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Old 01-27-2011, 01:24 PM
 
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If a publicly traded company goes under, who is responsible for the debt? This seems like such a silly question to ask, but I really have never thought of it before. Anyone know?

I also ask that you leave the political commentary out of this. I don't want to read responses like "Well, under Obama/Bush, the government takes it over".

Thanks!
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Old 01-27-2011, 01:35 PM
 
Location: South Jordan, Utah
7,773 posts, read 8,195,484 times
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Quote:
Originally Posted by Z3N1TH 0N3 View Post
If a publicly traded company goes under, who is responsible for the debt? This seems like such a silly question to ask, but I really have never thought of it before. Anyone know?

I also ask that you leave the political commentary out of this. I don't want to read responses like "Well, under Obama/Bush, the government takes it over".

Thanks!
The BK court decides and in many cases they can give debt holders ownership in the new reorged company. Or they just get pennies paid out from the sale of assets.
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Old 01-27-2011, 01:58 PM
 
63,436 posts, read 48,899,633 times
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Quote:
Originally Posted by Z3N1TH 0N3 View Post
If a publicly traded company goes under, who is responsible for the debt? This seems like such a silly question to ask, but I really have never thought of it before. Anyone know?

I also ask that you leave the political commentary out of this. I don't want to read responses like "Well, under Obama/Bush, the government takes it over".

Thanks!
Basically, the debt holders are responsible. (See previous response)

This is why corporate bonds get ratings and offer higher interest rates (forget tax implications) than US bonds.

For businesses doing business with people and other companies, unrecoverable debts are a part of doing business and should be factored into the pricing or having debts secured by letters of credit etc.

ie) if you sell $100,000 in copier machines to ABC co. and they go out of business a week later...depending upon the terms of your contract you might just take a bath on the deal.
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Old 02-01-2011, 02:48 AM
 
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depending upon the terms of your contract you might just take a bath on the deal.
Thats why we think over it so many times before we sign a deal. Before you go for such a sell its quite important that you go through the history and financial stability of the other party.
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