Download Privatization and Politics - FGV

Política e Privatização
Ciência Política
Aula 6
CGAE FGV-EAESP
Kurt von Mettenheim
Definition: Privatization
The process of transferring assets from public
ownership to private ownership, by way of sale of
going concerns, or sale of assets.
PO=Public Offering
PS=Private Sale
Structure of Lecture
1) Types of Privatization & Management
Challenges (Case Study = DEPFA Bank plc)
2) Political Limits to Privatizations (Paul Pierson:
Path Dependence, Increasing Returns,
Feedback Loops...)
3) Theories about Politics and Privatization
4) Case Studies/comments: China, Argentina,
Eastern Europe & FSU
Viability of Privatization
Challenges of Privatization for
Management
Privatization Planning
Case Study: DEPFA Bank plc
DEPFA Bank plc: Budget Finance
Infrastructure Finance
CPS Securitization & Ratings
Advisory
DEPFA Euro-Global Portfolio
Long-Term Finance
Hypo Real Estate Shares Slump on Concern
About Capital
!!!!FIM DE DEPFA!!!!
By Aaron Kirchfeld
Feb. 20 (Bloomberg) -- Hypo Real Estate Holding AG, the German commercial property lender
bailed out by the government, slumped the most in three months in Frankfurt trading on
concerns about dwindling capital and possible seizure by the state.
The Munich-based company fell 31 cents, or 19 percent, to 1.33 euros, the biggest drop since
November. The stock has declined 93 percent in the last 12 months, valuing the company at
281 million euros ($355 million euros).
Germany’s financial regulator BaFin may be forced to shut down Hypo Real Estate as capital
levels sink below required regulatory levels, Germany’s Finance Minister Peer Steinbrueck
said at a press conference on Feb. 18. Germany this week approved a draft bill allowing it to
seize control of the company after providing 102 billion euros in financial aid.
“The company would be bankrupt without the government,” Andreas Plaesier, a Hamburg-based
analyst at M.M. Warburg, said in an interview. The company may need another 10 billion euros
to solve its “capital problems,” he said.
J. C. Flowers & Co. head J. Christopher Flowers, the largest shareholder at Hypo Real Estate, told
the Frankfurter Allgemeine Zeitung in an interview today that he wants about 3 euros a share
for a 24 percent stake he controls with investors.
Some investors have been betting the government will offer shareholders a premium to the
current stock price, leading to a 47 percent increase on Feb. 18.
“The government will do all it can to defend itself from speculators trying to get higher
compensation,” Plaesier said.
German regional newspaper Hannoverschen Allgemeinen Zeitung reported on its Web site that
Hypo Real Estate’s situation is “more dramatic than originally known,” claiming the firm needs
to continuously refinance 1 trillion euros in credit, without saying where it got the information.
The company said in a separate e-mailed statement that the newspaper “incorrectly interpreted”
its derivative positions, which have a “nominal value” of 1 trillion euros and don’t require
refinancing in that amount.
To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at [email protected]
Last Updated: February 20, 2009 11:55 EST
2) Política e Privatização
Resistência a Privatização em Estados de Bem Estar:
Margaret Thatcher & Ronald Reagan: 1980+
 Feedback effects of past policy institutions on interests,
ideas, and organization of power in policy community.
 unable to privatize (more):
Pierson, Paul. 1994. Dismantling the Welfare State? Reagan,
Thatcher, and the Politics of Retrenchment. New York:
Cambridge University Press.
Pierson, Paul. 2000. Increasing Returns, Path Dependence,
and the Study of Politics. American Political Science Review
94.2 (June): 251-267.
British Privatizations
Continental Europe Privatizations
North American Privatizations
Latin American Privatizations
Sub-Saharan Africa Privatizations
Middle East – North Africa
Privatizations
Asia Privatizations
Eastern Europe & Former Soviet
Union Privatizations
Privatizations in Advanced
Economies, US$ mi
Country
Switzerland
Japan
Denmark
Norway
Austria
Germany
Finland
USA
Sweden
Netherlands
Belgium
France
Singapore
Ireland
Hong Kong
Australia
Canada
UK
Italy
Spain
New Zealand
Israel
Greece
South Korea
Portugal
Developed Countries avg.
