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Miami-Dade County did that: sold their $17m claim (because they owned the stadium that they sold naming rights to FTX) for probably about a third: > “I’ve neve

Miami-Dade County did that: sold their $17m claim (because they owned the stadium that they sold naming rights to FTX) for probably about a third: > “I’ve never worked on a bankruptcy case that got better. It always gets worse,” said Commissioner Raquel Regalado, a lawyer who now works as a broadcaster. “The idea of just getting out as early as possible seems like a great idea to me. “ Those were some expensive words. And in general, always somewhat expensive words because the hedge fund buyers generally don't work "lose" into their models. https://www.miamiherald.com/news/local/community/miami-dade/article274981761.html https://www.miamiherald.com/news/local/community/miami-dade/... Selling your claim is only a good deal if the hedge funds are drunkenly stupid, you have no other assets/lending sources and are going to die soon or have debt at payday loan rates.

ipsento606 2y ago
Selling your claim, or a portion of your claim, might also make sense from a risk tolerance / declining marginal utility of money point of view, if it represented a large enough portion of your net worth. Or put another way - if there were an investment opportunity that that had an 80% chance of 3x-4x returns in the next 2-3 years, I might consider investing 25% or even 50% of my net worth in that opportunity. But I certainly wouldn't invest 95% of my net worth.
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flomo 2y ago
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- nroets 2y ago
  The buyers of these claims often have inside information. By selling during bankruptcy they gambled that the "experts" were wrong and it turn out not to be the case. That's why exchanges often suspend shares during bankruptcy: To make it clear that price manipulation and outright corruption is likely. I have both a claim in FTX and shares in a suspended ("bankrupt") company listed outside the US. I just ride these things out because I don't need the money right now.
  - deleted 2y ago
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  - flomo 2y ago
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- Scoundreller 2y ago
  From a public policy standpoint, you don't want local government authorities taking a quick buck now instead of (on average) more money a few years later. But to an elected politician that might not even be in office in a few years, money now is worth more at any cost than money later. A gov agency is best suited to ride these things out because their cost of capital is among the lowest. Generally dumb for a county to sell an asset to a hedge fund: the HF has to pay more in interest than a county does just to pay you money now. There's nothing to do here except wait, nothing to whip in shape and make more profitable. (Also cities shouldn't own stadiums, that's a gamble on the success of your local sports team and solvency of whomever you sell the naming rights to)
  - flomo 2y ago
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  - JumpCrisscross 2y ago
    > gov agency is best suited to ride these things out because their cost of capital is among the lowest Municipalities have a higher borrowing cost then the Treasury, though it's still relatively low.
metaphor 2y ago
I fail to see how the decision was anything less than decisive prudence. Your cited article makes it abundantly clear that the provenance of said $17 million claim was a default clause entitling Miami-Dade County to three years worth of naming-rights fees. They sold that speculative claim for $5 million cash---effectively recovering that year's otherwise uncollectible receivables---then immediately turned around and locked in a 17-year, $117.4 million agreement with Kaseya[1]; back-of-the-envelope says that's an implied ~$5.4 million (2023 dollars) per year with 3% annual inflation adjustment baked in. Call me naive, but I imagine that if you're in the business of running a multi-purpose arena with real opex, you've gotta be the dumbest risk manager in South Florida to allocate expensive legal resources in chase of speculative claims when a mutual opportunity to repair a gapping hole in your balance sheet presents itself and you have a willing long-term replacement suitor lined up. [1] https://www.miamidade.gov/global/news-item.page?Mduid_news=news1684416610680546 https://www.miamidade.gov/global/news-item.page?Mduid_news=n...
- Scoundreller 2y ago
  The overarching question is: why should the County have thought the hedge funds are overpaying for the claim and to take the money and run? Usually when you have several suitors that purely have profit in mind, you're the mark. Doubly so when their cost of capital is higher than your own. > to allocate expensive legal resources in chase of speculative claims On a claim this big, the bankruptcy trustee takes care of that for you. They're literally a fiduciary. The cost would be reading whatever gets mailed to you, but at the end of the day, there isn't much control you have over the ultimate outcome. And uhhh, in terms of credit worthiness, Kaseya has an interesting history: https://en.wikipedia.org/wiki/Kaseya_VSA_ransomware_attack https://en.wikipedia.org/wiki/Kaseya_VSA_ransomware_attack .
  - s1artibartfast 2y ago
    They don't have to be overpaying. It was a win win. The way I read it the county got more money this way than if they held it. They they sold the stake ultimately worth 17 million, but they got their rights back, which they resold for 16 million. As long as they sold their stake for 1 million or more, they are in the green.
kelnos 2y ago
> Those were some expensive words. I find it weird that you condemn that decision based on perfect hindsight. > Selling your claim is only a good deal if the hedge funds are drunkenly stupid, you have no other assets/lending sources and are going to die soon or have debt at payday loan rates. Selling your claim reduces your exposure and eliminates the risk that you'd get even less after the bankruptcy process concludes. It also lets you book the loss now and move on. That's valuable to some people. Consider that people have different motivations and needs than you do.

