking of the business by selling off lines of business and assets to generate cash and reduce losses of cash.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.