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What I would like to be explained is who is lending them the money. In the article, they went bankrupt with 7 billion in debt. Someone isn't getting that money
by MattGaiser 3y ago
What I would like to be explained is who is lending them the money.
In the article, they went bankrupt with 7 billion in debt. Someone isn't getting that money back. Whoever gave them the money evidently gave it to them unsecured as well, as the PE company ran off with the buildings. Lender gave some very generous terms here evidently.
- legitster 3y agohttps://www.bloomberg.com/news/articles/2024-02-01/risky-borrowers-storm-loan-market-for-once-unthinkable-savings https://www.bloomberg.com/news/articles/2024-02-01/risky-bor... The fees on this kind of debt are incredibly high, and banks are kind of desperate right now for higher interest loans. I think banks kind of have a "fool me twice, shame on me" attitude when it comes to bad loans - if they are adjusting the fees accordingly for the risk they should (theoretically) be fine on average in the long run.
- s1artibartfast 3y agoIt isnt very different than an auto loan. A bank gives you money to buy it, knowing full well that the value will only go down after you drive it off the lot. The car is collateral for the loan, and if you pay a high enough premium, the bank may accept the car as the only collateral. The bank has an actuarial team that models the rate of loan defaults and car crashes. Back to the real examples, banks invest in leveraged buyouts because on average, they make more money than they lose.