Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

marmar

(76,982 posts)
Wed Jun 22, 2016, 01:16 PM Jun 2016

From Investment-Grade to Bankruptcy in 4 Months: Why Ratings Agencies are Still a Joke


From Investment-Grade to Bankruptcy in 4 Months: Why Ratings Agencies are Still a Joke
by Wolf Richter • June 21, 2016


[font color="blue"]Whom are they trying to fool?[/font]

The largest bankruptcy in Brazil’s history occurred on Monday when telecommunications carrier Oi SA threw in the towel. On Tuesday, it also filed for Chapter 15 bankruptcy protection in the US. A euro-denominated debt payment is coming due in less than a month, and it doesn’t have the money.

It owes creditors 65 billion reais ($19 billion). This includes 50 billion reais in bonds and bank loans, some of them denominated in foreign currencies.

It has been trying “restructure” its debt by stiffing creditors and practically wiping out stockholders. But ten days ago, CEO Bayard Gontijo resigned over a disagreement with some board members on the negotiations with the creditors. Last week, talks fell apart when board members rejected a plan by bondholders to swap their bonds for 95% of the company’s equity.

These creditors – among them Banco do Brasil and Itau Unibanco Holding – are licking their wounds. According to Bloomberg, the bankruptcy could also “trigger payments on $14 billion of derivatives contracts that are designed to pay out in an event of a default.”

Shareholders will be left with next to nothing. They include Pharol SGPS – a Portuguese telecom service provider – the Ontario Teachers’ Pension Plan, the state-owned Brazilian development bank BNDES, and BlackRock. ................(more)

http://wolfstreet.com/2016/06/21/investment-grade-to-bankruptcy-in-4-months-fitch-ratings-downgrades-oi-sa-brazil/





1 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
From Investment-Grade to Bankruptcy in 4 Months: Why Ratings Agencies are Still a Joke (Original Post) marmar Jun 2016 OP
These cons have become much more sophisticated since the simpler days of Louis Rukeyser's cons. PSPS Jun 2016 #1
Latest Discussions»Issue Forums»Economy»From Investment-Grade to ...