jmuguy parent
Am I wrong in reading this will add 20b in debt to EA the company, and not the purchasers? Because it seems like just servicing that debt will immediately put the company in a bad position.
Step 1. Take out a giant loan.
Step 2. Buy a company on credit.
Step 3. Stick company with the loan used to buy it.
Step 4. RIF, cut costs, reduce quality, break contracts, and discontinue goods and services.
Step 5. Sell everything of value.
Step 6. Send that company into bankruptcy.
Step 7. Rinse, lather, and repeat.
I don't understand why the creditors agree to this.
1) the creditors package up that debt and then sell it off to the next batch of suckers
2) the creditors are first in line to be reimbursed if the company goes belly up, so they are fine with it as long as the assets the company owns are worth more than the debt
Nobody fixed that exploit in the law yet?
That is how a leveraged buyout works. See: Toys "R" Us.
It doesn't matter much whether the purchasers personally hold the debt or the debt is held by EA, which is wholly owned by the purchasers.