On a Foundation of Finance
In the past, words such as ‘distressed situations, insolvency, turnaround, corporate restructuring’ were reserved for specific instances of business failures even if those failures happened within the broader context of a collapse of an industry segment. Today, those terms are being used throughout the global economy.
Private equity dollars chased returns in the early part of the economic crisis. Hedge fund manager tried to apply the same rules to the distressed arena that they learned at Harvard or Wharton. Many of them have failed spectacularly in recent months. The reason? The rules on the distressed arena are different. The motivations of the mangers, the work forces, the lenders – even the courts – are all very different on this new side of the fence.
When the organisms of our economic body are in severe strain, things change. Navigating a return to prosperity and profit requires an understanding of our complex insolvency laws and how credit markets are digesting the pain of the downturn.
This column offers insights to help understand the crisis and the reconstruction. The primary contributor of this column will have a book published in 2009 called Mortgage Cocktail.
