Friday, September 14, 2007

Subprime and the Alliance deal take 2

Though this article from the Globe and Mail briefly touches on the issue of the junk bond crisis (Subprime in other words), it's another glimpse into the reality of Leveraged Buyouts (LBO's), and how these nasty little schemes end up enriching the investment bankers who make the deals and hurt those who have no clue (the investors, the little the pensioners who unwittingly hold CanWest in their portfolios).

An excerpt (from Globe & Mail):

If there's a crisis brewing in the markets, CanWest always finds a way to step in the middle of it. After it bought Hollinger International's Canadian newspapers in 2000, it got caught in a credit squeeze, resulting in a horrible bond deal at usurious interest rates. When the company decided to float those papers as an income trust in 2005, it got hurt again; the deal closed just as it began to look like then-finance minister Ralph Goodale was going to tax trusts (he didn't). When it went to finance the Alliance deal this summer ... well, you know - it ran full-speed into the junk bond meltdown.

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