Denmark, Goldman, and those Japan put warrants

A friend of mine told me a story about how Denmark was part of some early financial innovation in the beginning of the 1990s. I guess it’s old news, but it’s a cool story.

Here’s the LA Times:

The story, for individual investors, began in January when Denmark, with the encouragement and assistance of Wall Street’s Goldman, Sachs & Co., issued 10.3 million “put warrants,” pegged to the level of Japan’s Nikkei stock average, for trading on the American Stock Exchange. Denmark is obligated to pay warrant holders, who can choose to exercise the warrants anytime over the next three years, cash if the Nikkei closes below 37,516.77, its level when the bulk of the warrants were issued Jan. 12 at $4.05 each.

Since then, the Nikkei has plunged and the warrants have become a dream come true for people who bought early.

With the Nikkei index was down to the 28,000.00 range on the Tokyo Stock Exchange, the Denmark warrants that haven’t yet been exercised are trading for about $12 on the Amex.

Denmark wasn’t looking to place a bet that the Nikkei would rise when it issued the warrants. It merely set out to make a bit of pocket change–something less than $2 million–to offset the cost of a recent Eurobond issue.

Nearly all of the $45 million Denmark received for issuing the warrants was spent to buy slightly less-expensive put warrants traded among institutions offshore. Those put warrants are intended to make up for the money Denmark stands to pay out.

Graphically it looks like this:

And a summary in words:

Interesting to sell your rating and ability to get clearing from the SEC. Although, I’m kinda wondering if this is not a little bit more risky that just pocketing a spread [full faith and credit and all given counterparty risk and so on], but what do I know.


  1. I owned about 2% of this issue in 1990. They were a great vehicle to get short the Nikkei in an era when there were limited other choices. We bought big blocks at about $3 from Dean Witter and Goldmans and exited from $18 to $21. It was a shame about the warrant portfolio that was held long against it!

  2. Hi Ede – that’s interesting! I just found it fascinating how Denmark was convinced to underwrite this issue for no apparent reason (to me), except pocketing a little spread. Nice story, though.

  3. walter McCarthy

    My maternal grandfather Howard J. Dauphinee` sr. was a member of the investor’s club at the Boston Post Newspaper where he worked as a printer. As a member he bought & traded many stocks & Bonds. The only one of the purchases to survive the STOCK MARKET CRASH of OCTOBER 1929, my maternal grandfather made on the 16th day of August, 1929 from Eugene B. Hamilton a trustee of the Pines Realty Company, under a Declaration of Trust dated February 10, 1928, and duly recorded with Plymouth Deeds, for a consideration paid, grant Howard J. Dauphinee` (my maternal grandfather), 60 Corona Street, Dorchester District, Boston, Suffolk County, Massachusetts with WARRANTY COVENANTS, the land in Marshfield, Plymouth County, Massachusetts…” aforesaid deed Seal, Filed with The Commonwealth of Massachusetts 16th day of August, 1929.
    The WARRANTY COVENANTS REFERENCED my Grandfather told me were these referenced by; New York Times November 9, 1927 page 36,. $16,900.000 bonds offered to public/ $6,000,000 certificates of the Pennsylvania Tank Line placed on market /// $5,300,000 Danish Issue //// Mortgage bank will use it for refunding //// —– $2,000,000 for Mexican Sugar Company. Seemingly, when the Lincoln Savings & Loans, California went bankrupt, under Chairman John J. Keating CEO what began was Savings & Loans across the nation fell like domino’s in the 1990’s. Is that the story you are referring to?

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