steady on, I'm sure that most of the riff raff has been chased or litigated out of the business by now. Those that have survivied and continue to lend or purchase hybrids have become as selective as straight equity purchasers of Issuers. In fact, the combined due diligence of an Issuer for convertible/hybrids is far deeper than any shareholder would probably ever do ;)
Which leads to the question of why? Why does a Hedge fund make a loan to an Issuer that it feels certain may fall into default?
EVERY loan is made that way. Issuers may well have been beating the bushes looking for Toxic debt to add to their misery, that says EVERYTHING about that POS Issuer!!
Hedge Funds like NIR prospected for Issuers that had little to no access to any form of traditional lending. It's hardly fair to say that the Lender is guilty because Lenders are predatory! Look at the sub prime mess..when banks have free money, Bankers lend until there's no credible borrowers left to lend too,then Banks lend to the incredible!!
Toxic Lenders must have had a secret sauce because its virtually impossible to make money on debt that doesn't meet its interest and principle payment,or if converted to equity it doesn't have a market to exit into.
So how the heck does an NIR & Funds make any real money? I'm baffled by the comparison to Payday Storefront Lenders...maybe you could be more precise ;)
Toxic convert funds are payday lenders with storefronts right outside the casino/crackhouse/whorehouse/liquor store.
AI
