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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: P.T.Burnem who wrote (1110)	1/18/1998 8:10:00 PM
From: Rational	Respond to of 9980

PTB: <<90-95% of listed I. companies are technically insolvent.>> I know this. But, this has very little economic significance because under standard corporate law/practice the debtholders will simply become equityholders. As new owners, the debtholders will continue the economic activity (perhaps more efficiently) either on their own or by appointing new managers, if not the same old managers. It is important to realize that leveraged companies have a very valuable default (put) option. If the debtholders did not price their debt at the time of lending (as it seems to be the case for Indonesian creditors), the borrowing companies have a wind-fall at the time of a technical-default. Of course, this process will wind-up a lot of enefficient economic activities which is in the best interest of everyone except the corrupt crony capitalists. Sankar