Great article. I like this part:
"Hiding value in bankruptcy is big business. In K-Mart’s (SHLD) 2002 bankruptcy, distressed security traders bought up creditor’s claims in the holding company and then underestimated the value of the company’s real estate assets. By doing so they were able to prove that the equity was “out of the money” and jettison its claims to a distribution. After the creditors reorganized the company in 2003, K-Mart sold multiple real estate holdings for their true value. Within a year K-Mart shares appreciated 250%.
In the case of Mirant’s (MIR) 2003 bankruptcy it was more of the same, except for a different ending. Creditors in the case, using Blackstone Group LP’s evaluations, initially low balled the value of the company’s electric power plants and natural gas trading contracts. Shareholders were due to be extinguished.
"Mirant's reorganization plan leaves shareholders, like me, who lost their investment, out in the cold," stated Mirant shareholder Al Kroemer during an April 2005 equity rally in front of the Texas bankruptcy court. "This is like a bank stealing your house, then selling it for half its value to a friendly 'competitor' who then resells it in the broader market for its real value and splits the profits with the bank. The rightful owners end up with nothing!" Three years later these words would seem prophetic. In September 2008, JP Morgan purchased WaMu’s $300 billion of assets for $1.9 billion from the FDIC."
Justice will prevail now!!!
We've learned out of history. Gooooooo Susman!
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