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But stockholders are the bottom of the capital structure, lower even than unsecured bond holders and other unsecured creditors, and tend to get wiped out.Īnd yet, bankruptcy filings have fired up the meme-stock crowd into bidding up shares of companies after they filed for bankruptcy, hoping for I dunno, that at a minimum they can sell that stuff to the greater meme-stock fool at 10 times the price?īut selling that stuff is precisely what the meme-stock crowd doesn’t do, and so they get wiped out when the hedge fund billionaires amid them – who know that you don’t have a profit until you dump this stuff – dump this stuff, and eager falling-knife grabbers in the meme-stock crowd make that a very profitable trade for the hedge fund billionaires.
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Holders of unsecured bonds issued by retailers tend to get little or nothing in bankruptcy court.
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Money-losing over-indebted brick-and-mortar retailers are notoriously difficult the restructure in bankruptcy court, and most end up getting liquidated. Sears was chopped to little pieces in bankruptcy court. Numerous other brick and mortar retailers were liquidated in bankruptcy court in recent years, including Toys ‘R’ Us. But that didn’t happen.īut from the prices today, we can see that holders of these unsecured bonds are now figuring into their calculus a very high probability that they will have to fight this out in bankruptcy court. This plunge in bond prices unwinds the boost that the bonds received from the meme-stock crowd when they inflated the shares to such an extent that it created the hope that the company could raise cash by issuing new shares at those inflated prices. The likely buyers of these bonds are hedge funds and PE firms that want a seat at the table during the bankruptcy proceedings to get their share of the pie while shareholders get ripped apart. But the bond market is nearly certain the company will default before August 2024, and that a bankruptcy court will give them high and tight haircuts (chart by FINRA/Morningstar) That’s a yield to maturity of 75%, assuming that those bonds will pay interest for two years and then get redeemed at face value in August 2024. The $300 million in of senior unsecured 10-year notes that Bed Bath & Beyond issued in 2014, due in 2024, with a coupon interest of 3.749%, collapsed to a new low of 32.7 cents on the dollar today. That would be a yield of 34%, assuming that the company even pays the interest for the life of the bond which the bond market assumes is very unlikely (chart by FINRA/Morningstar) The $225 million of senior unsecured 20-year notes that Bed Bath & Beyond issued in 2014, due in 2034, with a coupon interest of 4.915%, collapsed to a new low of 16 cents on the dollar today. And the bond market knows that a lot better than the meme-stock crowd. Not being able to pay suppliers is getting very close to the endgame. The suppliers also complained that “management is short on guidance about its plans to catch up with its past-due bills,” according to Bloomberg, citing the survey it had seen.Īlso according to Bloomberg, based on its sources, several firms that provide trade credit insurance to vendors have revoked coverage of Bed Bath & Beyond. On Friday, Bloomberg reported that a survey of vendors, undertaken by credit-rating and consulting firm Pulse Ratings, had found that Bed Bath & Beyond had fallen behind as much as 90 days on its bills.Īll respondents had past-due accounts receivable with Bed Bath & Beyond, and some said that over half of their accounts receivable with Bed Bath & Beyond were past due. But with this yield, the bond market is signaling that a default and a bankruptcy filing are imminent, with a massive haircut for unsecured bondholders (chart by FINRA/Morningstar): That would be a yield to maturity of 33%, assuming that the company pays the interest for the life of the bond and doesn’t default, and at maturity pays off the bond. The $675 million of senior unsecured 30-year bonds that meme-stock darling Bed Bath & Beyond issued in 2014, and that are due in 2044, with a coupon interest of 5.165%, collapsed to a new closing low of 15.8 cents on the dollar today, with some trades being below 15 cents, after having plunged all last week from the meme-stock inspired dead-cat bounce. Their b illionaire hedge-fund hero, who might have known about the unpaid bills, got out in time. Meme-stock crowd got crushed, s hares collapsed 69% in four days.
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