Andrew Newton 
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Struggling but viable companies fall prey to vultures
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Added by
apesphere on 27 Jan 2009
From: www.guardian.co.uk
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| Image courtesy Particlepat via Flickr |
Behind the headlines of companies going to the wall, there may well be a fund investing in distressed debt.
The Guardian has produced a neat analytical piece dissecting the shadowy world of the vulture fund: funds that buy up debt instruments of a struggling company, then push the firm into liquidation when there is the threat of default on the debt.
While other investors might be prepared to restructure a business in such circumstances, some investors in distressed debt have no interest in seeing a business survive because they stand to make a margin on liquidation over the price of the debt they buy up.
It all seems incredibly wasteful: the unnecessary destruction of jobs and goodwill in a viable business.
The Guardian has produced a neat analytical piece dissecting the shadowy world of the vulture fund: funds that buy up debt instruments of a struggling company, then push the firm into liquidation when there is the threat of default on the debt.
While other investors might be prepared to restructure a business in such circumstances, some investors in distressed debt have no interest in seeing a business survive because they stand to make a margin on liquidation over the price of the debt they buy up.
It all seems incredibly wasteful: the unnecessary destruction of jobs and goodwill in a viable business.
Andrew Newton is the author of The Handbook of Compliance: Making Ethics Work in Financial Services
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on 27 Jan 2009
I think business and business people have become too reliant on feedback. They set up they tidy contained systems and accurately determine the payoff, the timing and the manageable risks. Then they live and die by these systems without a care for the commons.
Governance is the piece of society that is supposed to balance out those systems for the commons. The libertarian view of the market is a false feedback loop. It throws the commons ledger on the floor to prop up the wrongly measured desk leg. The fools are missing ledger entries.
Resources and time are finite, they need to be accounted for in those neat little contained systems.