On Sat, 20 Nov 2004 08:56:23 -0500, "George" george@least wrote:

Chris, would you sell your house at a distressed price if you couldn't make
your car payments this month, or would you seek relief from the lienholder?

A lot of people do. However this is a completely different situation
both legally and practically.

The legal difference is that the holder of a mortgage is a secured
creditor and protected by the value of the asset. In other words, if
you quit making payments, they get the house. (Note that most mortgage
holders will work with the borrower to try to prevent that.)

However the _real_ difference is that a company like K-Mart doesn't
have just one creditor to deal with. They've got thousands of them,
from banks and other financial institutions to government agencies to
suppliers. Any single one of those creditors could bring down the
entire edifice by going to court on the debt and starting a land rush
of the other creditors. That kind of situation is flat unmanagable and
apallingly self-defeating without some kind of legal protection.

Also, it's my understanding that K-Mart had emerged from bankruptcy.
Again, it's not uncommon for companies in K-Mart's situation
(asset-rich, cash-poor) have wads of cash shortly after they emerge.

There are two other things worth noting about this particular
situation. First, it was anything but arms length. The same investors
controlled K-Mart and held a major share of Sears. They could act to
the detriment of the smaller shareholders pretty much with impunity.

Second, these guys are investors, not businessmen. If a company is
worth more as a dead, stripped carcass with its assets broken up and
sold, then so be it. I believe that is the major motive behind this
transaction, even if the companies will at least nominally continue in
business.

Could Sears and K-Mart have been rehabilitated and turned back into
major retailers? Perhaps. But that's not a game these guys know, or
would play even if they did know.

Asset-rich, cash-poor companies bring the vultures circling in.

--RC


"Chris Hornberger" wrote in message
...

Ain't that just grand? "Yeah, Hi... we're strapped for cash. Mind if I
file
for bankruptcy so I can reorganize? yeah? Great. Thanks... Oh, and by the
way... I wanna buy this other really huge retailer, too. Great. Thanks...
Take care now."

ugh.




Sleep? Isn't that a totally inadequate substitute for caffine?