CONFIDENTIAL PRELIMINARY DRAFT - FOR DISCUSSION PURPOSES
Maiden Lane Ill
Counterparty Briefers
November 5, 2008
. BLACKROCK
SOLUTIONSCONFIDENTIAL PRELUAINARY DRAFT - FOR DISCUSSION PURPOSES
Societe GeneraleCONFIDENTIAL PRELUAINARY DRAFT - FOR DISCUSSION PURPOSES
een errs
Negotiating Position: Societe Generale (Soc Gen) views the substantial expected recoveries on CDOs
and the funding benefit from collateral posting 2s providing great negotiating leverage
+ Soc Ger believes expected recoveries will exceed collateral storifalls under the CDS. SlackRock cash flew projections
support this view
- Cath flow projectiors diceountad st hond couper in the base c2s0 indicate that Soe Gan's portfolio is of higher
‘quailty than other counterparties (baceden projected value of BY for See Gen vs. 84% forall counterparties)
= The Funding benefit Soc Gen receives from AIG on collateral ported is the spread between LIBOR and Fed furs (Soe Gen
receives LIBOR and paye AIG Fed funds)
Concessions: Soc Gen has been unwilling to sell reference CDOs to AIG below par
* Soc Ger would be resistant to deep concessions, i.e., ayting greater than a few pointe, because it beLeves econcmic
value ‘ram collateral end expected recoveries on CDCs ae worth more thar par in some cases
+ Soe Ger expressed willingness to unwind lowest-quality trades at an effective price of ~90 but only if it retains the
reference CDOs (i.e., for a CDO priced at 30%, Soe Gen kaepz 705 collatertl, receives 20% more in cath from AG, keeps
the bend and the upside, anc rips up CDS with AIG). This arrangement wauld not ke acceptable under the centemplats
structure of Maiden Lane Ill.
Access te the Assets: We believe that Soc Gen owns most of the reference assets in its portfolio
(-$14bn of $16.4bn)
‘Stn worth ot referance assets may have been sold to Goleman Sachs
+ Me have heard second-hand from a trader thet Soe Ger haz pledged much of the portfelio ta the Fed dieourt window
for future lcuidity
Cther Factors
AIG
arse BMEKROCK
SOLUTION S®