Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: Freedom Fighter who wrote (804)	9/25/1998 10:32:00 AM
From: Daniel Chisholm	Read Replies (2) of 1722

Bailout, or bankruptcy? Wayne, it was my understanding (thanks to Henry Volquardsen) that even though the LTCM deal is being called a "bailout" by the press, in reality it is more of a bankruptcy takeover. Specifically, it is my understanding that the general partners will be wiped out (100 % loss), and the limited partners will now have only a 10% stake in the new firm. This appears to be more of a takeover to facilitate orderly liquidation, in order to protect the interests of the creditors (who are contributing capital). Essentially, a conversion of debt to equity, with the former creditors now becoming 90% owners of the remaining value of the fund. If my understanding is true, then it is not a Fed-brokered subsidy to the rich and reckless. Instead, it is the (reckless;-) lenders taking over what is left of their assets. Comments? - Daniel

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