Deals
6
17
7
29
47
151
55
38
51
28
15
97
25
14
19
131
57
215
113
88
42
36
37
20
77
57
Revenues
Rev/GDP Stock PO/Deals
7,014.30
0.02
0.54
0.50
187,708.40
0.03
0.15
1.00
3,533.31
0.02
0.66
0.71
7,979.26
0.05
0.64
0.45
9,597.65
0.04
0.65
0.57
77,752.34
0.03
0.79
0.13
18,404.17
0.11
0.59
0.40
12,519.94
0.00
0.97
0.34
18,970.51
0.07
0.77
0.22
18,763.94
0.04
0.59
0.39
6,675.09
0.02
0.53
0.20
58,633.64
0.03
0.68
0.55
3,308.30
0.03
0.54
0.64
5,811.79
0.06
0.64
0.29
11,187.14
0.07
0.49
0.47
58,054.89
0.13
0.93
0.07
11,439.49
0.02
0.81
0.32
133,635.28
0.10
0.91
0.33
98,275.28
0.08
0.63
0.38
48,626.92
0.07
0.65
0.34
7,697.39
0.11
0.88
0.10
5,379.36
0.05
0.38
0.72
8,005.71
0.06
0.51
0.49
9,588.22
0.06
0.16
0.95
26,691.79
0.21
0.52
0.51
34,209.08
0.06
0.62
0.44
Privatizations Developing
Countries, US$
Country
Argentina
Uruguay
Chile
Malaysia
Brazil
South Africa
Mexico
Venezuela
Turkey
Thailand
Peru
Colombia
Jordan
Ecuador
Egypt
Philippines
Indonesia
Sri Lanka
Zimbabwe
Pakistan
India
Kenya
Nigeria
Less developed Countries avg.
Deals
77
2
24
33
76
14
67
45
28
24
66
16
3
1
64
25
16
16
6
14
25
14
20
29
Revenue
Rev/GDP Stock PO/Deals
32,485.16
38.08
3,195.35
6,622.95
33,113.27
2,987.70
22,055.61
11,156.06
5,636.27
5,275.78
5,265.56
4,423.53
590.46
44.76
2,007.02
4,935.66
7,754.26
312.83
71.63
2,205.00
2,283.01
109.41
10,478.17
7,089.02
0.11
0.00
0.04
0.06
0.04
0.00
0.06
0.14
0.03
0.03
0.09
0.05
0.07
0.00
0.03
0.06
0.04
0.02
0.01
0.03
0.00
0.01
0.33
0.05
0.78
0.77
0.70
0.67
0.68
0.59
0.84
0.82
0.69
0.54
0.86
0.55
0.36
0.67
0.37
0.57
0.34
0.61
0.56
0.71
0.43
0.56
0.42
0.61
0.17
0.00
0.38
0.33
0.22
0.21
0.07
0.09
0.18
0.63
0.05
0.19
0.00
0.00
0.80
0.32
0.81
0.06
0.83
0.07
0.44
0.43
0.95
0.31
Golden Shares
Country Company
Italy
UK
Appoint Veto Other Ownership Vote Govt
Avg.
Intensity
BoD M&A veto limits
caps control
Intensity
Eni
x
Enel
x
Telecom Italia x
Finmeccanica x
British Energy x
Scottish Power
Scottish &
Southern Energy
National Grid
Group
Viridian Group
Rolls Royce
British
Aerospace
Baa plc
Railtrack Group
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
4
4
4
5
5
2
x
x
2
x
x
2
x
x
x
x
x
2
3
x
x
x
3
x
x
x
x
3
1
4.3
2.6
Theories: Politics & Privatization
Dinavo (1995): “politics plays the most important role in
deciding whether or not to privatize”
Theory: If > growth political support for govt party
Farazmand (2000), Privatizations = political agendas of
corporate elites for control of public sphere:
Theory: <equality, <labor, <accountability,
<transparency, <environment
Suleiman & Waterbury (1995) privatizations driven by political
rationale, not economic grounds alone.
