Well, at least a significant part of them:
A legal battle has erupted among the creditors who hold debt from the $8 billion acquisition of Extended Stay Hotels, a symbol of the easy-credit era. The chain was served a notice of default in late May.
Two investors...filed a lawsuit Wednesday alleging that lenders (diarist note - Bank of America and Wells Fargo via their taxpayer-guaranteed acquisitions of Marrill Lynch and Wachovia, respectively) that provided $7.4 billion in financing...are engaged in a "scheme" to take over the property and wipe out the...investors...Creditors have been negotiating...a possible restructuring of the debt.
U.S. taxpayers also have had an interest in the talks because another lender in the buyout was Bear Stearns Cos., whose stake was taken over by the Federal Reserve after Bear collapsed in March 2008...The Fed declined to comment.
Well, we know that the Fed took a lot of toxic financial assets on to it's balance sheet in order to bail out the banking system whose rank corruption has caused the economic mess the US is exporting to the rest of the world. But a bankrupt hotel chain?
What next? Fast food restaurants?
Indeed, the fed's balance sheet is looking more and more like a Jack-in-the-Box: no one has much of an idea what's going to pop out.
Interestingly, the Fed seems to be in league with some of the big banks it bailed out over the past 18 months on our behalf, in an effort to screw smaller (though likely only slightly less wealthy) investors. The US Taxpayer bailed its corrupt banking system, taking devalued assets, sight unseen in exchange for cash injections.
And this particular Jack, the bankrupt "Extended Stay America," how big of a bath will you, the US Taxpayer, be expected to take? Remember, this company was purchased for $8bn barely two years ago. Like most deals in the heady private equity era, it was a highly-lveraged deal; $7.4 billion in debt financed the deal. What do we stand to lose? Whatever the discount is on that debt, expressed in terms of the firm's enterprise value, or what it is worth now. And what is it worth?Not a whole helluva lot:
The hotel chain is now valued at $3.3 billion, according to its filing. That figure isn't even 60% of the buyout price and even lower than the amount of the first mortgage, $4.1 billion
What you, the US Taxpayer, stand to lose on this deal depends on what kind of debt the Fed owns on your behalf. If it is part of that first mortgage, your share is likely to written down from $4.1 billion to $3.3 billion, a roughly 20% loss. But, if it is part of the more subordinated debt, the $3.3 billion in non-mortgage debt? That part is likely worthless.
What kinds of debt does the fed have? Bernanke won't say. But, I think it's safe to say this won't be the only bath you, the US Taxpayer, will be expected to take in order to bail out the wealthy investors whose losses are piling up.
Another case of socializing the losses, privatizing the gains. The Anglo-American capitalist model.