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PeakOil is You

But what about peak oil?

General discussions of the systemic, societal and civilisational effects of depletion.

Re: But what about peak oil?

Unread postby ROCKMAN » Mon 08 Oct 2018, 08:55:41

ralfy - "...and the belief that by adding more credit...". To emphasize what I pointed out a couple of days ago. Most of the new capex raised by US pubcos is not done at "near zero rate". They are paying 5% to 10% on BONDS they are selling. And those bonds really aren't credit by bond buyers as they are more like INVESTMENTS. Investments that can be completely lost by a Chapter 11 filing since they are typically dealt with as UNSECURED creditors. All that BOND DEBT can be eliminated 100% as the company comes out of Chapter 11 in very healthy financial condition with shareholders in good shape. In that aspect bond INVESTORS are really second class minority owners of a pubco.

Again. most folks don't appear to understand how the oil patch finances it much of its operations. Can we say "junk bonds"? LOL
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Re: But what about peak oil?

Unread postby kublikhan » Mon 08 Oct 2018, 09:19:20

I was under the impression that stock holders are last in the pecking order under a bankruptcy. First come secured creditors. Then unsecured creditors. And finally, if there is anything left, stockholders. IE, stockholders will be wiped out before bondholders will. Or more likely: bondholders become the new stockholders after the old stockholders are wiped out.

How Are Assets Divided in Bankruptcy?
Secured Creditors - often a bank, is paid first.
Unsecured Creditors - such as banks, suppliers, and bondholders, have the next claim.
Stockholders - owners of the company, have the last claim on assets and may not receive anything if the Secured and Unsecured Creditors' claims are not fully repaid.

What Will Happen to My Stock or Bond?
A company's securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange. However, even when a company is delisted from one of these major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy.

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares.
SEC: What Happens When Public Companies Go Bankrupt
The oil barrel is half-full.
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Re: But what about peak oil?

Unread postby Tanada » Mon 08 Oct 2018, 12:28:26

kublikhan wrote:I was under the impression that stock holders are last in the pecking order under a bankruptcy. First come secured creditors. Then unsecured creditors. And finally, if there is anything left, stockholders. IE, stockholders will be wiped out before bondholders will. Or more likely: bondholders become the new stockholders after the old stockholders are wiped out.

How Are Assets Divided in Bankruptcy?
Secured Creditors - often a bank, is paid first.
Unsecured Creditors - such as banks, suppliers, and bondholders, have the next claim.
Stockholders - owners of the company, have the last claim on assets and may not receive anything if the Secured and Unsecured Creditors' claims are not fully repaid.

What Will Happen to My Stock or Bond?
A company's securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange. However, even when a company is delisted from one of these major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy.

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares.
SEC: What Happens When Public Companies Go Bankrupt



IIRC what you posted is how it is supposed to happen, but back in 2009 when GM and Chrysler were reorganized the government intervened and the order of pay outs was changed to suit friends with connections over the letter of the law.

Where did that money go? Mainly, it went to paying off debts owed by GM and Chrysler, and – in an historic distortion of our bankruptcy proceedings – to securing the pensions and livelihoods of UAW workers. It turns out the real debt was that of Mr. Obama to organized labor, which had ponied up some $400 million to help him defeat John McCain.

The Obama administration strong-armed the auto companies’ creditors into accepting undeniably unfair terms – terms that saw pensions obliterated for non-union workers but saved for those carrying a UAW card. Terms that saw non-UAW shops close but UAW factories stay open. Terms that doled out ownership in GM with political favoritism as a guiding principle.

These charges are not at issue. In the government-managed reorganization of GM, bond holders (secured bond holders, who normally are at the top of the pay-out chart) were given equity in the carmaker at a price of $2.7 billion per one percent ownership. The government ended up paying $834 million for every one percent it claimed; the UAW paid only $629 million.

Why did the UAW receive such favorable treatment? The government at the time argued that the UAW was already making sufficient sacrifices. While true that union members gave up cost-of-living increases and agreed to a no-strike rule, they were protected against the kind of pay cuts that would have made GM truly competitive.

Months earlier, Congress refused an emergency loan to the auto makers because the UAW would not lower pay to compete with foreign car makers operating in non-union U.S. factories. The reality is that the UAW could have been harder pressed. If GM and Chrysler had stopped turning out cars, the union was toast.

It was not only the ownership share that was skewed towards the UAW. As jobs began to come back, it was the UAW plants that kicked into high gear. Workers at GM’s plant in Moraine, Ohio, who had been laid off in 2007, were not included in the re-hiring. Why? Because they did not belong to the UAW. The Moraine plant was reportedly one of GM’s most productive, but under the terms of GM’s reorganization, its workers were “banned from transferring to other plants,” according to Sharon Terlep at The Wall Street Journal.

Moraine was not the only non-UAW facility to fall under the knife; a truck plant in Ontario organized by the Canadian Auto Workers also went down.


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Re: But what about peak oil?

Unread postby ralfy » Mon 08 Oct 2018, 20:40:20

ROCKMAN wrote:ralfy - "...and the belief that by adding more credit...". To emphasize what I pointed out a couple of days ago. Most of the new capex raised by US pubcos is not done at "near zero rate". They are paying 5% to 10% on BONDS they are selling. And those bonds really aren't credit by bond buyers as they are more like INVESTMENTS. Investments that can be completely lost by a Chapter 11 filing since they are typically dealt with as UNSECURED creditors. All that BOND DEBT can be eliminated 100% as the company comes out of Chapter 11 in very healthy financial condition with shareholders in good shape. In that aspect bond INVESTORS are really second class minority owners of a pubco.

Again. most folks don't appear to understand how the oil patch finances it much of its operations. Can we say "junk bonds"? LOL


Credit refers to anything that involves money. That includes bonds and various investments.

Declaring bankruptcy, finding means to make investors happy, and creating even more credit do not reverse the problem given in the topic thread.

But most folks are not aware of that. They simply assume that we can reverse the problem of peak oil (and even limits to growth) by simply creating more credit.
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