BAN CREDIT DEFAULT SWAPS NOW!!!
source: http://www.financialsense.com/fsu/editorials/cherniawski/2008/0222.html
-
-
- taps65
- added this
For frustrated investors looking to justify the ban of credit default swaps (CDS), look no further than last week’s corporate bankruptcies of Canadian newsprint producer AbitibiBowater Inc. (ABWTQ) and U.S. shopping center developer General Growth Properties Inc. (GGP).
In both of these cases, credit default swaps became an actual bankruptcy catalyst - for the first time ever.
In the lead-up to both bankruptcies, the lenders who had debt outstanding - who would have the right to vote on any reorganization - had hedged their debt through credit default swaps and so stood to benefit from the company’s bankruptcy. That made it very difficult for both companies to get the majorities they needed for debt reorganization, making bankruptcy inevitable.
HELP SPREAD THE WORD.
In both of these cases, credit default swaps became an actual bankruptcy catalyst - for the first time ever.
In the lead-up to both bankruptcies, the lenders who had debt outstanding - who would have the right to vote on any reorganization - had hedged their debt through credit default swaps and so stood to benefit from the company’s bankruptcy. That made it very difficult for both companies to get the majorities they needed for debt reorganization, making bankruptcy inevitable.
HELP SPREAD THE WORD.
