John, you are absolutely correct that most (if not all) floorless are issued by companies with "doubtful" prospects. Arakis was forced to accept a bid at less then their book value because of their inability to raise normal financing for their share of the project. The lesson is, you see a floorless? It is the first indication of financial weakness, the companies involved simply cannot access normal financing channels and have to resort to floorless issues. It used to be the overseas reg s, but the SEC clamped on them, so the wunderkids on the street invented a new, even more devastating death spiral instrument. Sure, there are going to be few companies managing to escape the end death spiral (this is often when, at great risk, you can make a killing, like a number of us did in AKSEF and GATE, or the one I just missed MABXA), but the odds are often against you.
Zeev |
