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Because the creditors make money off it as well.
by razster 6y ago
Because the creditors make money off it as well.
- whatok 6y agoCan you explain how the creditors of 4bn in Neiman Marcus debt are making money off this?
- 0x8BADF00D 6y agoBecause they won’t default now.
- whatok 6y agoOk, a potential positive sum is definitely better than zero but once again, how exactly are creditors making money off this? The grandparent's post is implying that somehow no one is losing money in this situation. I'd like to hear how it works.
- beamatronic 6y agoThey probably sold the debt to another party
- whatok 6y agoSo you're saying that the original creditors made money off this and new creditors through secondary market transactions are left holding the bag? That's partially true but a massive portion of this debt is in pension funds or passive investments that track index funds. They track benchmark indices so they're buying these bonds at issue or shortly after. With no active management involved, they are also losing money when a company files.
- jariel 6y agoThe creditors definitely won't make money. They are other banks, and probably all the suppliers who give to NM on credit and who won't get paid. Chapter 11 is by default bad news for creditors, it means they will get less than the agreed-to value of whatever.
- danielisaac 6y agoThey're not making any money, but they're not universally worse off. Depending on their status (e.g. if their debt is secured by a lien), it's totally possible that some classes of creditors could be reinstated with the same claims under the reorganization plan (assuming it gets confirmed by the court). Even if a secured class doesn't get the same value and votes against the plan, they're still entitled to a handful of protections under the Bankruptcy Code (§ 1129(b)(2)(A)). Less so for unsecured creditors and shareholders.