But, but, munis always pay back almost 100 cents on the dollar, even in bankruptcy, right? Wrong. Bankrupt Vallejo just filed a POR to pay back unsecured creditors between 5 and 20 cents. "The city regrets that it cannot pay a higher percentage,” Vallejo officials said in the court filings. “The city lacks the revenues to do so while maintaining an adequate level of municipal services, such as the provision of fire and police protection and the repairing of the city’s streets." Just wait for the reaction when holders of unsecured debt all those other (hundreds of) insolvent cities, towns, and states realize that a 5 cent recovery is all too possible...
Enter The Twilight Zone: World's Biggest Cocoa Exporter Tells Creditors To Legitimize Corrupt President... Or Face Wipe OutSubmitted by Tyler Durden on 01/17/2011 23:38 -0400
And so things move from the simply violently revolutionary to the outright surreal, and once again they originate in Africa where today's TheOnion reality seems to feel most at home in practice (unlike its mostly theoretical, for now, US counterpart). Ivory Coast, the biggest producer of cocoa, today told bondholders of $2.3 billion in debt that unless creditors legitimize the corrupt incumbent regime, and recognize voted out president Laurent Gbagbo, then the country will not make an interest payment on its bonds which already are in a grace period, and will essentially default, unless the political gridlock is resolved in two weeks. “It’s a joke, right?” said Phillip Blackwood, head of emerging markets at Sydbank A/S, Denmark’s fourth-largest bank and holder of Ivory Coast debt. No, unfortunately it isn't. And just like Tunisia is a harbinger of the food riots to come to the developed world, so Ivory Coast is a leading indicator of how the world's greater debtor - the US Treasury - will one day negotiate with its own creditors. As both countries are bona fide banana republics, it won't be much of a stretch...
The Beginning Of The End For Ernst & Young? Auditor Back In Spotlight As Lehman Creditors Seek ProbeSubmitted by Tyler Durden on 04/20/2010 09:22 -0400
With the spate of corruption news out of Wall Street and seismic updates out of Iceland dominating headlines in the past month, everybody forgot about the culprit in the Lehman Repo 105 fraud. Well, almost everybody - the Lehman unsecured creditor committee, or basically the post reorganized equity estate, has decided to seek a probe of Ernst & Young to see "if the estate may have causes of action against the auditor arising out of Lehman's use of a the controversial accounting technique, Repo 105" reports Reuters.
A vivid chart from VisualEconomics, demonstrates the key US creditors and their most recently disclosed holdings. Of course, the TIC does this monthly (in a much less pretty format), but it does make for a good poster, especially if knowing off the top of your head whom the U.S. will be screwing if and when it decided to repudiate its debt, is of notable relevance . One name omitted: the United States itself, which according to the H.4.1 owns $777 billion of debt, essentially making it the second largest creditor after China. Obviously, this analysis excludes retail level and individual holders of debt.
As expected, Bankruptcy Case 09-16565, Southern District of New York, is the latest addition to the Bowling Green testament of the collapsing consumer class. $71 Billion in Total Assets, $64.9 Billion in Total Liabilities listed, as well as a metric ton of various bond issues. Common stock holders getting hosed include recently downgraded FMR (9.9%), Brandes (9.7%) and Franklin Mutual (5.7%). Bank of America listed a primary creditor (as administrative and collateral agent) at $7.5 billion. The Goldman Sachs Swap agreement is listed as having a notional value of $1.934 billion.
In an event that just as easily may not have occurred, Judge Gonzalez presiding over the boiling hot Chrysler bankruptcy, has sided with an objection of the Chrysler Non-TARP creditors (aka abominable hedge funds). The issue at hand was a request for a delay of the hearing on Section 363 bidding procedures from today until tomorrow at 2:30 pm.
For those that remember the surreal weekend before Lehman filed chapter 11, Barclays was considered an eleventh hour white knight who would swoop in and buy the bank. These rumors were squashed after Barclays pussied out, saying it would not be able to afford Lehman without the Queen's, the Fed's and Santa Claus' blessings... Nonetheless, the bank did its diligence, and 4 days after Lehman filed, Barc used the smoke and mirrors of bankruptcy court to snatch the U.S. broker dealer for metaphorically pennies on the dollar, and literally $1.75 billion.
The acrimony over the world's largest DIP is reaching fever pitch. For a second day in a row, Judge Gerber said he will listen to yet another round of arguments tomorrow before deciding whether to approve the Debtor in Possession loan. As we wrote previously, the fate of the company (at least over the next 6 months) hangs in the approval of the DIP, as without it Lyondell will proceed straight to liquidation.
A group of disgruntled Sirius creditors has threatened to fire Mel Karmazin and other senior execs if the company does not cut a deal with EchoStar or John Malone (who has offered to provide bridge financing) and instead files for bankruptcy. Edward Weisfelner, a lawyer with Brown Rudnick was quoted as saying:
Restructuring consultancy firm Alvarez & Marsal has decided to take the easy way out, and simply give creditors in the Lehman's bankruptcy equity instead of trying to maximize cash recoveries. The bulk of Lehman's residual value (or lack thereof) is contained in its hard to value real estate and private equity assets.