Vulture Investors Circle Caving Companies
Vulture bonds or vulture trading consists of dealing in companies that are in or near default or bankruptcy. While the companies are weakening and are sliding farther and farther into debt without a hope of every paying it off, vulture investors can gain high-yielding stocks, such as those from defunct telecom companies, for very little cash. Vulture investors stake their claim in this risky area in hopes that a failing company with high debt and the likelihood of filing of filing for bankruptcy will restructure the company instead of liquidating its assets. Stockholders in the defunct company receive stock in the new company, and vulture investors who poured money into the failing company by buying stocks when they were pennies on the dollar can enjoy a monumental return if the restructures company soars back into profit. Large telecom companies like WorldCom are prime bait for vulture investment firms, since the company has languished in the gutters since the discovery of major accounting fraud. The company is undergoing restructuring since fling for bankruptcy, and stocks have begun to rise slowly but steadily, leading to a potential big payoff for involved vulture investment agencies. Vulture investors and funds are not limited solely to drain-circling companies - they sometimes play a part in the debt restructuring of entire countries that are struggling economically. The latest example is that of Argentina, in which several vulture funds bought out nearly all of the South American country's public debt and attempted to cash in when the country entered and economic crisis in 2001. The economically strapped country has no hope of paying off the bonds now being called in by the vulture funds. Some vulture funds are seeking legal recourse and are winning judgments authorizing them to seize the country's assets as early as October. One New York vulture fund won a judgment for as much as 700 million dollars. International investors are finding legal ways to recoup some of the losses, including seizing property and appropriating assets abroad, such as Argentine embassies.