Why can dividends and debt coexist?

[Loren Pechtel]

Thames Water breaches licence as part of its debt downgraded to junk

Move by ratings company Moody’s puts Thames in breach its operating licence but Ofwat likely to hold off on large fine

www.theguardian.com

Yeah, it's the Guardian but while they slant they usually are reasonably accurate in what they do say.

It's the usual story--private ownership looting the company via dividends, then letting it rot. It has long bothered me but this one gave me an idea. What if corporate bankruptcy had a clawback on dividends within the last say 10 years? And perhaps likewise on compensation above some threshold?

 

[Harry Bosch]

Thames Water breaches licence as part of its debt downgraded to junk

Move by ratings company Moody’s puts Thames in breach its operating licence but Ofwat likely to hold off on large fine

www.theguardian.com

Yeah, it's the Guardian but while they slant they usually are reasonably accurate in what they do say.

It's the usual story--private ownership looting the company via dividends, then letting it rot. It has long bothered me but this one gave me an idea. What if corporate bankruptcy had a clawback on dividends within the last say 10 years? And perhaps likewise on compensation above some threshold?

Well, it's hard to imagine that the senior debt holders didn't object to those dividends! (Most banks would have had covenants in place that would put their loan into default with excessive dividends. However, of course investors wouldn't invest if there was a 10 year claw back. As an fyi, investors are the last to get paid (if paid at all) during bankruptcy.

 

[bilby]

What if corporate bankruptcy had a clawback on dividends within the last say 10 years? And perhaps likewise on compensation above some threshold?

What if utility infrastructure like Thames Water (and other water and sewerage utilities, electricity generators, distributors, and reataliers, British Gas, British Telecom, British Rail, etc., etc.) had remained publicly owned, and/or were renationalised, to stop the looting of them that Thatcher enabled back in the '80s?

Fuck the current shareholders, privatisation was a massive theft from the previous shareholders - the citizens - whose share was sold to private and institutional owners at massively discounted prices, so that the middle and upper classes could steal the share that was owned by the working classes.

If those assets were profitable, they should have remained public, so that the profits benefitted the country. If they weren't profitable, they couldn't have been sold at all. And infrastructure needn't be profitable - its purpose is the support of profitability for other activities.

If you see Sid, tell him he's a theiving cunt.

 

[Harry Bosch]

Secondly, nothing wrong with having debt and dividends; as long as dividends arn't "excessive". Most bankers would consider dividends excessive when the year ending dividends are greater than net income and/or create a negative company cash flow (defined as (net income + dep + interest paid - dividends) / total Debt service.

 

[Loren Pechtel]

Thames Water breaches licence as part of its debt downgraded to junk

Move by ratings company Moody’s puts Thames in breach its operating licence but Ofwat likely to hold off on large fine

www.theguardian.com

Yeah, it's the Guardian but while they slant they usually are reasonably accurate in what they do say.

It's the usual story--private ownership looting the company via dividends, then letting it rot. It has long bothered me but this one gave me an idea. What if corporate bankruptcy had a clawback on dividends within the last say 10 years? And perhaps likewise on compensation above some threshold?

Well, it's hard to imagine that the senior debt holders didn't object to those dividends! (Most banks would have had covenants in place that would put their loan into default with excessive dividends. However, of course investors wouldn't invest if there was a 10 year claw back. As an fyi, investors are the last to get paid (if paid at all) during bankruptcy.

The problem is again and again we see highly leveraged private takeovers followed by the owners looting.