Posted on 09/10/2009 11:47:32 AM PDT by Lorianne
Foreign banks that entered oil-derivative contracts with some Chinese airlines and shippers could find they have little recourse if the companies make good on threats to default on obligations.
This week, China's State-Owned Assets Supervision and Administration Commission offered encouragement to some Chinese companies to challenge losses stemming from derivatives used to protect against sudden spikes in the price of fuel.
Some of China's biggest airlines and shippers lost hundreds of millions of dollars last year on derivative trades when the price of oil plunged. They are now seeking to claw back those losses.
Last month, China Eastern Airlines Corp., Air China Ltd. and China Ocean Shipping (Group) Co. sent letters to a handful of foreign banks, including Deutsche Bank AG, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Citigroup Inc. and Morgan Stanley. The letters warned that the companies reserved the right to default on those obligations.
Bankers said they haven't heard of any defaults thus far. A spokeswoman for the International Swaps and Derivatives Association, a global trade association for over-the-counter derivatives, declined to comment.
(Excerpt) Read more at online.wsj.com ...
Defaults first. Nationalizations next.
War follows afterwards.
thank God they didn’t say “oriental”!
Will we go to WAR with China over their defaults to Government Sachs?
My scenario is oil is run up dramatically from here, so they can take a much smaller loss.
Is “claw back” the new trendy phrase now?
Nut statement of the day.
China is famous for walking away from losing trades. Every large firm knows this, and hedges accordingly. If they didn’t, they deserve to fail a la Lehman.
The problem this time is that the hedge partner IS China. Oops!
Is “claw back” the new trendy phrase now?
(Not Craw, CRAW!)
Maybe you should study history and find out why Japan went to war with the USA. OIL and money were at the root causes of it.
This shouldn’t come as a surprise to anyone who has done (tried to do) business with Mainland Chinese. They have a vastly different paradigm of business ethics than westerners.
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