Theory: privatization  empower civil society
Mais teorias
Birch and Haar (2000) Set of neoliberal economic reforms:
political credibility, external pressure and ideological
commitment in Latin America.
Etchemendy’s (2001): Patronage Networks, new and old.
World Bank & IMF: Conditionality Programs include
privatization.
Exemplo: “Chicago Boys”  Chile
Exemplo: Paulo Leme, Goldman Sachs: Privatize CAIXA to
avert Financial Crisis, 2001
PRIVATIZATION AND DEMOCRATIZATION IN
CHINA: RETHINKING THE INFLUENCE OF ‘RED
CAPITALISTS’ Bruce J. Dickson, APSA paper,2004
Survey of Private Firm Owners in China
R2
---------------------------------------------------------------------------Age
-.031***
(.011)
Gender
.447*
(.177)
Level Of Education
.314***
(.086)
Enterprise Revenue
.000
(.000)
Getihu
-.005
(.136)
Years In Business
.063***
(.013)
Years In County
.021**
(.007)
Family Income
.025
(.034)
Communist Youth League
.542***
(.151)
Constant
-2.316***
(.499)
N = 635
Chi2 = 86.38 (p = .000)
Pseudo R2 = .13 * p < .05; ** p < .01; *** p < .001
Stiglitz & Privatizations in Eastern
Europe & Former Soviet Union
Como Organizar Apoio Político
para Privatizações
1) Usar Maioria Parliamentar
“Forçar reformas”  inércia  ‘snowball’ (or boomerang)
Thatcher, Yeltsin, Berlusconi, Juppe
2) Aumentar a Base Política (FHC, com PFL…)
3) Dividir para Reinar: Coloca consumidores vs produtores
(telecomunicações, transporte, energia)
4) “Enabling Constraints” (WTO, MERCOSUL, EURO, FMI, Banco
Mundial, Crise  privatizar
See: Boeri, Tito et al (eds). Structural Reforms Without Prejudices.
Oxford: Oxford University Press, 2006
Privatização no Brasil
1990-1994 vs 1995-2002
1990-1994
1990-1994
1995-2002
1995-2002
Das Privatizações de FHC
às Concessões de Dilma
Choque para Concessões
Eletric Energy
Concessions
6 September 2012 =
10-28% RATE
CUT!!!!!!!!!!
6 September Announcement: >50% share price declines...
http://exame.abril.com.br/mercados/cotacoes-bovespa/indices/IEE
Glossary
(Private Finance for Public Sector)
Irish Asset Covered Securities (ACS)
Covered securities issued under the Irish Asset Covered Securities Act, which came into force in
December 2001.
Asset
Resource controlled by an enterprise as a result of past events, and from which future economic
benefits are expected to flow to the enterprise.
Asset-backed securities
Bonds backed by loans, or accounts receivable originated by banks, credit card companies, or other
providers of credit. Asset-backed securities are often issued by special-purpose entities.
Agency issues
Bonds issued by government-sponsored or state-owned agencies. Securities issues by these agencies
are backed by a sovereign government, but not guaranteed since agencies are private entities,
usually established to provide low-cost financing. Prominent agency issuers include the Federal
National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation
(Freddie Mac) in the US, the World Bank, or the European Investment Bank.
Asset quality
The quality of assets exposed to risk asset quality is often expressed by a rating
Benchmark
A bond, frequently the most recent, sizable issue, whose terms set a standard for the market. The
benchmark bond usually has the greatest liquidity, the highest turnover, and is the most
frequently quoted.
Bond
Market term for debt securities; usually referring to securities with a medium- or long-term maturity.
Benchmark Programme
Bond issuance programme comprising benchmark issues (usually large-sized, regular issues).
