Lanesborough Real Estate Investment Trust V.LRT.UN

creditor vs creditor

[riverrrow]

Why is it that senior lenders/creditors think that the debenture holders should take the big loss in order to keep the company out of bankruptsy so that they, the senior lenders, might someday recoup all their money?  The senior lenders should preserve their investment by buying out the debenture holders for CASH!  GLTA.

[BobTheKnob2]

Unfortunately, the debentureohlders are unsecured. The secured bank debt takes precedence in any receivership or bankruptcy. Knowing this, why would a secured lender feel inclined to bail out an unsecured lender and cut into their potential profit? Your thesis needs more work. Having said that, converting unsecured debt to equity at least gives unsecured debt holders an option to recover

[riverrrow]

my point is creditors expect the debenture holders to accept pennies in order to preserve their own capital.  Let the company go into default and it would cost the mortgage holders and creditors  a lot more than if they bought out the debenture holders and common shareholders.  GLTA.

[BobTheKnob2]

  That is possible, although not always true. I appreciate the further explaination. My experience is that banks do not like holding real assets or being a landlord - they would rather sell the asset for next to nothing than have the hassle of owning the property.