Comments on: The story of Deutsche Bank’s Las Vegas casino

By: strawman

strawman — Thu, 18 Nov 2010 21:18:57 +0000

“What loans? Wasn’t Deutsche the owner of the project at that point, perfectly capable of selling an equity stake unencumbered by any debt?”

Couldn’t that be the cost of the new capital that (potentially) new investors would have to raise? I suppose you could buy the equity stake with straight cash, but that’s a lot of money to have lying around. So your cost of capital is going to enter into that equation.

By: johnband

johnband — Thu, 18 Nov 2010 15:50:37 +0000

Sunk costs fallacy. Apparently, it applies to large German banks just as much as it applies to individuals deep in the hole in non-recourse states…

By: EricVincent

EricVincent — Wed, 17 Nov 2010 23:13:35 +0000

It does, on the surface, appear to be a classic case of Escalating Commitment Syndrome. But this whole bit was interesting:

(Felix posted:) “Finally, what does Berzon mean when she says that other potential investors walked away “because they weren’t confident the Cosmopolitan could cover its loans”? What loans? Wasn’t Deutsche the owner of the project at that point, perfectly capable of selling an equity stake unencumbered by any debt?”

Yes, that’s odd, but the answer could be very simple: people simply do not trust banks anymore.