On 5/10/07, David B. Shemano <[EMAIL PROTECTED]> wrote:
>> I am afraid I have far less faith in the wisdom of the capital markets
>> than you do. I'll have to see the post-securitization actions of Sears
>> rather than the bond yields themselves - because to me the bond
>> markets are open to manipulation.
This is why I think you are still confused. The entire point of securitization is
that the post-transaction conduct of the original parent company is irrelevant.
The entire point is that a specific collateral package has been isolated from the
parent, so the parent's post-transaction defaults/bankruptcy will have no material
effect on the ability of (i) the subsidiary to pay interest on the bonds, or (ii)
the ability of the bondholders to be paid off from the collateral if the
subsidiary defaults.>
Subsequent to the securitization, will Sears continue to advertise and
promote these trademarks as they did before? Will they refrain from
creating or promoting new or competing brands for future products? Do
Sears or their IB partners have the ability to obtain 'AAA' ratings
from Moody's and S&P for their securities? Will S&P and Moody's be
able to devote enough resources to continually evaluate the value of
the trademarks over time in an accurate way? We will only find out all
of these well after Sears has monetized its trademarks.
The reason you think I am confused is that you are talking about an
ideal capital market, whereas I am concerned mainly with the
non-idealities. Such non-idealities would include such things as tax
laws, agency problems, information asymmetries and moral hazards and
they would distort the normal functioning of the capital markets that
you describe.
The main disagreement I have with your ideas is that I think these
non-idealities are all pervasive in the real-world capital markets
whereas you think that the markets work as expected from theory for
the most part with only minor distortions.
-raghu.
