You have to understand what the underlying assets are in order to determine if they really are continuing to make money. So what are the underlying assets to the CT’s? Good thing you asked me. I’ll tell you.
The underlying assets in the CT’s are subordinated debentures issued by LBHI. That sounds complicated - what are those? I’ll tell you.
It’s a promise to pay from LBHI to the trust. These debentures are essentially a form of debt issued by LBHI, but the specific assets backing them may not be directly identified in the public filing, as subordinated debentures are generally unsecured or backed by general assets rather than specific collateral. Ok - we’re getting somewhere - but what does this really mean? Are they generating MONIES?!? I’ll tell you.
Subordinated debentures are often backed by the general corporate assets of the issuing company - LBHI. They are typically unsecured and subordinated, meaning they are lower in priority compared to senior debts (hint these assets usually aren’t revenue generating assets that are so attractive to be so low in the priority class). OK - so that’s not good. Let’s keep digging…
Unlike secured debts, which are backed by specific assets (like real estate or equipment), subordinated debentures are unsecured, meaning there is no specific pool of assets pledged to back them. Ok - that’s not good.
I believe I’ve made my case that the assets which none of us can prove which are promised to the CT’s from LBHI are anything but revenue generating assets which will provide recovery to the CT’s. They’ve been drained per the Plan. Resolution of the bankruptcy case doesn’t change the calculus. Go figure…
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