CWB loan sharks

[chaffmeister]

Sawfly:
Afraid you mised it on two points:
1. The only reason the CWB has this play is because of govt-grade borrowing (lower interest rates). Not available to ADM or Cargill. Also, remember, if the Russian doesn't repay the principal later on (for whatever reason) the CWB isn't hit - the Canadian government is (taxpayers). But a Cargill or ADM would.
2. Cargill or ADM or any other commercial entity would of course accept the payment - it's only good common sense. You never turn down someone paying off a debt - it could be the only time you see the money.

[chaffmeister]

I hadn't seen Charlie's answer until after I wrote mine. It says the same thing but I like his better.

[cowman]

So in reality the CWB are ripping off the Canadian taxpayer? "Good money management" for the CWB with the Canadian taxpayer taking the interest hit plus taking quite a risk of never being paid back? I mean, come on, how stable is Russia? The whole darned country could default tommorrow.
Remember Poland.

[cowman]

One more thing: How much is the principal of this little loan sharking game? Could that money be used better somewhere else?

[charliep]

The debt is all outlined in the CWB annual report (page 64 2003/04). The total debt guaranteed by the government of Canada on July 31/04 was Cdn $5.3 bln. Of this Cdn $4.45 was scheduled debt (the countries are listed) and Cdn $772 mln arrears.

[charliep]

I note the CWB annual report has an section that outlines the repayment schedule (page 65) with payments of about Cdn $492 mln in 2005/06 (current year) and increasing to just under Cdn $700 mln in five years (2010/11). This debt should be paid off in 7 years if my math is right.

[charliep]

I apologize for 3 posts but people ask good questions/gets me thinking. The question is what currency the debt is held in with the countries (names are Algeria, Brazil, Egypt, Ethiopia, Haiti, Iraq, Jamaica, Pakistan, Peru, Poland, Russia and Zambia) - likely US dollars. If the debt is held and paid in US dollars, who takes the hit on the higher values loonie?

I note from the 2003/04 annual report that Canada wrote off debt to some of these countries. The has also been other re-scheduling of debt as a result of international agreements.

I highlight the above to indicate there is lots of other risk to these debts other than the principle payable. The Canadian government likely isolates the CWB from these risks.

[chaffmeister]

Charlie:

The CWB financial report indicates the amount of debt in US funds. I assume all other debt is in Cdn because they don't indicate otherwise. If you look at item eight in the notes of the financial statement, the CWB indicates the amount of US-dollar denominated debt it has taken out. I am left to assume that they (correctly) matched the outstanding US-dollar asset (accounts receivable) with a US-dollar liability (debt). This way they would be hedging the forex exposure on these credit sales appropriately.

They sell in USD but on credit so they don’t get paid. So they take out USD debt to cover the cash flow requirements. I assume the US dollars received with the debt instruments is converted into Canadian dollars just as they would had they been paid for the grain directly.

[TOM4CWB]

Chaff;

For forex and loan swaps straddles... what kind of commissions are involved?

For every $1000. what would the transaction fees be to the brokers providing the services?

[sawfly]

great information on the debt,and looking at some of the countries ,it would seem not that different than amercian food aid programs.
algeria egypt good customers thru the years,deserve credit . Haiti ethiopia probably more along the line of food aid.