Comments on: The truth about Blackstone and Codere http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: NYCEsq http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48834 Sun, 15 Dec 2013 03:39:56 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48834 Every contract, in the US at least, includes an implied covenant of good faith and fair dealing. Blackstone’s actions as described appear to violate that covenant. Moreover, I wouldn’t be surprised if a motivated prosecutor could find a criminal violation here. It’s disturbing that the article focused on the amount of profit Blackstone made, and not the allegation that the company created the default it collected on. If that is business as usual in the derivative markets, something has to change. Get your moral compass fixed, Felix! Then ask the counter-party how it feels about paying off after Blackstone’s manipulation.

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By: MarkInCA http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48829 Fri, 13 Dec 2013 15:08:53 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48829 Could you please turn off the auto-play function for the video that accompanies this post. It is hugely annoying to have the audio come suddenly blasting out of my computer whenever I visit your blog.

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By: whyascreenname http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48794 Tue, 10 Dec 2013 19:56:15 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48794 Of course it is more complicated than what we saw on the daily show. That’s true of just about everything we get from any media.

Whoever sold them that CDS should have had terms that would outlaw tricks like that. Normaly insurance has rules that prevent gaming the system.
Outfits like blackstone make their money by finding the creases and taking advantage of them, so it shouldn’t be surprising. Hopefully this is all part of some complex play that will fall to pieces and end in tears for blackstone, but they have never been looking for my respect.

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By: realist50 http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48783 Tue, 10 Dec 2013 05:17:38 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48783 Good points by Felix.

To the extent that events like this are a problem, it seems like a classic example of something that should be resolved contractually between private parties. As Felix correctly points out, both buyers and sellers of CDS are sophisticated institutions. So, for that matter, are companies issuing debt in large enough amounts that someone will write CDS on them. Changes to the ISDA form for CDS contracts, or language in a corporate credit agreement or bond indenture, could therefore address these issue in couple of ways – specifically, either limiting the circumstances in which CDS pay out or limiting the voting rights of a creditor who is hedged by CDS.

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By: Eericsonjr http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48778 Mon, 09 Dec 2013 20:24:23 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48778 They paid those dudes to default. Hard to make that anything but sleazy.

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By: Matthew_Saroff http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48772 Sun, 08 Dec 2013 04:23:10 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48772 We can argue as to the societal benefits and costs of the Blackstone-Cordere deal, and certainly their profit was less than the CDS payout (when not considering the interest that they were charging to Cordere).

But if you were to buy insurance on your neighbor’s house, and burn it down to collect the payout, it would be insurance fraud, and but for the fact that a CDS is not technically “Insurance”, the CDS transaction is insurance fraud.

Technically legal, which is the real problem, but clearly an example of how Wall Street makes its rents through regulatory arbitrage.

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By: jznyc http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48769 Sat, 07 Dec 2013 14:47:32 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48769 The forced technical default is interesting, could blackstone have worked out a deal to avoid the technical default? Like waiving some covenant, or extend payment period, etc. or re-structure the debt in exchange for a coupon bump… I don’t know the details of the indenture, did Blackstone make a good faith effort to avoid default? Did blackstone push the technical default knowing the firm would be better off with a default? I have no opinion till I know more about the details.

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By: y2kurtus1 http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48767 Sat, 07 Dec 2013 04:13:48 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48767 This might be the best article you’ve written in 2013 Felix… and as usual you’ve written some great ones.

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By: CDN_Rebel http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48766 Sat, 07 Dec 2013 04:06:31 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48766 All very true, but in the market of public opinion Blackstone was guilty the second their name was mentioned, and no amount of explanation will exonerate them. So kudos to Jon Stewart and the Daily Show for playing to the masses

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By: fjosidjf12321 http://blogs.reuters.com/felix-salmon/2013/12/06/the-truth-about-blackstone-and-cordere/comment-page-1/#comment-48765 Sat, 07 Dec 2013 02:22:55 +0000 https://blogs.reuters.com/felix-salmon/?p=22847#comment-48765 MY GOD! No wonder there are no comments. The sign up process is a nightmare, lol. Not to mention being forced to sign up for some newsletter. Back to this articles point. I agree with most of your assertions that insurance does cost something and so you can’t take the whole payout at face value (yet they did for obvious tv effect). On the other hand, I think you do not have a good moral compass. Example: I make a bet that a fighter will lose and then pay him to take a dive, that’s cheating. It doesn’t matter if the fighter has cancer and his family is starving. Yes, it is nice of you to pay that person to do a service. Especially when it will help him care for himself and his family (or workers). We are not talking about that. We’re talking about cheating on a bet. About insurance fraud in essence. The other guy may have been a regular person as it was with mortgage backed securities. These things have to stop. No one gets to say, we’re a “white knight” because we helped saved this company when they’re also cheating. No one gets to say while I give my wife a good life so that makes me a good husband, but I also kill people. Yes, being good to the company was a great thing and may have even saved it, but that doesn’t mean you get to cheat. Excuse my examples, they’re egregious to try and get the point across to someone it seems will defend these shady deals to the ends of the earth.

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