corp. bond

corporate bonds default:

//=== http://learnbonds.com/3771/bond-default/

*** There is no timeline as to when bondholders will receive payment
as it all depends on the speed of asset disposal and
whether any funds remain after creditors have been paid.


*** Its not unusual for the process to take from 1 to 3 years before the last payment is distributed.


"""...
corporate bonds default on a regular basis. When a company defaults, the government is under no
obligation and is unlikely to rescue the company.


Typically, companies file for bankruptcy protection prior to a bond default. If a company defaults without declaring bankruptcy first, then creditors are likely to force them into bankruptcy. US companies can file for bankruptcy either under Chapter 7 or Chapter 11.

...



//=== Bond Defaults and Chapter 7 bankruptcy

Under Chapter 7 bankruptcy, the company ceases operations and goes out of business.
The courts will have to first determine
that reorganization and recovery is neither realistic nor worthwhile.

The court then appoints a trustee whose core responsibility will be
to liquidate all company assets and ensure the proceeds are used to pay outstanding claims.

There is a predetermined pecking order through which outstanding claims are paid:

First are the secured creditors and holders of senior debt,
Next are the ordinary bondholders
Equity shareholders are the last in line

Since a chapter 7 bankruptcy inevitably implies the sale of company assets, there is
a stark difference between a company with hard assets and one with intellectual capital in the form of employees.

Hard assets can be sold –
great employees, no matter how good, cannot be sold and are an intangible ‘asset’.




//=== Chapter 11 bankruptcy

Under Chapter 11,
corporate bondholders no longer receive principal and interest payments just like the shareholders will no longer receive a divided. ???

The reorganization plan outlines the creditor’s rights, and what they can expect to get once the reorganization is complete.

??? Bondholders may be issued with new stock or a combination of stocks and bonds in the restructured corporation in exchange for their bonds.

*** The new securities are often fewer and are of lower value than the defaulted bond.



"""...
Chapter 11 bankruptcy is more widespread, as well as being costly and complex.
In a nutshell, Chapter 11 bankruptcy allows the business
to continue operating shielded from recovery actions from its creditors.

All major business decisions must however obtain approval from the bankruptcy court. The company is reorganized in order to return to profit and normalcy in operations.



//=== vultures, carcass
"""... Most investors will not buy the debt of bankrupt companies.
Specialists called distressed debt traders, nicknamed “vultures”
because they pick on the 'carcasses' of dead companies, will determine the value of debt
..."""


http://learnbonds.com/3771/bond-default/