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Voidable preference: Difference between revisions
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All this might seem a rather arid, even petulant objection, but [[repackaging]] vehicles are a rather special case, and it doesn’t really do to confuse them with regular fund vehicles, which are a lot more like normal companies. | All this might seem a rather arid, even petulant objection, but [[repackaging]] vehicles are a rather special case, and it doesn’t really do to confuse them with regular fund vehicles, which are a lot more like normal companies. | ||
By resisting [[limited recourse][ | By resisting [[limited recourse]] [[creditor]]s, who might otherwise be at each others’ throats, are protected from each other should the company go into receivership. Insolvency rules, such as those against [[voidable preference]]s a company grants to its favourite creditors just before it goes ''[[seins en l’air]]'', ensure fair treatment for everyone. | ||
Could such a preference happen with a harmless, peace-loving [[espievie]]? Well, imagine a fund that has put on aggressively levered positions with several brokers, without telling any of them that it has doubled down on the trade elsewhere. And imagine that trade suddenly goes, ''[[tango uniform]]'', prompting a margin call bonanza and sending the cream of each broker’s [[legal eagle]]ry scurrying for their [[close-out]] manuals. But — oh! — too late. They all try to sell the same stocks at once, into a market which suddenly has zero appetite for that stock, except not “suddenly”, really, since the only person who ever ''had'' the appetite for the stock is the one whose udders are currently pointing skyward, and they are pointing that way precisely ''because'' of his ravenous appetite for a crappy stock. Stock falls through the floor, and that of several apartments below. | Could such a preference happen with a harmless, peace-loving [[espievie]]? Well, imagine a fund that has put on aggressively levered positions with several brokers, without telling any of them that it has doubled down on the trade elsewhere. And imagine that trade suddenly goes, ''[[tango uniform]]'', prompting a margin call bonanza and sending the cream of each broker’s [[legal eagle]]ry scurrying for their [[close-out]] manuals. But — oh! — too late. They all try to sell the same stocks at once, into a market which suddenly has zero appetite for that stock, except not “suddenly”, really, since the only person who ever ''had'' the appetite for the stock is the one whose udders are currently pointing skyward, and they are pointing that way precisely ''because'' of his ravenous appetite for a crappy stock. Stock falls through the floor, and that of several apartments below. | ||