Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Yes, principle/agent problems with Dodd's common stock warrant plan did enter into it.

The Senior Preferred shares are non-voting shares ... the resolution they make between the greed of the private equity owners and the interests of the public equity owners is that unless the private equity owners pay their dividend rate, their freedom to act in pursuit of private greed is severely curtailed.

However, on further reflection, I would adopt Dodd's warrant system ... except warrants on issue of additional Public Preferred Shares, and at 100%. So the firm that hands over illiquid assets that turn out to be sound when disposed of would only have the 50% Public Preferred Share holding to serve, while the firm that hands over illiquid assets that turn out to be worthless would end up with 100% of their bail-out in issue of Public Preferred shares.

If a firm goes belly-up, as most Senior preferred shares (and if existing senior preferred shareholders are not willing to concede that status and prefer the company to fold, well, that would be their right as Preferred shareholders), if anything is left after settling fixed obligations, those assets would vest with the Public Trust up to the face value of the Public Preferred Shares was refunded, with anything left over handing down the ladder.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Sep 27th, 2008 at 05:56:14 PM EST
[ Parent ]

Others have rated this comment as follows:


Top Diaries

Occasional Series