for riversider...(BN) YRC Extends Bond-Swap Deadline to Avert Bankruptcy (Update1)
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about 16 years ago
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flame away on those cds.... YRC Extends Bond-Swap Deadline to Avert Bankruptcy (Update1) 2009-12-29 14:56:26.172 GMT (Adds analyst’s comment in fourth paragraph.) By Pierre Paulden Dec. 29 (Bloomberg) -- YRC Worldwide Inc., the largest U.S. trucking company, extended the deadline for a bond exchange for the fifth time this month until 11:59 p.m. today in New York as participation remained below a... [more]
flame away on those cds....
YRC Extends Bond-Swap Deadline to Avert Bankruptcy (Update1)
2009-12-29 14:56:26.172 GMT
(Adds analyst’s comment in fourth paragraph.)
By Pierre Paulden
Dec. 29 (Bloomberg) -- YRC Worldwide Inc., the largest U.S.
trucking company, extended the deadline for a bond exchange for
the fifth time this month until 11:59 p.m. today in New York as
participation remained below a required threshold.
Bondholders increased support for the debt exchange
designed to avert bankruptcy to 81 percent as of yesterday from
80 percent on Dec. 23, Overland Park, Kansas-based YRC said in a
statement today.
Facing a slump in freight demand, YRC is locked in a
struggle with a group of bondholders who own derivatives that
would pay out if the company defaults, according to two people
familiar with the situation. As of yesterday, 53 percent of the
holders of the company’s $150 million of 8.5 percent notes due
in April offered to tender, below the 70 percent required and
the same level after the prior deadline, YRC said.
“This increases the probability YRC will have to file for
bankruptcy,” said David Ross, a Baltimore-based analyst at
Stifel Nicolaus & Co., who has a “sell” rating on the stock.
“The company has said that if the exchange does not go through,
it will have to make a $19 million bank interest payment on Dec.
31 that would leave the company in an unsustainable liquidity
position.”
Concern is growing that the company wouldn’t survive a
bankruptcy filing because customers would defect, Iain Gold, a
director in the strategic research department of the
International Brotherhood of Teamsters, said earlier this month.
The union represented about 40,000 YRC employees as of January.
‘Running Out of Time’
Bank lenders are “extremely reluctant” to put YRC into
bankruptcy, in part because of “negative publicity related to
the Teamsters,” New York-based fixed-income research firm
CreditSights Inc. said in a Dec. 24 report.
“The lending group may allow the exchange to proceed if as
few as 65 percent of the noteholders accept the exchange,”
CreditSights said, referring to the holders of the 8.5 notes
maturing in April.
The trucking company took on debt when Yellow Corp.
acquired Roadway Corp. in 2003 for $1.07 billion and then bought
USF Corp. in 2005 for $1.37 billion. YRC has $1.6 billion of
loans and bonds, according to data compiled by Bloomberg.
“They’re running out of time,” Ross said.
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"To me, financial markets are not unlike sports bookmaking. In the bookie world, you have the "Squares" who are analogous to the retail investors. These are the guys who say things like "oh man - Tom Brady is wicked pissah - the Pats are SO totally gonna cover the 7 point spread," with little or no reasoning or analysis to back up their decision. They also might be guys who pay someone else (like a newsletter writer) to pick games for them (of course, these newsletters are almost always scams)
Then there are the professionals - I actually know a guy who was one of the biggest NFL bettors in the 80's. He still handicaps NFL games - he spends 30 hours+ a week analyzing the different matchups, weather, psychology, etc. Some weeks he finds several good bets, some weeks he finds none.
Now, in the investing world, pension fund managers need to be the PROFESSIONALS - they can't be in the "square" camp, and just say "hey - I paid the newsletter (ratings agency!!!) for the picks, if they lose, it's not my fault." That's amateur (square) thinking, and I could possibly be convinced that it's an acceptable excuse for RETAIL, amateur investors (but note, again, the culpability lies with the RATINGS agency here). Professionals, however, can't be allowed to make such excuses, or the system will never change! Similarly, you can't blame the bookie when you lose for having offered you an unfair bet.
Both sports betting markets and financial markets are efficient ENOUGH that you have to do your own work - and LOTS of it - if you expect to generate alpha.
But the International Swaps and Derivatives Association is mistaken in trying to knock down a central thrust of the empty creditor hypothesis, Reuters Breakingviews says. This argues that investors owning a company’s debt as well as the related credit-default swaps can prevent or distort a restructuring outside bankruptcy if the company gets into trouble. After all, blocking alternatives so that a company eventually has to file for bankruptcy would lead to a fat payout on the swaps, it notes.
As far as the association is concerned, there is no evidence that the ratio of bankruptcies to out-of-court restructurings has picked up since the credit derivatives market boomed. Still, the fear is that this dynamic could force companies into an otherwise avoidable collapse — or at least interfere with a restructuring. It’s fodder for those who want to ban credit-default swaps, or at least want creditors who hedge with them to have restricted voting rights.
