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Technology Stocks : Zenith - One and Only
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To: NRugg who wrote (6345)10/7/1999 2:26:00 AM
From: stilts  Read Replies (2) of 6570
 
My guess is that Pennsylvania Merchant Group was acting on behalf of LG. I have heard that under bankruptcy principles, the debt owed to a controlling shareholder, such as the debt owed by Zenith to LG, is equitably subordinated to other debt. In view of the suspicious nature in which the LG debt was incurred, the equitable subordination argument would likely be a slam dunk winner if made by the bondholders. Therefore, LG needed to control a substantial portion of the bonds to avoid the possibility of the bondholders arguing for such an equitable subordination, which would give them priority over LG in respect of foreclosing on the patents and other assets.

On another, but related, issue, if any of the purported bondholders were simply "fronts" for LG, then perhaps their non-disclosure of that fact is a fraudulent concealment. (And also, they arguably wouldn't be "parties in interest" entitled to participate in the bankruptcy proceeding.)

stilts
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