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Two worlds and in between

posted by Stephen Lubben

A discussion about why nation-by-nation bankruptcy fails when dealing with global enterprises, here.


I would disagree, if bankruptcy systems gave a priority to nonadjusting creditors.

Adjusting creditors (i.e., banks and bonds) almost always fund through the parent. If there were only adjusting creditors, subs really couldn't go bankrupt--they would be simple bags of assets and flow-through vehicles for incidental liabilities like trade credit and paychecks. The problem here is that the non-adjusting creditors are stuck down in the subsidiary level, and they don't receive a priority.

The problems of cross-border multi-entity insolvency are not inherent. They're largely self-inflicted.

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