Should Corporate Bankruptcy Law Be Changed?
Specifically, should shareholders be left holding the bag in a
corporate bankruptcy filing, as it appears Worldcom's current
shareholders will be. That company's current bondholders want to take
"possession" of what the current shareholder's have now. Any
long-term observer of the market, in this newsgroup, cannot deny what
will occur shortly - a pre-packaged bankruptcy filing, a "Thanks for
the Memories" ballad, sung in unison by the current bondholding group
to the current shareholders, around a bonfire of "old" equity paper
and a reissuance of new stock in exchange for current debt. Does the
law need changing, to accord with current notions of equity - in the
moral sense? Bankrolling a corporation requires large amounts of
capital. The bond investor can't do it alone. When the going gets
tough, why should the equity investor get "rolled" like a drunk lying
in the gutter? Aren't these rules of lending just what the corporations agreed to in order
to get the loans? You generally can't change the contract after you signed
it.
Yes. I like how this game is played. Some distressed bond vultures
come swooping in and purchasing up bonds for pennies on the dollar and
immediately turn around and ask the company for a debt-for-equity
swap, and then end up with a great company that has no debt while the
shareholders get the shaft.
Regardless, this stock will climb back to at least .75 - $1.00 before
all of that takes place. Furthermore, if they do the debt-for-equity
swap, current shareholders may still retain 10-20% of their shares
after dilution. That being the case, I'm sure WCOM could once again
rise to $10.00 from being debt free.
As a matter of fact, the shareholders (if I remember this correctly)
have to give a 2/3'rds approval for prepackage BK. If they're willing
to guarantee me at least 10-20% of the equity, I would vote yes. I
hate to do that with the realization that a lot of people lost their
life savings.
Sometimes we must reflect where we get the money when we cash out on
profits. Our profits are generally someone elses losses. It touches
me deeply as a human to realize that there are people who gave decades
of their lives to a company and got a few hundred or thousand dollars
leftover in their 401-k because of pandemonium.
Furthermore, after they enact new laws for accounting and bankruptcy,
they're going to have to start looking into the media. The media has
too much leverage as it is, and they are only making things worse.
I don't like the fact that everyone in the big chairs are tripping
over each other trying to rape the common man's last dollar so they
can fill the coffers. Capitalism is starting to suck in this country.