Thursday, April 05, 2007

Calculated Risk

CR has a post about the ABS bond market that I encourage you to read.

I have to admit that I'm having a moment of self doubt about that bankruptcy language in the bond prospectus that I wrote about here. (I also posted this on BR's website and Calculated Risk--those folks must think I'm nuts).

I wish someone would (1) tell me to shut up and stop yappin' about it because I have it all wrong, and then be kind enough to extend an explanation to me as to why or (2) would write about it. To me, the issue remains eerily silent.

Anyway, if it becomes an issue, you can say that you read about it first here. Otherwise, you can say that you have read the rantings of a deranged blogger.

10 comments:

Gemma Star said...

The issue remains eerily silent because it's technical and complicated for most of us. This does not mean you should hush up.

Au contraire. Keep at it.

In time, you will attract a few others who begin to note what you're talking about. Slowly, the word will spread.

Couldn't be soon enough, by my lights.

MarkM said...

I am a lawyer and I can tell you that counterintuitive results happen in BK cases. BK judges have broad powers, many of them equitable. On first read of that language it basically says to the holders that you may not get what you are expecting under this arrangement. That's just a result of BK being designed to protect the standing of the BK company.

Leisa said...

Mark--If I understand you correctly, then, my concern is a valid one.

MarkM said...

A little "admission" on CDOs from Moody's!

http://www.bloomberg.com/apps/news?pid=20601009&sid=aszosOrxVmjk&refer=bond

You can't make this stuff up! This is becoming a FARCE.

Leisa said...

MarkM--this risk concentration fits in well with my Hedge Fund + Sytemic Risk Article. It's 95 pages, and I'm re-reading it a second time to ensure that I've captured the issues.

It could very well be that there will be deferred pain. AS noted on CR today, the new accounting standards are allowing people to take investment losses through retained earnings--that sort of affects my investment thesis that earnings will be impacted.

sami said...

riddle me this. on the day that NEW (aka NEWC.PK) declared bankruptcy their preferred stock (NEWCP) traded at $6... Today (mere 4 days later) they are 30% above that... while the company is in bankruptcy and almost definitely will never pay a dividend again... what gives?

MarkM said...

Check CR this morning Leisa. Join UBS as an interested party to their lawsuit and find out how all this plays out from the front row!

Leisa said...

Sami, I can only surmise that people are looking for someone to come in and scoop them up for a premium.

sami said...

on the New preferred. I had owned couple of hundred shares. was waiting to see if somebody is going to save the company. when they announced bankruptcy, i sold, at the very bottom.
Here is the interesting thing. Vanguard had deposited my dividend into my account on the 30th. I was perplexed that they paid a dividend, but i did not complain. The preferred kept rallying all week long.
Last night, Vanguard reversed the payment, because the Company failed to Deliver.
I wonder how many people saw the dividend show up initially in their accounts, assumed the company will keep paying through bankruptcy and loaded up on the preferred thinking they are getting 30% dividend yield.
interesting times we live in.

~ Nona said...

Sami, very interesting denouement. Thanks for telling us about it.