In one of the least widely reported stories I have stumbled upon, Wilber Ross is purchasing the assets of steel operations that have gone bankrupt and is potentially in the position to make a lot of money. How? By purchasing the assets of the firms and leaving the so-called legacy costs (example pension and heath-care costs) out. It is a great example of several important topics that are often hard to demonstrate in class: how a. bankruptcy changes the rules of the game, b. why it is sometimes better to purchase assets rather than the whole firm, and c. that inadvertently government policies can impact more than intended. In this case, Ross is relying on the government (read tax payers) to pick up the legacy costs. Which is not a condemnation for without the bail-outs, it is unlikely that any of the deals would get done. However, his reliance on tariffs is troubling. [FinanceProfessor Annotation]
Click to Add the First »