Bookbuilding
Frequently-used method for determining the price of a securities issue. Prior to the issue, the issuing house conducts a
bookbuilding exercise where it contacts investors and obtains commitments to purchase quantities of securities at
a specified price. Having established the demand, the lead manager sets the fixed price for the issue in line with
the demand levels that have been established.
CDO
An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialise in one type of
debt, but are often based on non-mortgage loans or bonds. Similar in structure to a collateralised mortgage
obligation (CMO) or collateralised bond obligation (CBO), CDOs are unique in that they represent different types
of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as 'tranches' or
'slices'. Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays.
Commercial Paper
Unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts
receivable and inventory. Maturities typically range from 2 to 270 days. Commercial Paper is available in a wide
range of denominations, can be either discounted or interest-bearing, and usually has a limited or non-existent
secondary market. Commercial Paper is usually issued by entities with high credit ratings.
Cover Asset Monitor
The Cover Asset monitor has far-reaching responsibilities for covered bond issues, including the duty of supervising
any contractual undertakings given by the issuer to bondholders to maintain a given level of over-collateralisation.
Credit Default Swap (CDS)
Agreement which allows the transfer of third-party credit risk from one party to another. One party in the swap faces
credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in
exchange for regular periodic payments (essentially an insurance premium). If the third party defaults, the party
providing insurance will have to purchase the defaulted asset from the insured part, or pay a cash settlement
amount. (Note that despite its name, a CDS is essentially an option).
Credit enhancement
Techniques used to enhance the credit quality of securities, or issuers of securities, for example, by
way of over-collateralisation
Conduit
Special-purpose entity used to issue securities (usually asset-backed securities).
Covered securities
Collateralised debt securities issued to refinance loans secured by charges over property (mortgage
bonds), or loans to public-sector entities (public-sector covered securities). The issue of assetcovered securities is regulated by laws in various countries (see ACS, Pfandbriefe). Issuers of
covered securities, as well as the assets used for the cover assets pool, must comply with certain
minimum requirements.
Credit derivative
Contract between two parties that allows for the use of a derivative instrument to transfer credit risk
from one party to another. The party transferring risk away has to pay a fee to the party that will
take the risk.
Credit-linked Note (CLN)
Structured security – usually issued through a special purpose vehicle – that is designed to offer
investors par value at maturity unless a referenced credit defaults. In the case of default, the
investors receive a recovery rate. Given the higher risk exposure compared to traditional bond
issues, CLNs usually offer higher returns.
Debt
Amount owed to a person or organisation for funds borrowed. Debt can be represented by a loan
note, bond, mortgage or other form stating repayment terms and, if applicable, interest
requirements. These different forms all imply intent to pay back an amount owed by a specific
date, which is set forth in the repayment terms.
Deposit
Amount deposited with a bank or financial services provider as an investment, usually at moneymarket rates.
Debt securities
Securities representing debt.
Derivative
Financial instrument whose value is based on (“derived” from) the value of an underlying instrument.
Financial Engineering
Application of theoretical finance and computer modelling skills to make pricing, hedging, trading and portfolio
management decisions. Utilising various derivative securities and other methods, financial engineering aims to
precisely control the financial risk that an entity takes on. Methods can be employed to take on unlimited risks
under certain events, or completely eliminate other risks by utilising combinations of derivatives and other
instruments.
Hedge
Position established to protect an existing portfolio or planned investments against unfavourable price changes.
Hedging is most often carried out using derivatives.
Irish Asset Covered Securities (ACS)
Covered securities issued under the Irish Asset Covered Securities Act, which came into force in December 2001.
Issuer
Entity offering (or having already offered) securities for sale to investors. Examples include banks, corporations,
investment trusts, and government entities.
Letter of Credit
Commitment, usually made by a commercial bank, to honour demands for payment of a debt upon compliance with
conditions and/or the occurrence of certain events specified under the terms of the commitment. In municipal
financings, bank letters of credit are sometimes used as additional sources of security for issues of municipal
notes, Commercial Paper or bonds, with the bank issuing the letter of credit committing to pay principal and
interest on the securities in the event that the issuer is unable to do so.
