The Stock Market Thread

Any company with significant assets, reoccurring revenues, or good profitable brand names is going to survive. There has to be assets people want. With those assets there was zero chance they wouldn’t survive bankruptcy.

 

What is brand name about Windstream? It's a predominately rural telecommunications company. You might can find someone that uses Windstream... if you visit farm land. Compared to a donut shop, yea, they're big, with assets and revenues. Compared to other telecommunications companies, they are not.

You said they wouldn't have survived their debt. In other words, they would have gone bankrupt regardless, yes? But yet... they can survive bankruptcy? I'm confused... why is bankruptcy easier to survive than actual business, for this well regarded... brand name, significant asset held company, you have suddenly made Windstream out to be?

 

telecommunications companies have significant assets and reoccurring revenues. And I said OR brandname, not and. If I’m making $200k a year, but have $250k in debt payments I’m in trouble. If those debt payments are cut to $125k then I’m not. It’s not very complicated.

Here’s a nice article: https://www.cfo.com/bankruptcy/2020...ions-about-the-chapter-11-bankruptcy-process/

read the first misconception

 

Windstream probably had comparable assets to some community banks in LA, and less recurring revenue. I think you are making them out to be a lot more than they are.

Those debt payments were cut, but not the total amount you owed, correct? We'll give some leeway, you might have some amount washed away, but you won't have half of it gone. Your payments are restructured, you're not accumulating interest, and you're going to have the commitment for some period of time. Right?

So again, the institutions are saved. They're going to get their money. Or at least more than half of it. It'll just take longer. And they're not gaining interest. But they're going to get something. The common stock owner isn't. So if institutions are the predominate debt holders, the institutions are predominately getting something, whereas the common folks aren't. Now, institutions may hold the common stock at a higher proportion as well, and those are going to get screwed as well as the retail folks. But the net institutional, vs retail, is going to be net positive for institutions, because of the fact that the debt isn't washed away.

 

They have subscribers, they have assets. they are worth something to somebody. if they weren't no one would have bothered to buy up the debt to get control of the company.

Not necessarily. The bondholders are compensated by taking control of the company and owning the equity. sometimes companies emerge with new debt, sometimes they don't. it depends on what the assets are compared to the debt borrowed. if new debt is being issues it won't be at levels that aren't sustainable because no one will buy the new debt.

bankruptcy's aren't a net positive for anyone unless you are buying the debt after it's apparent they are going under and you are buying it at discounted levels. but yeah the bondholders fair better. on the other hand if it's a solid company and the stock is going up the common shareholders fair much better.

 

*hears inside information from being in congress*
"Hey investment manager, please buy $1m in X company"

Individual is then found to have invested in a company they had material non-public info about.

"Well someone manages my investments I don't deal with that"

 

yeah well that's essentially what martha stewart did and that's why she went to jail. that being said it's not always that easy to prove.

 

I'm still not following your logic. You said Windstream wouldn't have survived with their debt. Which is effectively saying, no matter what, they were going to declare bankruptcy. But because they were worth something, they were going to survive bankruptcy, otherwise nobody would have bought their debt. But isn't that the same as saying the reason they had the debt... was because someone thought they were going to be worth something? I can't make it go both ways in my head. How did they get the debt in the first place? Why would someone lend to something that was going to fail?

Yes, the bond holders fair better. That's the point. If it's a solid company, why is it declaring bankruptcy? We're not talking about when skies are blue. We're talking about when they are dark. And institutions are favored more in dark skies than retail investors, and that is irrelevant to what it is like when the sky is blue.

 

In some instances it's not hard to prove, but overall yeah not a ton that can be ton. Ultimately the problem is just how accepted it seems to be.

 

because i'm sure they didn't think it was going to fail when they issued the debt. things change. there was a time when absolutely no one would think GM or United Airlines could possibly go bankrupt and those were AAA rated companies.

 

Folks weren't issuing debt years and years before, this was occurring even through bankruptcy. Through litigation. Hell, Windstream wanted to appeal and Aurelius tea bagged them saying something like an appeal triggered an automatic payment, and they were happy to take someone else's credit over Windstreams. The point being, that even on the verge of owing a hundred million, Windstream still had institions willing to extend credit. Two weeks later, or so, though, Windstream decided on bankruptcy instead.

 

the debt that got them on the road to bankruptcy was issued when it was a viable company. i have no idea if they had credit available at the time right before bankruptcy that could have stopped them from going under. i guess it's possible they could have survived, but most will succumb eventually. i'd guess that the new borrowers were going to try to jump the existing creditors for the secured assets and the existing creditors said no, but i wasn't there and don't know the specifics.

 

Debt didn't get them on the road to bankruptcy. AC noticed a provision in its bonds (not being specific, just general, so some terms here may be wrong) that said Windstream could not unload assets to another entity, or it would trigger a default. Windstream Holdings did that when they moved one of their earning assets over to Uniti, their new company. AC said that was prohibited, and they've defaulted on the bonds, and owe something around a hundred million. Windstream said, no, that isn't right, and took it to court, thinking that the court would save them, simply because not doing so would cause them, a functioning company, to declare bankruptcy.

Court decided yea, what Windstream did was exactly what was said could not be done, and they were in default, regardless of whether it would trigger bankruptcy or not.

 

you don't try to unload your assets into another entity unless you are trying to avoid creditors because you are over leveraged. and yeah it's illegal. see enron.

 

It wasn't illegal to do what Windstream did. It was against the bond stipulations. AC expected Windstream to settle with them, over it. But when Windstream didn't, they decided to pound them. It wasn't illegal, so I doubt they were doing it to avoid creditors.

 

what possible other reason could they have to do it? it's illegal to transfer assets to avoid creditors. just like if I transferred all the cash out of my business account into my personal account that doesn't stop creditors from having access to that money.

 

Here, let me copy thing, so you can see the right words.

 

right so the bondholders probably were secured by those assets. so removing those reduces the quality of the securitization.

 

https://www.nytimes.com/2021/01/29/technology/robinhood-fundraising.html

raising $1 bil.

On Thursday, Robinhood was forced to stop customers from buying a number of stocks like GameStop that were heavily traded this week. To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation.

Robinhood still needed more cash quickly to ensure that it didn’t have to place further limits on customer trading, said two people briefed on the situation who insisted on remaining anonymous because the negotiations were confidential.

 

Continue to read. You said you knew the basics, but it seems that is less so.

The bond holders did not care. For two years, and then...