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Why does this make sense? Do the owning companies get to rid themselves of debt they transferred to the child company?
by eutropia 9y ago
Why does this make sense? Do the owning companies get to rid themselves of debt they transferred to the child company?
- CobrastanJorji 9y agoMy understanding of how this game works is pretty bad, so hopefully someone can correct me. The way I understand it, one way to do this is to take a company that has a lot of debt and to use that debt to acquire control over the company without needing to actually buy it as face value. Then the new controller begins charging huge "management fees" to the child company, has the child company pay "dividends" to the new owner, etc, basically lifting the money out of it as directly as they can get away with. Then the empty, indebted shell falls into bankruptcy, and the managers claim a big tax write-off for taking a big "loss" on their investment.