Liquidity facility
Line of credit provided as a source of liquidity
Maturity
The date on which a debt becomes due for payment – regularly used in connection with debt securities (referring to
the date or repayment) or derivatives (referring to the date when fulfilment of a forward transaction falls due).
Medium-term notes (MTN)
Debt securities typically issued in the form of uncollateralised promissory note loans placed by way of tap issues, with
maturities ranging between 9 months and 40 years. Each individual issue is backed by an MTN programme (which
provides the legal framework for all individual issues). Medium-term notes offer maximum flexibility in terms of
structure and market timing.
Municipal securities
General term referring to securities issued by local governmental sub-divisions such as cities, towns, villages, counties,
or special districts, as well as securities issued by states and their political sub-divisions or agencies of states.
Off-balance sheet transactions
Transactions accounted for outside the balance sheet, such as derivatives or asset-backed securities.
Origination
The origination unit of an investment bank is responsible for initiating and underwriting securities issues and other
corporate finance and capital markets transactions.
Off-budget entities
Entities owned and controlled by the government, whose transactions are excluded from the public budget totals.
Over-collateralisation
The cover assets pools of covered securities usually contain excess collateral compared to the covered liabilities, in
order to provide cover for any contingencies.
Pfandbriefe
Covered securities issued under the German Pfandbrief Act
Private placement
Sale of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds,
and foundations. Private placements generally do not require an exchange listing.
Promissory Note Loan (Schuldscheindarlehen)
Loan documented by the borrower's undertaking to pay interest, and repay the loan under agreed-upon terms.
Privatisation
The process of transferring assets from public ownership to private ownership, by way of sale of going concerns, or
sale of assets.
Public-sector covered securities
Collateralised debt securities issued to refinance loans secured by loans to public-sector entities (public-sector covered
securities).
Public/Private Partnership (PPP)
Type of privatisation in which elements of a service previously run solely by the public sector are provided through a partnership
between the government and one or more private sector companies. Unlike a full privatisation scheme, in which the new venture
is expected to function like any other private business, the government continues to participate in some way. PPPs are often used
for infrastructure projects, and may be supported through exclusive licensing, or usage guarantees.
Rating
Published ranking of a debtor’s or issuer’s credit quality, based on detailed financial analysis by an external credit assessment institution
(rating agency), specifically related to an entity’s ability to meet its debt obligations. Ratings are used by lenders to decide on
approval of credit applications, and also to determine the regulatory capital backing required to cover a lender’s exposure.
Repo
See securities repurchase transaction.
Securitisation
The process of aggregating similar instruments, such as loans or mortgages, into a negotiable security.
Swap
Exchange of streams of payments over time according to specified terms. The most common type is an interest rate swap, in which one
party agrees to pay a fixed interest rate in return for receiving a variable rate from another party.
Securities repurchase transaction (Repo)
Borrowing money by combining a sale of an asset (usually a debt security) with the repurchase of the same asset at a later time, at a
slightly higher price (which reflects the borrowing rate).
Special purpose entity
Entity established solely in order to accomplish some specific task or tasks. SPEs used for the issue of securities (e.g. asset-backed
securities) are referred to as “conduits”.
Structured transaction
Issue of securities or other financial transaction involving multiple components, e.g. debt securities (such as medium-term notes) with
embedded derivatives.
Syndicated Loan
Loan extended by a group (“syndicate”) of banks, rather than a single lender.
Tap issue
Debt security which is issued in varying amounts and at different times, usually in response to investor demand. The terms of the bond
(issuing conditions, coupon and maturity) remain unchanged, but the tap price can vary according to market conditions.
Underwriting
Underwriting describes the process where the underwriter (usually an investment bank) acquires a securities issue (thus assuming the
issuer’s placement risk), and subsequently places it in the market.
Desafio