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Lazard World Dividend & Income Message Board

  • wlampo wlampo Jan 5, 2005 10:32 AM Flag

    Bankruptcy Abuse?

    This is the text of the letter I wrote to Judge Drain on 12/23/04. Walter Lamp

    �More than 50% of the creditor/bondholder interest in Loral is new, meaning that more than half of those to receive shares in the reorganized Loral bought into Loral in connection with the bankruptcy and were not long-time creditor interests. I get this from my reading of page 85 of the Disclosure Document where it seems that the tax loss carryover rules bars full use of carryovers in a bankruptcy situation where less than 50% of the shares in the reorganized company go to the old creditors and shareholders.

    �As all the new Loral stock in the proposed reorganization goes only to creditors and bondholders, and as creditors are counted for this purpose, it would seem that most of them are disqualified because they bought in within eighteen months of the bankruptcy or after the filing. The 50% tax rule was aimed at disallowing the use of tax loss carryovers where there was a significant change in ownership, basically that the new corporation wasn�t the same one as the old corporation. Since no shares are being given to the old shareholders and most of the creditors/bondholders are �new� (bought in to profit from the bankruptcy), it does seem like the bankruptcy laws themselves are being abused.

    �Loral could waste $1.4 billion in tax loss carryovers (after being reduced for the recaptures) that could be worth over $500 million in cash to the new company. However you discount the $500 million, it would certainly pay to at least issue shares to the disenfranchised shareholders so at the exceed the 50% threshold. Why this is not being done is speculative, perhaps as it would show that there is much additional value in Loral.

    �My request is that you require Loral to disclose its computations (or make them) as to how it falls under the 50% rule -- including, how much of the current bondholder interest arose within 18 months of the filing and how much of the creditor interests were acquired by new owners since the filing. [The loss company has a tax duty to inquire, and can rely on penalty of perjury statements, whether those getting the stock in the new company were the beneficial owners of their interests during the requisite periods.] I am a holder of Loral common shares from before the filing.�

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    • "More than 50% of the creditor/bondholder interest in Loral is new, meaning that more than half of those to receive shares in the reorganized Loral bought into Loral in connection with the bankruptcy and were not long-time creditor interests."

      Walter.. Here is something for you to ponder. This is how I understand it.

      When you buy Stock in Loral. Are you really the Owner of that stock? Is the stock IN YOUR NAME? In the vast majority of the cases.. The stock that you think you have bought is held in "The Street's" name. Your Brokerage House acts sort of like a Trustee. The Brokerage keeps track of who bought what and when.. But, the actual ownership of the stock has not changed. It is held in "The Streets" name. That is why the Brokerage House can lend "your shares" to be Sold Short.
      So unless you request your Stock Certificates to be issued in YOUR NAME, and take physical delivery.. There has not been an "offical change of ownership"

      The same thing goes in the Public Debt Market. When a company issues Public Debt. The Debt is held by a Trustee.. Like the Bank of New York, or some other financial institution. When you "buy the debt".. The debt does not really "change ownership". The debt is still held in the name of the Trustee. And you are simply named a beneficiary.

      Now Creditor Debt, will usually qualify for change of ownership when that is bought and sold.

      So if The Weasel bought up alot of the Orion Debt, as Jeff so ofter pined for earlier in the BK. Then you can be sure that no official change in ownership has taken place that would exceed 50%.

      You are dealing with a Weasel.. And he has the best tax advisors money can buy.

      But, I commend you effort on this attempt to cage The Weasel�

      Too bad Jeff still thinks he is the best CEO available to carry on Post-BK.


    • Did you follow all the rules for filing your objections to the Disclosure? Ie copies to all the lawyers, putting your letter on disc etc. If not, your objection will not be filed and the Judge will never see your letter.

      • 2 Replies to dmw53711
      • - - - - HAVE IT YOUR WAY

        The judge in the G* bankruptcy case filed

        - - - - AT BURGER KING�

        filed every POS the Klub threw at him,

        - - - - HAVE IT YOUR WAY

        including one that Gbonz� wrote

        - - - - AT BURGER KING�

        on a Burger King wrapper. I kid

        - - - - HAVE IT YOUR WAY

        you not. It made for some pretty

        - - - - AT BURGER KING�

        entertaining reading!

      • No I didn't. I don't know who all the lawyers are and I am not familiar with disks or any other requirements.

        Why don't you, or someone else who knows what is required, pick it up and send the copies etc. Or copy it as your own and do it. It would be great if someone in the know picked this up.

    • A lot of those bonds are held in street name, and it would be difficult to determine when and how beneficial ownership changed. In any event, as a bagholder, it is not in your interest to challenge the loss carry forwards, which tend to have the effect of increasing the value of the company.

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