Moody’s, S&P and Fitch took a lot of flak for being a little too optimistic about the creditworthiness of derivatives before those derivatives proved anything but creditworthy. S&P got sued over it, but there may have been other motivations for that, and the other two, as well as the industry as a whole, more or less got away scot-free.
Today’s the big day for the uniquely recalcitrant debtor’s second big D in 13 years, now that its least favorite jurist has reiterated once again that, its best efforts not withstanding, it isn’t allowed to pay only the creditors it wants to pay while piously promising to “meet its obligations, pay off its debts and honor its commitments,” except maybe to these vulture usurers “trying to bring us down to our knees.” Well, maybe not the big day, since failure to pay today—and U.S. District Judge Thomas Griesa made very clear that the “illegal” payment “will not be made,” or he’s gonna start holding people in contempt—amounts to a mere “technical” or “selective” default for 30 days. Then, maybe Moody’s will do something about it. Read more »
Let’s say, for argument’s sake, that you are a member of a long-entrenched board of directors. Perhaps at a company that has been run (ineptly, perhaps) exclusively for the benefit of its ruling family. Then, disaster strikes, and someone—perhaps Carl Icahn, or Dan Loeb, or someone who used to work for Carl Icahn or Dan Loeb—notices just what a corporate governance and/or shareholder value nightmare you’re supposedly to be overseeing.
Now, let’s make the further assumption that all of the outrageous things the aforementioned activist(s) will say about you and the company to which you have a fiduciary duty are true. With that annual meeting coming up and a full slate of dissident director candidates eyeing your board fees, how will you ever convince the shareholders you’ve been screwing to keep you on?
Casting aspersions about the other guys probably won’t work, because, well, people who live in glass houses and all. And there isn’t enough time to make a few token moves to show that you’ve learned a thing or two from the ordeal—and even if there were time, well, you and the cronies just don’t feel like. And now those bastards at the proxy advisors are calling for your head.
Well, thanks to the infallible folks at Moody’s, you’ve now got a whole new argument to trot out: If Carl Icahn or Dan Loeb or one of their protégés take over, we’ll be downgraded, and then the activist trash who take over will have to pay way more to leverage the hell out of the company to pay themselves off, and will leave you the long-term shareholder holding the bag. And it won’t be my fucking problem anymore, because you’ll have kicked me out. So there. Read more »