And despite the group’s conclusion, credit derivatives clearly do in practice sometimes gum things up when companies are trying to negotiate out-of-court restructurings, Reuters Breakingviews says. Some of these debt revampings, as well as outright bankruptcies, can lead to payouts on credit-default swap contracts.
Whether that happens can depend on the terms of the restructuring, an interaction that has caused uncertainties in several recent cases, including a debt exchange carried out by Cemex, the Mexican cement giant. Wind Hellas, the Greek telecommunications company that recently entered a pre-packaged bankruptcy, said attempts to restructure its debt would have been complicated by the presence of credit default swap holders.
Companies need to bear this issue in mind when they draft credit agreements. But instead of playing down the issue, the International Swaps and Derivatives Association could help, too, Reuters Breakingviews suggests. The industry group has already missed a trick or two in the face of widespread criticism of derivatives trading practices that go well beyond credit-default swap instruments, the publication says. Rather than trying to defend everything about the industry, it should emphasize the useful features of derivatives markets while recognizing, and trying to address, their flaws.
This means making a concerted effort to find better ways to manage the difficulties posed by creditors who own credit-default swaps in restructurings, Reuters Breakingviews argues. The extreme solution — draconian curbs on the voting rights of hedged investors — would not be workable. But a good first step could be full disclosure of which creditors are hedged with credit-default swaps before restructuring discussions begin.
Interesting..... Thanks
I think you would agree with this guy Marco...
http://fridayinvegas.blogspot.com/2009/12/synthetic-cdos-spanish-21-and-sports.html
"To me, financial markets are not unlike sports bookmaking. In the bookie world, you have the "Squares" who are analogous to the retail investors. These are the guys who say things like "oh man - Tom Brady is wicked pissah - the Pats are SO totally gonna cover the 7 point spread," with little or no reasoning or analysis to back up their decision. They also might be guys who pay someone else (like a newsletter writer) to pick games for them (of course, these newsletters are almost always scams)
Then there are the professionals - I actually know a guy who was one of the biggest NFL bettors in the 80's. He still handicaps NFL games - he spends 30 hours+ a week analyzing the different matchups, weather, psychology, etc. Some weeks he finds several good bets, some weeks he finds none.
Now, in the investing world, pension fund managers need to be the PROFESSIONALS - they can't be in the "square" camp, and just say "hey - I paid the newsletter (ratings agency!!!) for the picks, if they lose, it's not my fault." That's amateur (square) thinking, and I could possibly be convinced that it's an acceptable excuse for RETAIL, amateur investors (but note, again, the culpability lies with the RATINGS agency here). Professionals, however, can't be allowed to make such excuses, or the system will never change! Similarly, you can't blame the bookie when you lose for having offered you an unfair bet.
Both sports betting markets and financial markets are efficient ENOUGH that you have to do your own work - and LOTS of it - if you expect to generate alpha.
This is for Marco..
http://dealbook.blogs.nytimes.com/2009/12/21/is-the-empty-creditor-theory-just-empty/
But the International Swaps and Derivatives Association is mistaken in trying to knock down a central thrust of the empty creditor hypothesis, Reuters Breakingviews says. This argues that investors owning a company’s debt as well as the related credit-default swaps can prevent or distort a restructuring outside bankruptcy if the company gets into trouble. After all, blocking alternatives so that a company eventually has to file for bankruptcy would lead to a fat payout on the swaps, it notes.
As far as the association is concerned, there is no evidence that the ratio of bankruptcies to out-of-court restructurings has picked up since the credit derivatives market boomed. Still, the fear is that this dynamic could force companies into an otherwise avoidable collapse — or at least interfere with a restructuring. It’s fodder for those who want to ban credit-default swaps, or at least want creditors who hedge with them to have restricted voting rights.
And despite the group’s conclusion, credit derivatives clearly do in practice sometimes gum things up when companies are trying to negotiate out-of-court restructurings, Reuters Breakingviews says. Some of these debt revampings, as well as outright bankruptcies, can lead to payouts on credit-default swap contracts.
Whether that happens can depend on the terms of the restructuring, an interaction that has caused uncertainties in several recent cases, including a debt exchange carried out by Cemex, the Mexican cement giant. Wind Hellas, the Greek telecommunications company that recently entered a pre-packaged bankruptcy, said attempts to restructure its debt would have been complicated by the presence of credit default swap holders.
Companies need to bear this issue in mind when they draft credit agreements. But instead of playing down the issue, the International Swaps and Derivatives Association could help, too, Reuters Breakingviews suggests. The industry group has already missed a trick or two in the face of widespread criticism of derivatives trading practices that go well beyond credit-default swap instruments, the publication says. Rather than trying to defend everything about the industry, it should emphasize the useful features of derivatives markets while recognizing, and trying to address, their flaws.
This means making a concerted effort to find better ways to manage the difficulties posed by creditors who own credit-default swaps in restructurings, Reuters Breakingviews argues. The extreme solution — draconian curbs on the voting rights of hedged investors — would not be workable. But a good first step could be full disclosure of which creditors are hedged with credit-default swaps before restructuring discussions begin.
YRC survived..everyone lives happily ever after