ipsento606 2y ago

Selling your claim, or a portion of your claim, might also make sense from a risk tolerance / declining marginal utility of money point of view, if it represented a large enough portion of your net worth. Or put another way - if there were an investment opportunity that that had an 80% chance of 3x-4x returns in the next 2-3 years, I might consider investing 25% or even 50% of my net worth in that opportunity. But I certainly wouldn't invest 95% of my net worth.

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flomo 2y ago

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nroets 2y ago
The buyers of these claims often have inside information. By selling during bankruptcy they gambled that the "experts" were wrong and it turn out not to be the case. That's why exchanges often suspend shares during bankruptcy: To make it clear that price manipulation and outright corruption is likely. I have both a claim in FTX and shares in a suspended ("bankrupt") company listed outside the US. I just ride these things out because I don't need the money right now.
- deleted 2y ago
  [deleted]
- flomo 2y ago
  [flagged]
Scoundreller 2y ago
From a public policy standpoint, you don't want local government authorities taking a quick buck now instead of (on average) more money a few years later. But to an elected politician that might not even be in office in a few years, money now is worth more at any cost than money later. A gov agency is best suited to ride these things out because their cost of capital is among the lowest. Generally dumb for a county to sell an asset to a hedge fund: the HF has to pay more in interest than a county does just to pay you money now. There's nothing to do here except wait, nothing to whip in shape and make more profitable. (Also cities shouldn't own stadiums, that's a gamble on the success of your local sports team and solvency of whomever you sell the naming rights to)
- flomo 2y ago
  [flagged]
- JumpCrisscross 2y ago
  > gov agency is best suited to ride these things out because their cost of capital is among the lowest Municipalities have a higher borrowing cost then the Treasury, though it's still relatively low.

metaphor 2y ago

I fail to see how the decision was anything less than decisive prudence. Your cited article makes it abundantly clear that the provenance of said $17 million claim was a default clause entitling Miami-Dade County to three years worth of naming-rights fees. They sold that speculative claim for $5 million cash---effectively recovering that year's otherwise uncollectible receivables---then immediately turned around and locked in a 17-year, $117.4 million agreement with Kaseya[1]; back-of-the-envelope says that's an implied ~$5.4 million (2023 dollars) per year with 3% annual inflation adjustment baked in. Call me naive, but I imagine that if you're in the business of running a multi-purpose arena with real opex, you've gotta be the dumbest risk manager in South Florida to allocate expensive legal resources in chase of speculative claims when a mutual opportunity to repair a gapping hole in your balance sheet presents itself and you have a willing long-term replacement suitor lined up. [1] https://www.miamidade.gov/global/news-item.page?Mduid_news=news1684416610680546 https://www.miamidade.gov/global/news-item.page?Mduid_news=n...

Scoundreller 2y ago
The overarching question is: why should the County have thought the hedge funds are overpaying for the claim and to take the money and run? Usually when you have several suitors that purely have profit in mind, you're the mark. Doubly so when their cost of capital is higher than your own. > to allocate expensive legal resources in chase of speculative claims On a claim this big, the bankruptcy trustee takes care of that for you. They're literally a fiduciary. The cost would be reading whatever gets mailed to you, but at the end of the day, there isn't much control you have over the ultimate outcome. And uhhh, in terms of credit worthiness, Kaseya has an interesting history: https://en.wikipedia.org/wiki/Kaseya_VSA_ransomware_attack https://en.wikipedia.org/wiki/Kaseya_VSA_ransomware_attack .
- s1artibartfast 2y ago
  They don't have to be overpaying. It was a win win. The way I read it the county got more money this way than if they held it. They they sold the stake ultimately worth 17 million, but they got their rights back, which they resold for 16 million. As long as they sold their stake for 1 million or more, they are in the green.

kelnos 2y ago

> Those were some expensive words. I find it weird that you condemn that decision based on perfect hindsight. > Selling your claim is only a good deal if the hedge funds are drunkenly stupid, you have no other assets/lending sources and are going to die soon or have debt at payday loan rates. Selling your claim reduces your exposure and eliminates the risk that you'd get even less after the bankruptcy process concludes. It also lets you book the loss now and move on. That's valuable to some people. Consider that people have different motivations and needs than you do.