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>But I imagine that he can't just skip out on his obligation to the banks without a severe reckoning. Can he? If you default on your bonds, your creditors can
by NovemberWhiskey 3y ago
>But I imagine that he can't just skip out on his obligation to the banks without a severe reckoning. Can he?
If you default on your bonds, your creditors can just force you into bankruptcy. In the context of a Chapter 11 bankruptcy, the company would have to propose a reorganization plan that was acceptable to the creditors.
One could imagine a debt-to-equity conversion during which Musk's holdings would effectively become worthless and the banks would end up owning the business. If the bondholders conclude that the business has value, but less if Musk keeps calling the shots, one can imagine an outcome like that.
At that point, best case is probably that you'd try to put a turnaround management team in place with a view to taking it public again.
- tomatocracy 3y agoNot sure how it might play out in this case but in restructurings there is often a trade off between value destroyed by "kicking equity out" completely and value allocated to creditors vs equity (plus there's often value to agreeing anything rather than dragging it all through the courts which takes a long time, is distracting for management and costs a huge amount). Outcomes in big restructurings where equity walks away with nothing are rarer than you might think.
- NovemberWhiskey 3y agoIf the calculus is that "Twitter with Elon" is valueless and "Twitter without Elon" is not, then perhaps this will be the exception that proves the rule.