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In bankruptcy, wouldn’t all their assets be encumbered by security interests owned by their creditors/hand holders? Wouldn’t any normal bankruptcy just be a reo
by singleshot_ 4y ago
In bankruptcy, wouldn’t all their assets be encumbered by security interests owned by their creditors/hand holders? Wouldn’t any normal bankruptcy just be a reorganization around the interests of the secured parties? I’m having trouble seeing how an obligation to pay subsidies, be it executory or not, would give the subsidisor any leverage in bankruptcy.
Is the idea that the secured creditors need the subsidy too?
- toomuchtodo 4y agoYou have a lot of wiggle room to make what you want happen when you're the government, and arguing the finer points until an insolvency event occurs requires copious amounts of speculation. One of the country's largest utilities entering insolvency isn't a normal bankruptcy is a fact I hope we can agree on.
- singleshot_ 4y agoIf your suggestion is that a $39 billion utility filing in federal bankruptcy court means that an unsecured counterparty would be given enough “wiggle room” to insist they be paid before secured creditors on the theory that they owe the utility subsidies, then no, we definitely can’t all agree. No bankruptcy would be that abnormal because that wouldn’t be a bankruptcy; the goal of a bankruptcy is to preserve the estate for the creditors, while the model you seem to present destroys the estate for the good of the debtors.
- toast0 4y agoAt a bankruptcy auction, assets are sold free of encumbrance. Generally, secured creditors participate in bankruptcy auctions because they would prefer good funds over holding the assets that failed to provide for a solvent business.