5 ms·

What I don't understand is why lenders keep funding debt for the companies when they are just going to declare bankruptcy. You would think creditors would get w

• adventured 6y ago
  The loss Hertz was producing wasn't outrageous compared to their sales and operating income (2019: $9.8b sales, $759m operating income, $805m in debt interest expenses). If you're Hertz you can make a very good case that that is a situation that can be managed, as they had been producing some growth over the prior years as well. Operating income had gone from $167m to $442m to $759m. It looked like they had a solid shot at climbing above the killer debt interest costs in 2020. They were clearly in trouble, however the pandemic is what buried them. Lenders didn't see that coming.
• lordnacho 6y ago
  It's not inevitable at the time when the debt is raised that it will be unserviceable. The creditors will have a view on whether the firm can service the debt, but typically that doesn't incorporate a complete cessation of business due to a global pandemic. Whether in the larger picture the creditors are getting paid enough to take on the risk is an interesting question. My guess is that they don't take enough account of a scenario where many bankruptcies happen at once.
• empath75 6y ago
  in a lot of cases, the people in charge of those loans are self-dealing and don't give a shit if the company they work for loses money on it. That's what the savings and loan crises was about.
• ww520 6y ago
  The debt probably has seniority over other obligation and can be recovered from the remaining assets.